Document:

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                                                                      EXHIBT 4.6

                                                                  CONFORMED COPY

                                   AGREEMENT

                             DATED 5th June, 2001

                             (Pounds)1,000,000,000

                    MULTICURRENCY REVOLVING CREDIT FACILITY

                                      FOR

                             SCOTTISH POWER UK PLC

                                  ARRANGED BY

                      THE BANK OF TOKYO-MITSUBISHI, LTD.
                 COMMERZBANK AKTIENGESELLSCHAFT, LONDON BRANCH
                                J.P. MORGAN PLC

                                      AND

                        THE ROYAL BANK OF SCOTLAND PLC

                                 ALLEN & OVERY
                                    London
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THIS AGREEMENT is dated 5th June, 2001 between:

(1)  SCOTTISH POWER UK PLC (Registered No. SC11712OP) (the "Company");

(2)  THE BANK OF TOKYO-MITSUBISHI, LTD., COMMERZBANK AKTIENGESELLSCHAFT, LONDON
     BRANCH, J.P. MORGAN PLC and THE ROYAL BANK OF SCOTLAND PLC as joint
     arrangers (in this capacity the "Joint Arrangers");

(3)  THE FINANCIAL INSTITUTIONS listed in Schedule 1 (Original Parties) as banks
     (the "Banks"); and

(4)  THE ROYAL BANK OF SCOTLAND PLC as agent (in this capacity the "Agent").

IT IS AGREED as follows:

1.   INTERPRETATION

1.1  Definitions

     In this Agreement:

     "Affiliate"

     means a Subsidiary or a Holding Company (as defined in Section 736 of the
     Companies Act 1985) of a person and any other Subsidiary of that Holding
     Company.

     "Agent's Spot Rate of Exchange"

     means the Agent's spot rate of exchange for the purchase of the relevant
     Optional Currency in the London foreign exchange market with Sterling at or
     about 11.00 a.m. on a particular day.

     "Appointee"

     means Southern Water Services Limited (registered number 2366670) a wholly
     owned subsidiary of SWP.

     "Appointment"

     means the instrument of appointment dated August 1989 of the Appointee as
     water undertaker and sewerage undertaker for the Franchise Area under the
     Water Act 1989 as subsequently repealed and replaced by the Water Act.

     "Balance Sheet"

     means, at any time, the latest published audited consolidated balance sheet
     of the Group on a historic cost basis.

     "Borrowings"

     means any indebtedness in respect of:

     (a)  moneys borrowed and debit balances at banks and other financial
          institutions;

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     (b)  any debt security including any bond, note or loan stock;

     (c)  any acceptance under any acceptance credit facility opened by a bank
          or other financial institution;

     (d)  the sale or discounting of receivables (except to the extent that such
          sale or discounting is on a non-recourse basis);

     (e)  any lease which the Company accounts for as a finance lease as such
          term is described in the Statement of Standard Accounting Practices
          No. 21 (or any successor statement or financial reporting standard);

     (f)  any accrued fixed or minimum premium payable on the repayment or
          redemption of any instrument referred to in paragraph (b) above;

     (g)  for the purposes of Clause 19.5 (Cross-default) only, interest rate
          swaps, currency swaps (including spot and forward exchange contracts),
          caps, collars, floors and similar obligations;

     (h)  the acquisition cost of any asset to the extent payable before or
          after the time of acquisition or possession by the party liable where
          the advance or deferred payment is arranged primarily as a method of
          raising finance or financing the acquisition of that asset; and

     (i)  any guarantee, indemnity and/or other form of assurance against
          financial loss by any member of the Group in respect of any
          indebtedness of any person of a type referred to in paragraphs (a) to
          (h) above (in the case of paragraph (g) above, for the purposes of
          Clause 19.5 (Cross default) only),

     but excluding any borrowings from PacifiCorp Group Holdings Company or
     Holdco to the Company provided that such borrowings do not bear interest
     and are subordinated to the rights of the Finance Parties on terms
     satisfactory to the Majority Banks.

     Any amount outstanding in a currency other than Sterling is to be taken
     into account at its Sterling equivalent calculated on the basis of the
     Agent's spot rate of exchange at 11.00 a.m. on the day the relevant amount
     falls to be calculated.  However, indebtedness owing by one member of the
     Group to another member of the Group shall not be taken into account as
     Borrowings and, for the purposes of calculating the amount of Borrowings at
     any time:

     (i)  deep discount borrowings will be valued at the amount attributed to
          them in the then latest Balance Sheet; and

     (ii) no item of indebtedness will be double counted by the inclusion of
          both the primary indebtedness and indebtedness arising under a
          guarantee, indemnity and/or other form of assurance with respect to
          that primary indebtedness.

     "Business Day"

     means a day (other than a Saturday or a Sunday) on which banks are open for
     business in:

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     (a)  London; and

     (b)  Glasgow; and

     (c)  in relation to a transaction involving an Optional Currency (other
          than euros) the principal financial centre of the country of that
          Optional Currency; and

     (d)  in relation to a transaction involving euros, a TARGET Day.

     "Commitment"

     means:

     (a)  in relation to a Bank which is a Bank on the date of this Agreement,
          the amount set opposite its name under the heading "Commitments" in
          Schedule 1 (Original Parties); and

     (b)  in relation to a Bank which becomes a Bank after the date of this
          Agreement, the amount of Commitment acquired by it under Clause 27
          (Changes to the Parties) or pursuant to any Finance Document,

     in each case, to the extent not cancelled, reduced or transferred under
     this Agreement.

     "Consolidated EBITDA"

     means in respect of any financial year of the Group, the consolidated
     profits of the Group before:

     (a)  Net Interest Payable;

     (b)  tax;

     (c)  depreciation;

     (d)  amortisation (including, for the avoidance of doubt, of goodwill); and

     (e)  extraordinary and exceptional items,

     but adjusted by deducting any amount attributable to minority interests.

     "Counter Guarantor"

     has the meaning given to it in Clause 27.4(a)(iii) (Accession).

     "Counter Guarantor Accession Agreement"

     means a deed substantially in the form of Part 2 of Schedule 8 with such
     amendments as the Agent may approve or reasonably require.

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     "Dangerous Substance"

     means any radioactive emissions and any natural or artificial substance
     (whether in solid or liquid form or in the form of a gas or vapour and
     whether alone or in combination with any other substance) capable (in each
     case) of causing harm to man or any other living organism or damaging the
     environment or public health or welfare, including (without limitation) any
     controlled, special, hazardous, toxic, radioactive or dangerous waste.

     "Default"

     means an Event of Default or an event which, with the giving of notice,
     lapse of time, or fulfilment of any other applicable condition (or any
     combination of the foregoing), would constitute an Event of Default.

     "Drawdown Date"

     means the date of the advance of a Loan.

     "EC"

     means the European Community and its successors.

     "EIB Facilities"

     means the credit facilities made available by the European Investment Bank
     which mature after the Final Repayment Date, and more particularly being:

     (a)  a (Pounds)144,000,000 credit facility dated 26th February, 1998 for
          Southern Water Services Limited and the Company, to be novated to
          Southern Water Services Limited;

     (b)  a (Pounds)50,000,000 credit facility dated 14th February, 2000 for
          Manweb plc; and

     (c)  a (Pounds)150,000,000 credit facility dated 14th December, 1998 as
          amended and restated on 19th and 22nd July, 1999 for the Company of
          which (Pounds)80,000,000 will be novated to SP Distribution and
          (Pounds)70,000,000 will be novated to SP Transmission.

     "Environmental Law"

     means all laws, regulations, codes of practice, circulars, guidance notices
     and the like (whether in the United Kingdom or elsewhere) whether or not
     having the force of law but if not having the force of law compliance with
     which is customary in the industry concerning the protection of human
     health or the environment or the conditions of the work place or the
     generation, transportation, storage, treatment or disposal of Dangerous
     Substances.

     "Environmental Licence"

     means any permit, licence, authorisation, consent or other approval
     required by any Environmental Law.

     "euro"

     means the single currency of the Participating Member States.

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     "Event of Default"

     means an event specified as such in Clause 19.1 (Events of Default).

     "Excluded Entity"

     means SWP, Manweb plc and Thus plc and any of their Subsidiaries.

     "Existing Facility"

     means the (Pounds)2,600,000,000 credit agreement dated 24th June, 1996 as
     amended by a supplemental agreement dated 12th March, 1999 made between
     (among others) the Company and the Agent.

     "Facility"

     means the facility referred to in Clause 2.1 (Facility).

     "Facility Office"

     means, subject to Clause 27.7 (Change of Facility Office), the office(s)
     notified by a Bank to the Agent:

     (a)  on or before the date it becomes a Bank; or

     (b)  by not less than five Business Days' notice,

     as the office(s) through which it will perform all or any of its
     obligations under this Agreement.

     "Fee Letter"

     means:

     (a)  the letter dated the date of this Agreement between the Joint
          Arrangers and the Company setting out the amount of various fees
          referred to in Clause 21.1 (Front-end fees); and

     (b)  the letter dated the date of this Agreement between the Agent and the
          Company setting out the amount various fees referred to in Clause 21.4
          (Agent's fee).

     "Final Repayment Date"

     means the fifth anniversary of the date of this Agreement.

     "Finance Document"

     means this Agreement, a Fee Letter, a Counter Guarantor Accession
     Agreement, a Guarantor Accession Agreement, a Novation Certificate or any
     other document designated as such by the Agent and the Company.

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     "Finance Party"

     means a Joint Arranger, a Bank or the Agent.

     "Franchise Area"

     means each of:

     (a)  the area described in paragraph 1 of Schedule 1 of the Appointment in
          respect of the Appointee's appointment as a water undertaker; and

     (b)  the area described in paragraph 2 of Schedule 1 of the Appointment in
          respect of the Appointee's appointment as a sewerage undertaker.

     "GEMA"

     means the Gas and Electricity Markets Authority.

     "GEMA Subsidiary"

     means a Subsidiary of the Company which has any assets or business of the
     Group transferred to it as a result of a Restructuring.

     "GEMA Subsidiary Guarantor"

     has the meaning given in Clause 27.4(a)(ii) (Accession).

     "Group"

     means at any time the Company and its Subsidiaries at that time.

     "Guarantor"

     means, subject to Clause 27.4(a) (Accession), a GEMA Subsidiary Guarantor
     or Holdco.

     "Guarantor Accession Agreement"

     means a deed substantially in the form of Part 1 of Schedule 8 with such
     amendments as the Agent may approve or reasonably require.

     "Hedging Liabilities"

     means indebtedness arising in respect of obligations of the type referred
     to in paragraph (g) of the definition of "Borrowings" in this Clause 1.1.

     "Holdco"

     means Scottish Power plc (Registered No. SC193794).

     "Holdco Group"

     means at any time Holdco and its Subsidiaries at that time.

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     "Interest Payable"

     means, in respect of any financial period, all interest, discount and
     acceptance commission and all other continuing, regular or periodic costs,
     charges and expenses in the nature of interest (whether paid, payable or
     capitalised) or treated for accounting purposes as interest, incurred by
     the Group in effecting, servicing or maintaining Total Consolidated
     Borrowings during that period.

     "Interest Receivable"

     means, in respect of any financial period, interest and amounts in the
     nature of interest received during that period by the Group from persons
     outside the Group.

     "Investments"

     means:

     (a)  cash on current account or cash on deposit with, or certificates of
          deposit issued by, or bills of exchange accepted by, any bank
          incorporated in an OECD country from which proceeds are readily
          remittable to the United Kingdom, and in each case, where the deposit
          or the maturity is for a duration of six months or less; and

     (b)  bonds or treasury bills issued by an OECD government or agency, bonds
          rated single-A or above by a major rating agency and commercial paper
          rated A1 or P1 by a major rating agency, in each case, where the
          proceeds of which are readily remittable to the United Kingdom.

     "LIBOR"

     means, in relation to a Loan:

     (a)  the rate per annum which appears on Telerate Page 3750 or Telerate
          Page 3740 (as appropriate); or

     (b)  if no such offered quotation appears on Telerate Page 3750 or Telerate
          Page 3740, the arithmetic mean (rounded upward to four decimal places)
          of the rates, as supplied to the Agent at its request quoted by the
          Reference Banks to leading banks in the London interbank market,

     in each case, at or about 11.00 a.m. on the applicable Rate Fixing Day for
     the offering of deposits in the currency of the relevant Loan for a period
     comparable to its Term.

     For the purposes of this definition, "Telerate Page 3750" or "Telerate Page
     3740" means the display designated as "Page 3750" or "Page 3740" (as
     appropriate) on the Telerate Service (or other such page as may replace
     Page 3750 or Page 3740 on that service) or such other service as may be
     nominated by the British Bankers' Association as the information vendor for
     the purpose of displaying British Bankers' Association Interest Settlement
     Rates for various currencies.

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     "Licence"

     means each licence granted by GEMA to a member of the Group under section
     6(1) of the Electricity Act 1989 (as amended, after section 30 of the
     Utilities Act 2000 comes into force).

     "Loan"

     means the principal amount of a borrowing by the Company under this
     Agreement or the principal amount outstanding of that borrowing.

     "Majority Banks"

     means, at any time, Banks whose Commitments:

     (a)  then aggregate more than 66 2/3 per cent. of the Total Commitments; or

     (b)  if no Loans are then outstanding and the Total Commitments have been
          reduced to zero, aggregated more than 66 2/3 per cent. of the Total
          Commitments immediately before the reduction.

     "Mandatory Cost"

     means the cost of complying with certain regulatory requirements, expressed
     as a percentage rate per annum and calculated by the Agent under Schedule 3
     (Calculation of Mandatory cost).

     "Mandatory Subsidiaries"

     means SP Distribution, SP Generation and SP Transmission.

     "Margin"

     means, subject to Clause 8.2 (Margin adjustments), 0.45 per cent. per
     annum.

     "Net Interest Payable"

     means, in respect of any financial period, Interest Payable during that
     period less Interest Receivable during that period.

     "Novation Certificate"

     means a duly completed certificate, substantially in the form of Schedule 5
     (Form of Novation Certificate).

     "Obligor"

     means the Company, a Guarantor or a Counter Guarantor.

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     "Operating Profit"

     means the consolidated net pre-taxation profits (after adding back Net
     Interest Payable) of the Group for a financial year of the Group before
     taking account of any extraordinary profits (or losses).

     "Optional Currency"

     means US Dollars, euros or any other currency (other than Sterling) which
     is for the time being freely transferable and convertible into Sterling and
     deposits of which are readily available in the London interbank market.

     "Original Group Accounts"

     means the audited consolidated accounts of the Group for the year ended
     31st March, 2000.

     "Original Sterling Amount"

     means:

     (a)  the principal amount of a Loan denominated in Sterling; or

     (b)  the principal amount of a Loan denominated in an Optional Currency
          translated into Sterling on the basis of the Agent's Spot Rate of
          Exchange three Business Days before its Drawdown Date.

     "Outstandings"

     means at any time, the aggregate of each outstanding Loan.

     "PacifiCorp"

     means PacifiCorp (a company incorporated in Portland, Oregon).

     "Participating Member State"

     means a member state of the European Union that adopts a single currency in
     accordance with the treaty establishing the EC.

     "Party"

     means a party to this Agreement.

     "Permitted Security Interest"

     means:

     (a)  any Security Interest created or outstanding with the prior written
          consent of the Majority Banks;

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     (b)  any lien or hypothecation arising by operation of law or contained in
          a contract for the sale of goods, supply of services or joint
          operation of assets entered into in the ordinary course of trade of
          the company creating the same;

     (c)  Security Interests not otherwise permitted under paragraphs (a) and
          (b) above provided that the aggregate principal amount of the
          indebtedness secured by Security Interests permitted under this
          paragraph (c) shall not at any time exceed an amount equal to 15 per
          cent. of Tangible Consolidated Net Worth at that time; and

     (d)  any Security Interest created by a Project Finance Subsidiary to
          secure its Project Finance Borrowings.

     "Principal Subsidiary"

     means any Subsidiary of the Company:

     (a)  whose profits (before taxation and before extraordinary items and any
          taxation relating thereto) are 10 per cent. or more of the
          consolidated net profits of the Group (before taxation and before
          extraordinary items and any taxation relating thereto); or

     (b)  whose gross assets are 10 per cent. or more of the consolidated gross
          assets of the Group; or

     (c)  whose Net Assets are 10 per cent. or more of the consolidated Net
          Assets of the Group,

          all as shown (in the case of any Subsidiary) in its most recent annual
          accounts and (in the case of the Group) in the most recent annual
          consolidated accounts of the Group and for this purpose "Net Assets"
          in relation to any Subsidiary means its total assets (excluding
          goodwill) less its total liabilities and in relation to the Group
          means the total assets (excluding goodwill) of the Group less its
          total liabilities; and

     (d)  any other Subsidiary or Subsidiaries of the Company to whom all or
          substantially all of the assets or business of a Principal Subsidiary
          are transferred.

     "Project Finance Borrowings"

     means any Borrowing which finances, and any Hedging Liabilities incurred in
     the financing of the acquisition, development, ownership and/or operation
     of an asset:

     (a) which is incurred by a Project Finance Subsidiary; or

     (b)  in respect of which the person or persons to whom such Borrowing is or
          may be owed by the relevant debtor (whether or not a member of the
          Group) has or have no recourse whatsoever to any member of the Group
          (other than to a Project Finance Subsidiary) for the repayment thereof
          other than:

          (i)  recourse to such debtor for amounts limited to the cash flow or
               net cash flow (other than historic cash flow or historic net cash
               flow) from such asset; and/or
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          (ii)  recourse to such debtor for the purpose only of enabling amounts
                to be claimed in respect of such Borrowing in an enforcement of
                any Security Interest given by such debtor over such asset or
                the income, cash flow or other proceeds deriving therefrom (or
                given by any shareholder or the like in the debtor over its
                shares or like interest in the capital of the debtor) to secure
                such Borrowing, provided that (I) the extent of such recourse to
                such debtor is limited solely to the amount of any recoveries
                made on any such enforcement, and (II) such person or persons
                are not entitled, by virtue of any right or claim arising out of
                or in connection with such Borrowing, to commence proceedings
                for the winding up or dissolution of the debtor or to appoint or
                procure the appointment of any receiver, trustee or similar
                person or officer in respect of the debtor or any of its assets
                (save only for the assets the subject of such Security
                Interest); and/or

          (iii) recourse to such debtor generally, or directly or indirectly to
                a member of the Group, under any form of assurance, undertaking
                or support, which recourse is limited to a claim for damages
                (other than liquidated damages and damages required to be
                calculated in a specified way) for breach of an obligation (not
                being a payment obligation or an obligation to procure payment
                by another or an indemnity in respect thereof or any obligation
                to comply or to procure compliance by another with any financial
                ratios or other tests of financial condition) by the person
                against whom such recourse is available.

     "Project Finance Subsidiary"

     means any Subsidiary of the Company:

     (a)  which is a company whose principal assets and business are constituted
          by the ownership, acquisition, development and/or operation of an
          asset whether directly or indirectly;

     (b)  none of whose Borrowings in respect of the financing of such
          ownership, acquisition, development and/or operation of an asset
          benefits from any recourse whatsoever to any member of the Group
          (other than the Subsidiary itself or another Project Finance
          Subsidiary) in respect of the repayment thereof, except as expressly
          referred to in paragraph (b)(iii) of the definition of Project Finance
          Borrowings in this Clause 1.1; and

     (c)  which has been designated as such by the Company by written notice to
          the Agent, provided that the Company may give written notice to the
          Agent at any time that any Project Finance Subsidiary is no longer a
          Project Finance Subsidiary, whereupon it shall cease to be a Project
          Finance Subsidiary.

     "Qualifying Bank"

     means an institution which is:

     (a)  a bank which is within the charge to U.K. corporation tax in respect
          of, and beneficially entitled to, a payment of interest on a Loan made
          by a person that was a bank for the purposes of section 349 of the
          Income and Corporation Taxes Act 1988

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          (as currently defined in section 840A of the Income and Corporation
          Taxes Act) at the time the Loan was made; or

     (b)  a financial institution lending through any other branch, affiliate or
          agency if, at the time such financial institution becomes a Party, the
          financial institution or affiliate (as the case may be) is a resident
          in a country with which the United Kingdom has an appropriate double
          taxation treaty pursuant to which the Company, upon receiving an
          appropriate direction from the UK Inland Revenue Financial
          Intermediaries and Claims Office, will be permitted to pay interest in
          respect of advances made by that financial institution under this
          Agreement without withholding of United Kingdom income tax.

     "Rate Fixing Day"

     means:

     (a)  the first day of a Term for a Loan denominated in Sterling; or

     (b)  the second Business Day before the first day of a Term for a Loan
          denominated in an Optional Currency (other than euros); or

     (c)  the second TARGET Day before the first day of a Term for a Loan
          denominated in euros.

     "Reference Banks"

     means, subject to Clause 27.5 (Reference Banks), the principal London
     offices of The Royal Bank of Scotland plc, The Chase Manhattan Bank, The
     Bank of Tokyo-Mitsubishi, Ltd. and Commerzbank Aktiengesellschaft.

     "Relevant Group"

     means

     (a)  in the case of the Company, the Group; or

     (b)  in the case of Holdco, the Holdco Group.

     "Repayment Date"

     means the last day of a Term for a Loan.

     "Request"

     means a request made by the Company for a Loan, substantially in the form
     of Schedule 4 (Form of Request).

     "Reservations"

     means the qualifications as to matters of law only contained in the legal
     opinions set out in Schedule 6 (Form of legal opinion of Allen & Overy) and
     Schedule 7 (Form of legal opinion of Maclay Murray & Spens).

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     "Restructuring"

     means any restructuring of the Group required in order to comply with the
     Utilities Act 2000 and the Licences.

     "Ring Fenced Group"

     means Holdco and any Affiliate of Holdco that is not also a member of
     the Group.

     "Security Interest"

     means any mortgage, pledge, lien, charge, assignment by way of security or
     subject to a proviso for redemption, assignation in security, standard
     security, hypothecation or security interest or any other agreement or
     arrangement having the effect of conferring security.

     "SP Distribution"

     means SP Distribution Limited (Registered No. SC189125).

     "SP Generation"

     means Scottish Power Generation Limited (Registered No. SC189124).

     "SP Transmission"

     means SP Transmission Limited (Registered No. SC189126).

     "Sterling"

     means the lawful currency for the time being of the U.K.

     "Subsidiary"

     means a subsidiary within the meaning of Section 736 of the Companies Act
     1985, as amended by Section 144 of the Companies Act 1989.

     "SWP"

     means Southern Water PLC (registered number 2366620).

     "Tangible Consolidated Net Worth"

     means at any time the aggregate of:

     (a)  the amount paid up or credited as paid up on the issued share capital
          of the Company; and

     (b)  the amount standing to the credit of the consolidated capital and
          revenue reserves of the Group;

     based on the Balance Sheet but adjusted by:

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     (i)    adding any amount standing to the credit of the profit and loss
            account for the Group for the period ending on the date of the
            Balance Sheet, to the extent not included in sub-paragraph (b) above
            and to the extent the amount is not attributable to any dividend or
            other distribution declared, recommended or made by any member of
            the Group;

     (ii)   deducting any amount standing to the debit of the profit and loss
            account for the Group for the period ending on the date of the
            Balance Sheet, to the extent not included in sub-paragraph (b)
            above;

     (iii)  deducting any amount attributable to goodwill or any other
            intangible asset;

     (iv)   deducting any amount attributable to a revaluation of assets after
            31st March, 2000 or, in the case of assets of a company which
            becomes a member of the Group after that date, the date on which
            that company becomes a member of the Group unless in either case
            such revaluation is based on valuations by independent valuers;

     (v)    reflecting any variation in the amount of the issued share capital
            of the Company and the consolidated capital and revenue reserves of
            the Group after the date of the Balance Sheet;

     (vi)   reflecting any variation in the interest of the Company in any other
            member of the Group since the date of the Balance Sheet;

     (vii)  excluding any amounts required to be set aside for taxation payable
            by the Group;

     (viii) excluding any amount attributable to minority interests; and

     (ix)   eliminating inconsistencies between the accounting principles
            applied in connection with the Balance Sheet and those applied in
            connection with the Original Group Accounts.

     "TARGET Day"

     means a day on which the Trans-European Automated Real-time Gross
     Settlement Express Transfer payment system is open for the settlement of
     payments in euro.

     "Term"

     means the period selected by the Company in a Request for which the
     relevant Loan is to be outstanding.

     "Total Commitments"

     means the aggregate for the time being of the Commitments, being
     (Pounds)1,000,000,000 at the date of this Agreement.

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     "Total Consolidated Borrowings"

     means, at any time, the aggregate principal amount (or amounts equivalent
     to principal, howsoever described) comprised in the Borrowings of the
     Company and its Subsidiaries at that time calculated on a consolidated
     basis.  Any amount outstanding in a currency other than Sterling is to be
     taken into account at its Sterling equivalent calculated on the basis of
     the Agent's Spot Rate of Exchange on the day the relevant amount falls to
     be calculated.

     "Total Consolidated Net Borrowings"

     means, at any time, Total Consolidated Borrowings less the aggregate
     principal amount of Investments beneficially owned by the Group free from
     Security Interests (to the extent the proceeds of the same are readily
     remittable to the U.K.) at that time.

     "U.K."

     means the United Kingdom.

     "Water Act"

     means the Water Industry Act 1991 and any subordinate legislation,
     regulations and codes of practice made or issued under it.

     "US Dollars"

     means the lawful currency for the time being of the United States of
     America.

1.2  Construction

(a)  In this Agreement, unless the contrary intention appears, a reference to:

     (i)    "assets" includes properties, revenues and rights of every
            description;

            an "authorisation" includes an authorisation, consent, approval,
            resolution, licence, exemption, filing, registration and
            notarisation;

            a "regulation" includes any regulation, rule, official directive,
            request or guideline (whether or not having the force of law) of any
            governmental body, agency, department or regulatory, self-regulatory
            or other authority or organisation;

     (ii)   a provision of a law is a reference to that provision as amended or
            re-enacted;

     (iii)  a Clause or a Schedule is a reference to a clause of or a schedule
            to this Agreement;

     (iv)   a person includes its permitted successors and assigns;

     (v)    a Finance Document or another document is a reference to that
            Finance Document or that other document as amended, novated or
            supplemented in writing; and

     (vi)   a time of day is a reference to London time.

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                                      16
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(b)  Unless the contrary intention appears, a reference to a "month" or "months"
     is a reference to a period starting on one day in a calendar month and
     ending on the numerically corresponding day in the next calendar month or
     the calendar month in which it is to end, except that:

     (i)   if the numerically corresponding day is not a Business Day, the
           period will end on the next Business Day in that month (if there is
           one) or the preceding Business Day (if there is not);

     (ii)  if there is no numerically corresponding day in that month, that
           period will end on the last Business Day in that month; and

     (iii) notwithstanding sub-paragraph (i) above, a period which commences on
           the last Business Day of a month will end on the last Business Day in
           the next month or the calendar month in which it is to end, as
           appropriate.

(c)  Unless the contrary intention appears, a term used in any other Finance
     Document or in any notice given under or in connection with any Finance
     Document has the same meaning in that Finance Document or notice as in this
     Agreement.

(d)  (i)   Terms used in the definitions of "Borrowings", "Consolidated EBITDA",
           "Interest Payable", "Interest Receivable", "Net Interest Payable",
           "Operating Profit", "Tangible Consolidated Net Worth", "Total
           Consolidated Borrowings" and "Total Consolidated Net Borrowings" in
           Clause 1.1 (Definitions) are to be calculated in accordance with the
           accounting principles applied in connection with the Original Group
           Accounts.

     (ii)  If there is a dispute as to any interpretation or computation for
           sub-paragraph (i) above, the interpretation or computation of the
           auditors for the time being of the Company will prevail.

(e)  The index to and the headings in this Agreement are for convenience only
     and are to be ignored in construing this Agreement.

(f)  (i)   Unless expressly provided to the contrary in a Finance Document, a
           person who is not a party to a Finance Document may not enforce any
           of its terms under the Contracts (Rights of Third Parties) Act 1999.

     (ii)  Notwithstanding any term of any Finance Document, the consent of any
           third party is not required for any variation (including any release
           or compromise of any liability under) or termination of that Finance
           Document.

2.   THE FACILITY

2.1  Facility

(a)  Subject to the terms of this Agreement, the Banks grant to the Company a
     committed multicurrency revolving credit facility under which the Banks
     agree to make Loans to the Company.

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                                      17
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(b)  The Banks shall, when requested by the Company, make to the Company Loans
     up to an aggregate principal amount not exceeding, at any time, the Total
     Commitments at that time.

(c)  No Bank is obliged to lend more than its Commitment.

2.2  Number of Requests and Drawdowns

     No Request may specify a Drawdown Date which is within three Business Days
     of another Drawdown Date, although up to three Loans may be made on the
     same day.  Subject to the above, any number of Requests may be delivered on
     the same day and/or specifying the same Drawdown Date, whether or not the
     Terms requested are similar.

2.3  Limits

(a)  The aggregated Original Sterling Amount of all outstanding Loans shall not
     exceed the Total Commitments.

(b)  No Bank is obliged to participate if it would cause the Original Sterling
     Amount of its participations in the Loans to exceed its Commitment.

2.4  Nature of a Finance Party's rights and obligations

(a)  The obligations of a Finance Party under the Finance Documents are several.
     Failure of a Finance Party to carry out those obligations does not relieve
     any other Party of its obligations under the Finance Documents.  No Finance
     Party is responsible for the obligations of any other Finance Party under
     the Finance Documents.

(b)  The rights of a Finance Party under the Finance Documents are divided
     rights.  A Finance Party may, except as otherwise stated in the Finance
     Documents, separately enforce those rights.

2.5  Change of Currency

     If a change in any currency of a country occurs, this Agreement will be
     amended to the extent the Agent acting reasonably and in consultation with
     the Company specifies to be necessary to reflect the change in currency and
     to put the Banks in the same position, so far as possible, that they would
     have been in if no change in currency had occurred.

3.   PURPOSE

(a)  The Company shall apply each Loan towards its general corporate purposes
     and the refinancing of any outstanding amounts under the Existing Facility.

(b)  Without affecting the obligations of the Company in any way, no Finance
     Party is bound to monitor or verify the application of any Loan.

4.   CONDITIONS Precedent

4.1  Documentary conditions precedent

     The obligations of each Finance Party to the Company under this Agreement
     are subject to the condition precedent that the Agent has notified the
     Company and the Banks that it has

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                                      18

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     received all of the documents set out in Part 1 of Schedule 2 in form and
     substance satisfactory to the Agent.

4.2  Further conditions precedent

     The obligations of each Bank to participate in a Loan are subject to the
     further conditions precedent that on both the date of the Request and the
     Drawdown Date for that Loan:

     (i)  the representations and warranties in Clause 17 (Representations and
          warranties) to be repeated on those dates are correct and will be
          correct immediately after the Loan is made; and

     (ii) no Default is outstanding or could reasonably be expected to result
          from the making of the Loan.

5.   DRAWDOWN

5.1  Receipt of Requests

     The Company may utilise the Facility if the Agent receives a duly completed
     Request, not later than:

     (a)  9.30 a.m. on the proposed Drawdown Date for a Loan denominated in
          Sterling which is to be used solely for the purposes of repayment of
          commercial paper which is due for repayment on that Drawdown Date; or

     (b)  12.00 noon one Business Day before the applicable Rate Fixing Day for
          a Loan denominated in:

          (i)  an Optional Currency; or

          (ii) Sterling if borrowed for a purpose other than that set out in
               paragraph (a) above.

5.2  Completion of Requests

     A Request will not be regarded as having been duly completed unless:

     (a)  the Drawdown Date is a Business Day falling before the Final Repayment
          Date;

     (b)  the principal amount of the Loan is a minimum of (Pounds)25,000,000
          and an integral multiple of (Pounds)5,000,000 (or its equivalent in an
          Optional Currency) or the principal amount of the Loan is equal to the
          balance of the undrawn Total Commitments as at the proposed Drawdown
          Date;

     (c)  one Term is specified which:

          (i)  does not extend beyond the Final Repayment Date; and

          (ii) is a period of one, two, three or six months.

     (d)  the payment instructions comply with Clause 10 (Payments);

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                                      19
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     (e)  the amount selected under paragraph (b) above does not cause Clause
          2.3 (Limits) to be contravened; and

     (f)  if the currency selected is an Optional Currency it complies with
          Clause 9 (Optional Currencies).

5.3  Amount of each Bank's participation in a Loan

     The amount of a Bank's participation in a Loan will be the proportion of
     that Loan which its Commitment bears to the Total Commitments on the date
     of receipt of the relevant Request.

5.4  Notification of the Banks

     The Agent shall promptly notify each Bank of the details of the requested
     Loan and the amount of its participation in the Loan.

5.5  Payment of proceeds

     Subject to the terms of this Agreement, each Bank shall make its
     participation in each Loan available to the Agent for the Company on the
     relevant Drawdown Date.

6.   REPAYMENT

     The Company shall repay each Loan in full on its Repayment Date to the
     Agent for the Banks.

7.   PREPAYMENT AND CANCELLATION

7.1  Automatic cancellation of the Total Commitments

     The Commitment of each Bank shall be automatically cancelled at close of
     business on the Final Repayment Date.

7.2  Voluntary cancellation

     The Company may, by giving not less than 10 days' prior notice to the
     Agent, cancel the unutilised portion of the Total Commitments in whole or
     in part (but, if in part, in a minimum Original Sterling Amount of
     (Pounds)25,000,000 and an integral multiple of (Pounds)5,000,000).  Any
     cancellation in part shall be applied against the Commitment of each Bank
     pro rata.

7.3  Additional right of prepayment and cancellation

     If any Obligor is required to pay any amount to or for the account of a
     Bank under Clause 11 (Taxes) or Clause 13 (Increased costs) the Company
     may, whilst the circumstances giving rise to the requirement continue,
     serve a notice of prepayment and cancellation on that Bank through the
     Agent.  On the date falling five Business Days after the date of service of
     the notice:

     (a)  the Company shall prepay that Bank's participation in all the Loans
          together with all other amounts payable by it to that Bank under this
          Agreement; and

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                                      20
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     (b)  the Bank's Commitment shall be cancelled.

7.4  Miscellaneous provisions

(a)  Any notice of prepayment and/or cancellation under this Agreement is
     irrevocable. The Agent shall notify the Banks promptly of receipt of any
     such notice.

(b)  All prepayments under this Agreement shall be made together with accrued
     interest on the amount prepaid.

(c)  No prepayment or cancellation is permitted except in accordance with the
     express terms of this Agreement.

(d)  Any amount of a Loan repaid under this Agreement may subsequently be re-
     borrowed.

8.   INTEREST

8.1  Interest rate

     Subject to Clause 8.5 (Default interest), the rate of interest on each Loan
     for its Term is the rate per annum determined by the Agent to be the
     aggregate of the applicable:

     (a)  Margin;

     (b)  LIBOR; and

     (c)  Mandatory Cost.

8.2  Margin adjustments

(a)  In this Clause 8.2:

     "Accounting Reference Date" means the last day of each financial year and
     each financial half year of the Company.

     "Margin Certificate" is a certificate, substantially in the form of
     Schedule 9 (Form of Margin Certificate), setting out the amount of Total
     Consolidated Net Borrowings and Consolidated EBITDA for the period ending
     on the Accounting Reference Date.

(b)  The Company must supply to the Facility Agent a Margin Certificate on each
     date that it supplies the relevant accounts under Clause 18.2(a) or (b)
     (Financial Information).

(c)  A Margin Certificate must be signed by one of the senior officers of the
     Company.

(d)  Subject to paragraph (e) below, the Margin applicable to any Loan during a
     Term with an applicable Rate Fixing Day falling after the delivery of a
     Margin Certificate delivered on or after the date falling six months after
     the date of this Agreement but on or before delivery of the next Margin
     Certificate will be calculated by reference to the table below and the
     information set out in the relevant Margin Certificate:

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<PAGE>

                                      21
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<TABLE>
<CAPTION>

               Total Consolidated Net Borrowings                        Applicable Margin (%)
                     to Consolidated EBITDA                                   per annum
<S>                                                                    <C>
     Greater than or equal to 3.25:1                                             0.50

     Less than 3.25:1 but greater than or equal to 2.25:1                        0.45

     Less than 2.25:1                                                            0.40
</TABLE>

(e)  For so long as:

     (i)  the Company is in default of its obligations under this Agreement to
          provide a Margin Certificate; or

     (ii) a Default is outstanding,

     the Margin will be 0.50 per cent. per annum.

8.3  Non-Business Days

     If a Term would otherwise end on a day which is not a Business Day, that
     Term shall instead end on the next Business Day in that calendar month (if
     there is one) or the preceding Business Day (if there is not).

8.4  Due dates

     Except as otherwise provided in this Agreement, accrued interest on each
     Loan is payable by the Company on the last day of its Term and also, if the
     Term is longer than 6 months, on the date falling at 6 monthly intervals
     after the first day of that Term.

8.5  Default interest

(a)  If an Obligor fails to pay any amount payable by it under the Finance
     Documents, it shall forthwith on demand by the Agent pay interest on the
     overdue amount from the due date up to the date of actual payment, as well
     after as before judgment , at a rate (the "default rate") determined by the
     Agent to be one per cent. per annum above  the rate which would have been
     payable if the overdue amount had, during the period of non-payment,
     constituted a Loan in the currency of the overdue amount for such
     successive Terms of such duration as the Agent may determine (each a
     "Designated Term"), that default rate applying to those overdue amounts
     instead of the rate under Clause 8.1 (Interest rate).

(b)  The default rate will be determined on each Business Day or the first day
     of the relevant Designated Term, as appropriate.

(c)  If the Agent is informed that deposits in the currency of the overdue
     amount are not at the relevant time being made available by the Reference
     Banks to leading banks in the London interbank market, the default rate
     will be determined by reference to the cost of funds to the Agent from
     whatever sources it reasonably selects, after consultation with the
     Reference Banks.

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<PAGE>

                                      22
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(d)  Default interest will be compounded monthly (where paragraph (a)(i)
     applies) and at the end of each Designated Term (in each other case).

8.6  Notification of rates of interest

     The Agent shall promptly notify each relevant Party of the determination of
     a rate of interest under this Agreement.

9.   OPTIONAL CURRENCIES

9.1  Selection

(a)  The Company shall select the currency of a Loan in the relevant Request.

(b)  The currency of each Loan must be Sterling or an Optional Currency.

(c)  The Company may not choose a currency if as a result the Loans would be
     denominated at any time in more than 3 currencies.

(d)  The Agent shall notify each Bank of the currency and the Original Sterling
     Amount of each Loan and the applicable Agent's Spot Rate of Exchange
     promptly after they are ascertained.

9.2  Revocation of currency

     If, before 9.30 a.m. on any Rate Fixing Day, the Agent receives notice from
     a Bank that:

     (a)  it is impracticable for the Bank to fund its participation in the
          relevant Loan in the relevant Optional Currency during its Term in the
          ordinary course of business in the London interbank market; and/or

     (b)  the use of the proposed Optional Currency might contravene any law or
          regulation,

     the Agent shall give notice to the Company and to the Banks to that effect
     before 11.00 a.m. on that day.  In this event:

     (i)  the Company and the Banks may agree that the drawdown will not be
          made; or

     (ii) in the absence of agreement, that Bank's participation in the Loan
          (or, if more than one Bank is similarly affected, those Banks'
          participations in the Loan) shall be treated as a separate Loan
          denominated in Sterling during the relevant Term.

10.  PAYMENTS

10.1 Place

     All payments by an Obligor or a Bank under the Finance Documents shall be
     made to the Agent to its account at such office or bank as it may notify to
     the Obligors or that Bank for this purpose.

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<PAGE>

                                      23
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10.2  Funds

      Payments under the Finance Documents to the Agent shall be made for value
      on the due date at such times and in such funds as the Agent may specify
      to the Party concerned as being customary at the time for the settlement
      of transactions in the relevant currency in the place for payment.

10.3  Distribution

(a)   Each payment received by the Agent under this Agreement for another Party
      shall, subject to paragraphs (b) and (c) below, be made available by the
      Agent to that Party by payment (on the date and in the currency and funds
      of receipt) to its account with such office or bank:

      (i)  in the principal financial centre of the relevant currency; or

      (ii) in the case of euro units or national currency units, in the
           principal financial centre of a Participating Member State or London,

      as it may notify to the Agent for this purpose by not less than 5 Business
      Days' prior notice.

(b)   The Agent may apply any amount received by it for an Obligor in or towards
      payment (on the date and in the currency and funds of receipt) of any
      amount due from an Obligor under the Finance Documents.

(c)   Where a sum is to be paid under the Finance Documents to the Agent for the
      account of another Party, the Agent is not obliged to pay that sum to that
      Party until it has established that it has actually received that sum. The
      Agent may, however, assume that the sum has been paid to it in accordance
      with this Agreement and, in reliance on that assumption, make available to
      that Party a corresponding amount. If the sum has not been made available
      but the Agent has paid a corresponding amount to another Party, that Party
      shall forthwith on demand refund the corresponding amount to the Agent
      together with interest on that amount from the date of payment to the date
      of refund, calculated at a rate determined by the Agent to reflect its
      cost of funds.

10.4  Currency

(a)   A repayment or prepayment of a Loan or any part of a Loan is payable in
      the currency in which the Loan is denominated on its due date.

(b)   Interest is payable in the currency in which the relevant amount in
      respect of which it is payable is denominated.

(c)   Amounts payable in respect of costs, expenses, taxes and the like are
      payable in the currency in which they are incurred.

(d)   Any other amount payable under the Finance Documents is, except as
      otherwise provided in this Agreement, payable in Sterling.

10.5  Set-off and counterclaim

      All payments made by an Obligor under the Finance Documents shall be made
      without set-off or counterclaim.

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                                      24
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10.6  Non-Business Days

(a)  If a payment under the Finance Documents is due on a day which is not a
     Business Day, the due date for that payment shall instead be the next
     Business Day in the same calendar month (if there is one) or the preceding
     Business Day (if there is not).

(b)  During any extension of the due date for payment of any principal under
     this Agreement interest is payable on the principal at the rate payable on
     the original due date.

10.7  Partial payments

(a)  If the Agent receives a payment insufficient to discharge all the amounts
     then due and payable by the Obligors under the Finance Documents, the Agent
     shall apply that payment towards the obligations of the Obligors under the
     Finance Documents in the following order:

     (i)    first, in or towards payment of any unpaid costs and expenses of the
            Agent under the Finance Documents;

     (ii)   secondly, in or towards payment pro rata of any accrued fees due but
            unpaid under Clause 21.2 (Commitment fee);

     (iii)  thirdly, in or towards payment pro rata of any accrued interest due
            but unpaid under this Agreement;

     (iv)   fourthly, in or towards payment pro rata of any principal due but
            unpaid under this Agreement; and

     (v)    fifthly, in or towards payment pro rata of any other sum due but
            unpaid under the Finance Documents.

(b)  The Agent shall, if so directed by all the Banks, vary the order set out in
     sub-paragraphs (a)(ii) to (v) above.

(c)  Paragraphs (a) and (b) above shall override any appropriation made by an
     Obligor.

10.8 Netting of payments

(a)  If on any date an amount (the "first amount") is to be advanced or paid by
     a Bank under this Agreement and an amount (the "second amount") is due from
     an Obligor to that Bank under the Finance Documents, the Obligor instructs
     that Bank to apply the first amount in or towards payment of the second
     amount.

(b)  The relevant Bank shall remain obliged to advance any excess (or, as the
     case may be, an Obligor shall remain obliged to pay any shortfall) in
     accordance with this Clause 10. Nothing in this Clause 10.8 shall be
     effective to create a charge.

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<PAGE>

                                      25
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11.   TAXES

11.1  Gross-up

      All payments by an Obligor under the Finance Documents shall be made free
      and clear of and without deduction for or on account of any taxes levied
      or imposed by or on behalf of the UK or any taxing authority thereof or
      therein except to the extent that the Obligor is required by law to make
      payment subject to any taxes. If any tax or amounts in respect of tax must
      be deducted from any amounts payable or paid by an Obligor, or paid or
      payable by the Agent to a Bank, under the Finance Documents, the Obligor
      shall pay such additional amounts as may be necessary to ensure that the
      relevant Bank receives a net amount equal to the full amount which it
      would have received had payment not been made subject to tax.

11.2  Tax receipts

      All taxes required by law to be deducted or withheld by an Obligor from
      any amounts paid or payable under the Finance Documents shall be paid by
      the relevant Obligor when due and the Obligor shall, within 30 days of the
      payment being made, deliver to the Agent for the relevant Bank an original
      or certified copy of an official receipt or such other evidence, if any,
      as is then customary, evidencing that such deduction or withholding has
      been made and has been accounted for to the appropriate authorities.

11.3  Qualifying Banks

(a)   If, otherwise than as a result of the introduction of, change in, or
      change in the interpretation, administration or application of, any law,
      treaty or regulation or any practice or concession of the UK Inland
      Revenue occurring after the date of this Agreement, a Bank is not or has
      ceased to be a Qualifying Bank or is not or has ceased to be beneficially
      entitled to all interest received by it in respect of advances made by it
      under this Agreement, no Obligor will be liable to pay to or for the
      account of that Bank under Clause 11.1 (Gross-up) any amount in respect of
      taxes levied or imposed by the U.K. or any taxing authority of or in the
      UK in excess of the amount it would have been obliged to pay if that Bank
      had been, or had not ceased to be a Qualifying Bank and had been
      beneficially entitled to all interest received by it in respect of
      advances made by it under this Agreement.

(b)   Each Bank warrants and represents to the Obligors on the date of this
      Agreement or (if later) on the date on which it becomes a Party that it is
      a Qualifying Bank and is beneficially entitled to all interest receivable
      by it in respect of advances made by it under this Agreement.

(c)   Each Bank which ceases to be a Qualifying Bank or which ceases to be
      beneficially entitled to interest received by it in respect of advances
      made by it under this Agreement will notify the Company forthwith upon
      becoming aware that it has so ceased.

11.4  Tax Credit

(a)   If an Obligor makes a payment pursuant to Clause 11.1 (Gross-up) for the
      account of any Bank and that Bank has received or been granted a credit
      against, or relief or remission or repayment of, any tax paid or payable
      by it (a "Tax Credit") which is attributable to that payment or the
      corresponding payment under the Finance Document that Bank shall, to the
      extent that it can do so without prejudice to the retention of the amount
      of such credit, relief, remission or repayment, pay to the Obligor
      concerned such amount as the Bank shall have

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<PAGE>

                                      26

      reasonably determined to be attributable to such payments and which will
      leave the Bank (after such payment) in no better or worse position than it
      would have been if the Obligor had not been required to make any deduction
      or withholding.

(b)   Nothing in this Clause 11.4 shall interfere with the right of a Bank to
      arrange its tax affairs in whatever manner it thinks fit and without
      limiting the foregoing no Bank shall be under any obligation, except as
      expressly stated in sub-clause (a) above, to claim a Tax Credit or to
      claim a Tax Credit in priority to any other claims, relief, credit or
      deduction available to it. No Bank shall be obliged to disclose any
      information relating to its tax affairs or any computations in respect
      thereof.

11.5  Double Tax Treaties

      For the purposes of Clause 11.3(a) above, a financial institution which is
      a Qualifying Bank by virtue of satisfying part (b) of the definition
      thereof shall nevertheless not be treated as a Qualifying Bank until the
      Obligors receive an appropriate direction as described in that part (b).

12.   MARKET DISRUPTION

12.1  Market disturbance

(a)   If LIBOR is to be determined in accordance with paragraph (b) of its
      definition and a Reference Bank does not supply an offered rate by 11.30
      a.m. on the applicable Rate Fixing Day, the applicable LIBOR shall,
      subject to paragraph (b) below, be determined on the basis of the
      quotations of the remaining Reference Banks.

(b)   If, in relation to any proposed Loan:

      (i)  LIBOR is to be determined in accordance with paragraph (b) of its
           definition and no, or only one, Reference Bank supplies a rate by
           11.30 a.m. on the applicable Rate Fixing Day for the purposes of
           determining the applicable LIBOR; or

      (ii) the Agent otherwise determines (which determination, made by the
           Agent acting reasonably, shall be conclusive and binding on all
           parties) that adequate and fair means do not exist for ascertaining
           the applicable LIBOR,

      the Agent shall promptly notify the Company and the relevant Banks of the
      fact and that this Clause 12 is in operation.

12.2  Alternative rates

      If the Agent gives a notice under Clause 12.1 (Market disturbance):

      (a)  the Company and the Banks may (through the Agent) agree that in the
           case of a Loan which has not been borrowed, that Loan shall not be
           borrowed; or

      (b)  in the absence of agreement, a Loan (if it has not been borrowed)
           shall still be made: and

           (i)  the Term of the Loans concerned shall be one month; and

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                                      27
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          (ii) during the Term of each Loan the rate of interest applicable to
               that Loan shall be the applicable Margin plus the Mandatory Cost
               plus the rate per annum which is expressed as a percentage rate
               per annum of the cost to the Bank concerned of funding that Loan
               from whatever sources it may reasonably select, which rate shall
               be notified by the Bank concerned to the Agent before that last
               date of such Term.

13.  INCREASED COSTS

13.1 Increased costs

(a)  Subject to Clause 13.2 (Exceptions), the Company shall forthwith on demand
     by a Finance Party or any of its Affiliates pay that Finance Party the
     amount of any increased cost incurred by it as a result of:

     (i)   the introduction of, or any change in, or any change in the
           interpretation or application of, any law or regulation (including
           any relating to taxation or reserve asset, special deposit, cash
           ratio, liquidity or capital adequacy requirements or any other form
           of banking or monetary control); or

     (ii)  compliance with any law or regulation made after the date of this
           Agreement.

(b)  In this Agreement "increased cost" means:

     (i)   an additional cost incurred by a Finance Party or any of its
           Affiliates as a result of it having entered into, or performing,
           maintaining or funding its obligations under, this Agreement; or

     (ii)  that portion of an additional cost incurred by a Finance Party or any
           of its Affiliates in making, funding or maintaining all or any
           advances comprised in a class of advances formed by or including the
           participations in the Loans made or to be made under this Agreement
           as is attributable to it making, funding or maintaining those
           participations; or

     (iii) a reduction in any amount payable to a Finance Party or any of its
           Affiliates or the effective return to a Finance Party or any of its
           Affiliates under this Agreement or on its capital; or

     (iv)  the amount of any payment made by a Finance Party or any of its
           Affiliates, or the amount of interest or other return foregone by a
           Finance Party or any of its Affiliates, calculated by reference to
           any amount received or receivable by a Finance Party or any of its
           Affiliates from any other Party under this Agreement.

13.2  Exceptions

     Clause 13.1 (Increased costs) does not apply to any increased cost:

     (a)  compensated for by the payment of the Mandatory Cost;

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<PAGE>

                                      28
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     (b)  attributable to any tax or amounts in respect of tax which must be
          deducted from any amounts payable or paid by the Company or payable or
          paid by the Agent to a Finance Party or any of its Affiliates under
          the Finance Documents;

     (c)  attributable to any change in the rate of tax on the overall net
          income, profits or gains of a Bank (or the overall net income, profits
          or gains of a division or branch of the Bank) imposed in the
          jurisdiction in which its principal office or Facility Office is
          situate.

14.  ILLEGALITY AND MITIGATION

14.1 Illegality

     If it is or becomes unlawful in any jurisdiction for a Bank to give effect
     to any of its obligations as contemplated by this Agreement or to fund or
     maintain its participation in any Loan, then:

     (a)  the Bank may notify the Company through the Agent accordingly; and

     (b)  (i)  the Company shall to the extent required and within the period
               allowed by law or regulation or, if no period is allowed by law
               or regulation, forthwith prepay that Bank's participation in all
               the Loans together with all other amounts payable by it to that
               Bank under this Agreement; and

          (ii) the Bank's Commitment shall be cancelled.

14.2 Mitigation

     Notwithstanding the provisions of Clauses 11 (Taxes), 13 (Increased costs)
     and 14.1 (Illegality), if in relation to a Bank or (as the case may be) the
     Agent circumstances arise which would result in:

     (a)  any deduction, withholding or payment of the nature referred to in
          Clause 11 (Taxes); or

     (b)  any increased cost of the nature referred to in Clause 13 (Increased
          costs); or

     (c)  a notification pursuant to Clause 14.1 (Illegality),

     then without in any way limiting, reducing or otherwise qualifying the
     rights of that Bank or the Agent, that Bank shall upon becoming aware of
     the same notify the Agent thereof (whereupon the Agent shall notify the
     Company) and such Bank shall use reasonable endeavours to transfer its
     participation in the Facility and, in the case of the Agent or that Bank,
     its rights hereunder and under the Finance Documents to another financial
     institution or Facility Office not affected by the circumstances having the
     results set out in (a), (b) or (c) above and shall otherwise take such
     reasonable steps as may be open to it to mitigate the effects of such
     circumstances provided that such Bank or the Agent (as the case may be)
     shall not be under any obligation to take any such action if, in its
     reasonable opinion, to do so might have a material adverse effect upon its
     business, operations or financial condition or might involve it in any
     unlawful activity or any activity that is contrary to any request,

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     guidance or directive of any competent authority (whether or not having the
     force of law) or (unless indemnified to its satisfaction) might involve it
     in any expense or tax disadvantage.

15.  GUARANTEE

15.1 Guarantee

     Each Guarantor irrevocably and unconditionally and notwithstanding the
     release of the Company or any other person under the terms of any
     composition or arrangement with any creditors of any member of the Group:

     (a)  as principal obligor guarantees to each Finance Party prompt
          performance by the Company of all its obligations under the Finance
          Documents;

     (b)  undertakes with each Finance Party that, whenever the Company does not
          pay any amount when due under or in connection with any Finance
          Document, a Guarantor shall forthwith on demand by the Agent pay that
          amount as if that Guarantor, instead of the Company, were expressed to
          be the principal obligor; and

     (c)  indemnifies each Finance Party on demand against any loss or liability
          suffered by such Finance Party if any obligation guaranteed by a
          Guarantor is or becomes unenforceable, invalid or illegal.

15.2 Continuing guarantee

     This guarantee is a continuing guarantee and will extend to the ultimate
     balance of all sums payable by the Company under the Finance Documents and
     shall not be discharged by any intermediate payment or discharge in whole
     or in part.

15.3 Reinstatement

     (a)  Where any discharge (whether in respect of the obligations of any
          Obligor or any security for those obligations or otherwise) is made in
          whole or in part or any arrangement is made on the faith of any
          payment, security or other disposition which is avoided or must be
          restored on insolvency, liquidation or otherwise without limitation,
          the liability of a Guarantor under this Clause 15 shall continue as if
          the discharge or arrangement had not occurred.

     (b)  Each Finance Party may concede or compromise any claim that any
          payment, security or other disposition is liable to avoidance or
          restoration.

15.4 Waiver of defences

     The obligations of each Guarantor under this Clause 15 will not be affected
     by an act, omission, matter or thing which, but for this provision, would
     reduce, release or prejudice any of its obligations under this Clause 15 or
     prejudice or diminish those obligations in whole or in part, including
     (whether or not known to it or any Finance Party):

     (a)  any time or waiver granted to, or composition with, the Company or
          other person;

     (b)  the taking, variation, compromise, exchange, renewal or release of, or
          refusal or neglect to perfect, take up or enforce, any rights against,
          or security over assets of, the Company or other person or any non-
          presentation or non-observance of any

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          formality or other requirement in respect of any instrument or any
          failure to realise the full value of any security;

     (c)  any incapacity or lack of powers, authority or legal personality of or
          dissolution or change in the members of status of the Company or any
          other person;

     (d)  any variation (however fundamental) or replacement of a Finance
          Document or any other document or security so that references to that
          Finance Document in this Clause 15 shall include each variation or
          replacement;

     (e)  any unenforceability, illegality or invalidity of any obligation of
          any person under any Finance Document or any other document or
          security, to the intent that a Guarantor's obligations under this
          Clause 15 shall remain in full force and its guarantee be construed
          accordingly, as if there were no unenforceability, illegality or
          invalidity;

     (f)  any postponement, discharge, reduction, non-provability or other
          similar circumstance affecting any obligation of a Guarantor under a
          Finance Document resulting from any insolvency, liquidation or
          dissolution proceedings or from the law, regulation or order so that
          each such obligation shall for the purposes of a Guarantor's
          obligations under this Clause 15 be construed as if there were no such
          circumstances; or

     (g)  the release of the Company or any other person under the terms of any
          composition or arrangement with any creditor of any member of the
          Group.

15.5 Immediate recourse

     Each Guarantor waives any right it may have of first requiring any Finance
     Party (or any trustee or agent on its behalf) to proceed against or enforce
     any other rights or security or claim payment from any person before
     claiming from a Guarantor under this Clause 15.

15.6 Appropriations

     If a notice has been served on the Company under Clause 19.19
     (Acceleration) then, until all amounts which may be or become payable by
     the Obligors under or in connection with the Finance Documents have been
     irrevocably paid in full, each Finance Party (or any trustee or agent on
     its behalf) may:

     (a)  refrain from applying or enforcing any other moneys, security or
          rights held or received by that Finance Party (or any trustee or agent
          on its behalf) in respect of those amounts, or apply and enforce the
          same in such manner and order as it sees fit (whether against those
          amounts or otherwise), and a Guarantor shall not be entitled to the
          benefit of the same; and

     (b)  hold in a suspense account any moneys received from a Guarantor or on
          account of a Guarantor's liability under this Clause 15 which shall
          bear interest at an appropriate commercial rate as reasonably
          determined by such Finance Party.

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15.7 Non-competition

     Until all amounts which may be or become payable by the Obligors under or
     in connection with the Finance Documents have been irrevocably paid in
     full, a Guarantor shall not, after a claim has been made or by virtue of
     any payment or performance by it under this Clause 15:

     (a)  be subrogated to any rights, security or moneys held, received or
          receivable by any Finance Party (or any trustee or agent on its
          behalf) or be entitled to any right of contribution or indemnity in
          respect of any payment made or moneys received on account of a
          Guarantor's liability under this Clause 15;

     (b)  claim, rank, prove or vote as a creditor of the Company or its estate
          in competition with any Finance Party (or any trustee or agent on its
          behalf) unless otherwise required by law; or

     (c)  receive, claim or have the benefit of any payment, distribution or
          security from or on account of the Company, or exercise any right of
          set-off as against the Company.

     Each Guarantor shall hold in trust for and forthwith pay or transfer to the
     Agent for the Finance Parties any payment or distribution or benefit of
     security received by it contrary to this Clause 15.7 or if required by law
     as contemplated by paragraph (b) above or as directed by the Agent.

15.8 Additional security

     This guarantee is in addition to and is not in any way prejudiced by any
     other security now or subsequently held by any Finance Party.

16.  COUNTER GUARANTEE

16.1 Guarantee

     The provisions of this Clause 16 (Counter Guarantee) are subject to the
     terms of Clause 15 (Guarantee) of this Agreement.

16.2 Counter Guarantee

     Each Counter Guarantor irrevocably and unconditionally and notwithstanding
     the release of the Company, any Guarantor or any other person under the
     terms of any composition or arrangement with any creditors of any member of
     the Group:

     (a)  authorises each Guarantor to pay any demand made or purporting to be
          made under Clause 15 (Guarantee) without investigation by it or
          confirmation from a Counter Guarantor or any other person;

     (b)  agrees that, as between itself and any Guarantor, the demand will be
          conclusive evidence that the demand has been properly made;

     (c)  agrees that each Guarantor deals in documents only and shall not be
          concerned with the legality of the claim or any underlying transaction
          or any set-off, counterclaim or defence as between the Company, the
          Guarantors or any other person; and

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     (d)  agrees that this Clause 16.2 shall apply in respect of amounts paid
          under any demand made under Clause 15 (Guarantee) without regard to:

          (i)    the sufficiency, accuracy or genuineness of any demand or any
                 certificate or statement in connection with any demand;

          (ii)   any incapacity of, or limitation upon the powers of, any person
                 signing or issuing any demand or certificate or statement in
                 respect of any demand; or

          (iii)  any other condition.

16.3 Reimbursement and indemnity

     Each Counter Guarantor shall, forthwith on demand:

     (a)  pay to the relevant Guarantor an amount equal to each amount demanded
          of or paid out by a Guarantor in respect of Clause 15 (Guarantee)
          together with interest at the rate specified in Clause 8.5 (Default
          interest) from the date of payment by the relevant Guarantor to the
          date of the corresponding payment by the relevant Counter Guarantor
          under this Clause 16.3(a); and

     (b)  indemnify the relevant Guarantor against any loss or liability which
          it incurs under or in connection with Clause 15 (Guarantee) of this
          Agreement.

16.4 Continuing guarantee

     This counter guarantee is a continuing counter guarantee and will extend to
     the ultimate balance of all sums payable by a Guarantor under or in
     connection with the Finance Documents and shall not be discharged by any
     intermediate payment or discharge in whole or in part.

16.5 Reinstatement

     Where any discharge (whether in respect of the obligations of any Obligor
     or any security for those obligations or otherwise) is made in whole or in
     part or any arrangement is made on the faith of any payment, security or
     other disposition which is avoided or must be restored on insolvency,
     liquidation or otherwise without limitation, the liability of each Counter
     Guarantor under this Clause 16 shall continue as if the discharge or
     arrangement had not occurred.

16.6 Waiver of defences

     The obligations of each Counter Guarantor under this Clause 16 will not be
     affected by an act, omission, matter or thing which, but for this
     provision, would reduce, release or prejudice any of its obligations under
     this Clause 16 or prejudice or diminish those obligations in whole or in
     part, including (whether or not known to it or any Obligor):

     (a)  any time or waiver granted to, or composition with, any Obligor or
          other person;

     (b)  the taking, variation, compromise, exchange, renewal or release of, or
          refusal or neglect to perfect, take up or enforce, any rights against,
          or security over assets of, any Obligor or other person or any non-
          presentation or non-observance of any

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          formality or other requirement in respect of any instrument or any
          failure to realise the full value of any security;

     (c)  any incapacity or lack of powers, authority or legal personality of or
          dissolution or change in the members or status of any Obligor or other
          person;

     (d)  any variation (however fundamental) or replacement of a Finance
          Document or any other document or security so that references to that
          Finance Document or other document or security in this Clause 16 shall
          include each variation or replacement;

     (e)  any unenforceability, illegality or invalidity of any obligation of
          any person under any Finance Document or any other document or
          security, to the intent that each Counter Guarantor's obligations
          under this Clause 16 shall remain in full force and its counter
          guarantee be construed accordingly, as if there were no
          unenforceability, illegality or invalidity;

     (f)  any postponement, discharge, reduction, non-provability or other
          similar circumstance affecting any obligation of a Counter Guarantor
          or other person under a Finance Document or any other document
          resulting from any insolvency, liquidation or dissolution proceedings
          or from any law, regulation or order so that each such obligation
          shall for the purposes of a Counter Guarantor's obligations under this
          Clause 16 be construed as if there were no such circumstances; or

     (g)  the release of any Obligor or any other person under the terms of any
          composition or arrangement with any creditor of any member of the
          Group.

16.7 Immediate recourse

     Each Counter Guarantor waives any right it may have of first requiring any
     Guarantor  to proceed against or enforce any other rights or security or
     claim payment from any person before a claim is made from a Counter
     Guarantor under this Clause 16.

16.8 Appropriations

     If a notice has been served on the Company under Clause 19.19
     (Acceleration) then, until all amounts which may be or become payable by
     the Obligors under or in connection with the Finance Documents have been
     irrevocably paid in full, each Guarantor may:

     (a)  refrain from applying or enforcing any other moneys, security or
          rights held or received by that Guarantor in respect of those amounts,
          or apply and enforce the same in such manner and order as it sees fit
          (whether against those amounts or otherwise) and a Counter Guarantor
          shall not be entitled to the benefit of the same; and

     (b)  hold in a suspense account any moneys received from a Counter
          Guarantor or on account of a Counter Guarantor's liability under this
          Clause 16 which shall bear interest at an appropriate commercial rate
          as reasonably determined by such Guarantor.

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16.9 Non-competition

     Until all amounts which may be or become payable by the Obligors under or
     in connection with the Finance Documents have been irrevocably paid in
     full, a Counter Guarantor shall not, after a claim has been made or by
     virtue of any payment or performance by it under this Clause 16:

     (a)  be subrogated to any rights, security or moneys held, received or
          receivable by any Guarantor or be entitled to any right of
          contribution or indemnity in respect of any payment made or moneys
          received on account of a Counter Guarantor's liability under this
          Clause 16;

     (b)  claim, rank, prove or vote as a creditor of any Obligor or its estate
          in competition with any Guarantor unless otherwise required by law; or

     (c)  receive, claim or have the benefit of any payment, distribution or
          security from or on account of any Obligor, or execute any right of
          set-off as against any Obligor.

     Each Counter Guarantor shall hold in trust for and forthwith pay or
     transfer to the Guarantor any payment or distribution or benefit of
     security received by it contrary to this Clause 16.9 or if required by law
     as contemplated by paragraph (b) above or as directed by a Guarantor.

17.  REPRESENTATIONS AND WARRANTIES

17.1 Representations and warranties

     The Company and, on becoming an Obligor, Holdco (in respect of itself and
     the Relevant Group only) and each Obligor (in respect of itself only) makes
     the representations and warranties set out in this Clause 17
     (Representations and warranties) to each Finance Party.

17.2 Status

(a)  It is a limited liability company, duly incorporated and validly existing
     under the laws of the jurisdiction of its incorporation; and

(b)  each member of the Relevant Group has the power to own its assets and carry
     on its business as it is being conducted.

17.3 Powers and authority

     It has the power to enter into and perform, and has taken all necessary
     action to authorise the entry into, performance and delivery of, the
     Finance Documents to which it is or will be a party and the transactions
     contemplated by those Finance Documents.

17.4 Legal validity

     Each Finance Document to which it is or will be a party constitutes, or
     when executed in accordance with its terms will constitute, its legal,
     valid and binding obligation, enforceable (subject to the Reservations) in
     accordance with its terms.

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17.5 Non-conflict

     The entry into and performance by it of, and the transactions contemplated
     by, the Finance Documents do not and will not conflict with:

     (a)  any law or regulation or judicial or official order; or

     (b)  the constitutional documents of any member of the Relevant Group; or

     (c)  to the best of the knowledge, information and belief of its Directors,
          any document which is binding upon any member of the Relevant Group or
          any asset of any member of the Relevant Group,

     in any such case to an extent or in a manner which would have a material
     adverse effect on its ability to perform its obligations under this
     Agreement.

17.6 No default

(a)  No Default is outstanding or would result from the making of any Loan; and

(b)  no other event is outstanding which constitutes (or, with the giving of
     notice, lapse of time, determination of materiality or the fulfilment of
     any other applicable condition or any combination of the foregoing, is
     reasonably likely to constitute) a default under any document which is
     binding on any member of the Relevant Group or any asset of any member of
     the Relevant Group to an extent or in a manner which might have a material
     adverse effect on its ability to perform its obligations under the Finance
     Documents.

17.7 Authorisations

     All authorisations required in connection with the entry into, performance,
     validity and enforceability of, and the transactions contemplated by, the
     Finance Documents have been obtained or effected (as appropriate) and are
     in full force and effect.

17.8 Licences

(a)  Each member of the Relevant Group which requires a Licence for the conduct
     of its business has been duly licensed.

(b)  The Appointee is the duly appointed water and sewerage undertaker for the
     Franchise Area pursuant to the Appointment.

17.9 Accounts

     The audited consolidated accounts of the Relevant Group most recently
     delivered to the Agent (which in respect of the Company only, at the date
     of this Agreement, are the Original Group Accounts):

     (a)  have been prepared in accordance with accounting principles and
          practices generally accepted in the United Kingdom consistently
          applied; and

     (b)  fairly represent the consolidated financial condition of the Relevant
          Group as at the date to which they were drawn up.

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17.10 Litigation

      Save as disclosed in writing to the Agent prior to the date of this
      Agreement, no litigation, arbitration or administrative proceedings in
      relation to any member of the Relevant Group are current or, to its
      knowledge, pending or threatened, which are reasonably expected to be
      adversely determined and which would, if adversely determined, be likely
      to have a material adverse effect on the ability of any Obligor to perform
      its obligations under this Agreement.

17.11 Information

(a)   All of the factual information (including all information relating to the
      Company provided in the information memorandum dated April, 2001) supplied
      by it to the Agent in connection with the Finance Documents is true in all
      material respects and not misleading in any respect and there are no facts
      or matters not disclosed in writing to the Agent the omission of which
      makes any such factual information incorrect or misleading in any respect.

(b)   Nothing has occurred since the date the information was provided which
      renders the information contained in it untrue or misleading in any
      material respect and which, if disclosed, may affect the decision of a
      person considering whether to enter into this Agreement.

17.12 Times for making representations and warranties

      The representations and warranties set out in this Clause 17:

      (a)  (i)   in the case of the Company, are made by it on the date of this
                 Agreement; and

           (ii)  in the case of each Guarantor and Counter Guarantor will be
                 deemed to be made by the relevant Guarantor or Counter
                 Guarantor (as the case may be) on the date it executes and
                 delivers a Guarantor Accession Agreement or Counter Guarantor
                 Accession Agreement (as the case may be) to the Agent in
                 accordance with Clause 27.4 (Accession); and

      (b)   other than Clause 17.11 (Information), are deemed to be repeated by
            the Obligors on the date of each Request, each Drawdown Date and the
            first day of each Term with reference to the facts and circumstances
            then existing.

18.   UNDERTAKINGS

18.1  Duration

      The undertakings in this Clause 18 (Undertakings) will remain in force
      from the date of this Agreement for so long as any amount is or may be
      outstanding under this Agreement or any Commitment is in force.

18.2  Financial information

      The Company, and, where relevant, the Company on behalf of each Obligor
      shall supply to the Agent in sufficient copies for all the Banks:

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     (a)  as soon as the same are available (and in any event within 180 days of
          the end of each of its financial years) its (including, for the
          avoidance of doubt, each Obligor's) audited financial statements and
          the audited consolidated accounts of the Relevant Group for that
          financial year;

     (b)  as soon as the same are available (and in any event within 90 days of
          the end of the first half-year of each of its financial years) the
          unaudited consolidated accounts of the Relevant Group for that half-
          year;

     (c)  (in respect of the Company only), together with the accounts specified
          in:

          (i)  paragraph (a) above, a certificate signed by one of its senior
               officers on its behalf setting out in reasonable detail
               computations establishing compliance with Clause 18.12 (Financial
               covenants) as at the date to which those accounts were drawn up;

          (ii) paragraph (b) above, a certificate signed by one of its senior
               officers on its behalf setting out in reasonable detail
               computations establishing compliance with Clause 18.12 (a)
               (Financial covenants) as at the date to which those accounts were
               drawn up; and

     (d)  as soon as the same are available (and in any event within 90 days
          from the end of the period for which they are produced) the quarterly
          unaudited consolidated accounts of the Relevant Group.

18.3 Information - Miscellaneous

     Each Obligor shall supply to the Agent:

     (a)  all documents despatched by it to its shareholders (or any class of
          them) or its creditors (or any class of them) at the same time as they
          are despatched;

     (b)  promptly upon becoming aware of them, details of any litigation,
          arbitration or administrative proceedings which are current,
          threatened or pending, and which might, if adversely determined, have
          a material adverse effect on its ability to perform its obligations
          under the Finance Documents; and

     (c)  promptly, such further information in the possession or control of
          that Obligor regarding its financial condition as any Finance Party
          through the Agent may reasonably request,

     in sufficient copies for all of the Banks, if the Agent so requests.

18.4 Notification of Default

     Each Obligor shall notify the Agent of any Default (and the steps, if any,
     being taken to remedy it) promptly upon becoming aware of it.

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18.5 Compliance certificates

     Each Obligor shall supply to the Agent promptly at any time, if the
     Majority Banks so request and they have or the Agent has grounds for
     believing that a Default may be outstanding, a statement signed by one of
     its senior officers on its behalf incorporating such information as it has
     in its possession which may be relevant as to whether any Default is
     outstanding and, if a Default is stated to be outstanding, stating the
     steps if any being taken to remedy it.  Such statements shall contain such
     certificates as the Majority Banks may reasonably require as to questions
     of fact which are within the knowledge of the Obligor providing such
     statements.

18.6 Authorisations

     Each Obligor shall promptly:

     (a)  obtain, maintain and comply with the terms of; and

     (b)  if requested, supply certified copies to the Agent of,

     any authorisation required under any law or regulation to enable it to
     perform its obligations under, or for the validity or enforceability of,
     any Finance Document.

18.7 Pari passu ranking

(a)  Each Obligor shall procure that its obligations under the Finance Documents
     do and will rank at least pari passu with all its other present and future
     unsecured obligations, except for taxes, national insurance contributions,
     employee remuneration and benefits and any other obligations which from
     time to time are mandatorily preferred by law applying to companies
     generally.

(b)  The Company shall ensure that (except as permitted by Clause 18.8 (Negative
     Pledge)) the creditors in respect of any Borrowings of the Group (including
     without limitation the holders of its bonds, commercial paper and medium-
     term notes) will not, following or as a result of a Restructuring, be (in
     the opinion of the Majority Banks) in any more favourable guarantee,
     security or structural positions than the Banks under the Facility.

18.8 Negative pledge

(a)  Subject to paragraph (b) below, no Obligor shall, and the Company or (on
     becoming an Obligor) Holdco (as the case may be) shall procure that no
     other member of the Relevant Group will, create or permit to subsist, any
     Security Interest on any of its assets.

(b)  Notwithstanding paragraph (a) above, each member of the Relevant Group may
     create, or permit to subsist, Permitted Security Interests on its assets.

18.9 Disposals

(a)  No Obligor shall, and the Company or (on becoming an Obligor) Holdco (as
     the case may be) shall procure that no other member of, in the case of the
     Company, the Group and, (on becoming an Obligor) in the case of Holdco, the
     Ring Fenced Group will, either in a single transaction or in a series of
     transactions, whether related or not and whether voluntarily or
     involuntarily, sell, transfer, grant or lease or otherwise dispose of all
     or any material part of its assets.

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(b)   Paragraph (a) does not apply to:

      (i)   disposals made in the ordinary course of business of the disposing
            entity;

      (ii)  disposals of assets in exchange for other assets comparable or
            superior as to type, value and quality;

      (iii) the disposal of assets on arm's length terms;

      (iv)  sale and lease-back transactions the net financial effect of each of
            which (looking at the sale and any related lease-back together)
            represent a transaction on arm's length terms;

      (v)   other than in relation to a Restructuring, the disposal of assets to
            other members of, in the case of the Company, the Group (other than
            to a member of the Group which is not an Obligor) and, (on becoming
            an Obligor) in the case of Holdco, the Ring Fenced Group;

      (vi)  disposals of assets to a GEMA Subsidiary made as a result of a
            Restructuring provided that the aggregate total net assets of all
            Mandatory Subsidiaries and all other GEMA Subsidiary Guarantors and
            Counter Guarantors (when combined with the total un-consolidated net
            assets of the Company immediately after the Restructuring) and after
            deducting all net assets of the Group resulting from any
            intercompany arrangements between any member of the Group (other
            than an Excluded Entity) and an Excluded Entity, comprise no less
            than 80 per cent. (80%) of the Company's total un-consolidated net
            assets immediately prior to the Restructuring; and

      (vii) disposals to which the Majority Banks have agreed in writing.

18.10 GEMA Subsidiaries

      The Company will procure that each member of the Group ensures that at all
      times the aggregate total net assets of all Mandatory Subsidiaries and all
      other GEMA Subsidiary Guarantors and Counter Guarantors (when taken
      together with the total un-consolidated net assets of the Company at that
      time) and after deducting all net assets of the Group resulting from any
      intercompany arrangements between any member of the Group (other than an
      Excluded Entity) and an Excluded Entity, comprise no less than 80 per
      cent. (80%) of the Company's un-consolidated net assets immediately prior
      to such Restructuring.

18.11 Environmental matters

      Each Obligor will comply and the Company or (on becoming an Obligor)
      Holdco (as the case may be) will procure that each member of the Relevant
      Group complies in all material respects with:

      (a) the terms and conditions of all Environmental Licences applicable to
          it; and

      (b) all other applicable Environmental Law,

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       where failure to comply with the relevant Environmental Licence or
       Environmental Law might reasonably be expected to have a material adverse
       effect on its ability to comply with its obligations under the Finance
       Documents.

18.12  Financial covenants

(a)    The Company shall procure that as at the last day of each period of
       twelve months ending on the last day of each financial year and each
       financial half-year of the Company, the ratio of Total Consolidated Net
       Borrowings to Consolidated EBITDA does not at any time exceed 4.0:1.

(b)    The Company shall procure that the ratio of Operating Profit for a
       financial year of the Group to Net Interest Payable for the same
       financial year is not, with respect to any financial year, less than 2.50
       to 1.

18.13  Restriction on Borrowings of Subsidiaries

       The Company shall procure that none of its Subsidiaries will have
       outstanding any Borrowings, except for:

       (a)   Borrowings incurred by Relevant Subsidiaries in accordance with the
             terms of the Finance Documents;

       (b)   Borrowings incurred by Relevant Subsidiaries with the prior consent
             of the Majority Banks;

       (c)   Borrowings owed by Relevant Subsidiaries to other Relevant
             Subsidiaries;

       (d)   Borrowings of a Relevant Subsidiary which becomes a member of the
             Group after the date of this Agreement, which is not created in
             contemplation of or in connection with that company becoming a
             member of the Group, so long as the same is discharged on or before
             the date falling 6 months after it becomes a member of the Group or
             (if later) the first date upon which it can be so discharged
             without any premium or penalty (other than reimbursement to the
             relevant lender of any costs for breaking any fixture period
             relating to that lender's funding arrangements);

       (e)   Project Finance Borrowings by Relevant Subsidiaries not exceeding
             (Pounds)500,000,000 in aggregate at any one time outstanding;

       (f)   Borrowings by Relevant Subsidiaries under EIB Facilities and not
             exceeding (Pounds)500,000,000 in aggregate at any one time
             outstanding;

       (g)   Borrowings incurred by a Subsidiary which is a Guarantor or a
             Counter Guarantor;

       (h)   Borrowings of Relevant Subsidiaries which are non-trading financing
             vehicles:

             (i)  where the proceeds of the Borrowings are on lent to the
                  Company; or

             (ii) which are Hedging Liabilities,

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             and where the only assets of those Relevant Subsidiaries are those
             loans to the Company and receivables under instruments evidencing
             or creating those Hedging Liabilities;

       (i)   subject to paragraph (j) below, any other Borrowings of any
             Subsidiary of the Company so long as the amount of those
             Borrowings, when aggregated with the Borrowings of all other
             Subsidiaries of the Company permitted under this paragraph (i) does
             not exceed, at any time, (Pounds)100,000,000 (or its equivalent in
             other currencies) at that time; and

       (j)   Borrowings by Relevant Subsidiaries made by way of a tradable
             instrument in a maximum amount of (Pounds)100,000,000 and for a
             maximum period of 10 years commencing on 29th January, 1998 issued
             by the Appointee to assist it in fulfilling its obligations to the
             Director General of Water Services.

       In this Clause 18.13:

       (A)   Borrowings of a Subsidiary or Relevant Subsidiary (as the case may
             be) arising in respect of guarantees issued by it, at any time,
             shall be taken into account in an amount equal to the actual (and
             not the nominal) amount guaranteed by that guarantee at that time;
             and

       (B)   Borrowings of Subsidiaries or Relevant Subsidiaries (as the case
             may be) party to an intra-Group bank netting arrangement in
             relation to the usual operation of current accounts, at any time,
             shall be taken into account only in an amount equal to the net
             debit balance outstanding in respect of all accounts subject to
             that netting arrangement, at that time.

       For the purposes of this Clause 18.13, a "Relevant Subsidiary" means any
       Subsidiary of the Company (other than a GEMA Subsidiary which is not a
       GEMA Subsidiary Guarantor or a GEMA Subsidiary Counter Guarantor) which
       is not an Obligor.

18.14  Distributions

(a)    Subject to paragraph (b) and Clause 18.15(a) (Lending and guarantees)
       below, the Company shall not make any loans, provide any form of credit,
       or pay or make any dividends or distributions in respect of any class of
       equity or preference shares in cash or in kind (a "Distribution") to any
       member of the Ring Fenced Group.

(b)    Notwithstanding paragraph (a) above and subject to Clause 18.15(a)(ii)-
       (v) (inclusive) (Lending and guarantees) below, the Company may (provided
       no Default is outstanding or would result from the making of that
       Distribution), in any 12 month period, make Distributions to Holdco in an
       aggregate amount not exceeding an amount equal to the higher of:

       (i)   100 per cent. of dividends on ordinary share capital made in
             respect of that twelve month period by Holdco to its shareholders
             less the amount of any Distribution made by PacifiCorp to Holdco in
             that 12 month period; and

       (ii)  the consolidated post-taxation profits of the Company for that
             twelve month period.

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18.15  Lending and guarantees

(a)    Subject to paragraph (b) below, the Company shall not, and shall procure
       that no member of the Group will:

       (i)   subject to Clause 18.14(b) (Distributions), make any loans or
             provide any form of credit to members of the Ring Fenced Group; or

       (ii)  give any guarantee or indemnity to or for the benefit of members of
             the Ring Fenced Group or for the benefit of any person in respect
             of any obligation or enter into any document under which any member
             of the Group assumes the liability of members of the Ring Fenced
             Group; or

       (iii) either in a single transaction or in a series of transactions
             whether related or not and whether voluntarily or involuntarily,
             sell, transfer, grant or lease or otherwise dispose of all or any
             part of its assets to a member of the Ring Fenced Group; or

       (iv)  create or permit to subsist any Security Interest on any of its
             assets in respect of any indebtedness owed by members of the Ring
             Fenced Group; or

       (v)   enter into any agreement with members of the Ring Fenced Group
             unless it is on arm's length terms in the ordinary course of
             business,

       which together, in an aggregate amount exceed (Pounds)100,000,000 (or its
       equivalent).

(b)    Notwithstanding paragraph (a) above the Company may enter into a senior
       interest bearing loan facility with PacifiCorp provided that the
       aggregate amount of any loan outstanding to PacifiCorp thereunder does
       not exceed US Dollars 350,000,000 (or its equivalent).

19.    DEFAULT

19.1   Events of Default

       Each of the events set out in Clauses 19.2 (Non-payment) to 19.18
       (Enforceability) (inclusive) is an Event of Default (whether or not
       caused by any reason whatsoever outside the control of any Obligor or any
       other person).

19.2   Non-payment

       Any Obligor does not pay, within three Business Days of notification by
       the Agent that such amount is unpaid after having become due, any amount
       payable by it under the Finance Documents at the place at and in the
       currency in which it is expressed to be payable.

19.3   Breach of other obligations

       Any Obligor does not comply with any provision of the Finance Documents
       (other than those referred to in Clause 19.2 (Non-payment)) and such
       failure (if capable of remedy before the expiry of such period) continues
       unremedied for a period of 30 days from the date on which the Agent gives
       notice to that Obligor requiring the same to be remedied.

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19.4   Misrepresentation

       A representation, warranty or statement made or repeated by any Obligor
       in or in connection with any Finance Document or in any document
       delivered by or on behalf of that Obligor under or in connection with any
       Finance Document is incorrect in any material respect when made or deemed
       to be made or repeated.

19.5   Cross-default

(a)    Any Borrowings (other than Hedging Liabilities) of a member of the Group
       or Holdco are not paid when due or within any applicable grace period
       provided in the original documentation therefor; or

(b)    any Hedging Liabilities are not paid within a period of five Business
       Days of the due date or any applicable grace period provided in the
       original documentation therefor, whichever is the shorter; or

(c)    any Borrowings of a member of the Group or Holdco become prematurely due
       and payable or are placed on demand in each case as a result of an event
       of default or termination event (howsoever described) under the document
       relating to those Borrowings; or

(d)    any Security Interest securing Borrowings over any asset of a member of
       the Group or Holdco becomes enforceable and the holder thereof shall
       commence proceedings or appoint a receiver, manager or similar officer to
       take steps to enforce the same,

       except that this Clause 19.5 shall not apply to:

       (i)   Project Finance Borrowings; or

       (ii)  Borrowings:

             (A)    liability for payment of which is being contested in good
                    faith by appropriate proceedings provided that if the
                    Company's auditors determine that the amount in dispute
                    should be provided for in the relevant accounts, that the
                    auditors verify that such amount is fully provided against;
                    or

             (B)    the aggregate principal amount of which (taking into
                    account, in the case of Hedging Liabilities, the net payment
                    due to the relevant counterparties as the principal amount
                    for this purpose) is (Pounds)20,000,000 or less or its
                    equivalent in other currencies.

19.6   Insolvency

(a)    Any Obligor or a Principal Subsidiary is, or is deemed for the purposes
       of any law to be, unable to pay its debts (within the meaning of Section
       123(1) or, in the case of an Obligor only, 123(2) of the Insolvency Act
       1986 but, for the purposes of this Clause 19.6, Section 123(1)(a) of the
       Insolvency Act 1986 shall have effect as if for "(Pounds)750" there was
       substituted "(Pounds)250,000" or such higher figure as the Majority Banks
       may from time to time agree);

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(b)    any Obligor or a Principal Subsidiary suspends making payments on all or
       any class of its debts or announces an intention to do so, or a
       moratorium is declared in respect of any of its indebtedness; or

(c)    an Obligor or a Principal Subsidiary by reason of financial difficulties,
       begins negotiations with one or more of its creditors with a view to the
       readjustment or rescheduling of any of its indebtedness.

19.7   Administration

(a)    Any meeting of any Obligor or any Principal Subsidiary is convened for
       the purpose of considering any resolution to present an application for
       an administration order; or

(b)    any Obligor or any Principal Subsidiary passes a resolution to present an
       application for an administration order; or

(c)    an application for an administration order in relation to any Obligor or
       any Principal Subsidiary is presented to the court and either (i) that
       Obligor or such Principal Subsidiary does not apply to the court within
       30 days after the presentation of such petition requesting the court to
       refuse such petition or (ii) it does so apply but such petition is not
       refused by such court within 60 days after such application for the
       refusal of such petition; or

(d)    any Obligor or any Principal Subsidiary has an administration order made
       in relation to it or a special administration order is made under the
       Water Act in relation to the Appointee.

19.8   Compositions etc

       An Obligor or any Principal Subsidiary has any voluntary arrangement
       proposed in relation to it under Section 1 of the Insolvency Act 1986 or
       enters into any other composition, scheme of arrangement, compromise or
       arrangement involving that Obligor or such Principal Subsidiary and their
       respective creditors generally (other than for the purposes of
       reconstruction or amalgamation upon terms and within such period as may
       previously have been approved in writing by the Majority Banks).

19.9   Winding up

(a)    Any meeting of the shareholders of any Obligor or any Principal
       Subsidiary is convened for the purpose of considering any resolution for
       (or to petition for) its winding up (other than in connection with a
       reconstruction or amalgamation upon terms and within such period as may
       previously have been approved in writing by the Majority Banks); or

(b)    Any Obligor or any Principal Subsidiary passes any resolution for its
       winding up other than a resolution previously approved in writing by the
       Majority Banks (other than in connection with a reconstruction or
       amalgamation upon terms and within such period as may previously have
       been approved in writing by the Majority Banks); or

(c)    A petition for the winding up of any Obligor or any Principal Subsidiary
       is presented to the court and either (i) that Obligor or such Principal
       Subsidiary does not apply to the court within 30 days after the
       presentation of such petition requesting the court to refuse such
       petition, or (ii) it does so apply but such petition is not refused by
       such court within 60 days after such application for the refusal of such
       petition; or

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                                      45
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(d)    Any Obligor or any Principal Subsidiary becomes subject to a winding up
       order.

19.10  Appointment of receivers and managers

(a)    Any liquidator, trustee in bankruptcy, judicial custodian, compulsory
       manager, receiver, administrative receiver, administrator or the like is
       appointed in respect of any Obligor or any Principal Subsidiary or any
       material part of its assets or undertaking and (in the case of a receiver
       only) such appointment continues for more than 30 days; or

(b)    the directors of any Obligor or any Principal Subsidiary request the
       appointment of a liquidator, trustee in bankruptcy, judicial custodian,
       compulsory manager, receiver, administrative receiver, administrator or
       the like.

19.11  Creditors' process

       Any attachment, sequestration, distress, execution or diligence (whether
       on the dependence or otherwise) affects any material asset of any Obligor
       or any Principal Subsidiary and is not discharged within 21 days.

19.12  Analogous proceedings

       There occurs, in relation to any Obligor or any Principal Subsidiary, any
       event anywhere which corresponds to any of those mentioned in Clauses
       19.6 (Insolvency) to 19.11 (Creditors' process) (inclusive).

19.13  Unlawfulness

       It is or becomes unlawful for any Obligor to perform any of its
       obligations under the Finance Documents.

19.14  Revocation and Modification of Licences or Appointment etc

(a)    Any Licence or the Appointment is:

       (i)   revoked, surrendered, terminated or disposed of (or any notice of
             revocation or termination is issued by the relevant Secretary of
             State); or

       (ii)  modified; or

       (iii) in the case of the Appointment, varied under Section 7 of the Water
             Act,

       in any manner or circumstances which would have a material adverse effect
       on the ability of any Obligor to perform its obligations under this
       Agreement; or

(b)    any final enforcement order is made or any provisional enforcement order
       is confirmed with respect to the Appointee under the Water Act (other
       than where the Appointee demonstrates to the satisfaction of the Majority
       Banks that the order is being contested in good faith by the Appointee
       pursuant to the Water Act) and failure to comply with such order is
       likely to have a material adverse effect on the Company's ability to
       perform its obligations under this Agreement.

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19.15  Cessation of business

       Any Obligor ceases to carry on all or a substantial part of its business.

19.16  Change of control of Holdco, the Company, a Guarantor or a Counter
       Guarantor

(a)    Any person or group of persons acting in concert gains control of Holdco.

(b)    The Company ceases to be a wholly owned Subsidiary of Holdco.

(c)    A Guarantor (other than Holdco or a Mandatory Subsidiary) or a Counter
       Guarantor ceases to be a wholly owned Subsidiary of the Company and, as a
       result, the minimum aggregate total net asset test referred to in Clause
       18.10 (GEMA Subsidiaries) would be breached.

(d)    A Mandatory Subsidiary ceases to be a wholly owned Subsidiary of the
       Company.

(e)    In paragraph (a) above:

       "control" means the power to direct the management and policies of an
       entity, whether through the ownership of voting capital by contract or
       otherwise; and

       "acting in concert" has the meaning given to it in the City Code on
       Takeovers and Mergers.

19.17  Guarantee and Counter Guarantee

(a)    On the date upon which Holdco gives any guarantee, Security Interest,
       indemnity or enters into any other similar arrangement in respect of any
       of the obligations of any of its Subsidiaries (other than in respect of
       the EIB Facilities), Holdco does not enter into a Guarantor Accession
       Agreement in accordance with Clause 27.4 (Accession) or the documents set
       out in Part 2 of Schedule 2 in relation to Holdco are either not provided
       or are not in form or substance satisfactory to the Agent (acting
       reasonably) on that date.

(b)    (i)   Subject to Clause 27.4(b) (Accession), in the case of a GEMA
             Subsidiary Guarantor or any Counter Guarantor (other than a
             Mandatory Subsidiary), on the date falling 5 Business Days after
             the date upon which such GEMA Subsidiary Guarantor or Counter
             Guarantor has any assets transferred to it as a result of a
             Restructuring; and

       (ii)  in the case of a Mandatory Subsidiary, on the date upon which such
             Mandatory Subsidiary has any assets transferred to it as a result
             of a Restructuring or, if later, the date of this Agreement,

       such GEMA Subsidiary Guarantor (including a Mandatory Subsidiary) or
       Counter Guarantor (as the case may be) does not enter into a Guarantor
       Accession Agreement or Counter Guarantor Accession Agreement (as the case
       may be), in accordance with Clause 27.4 (Accession) or the documents set
       out in Part 2 of Schedule 2 in relation to that GEMA Subsidiary Guarantor
       or Counter Guarantor (including a Mandatory Subsidiary) (as the case may
       be) are either not provided or are not in form and substance satisfactory
       to the Agent (acting reasonably) on that date or GEMA revokes, surrenders
       or terminates (or any notice of revocation or termination is issued by
       GEMA) its consent to the giving of such guarantee or counter guarantee by
       a Guarantor or Counter Guarantor.

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                                      47
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19.18  Enforceability

       On or after the date a Guarantor or a Counter Guarantor (as the case may
       be) enters into a Guarantor Accession Agreement or a Counter Guarantor
       Accession Agreement (as the case may be), the guarantee in Clause 15
       (Guarantee) or the counter guarantee in Clause 16 (Counter Guarantee) (as
       the case may be) is not, or is alleged by a Guarantor or a Counter
       Guarantor (as the case may be) not to be, binding on or enforceable
       against a Guarantor or a Counter Guarantor (as the case may be).

19.19  Acceleration

       On and at any time after the occurrence of an Event of Default while such
       event is continuing the Agent may, and shall if so directed by the
       Majority Banks, by notice to the Company:

       (a)   cancel the Total Commitments; and/or

       (b)   demand that all of the Loans, together with accrued interest, and
             all other amounts accrued under this Agreement be immediately due
             and payable, whereupon they shall become immediately due and
             payable; and/or

       (c)   demand that all or part of the Loans be payable on demand,
             whereupon they shall immediately become payable on demand.

20.    THE AGENT AND THE JOINT ARRANGERS

20.1   Appointment and duties of the Agent

       Each Finance Party (other than the Agent) irrevocably appoints the Agent
       to act as its agent under and in connection with the Finance Documents,
       and irrevocably authorises the Agent on its behalf to perform the duties
       and to exercise the rights, powers and discretions that are specifically
       delegated to it under or in connection with the Finance Documents,
       together with any other incidental rights, powers and discretions. The
       Agent shall have only those duties which are expressly specified in this
       Agreement. Those duties are solely of a mechanical and administrative
       nature.

20.2   Role of the Joint Arrangers

       Except as otherwise provided in this Agreement, each Joint Arranger has
       no obligations of any kind to any other Party under or in connection with
       any Finance Document.

20.3   Relationship

       The relationship between the Agent and the other Finance Parties is that
       of agent and principal only. Nothing in this Agreement constitutes the
       Agent as trustee or fiduciary for any other Party or any other person and
       the Agent need not hold in trust any moneys paid to it for a Party or be
       liable to account for interest on those moneys.

20.4   Majority Banks' directions

       The Agent will be fully protected if it acts in accordance with the
       instructions of the Majority Banks in connection with the exercise of any
       right, power or discretion or any matter not expressly provided for in
       the Finance Documents. Any such instructions given by the

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                                      48
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       Majority Banks will be binding on all the Banks. In the absence of such
       instructions the Agent may act as it considers to be in the best
       interests of all the Banks.

20.5   Delegation

       The Agent may act under the Finance Documents through its personnel and
       agents.

20.6   Responsibility for documentation

       Neither the Agent nor a Joint Arranger is responsible to any other Party
       for:

       (a)   the execution, genuineness, validity, enforceability or sufficiency
             of any Finance Document or any other document;

       (b)   the collectability of amounts payable under any Finance Document;
             or

       (c)   the accuracy of any statements (whether written or oral) made in or
             in connection with any Finance Document.

20.7   Default

(a)    The Agent is not obliged to monitor or enquire as to whether or not a
       Default has occurred. The Agent will not be deemed to have knowledge of
       the occurrence of a Default. However, if the Agent receives notice from a
       Party referring to this Agreement, describing the Default and stating
       that the event is a Default, it shall promptly notify the Banks.

(b)    The Agent may require the receipt of security satisfactory to it whether
       by way of payment in advance or otherwise, against any liability or loss
       which it will or may incur in taking any proceedings or action arising
       out of or in connection with any Finance Document before it commences
       these proceedings or takes that action.

20.8   Exoneration

(a)    Without limiting paragraph (b) below, the Agent will not be liable to any
       other Party for any action taken or not taken by it under or in
       connection with any Finance Document, unless directly caused by its gross
       negligence or wilful misconduct.

(b)    No Party may take any proceedings against any officer, employee or agent
       of the Agent in respect of any claim it might have against the Agent or
       in respect of any act or omission of any kind (including negligence or
       wilful misconduct) by that officer, employee or agent in relation to any
       Finance Document.

20.9   Reliance

       The Agent may:

       (a)   rely on any notice or document believed by it to be genuine and
             correct and to have been signed by, or with the authority of, the
             proper person;

       (b)   rely on any statement made by a director or employee of any person
             regarding any matters which may reasonably be assumed to be within
             his knowledge or within his power to verify; and

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                                      49
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       (c)   engage, pay for and rely on legal or other professional advisers
             selected by it (including those in the Agent's employment and those
             representing a Party other than the Agent).

20.10  Credit approval and appraisal

       Without affecting the responsibility of each Obligor for information
       supplied by it or on their behalf in connection with any Finance
       Document, each Bank confirms that it:

       (a)   has made its own independent investigation and assessment of the
             financial condition and affairs of the Obligors and their related
             entities in connection with its participation in this Agreement and
             has not relied exclusively on any information provided to it by the
             Agent or the Joint Arrangers in connection with any Finance
             Document; and

       (b)   will continue to make its own independent appraisal of the
             creditworthiness of the Obligors and their related entities while
             any amount is or may be outstanding under the Finance Documents or
             any Commitment is in force.

20.11  Information

(a)    The Agent shall promptly forward to the person concerned the original or
       a copy of any document which is delivered to the Agent by a Party for
       that person.

(b)    The Agent shall promptly supply a Bank with a copy of each document
       received by the Agent under Clause 4 (Conditions precedent) upon the
       request and at the expense of that Bank.

(c)    Except where this Agreement specifically provides otherwise, the Agent is
       not obliged to review or check the accuracy or completeness of any
       document it forwards to another Party.

(d)    Except as provided above, the Agent has no duty:

       (i)   either initially or on a continuing basis to provide any Bank with
             any credit or other information concerning the financial condition
             or affairs of any Obligor or any related entity of any Obligor
             whether coming into its possession or that of any of its related
             entities before, on or after the date of this Agreement; or

       (ii)  unless specifically requested to do so by a Bank in accordance with
             this Agreement, to request any certificates or other documents from
             any Obligor.

20.12  The Agent and each Joint Arranger individually

(a)    If it is also a Bank, each of the Agent and a Joint Arranger has the same
       rights and powers under this Agreement as any other Bank and may exercise
       those rights and powers as though it were not the Agent or a Joint
       Arranger.

(b)    Each of the Agent and a Joint Arranger may:

       (i)   carry on any business with any Obligor or its related entities;

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       (ii)   act as agent or trustee for, or in relation to any financing
              involving, any Obligor or its related entities; and

       (iii)  retain any profits or remuneration in connection with its
              activities under this Agreement or in relation to any of the
              foregoing.

20.13  Indemnities

(a)    Without limiting the liability of any Obligor under the Finance
       Documents, each Bank shall forthwith on demand indemnify the Agent for
       its proportion of any liability or loss incurred by the Agent in any way
       relating to or arising out of its acting as the Agent, except to the
       extent that the liability or loss arises directly from the Agent's gross
       negligence or wilful misconduct.

(b)    A Bank's proportion of the liability or loss set out in paragraph (a)
       above is the proportion which the Original Sterling Amount of its
       participation in the Loans (if any) bear to the Original Sterling Amount
       of all the Loans on the date of the demand. If, however, there are no
       Loans outstanding on the date of demand, then the proportion will be the
       proportion which its Commitment bears to the Total Commitments at the
       date of demand or, if the Total Commitments have been cancelled, bore to
       the Total Commitments immediately before being cancelled.

20.14  Compliance

(a)    The Agent may refrain from doing anything which might, in its opinion,
       constitute a breach of any law or regulation or be otherwise actionable
       at the suit of any person, and may do anything which, in its opinion, is
       necessary or desirable to comply with any law or regulation of any
       jurisdiction.

(b)    Without limiting paragraph (a) above, the Agent need not disclose any
       information relating to any Obligor or any of its related entities if the
       disclosure might, in the opinion of the Agent, constitute a breach of any
       law or regulation or any duty of secrecy or confidentiality or be
       otherwise actionable at the suit of any person.

20.15  Resignation of Agent

(a)    Notwithstanding its irrevocable appointment, the Agent may resign by
       giving notice to the Banks and the Company, in which case the Agent may
       forthwith appoint one of its Affiliates as successor Agent or, failing
       that, the Majority Banks may appoint a successor Agent.

(b)    If the appointment of a successor Agent is to be made by the Majority
       Banks but they have not, within 30 days after notice of resignation,
       appointed a successor Agent which accepts the appointment, the retiring
       Agent may appoint a successor Agent.

(c)    The resignation of the retiring Agent and the appointment of any
       successor Agent will both become effective only upon the successor Agent
       notifying all the Parties that it accepts the appointment. On giving the
       notification, the successor Agent will succeed to the position of the
       retiring Agent and the term "Agent" will mean the successor Agent.

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(d)    The retiring Agent shall, at its own cost, make available to the
       successor Agent such documents and records and provide such assistance as
       the successor Agent may reasonably request for the purposes of performing
       its functions as the Agent under this Agreement.

(e)    Upon its resignation becoming effective, this Clause 20 shall continue to
       benefit the retiring Agent in respect of any action taken or not taken by
       it under or in connection with the Finance Documents while it was the
       Agent, and, subject to paragraph (d) above, it shall have no further
       obligation under any Finance Document.

20.16  Banks

       The Agent may treat each Bank as a Bank, entitled to payments under this
       Agreement and as acting through its Facility Office(s) until it has
       received notice from the Bank to the contrary by not less than five
       Business Days prior to the relevant payment.

20.17  Extraordinary management time and resources

       In addition to the fees (if any) paid or payable to the Agent pursuant to
       Clause 21 (Fees), an Obligor shall, on demand by the Agent, reimburse it
       for its own account at such reasonable daily or hourly rates as the Agent
       may separately agree with that Obligor from time to time, the reasonable
       cost of utilising its management time or other resources in connection
       with taking all such steps or other action which:

       (a)  that Obligor requests, in connection with:

            (i)   the granting or proposed granting of any waiver or consent
                  under any Finance Document; or

            (ii)  any amendment or proposed amendment to any Finance Document;
                  or

       (b)  which any Obligor or the Majority Banks request(s) in connection
with:

            (i)   any breach by any Obligor of its obligations under any Finance
                  Document or any investigations in respect of any such breach;
                  or

            (ii)  the preservation and enforcement of any of the rights of the
                  Finance Parties under the Finance Documents; or

            (iii) the occurrence of a Default.

21.    FEES

21.1   Front-end fees

       The Company shall pay to the Agent for the Joint Arrangers front-end fees
       in the amounts agreed in the relevant Fee Letter within one Business Day
       of the date of this Agreement which the Agent shall distribute to the
       Banks in the manner agreed between the Joint Arrangers and the Banks.

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21.2 Commitment fee

(a)  The Company shall pay to the Agent for each Bank a commitment fee computed
     at the rate of 0.225 per cent. per annum on the undrawn, uncancelled amount
     of that Bank's Commitment during the period from the date of this Agreement
     up to and including the Final Repayment Date.  For this purpose Loans are
     taken at their Original Sterling Amount.

(b)  Accrued commitment fee is payable quarterly in arrear.  Accrued commitment
     fee is also payable to the Agent for the relevant Bank(s) on the cancelled
     amount of its Commitment at the time the cancellation takes effect.

21.3 Utilisation fee

(a)  If, on any day, the Outstandings exceed 33.3 per cent. of the Total
     Commitments at that time, a utilisation fee shall be payable by the Company
     to the Agent, for the account of the Banks, on the amount of the
     Outstandings on that day.

(b)  Subject to paragraph (a) above, the utilisation fee, which shall accrue
     from day to day during the period beginning on the date of this Agreement
     and ending on the Final Repayment Date, shall be calculated at the rate of
     0.05 per cent. per annum on the Outstandings on that day.

(c)  The utilisation fee is payable quarterly in arrear.

21.4 Agent's fee

     The Company shall pay to the Agent for its own account an agency fee in the
     amount and at the times agreed in the relevant Fee Letter.

21.5 VAT

     Any fee referred to in this Clause 21 (Fees) is exclusive of any value
     added tax or any other tax which might be chargeable in connection with
     that fee.  If any value added tax or other tax is so chargeable, it shall
     be paid by the Company at the same time as it pays the relevant fee.

22.  EXPENSES

22.1 Initial and special costs

     The Company shall forthwith on demand pay the Agent and each Joint Arranger
     the amount of all reasonable costs and expenses (including legal fees)
     incurred by each of them in connection with:

     (a)  the negotiation, preparation, printing and execution of:

          (i)  this Agreement and any other documents referred to in this
               Agreement;

          (ii) any other Finance Document (other than a Novation Certificate)
               executed after the date of this Agreement;

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     (b)  any amendment, waiver, consent or suspension of rights (or any
          proposal for any of the foregoing) requested by or on behalf of an
          Obligor and relating to a Finance Document or a document referred to
          in any Finance Document; and

     (c)  any other matter, not of an ordinary administrative nature, arising
          out of or in connection with a Finance Document.

22.2 Enforcement costs

     The Company shall forthwith on demand pay to each Finance Party the amount
     of all reasonable costs and expenses (including legal fees) incurred by it:

     (a)  in connection with the enforcement of, or the preservation of any
          rights under, any Finance Document; or

     (b)  in investigating any possible Default.

23.  STAMP DUTIES

     The Company shall pay and forthwith on demand indemnify each Finance Party
     against any liability it incurs in respect of any stamp, registration and
     similar tax which is or becomes payable in connection with the entry into,
     performance or enforcement of any Finance Document.

24.  INDEMNITIES

24.1 Currency indemnity

(a)  If a Finance Party receives an amount in respect of an Obligor's liability
     under the Finance Documents or if that liability is converted into a claim,
     proof, judgment or order in a currency other than the currency (the
     "contractual currency") in which the amount is expressed to be payable
     under the relevant Finance Document:

     (i)   that Obligor shall indemnify that Finance Party as an independent
           obligation against any loss or liability arising out of or as a
           result of the conversion;

     (ii)  if the amount received by that Finance Party, when converted into the
           contractual currency at a market rate in the usual course of its
           business, is less than the amount owed in the contractual currency,
           the Obligor concerned shall forthwith on demand pay to that Finance
           Party an amount in the contractual currency equal to the deficit; and

     (iii) the Obligor shall pay to the Finance Party concerned on demand any
           exchange costs and taxes payable in connection with any such
           conversion.

(b)  Each Obligor waives any right it may have in any jurisdiction to pay any
     amount under the Finance Documents in a currency other than that in which
     it is expressed to be payable.

24.2 Other indemnities

     The Company shall forthwith on demand indemnify each Finance Party against
     any loss or liability which that Finance Party incurs as a consequence of:

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     (a)  the occurrence of any Default;

     (b)  the operation of Clause 2.5 (Change of currency), 19.19 (Acceleration)
          or Clause 30 (Pro rata sharing);

     (c)  any payment of principal or an overdue amount being received from any
          source otherwise than on its Repayment Date and, for the purposes of
          this paragraph (c), the Repayment Date of an overdue amount is the
          last day of each Designated Term (as defined in Clause 8.5 (Default
          interest)); or

     (d)  (other than by reason of negligence or default by a Finance Party) a
          Loan not being made after the Company has delivered a Request for that
          Loan.

     The Company's liability in each case includes any loss of margin or other
     loss or expense on account of funds borrowed, contracted for or utilised to
     fund any amount payable under any Finance Document, any amount repaid or
     prepaid or any Loan.

25.  EVIDENCE AND CALCULATIONS

25.1 Accounts

     Accounts maintained by a Finance Party in connection with this Agreement
     are prima facie evidence of the matters to which they relate.

25.2 Certificates and determinations

     Any certification or determination by a Finance Party of a rate or amount
     under this Agreement is, in the absence of manifest error, conclusive
     evidence of the matters to which it relates.

25.3 Calculations

     Interest (including any applicable Mandatory Cost) and the fee payable
     under Clause 21.2 (Commitment fee) accrue from day to day and are
     calculated on the basis of the actual number of days elapsed and a year of
     365 days or, in the case of interest payable on an amount denominated in an
     Optional Currency only or where the market practice otherwise dictates, 360
     days.

26.  AMENDMENTS AND WAIVERS

26.1 Procedure

(a)  Subject to Clause 26.2 (Exceptions), any term of the Finance Documents may
     be amended or waived with the agreement of the Company (on behalf of each
     Obligor), the Majority Banks and the Agent.  The Agent may effect, on
     behalf of the Banks, an amendment to which they or the Majority Banks have
     agreed.

(b)  The Agent shall promptly notify the other Parties of any amendment or
     waiver effected under paragraph (a) above, and any such amendment or waiver
     shall be binding on all the Parties.

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26.2 Exceptions

     An amendment or waiver which relates to:

     (a)  the definition of "Majority Banks" in Clause 1.1;

     (b)  an extension of the date for, or a decrease in an amount or a change
          in the currency of, any payment under the Finance Documents;

     (c)  an increase in a Bank's Commitment;

     (d)  the incorporation of additional borrowers or the resignation or
          removal of any Guarantor or Counter Guarantor;

     (e)  a term of a Finance Document which expressly requires the consent of
          each Bank; or

     (f)  Clause 30 (Pro rata sharing) or this Clause 26,

     may not be effected without the consent of each Bank.

26.3 Waivers and remedies cumulative

     The rights of each Finance Party under the Finance Documents:

     (a)  may be exercised as often as necessary;

     (b)  are cumulative and not exclusive of its rights under the general law;
          and

     (c)  may be waived only in writing and specifically.

     Delay in exercising or non-exercise of any such right is not a waiver of
     that right.

27.  CHANGES TO THE PARTIES

27.1 Transfers by Obligors

     No Obligor may assign, transfer, novate or dispose of any of, or any
     interest in, its rights and/or obligations under this Agreement.

27.2 Transfers by Banks

(a)  A Bank (the "Existing Bank") may at any time assign, transfer or novate any
     of its rights and/or obligations under this Agreement (in a minimum amount
     equal to (Pounds)10,000,000 or, if less with respect to a particular Bank,
     the balance of that Bank's Commitment at the time of transfer) to another
     bank or financial institution which is a Qualifying Bank (the "New Bank").
     The prior consent of the Company is required for any such assignment,
     transfer or novation, unless:

     (i)  the New Bank is another Bank or an Affiliate of a Bank; or

     (ii) a Default is outstanding.

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     However, the prior consent of the Company must not be unreasonably withheld
     or delayed and will be deemed to have been given if, within 10 days of
     receipt by the Company of an application for consent, it has not been
     expressly refused.

(b)  A transfer of obligations will be effective only if either:

     (i)  the obligations are novated in accordance with Clause 27.3 (Procedure
          for novations); or

     (ii) the New Bank confirms to the Agent and the Company that it is a
          Qualifying Bank and that it undertakes to be bound by the terms of
          this Agreement as a Bank in form and substance satisfactory to the
          Agent.  On the transfer becoming effective in this manner the Existing
          Bank shall be relieved of its obligations under this Agreement to the
          extent that they are transferred to the New Bank.

(c)  Nothing in this Agreement restricts the ability of a Bank to sub-contract
     an obligation if that Bank remains liable under this Agreement for that
     obligation except that no Bank may sub-contract any such obligation if the
     effect of such contract would be that a person other than a Qualifying Bank
     has any beneficial entitlement to any interest received by it under this
     Agreement.

(d)  On each occasion that an Existing Bank assigns, transfers or novates any of
     its rights and/or obligations under this Agreement, the New Bank shall, on
     the date the assignment, transfer and/or novation takes effect, pay to the
     Agent for its own account a fee of (Pounds)1,000.

(e)  An Existing Bank is not responsible to a New Bank for:

     (i)    the execution, genuineness, validity, enforceability or sufficiency
            of any Finance Document or any other document;

     (ii)   the collectability of amounts payable under any Finance Document; or

     (iii)  the accuracy of any statements (whether written or oral) made in or
            in connection with any Finance Document.

(f)  Each New Bank confirms to the Existing Bank and the other Finance Parties
     that it:

     (i)    has made its own independent investigation and assessment of the
            financial condition and affairs of each Obligor and its related
            entities in connection with its participation in this Agreement and
            has not relied exclusively on any information provided to it by the
            Existing Bank in connection with any Finance Document; and

     (ii)   will continue to make its own independent appraisal of the
            creditworthiness of each Obligor and its related entities while any
            amount is or may be outstanding under this Agreement or any
            Commitment is in force.

(g)  Nothing in any Finance Document obliges an Existing Bank to:

     (i)    accept a re-transfer from a New Bank of any of the rights and/or
            obligations assigned, transferred or novated under this Clause; or

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     (ii) support any losses incurred by the New Bank by reason of the non-
          performance by the Company of its obligations under this Agreement or
          otherwise.

(h)  Any reference in this Agreement to a Bank includes a New Bank, but excludes
     a Bank if no amount is or may be owed to or by that Bank under this
     Agreement and its Commitment has been cancelled or reduced to nil.

27.3 Procedure for novations

(a)  A novation is effected if the Existing Bank and the New Bank deliver to the
     Agent a Novation Certificate in the form of Schedule 5 and the Agent
     executes it.

(b)  Each Party (other than the Existing Bank and the New Bank) irrevocably
     authorises the Agent to execute any duly completed Novation Certificate in
     the form of Schedule 5 on its behalf.

(c)  To the extent that they are expressed to be the subject of the novation in
     the Novation Certificate:

     (i)   the Existing Bank and the other Parties (the "existing Parties") will
           be released from their obligations to each other (the "discharged
           obligations");

     (ii)  the New Bank and the existing Parties will assume obligations towards
           each other which differ from the discharged obligations only insofar
           as they are owed to or assumed by the New Bank instead of the
           Existing Bank;

     (iii) the rights of the Existing Bank against the existing Parties and vice
           versa (the "discharged rights") will be cancelled; and

     (iv)  the New Bank and the existing Parties will acquire rights against
           each other which differ from the discharged rights only insofar as
           they are exercisable by or against the New Bank instead of the
           Existing Bank,

     all on the date of execution of the Novation Certificate by the Agent or,
     if later, the date specified in the Novation Certificate.  The completed
     Novation Certificate must be delivered to the Agent at least 5 Business
     Days before the date on which it is stated to be effective or such other
     date agreed by the Agent.  If no agreement can be reached by the Agent the
     novation will not be effective.

27.4 Accession

(a)  (i)  In the event that Holdco guarantees any obligations of any of its
          Subsidiaries (other than in respect of any EIB Facility), the Company
          shall procure that, on or prior to the date it gives that guarantee,
          Holdco delivers to the Agent a Guarantor Accession Agreement, duly
          executed by it.

     (ii) The Company shall procure that each Mandatory Subsidiary and any other
          GEMA Subsidiary delivers to the Agent a Guarantor Accession Agreement
          (a "GEMA Subsidiary Guarantor"), duly executed by it unless (in the
          case of a GEMA Subsidiary which is not a Mandatory Subsidiary only) it
          is prohibited from doing so by any law or regulation or the terms of
          any Licence applicable to it.

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     (iii)  If, in accordance with sub-paragraph (ii) above, a GEMA Subsidiary
            (other than a Mandatory Subsidiary) is unable to deliver to the
            Agent a Guarantor Accession Agreement, then the Company shall
            procure that such GEMA Subsidiary (other than a Mandatory
            Subsidiary) delivers to the Agent a Counter Guarantor Accession
            Agreement (a "Counter Guarantor"), duly executed by it unless it is
            prohibited from doing so by any law or regulation or the terms of
            any Licence applicable to it.

(b)  No GEMA Subsidiary (other than a Mandatory Subsidiary) will be required to
     deliver a Guarantor Accession Agreement or a Counter Guarantor Accession
     Agreement if, at all times, the minimum aggregate total net asset test
     referred to in Clause 18.10 (GEMA Subsidiaries) is satisfied.

(c)  Upon execution and delivery of a Guarantor Accession Agreement or a Counter
     Guarantor Accession Agreement (as the case may be) and all those other
     documents listed in Part 2 of Schedule 2, in each case in form and
     substance satisfactory to the Agent (acting reasonably), each Guarantor or
     Counter Guarantor (as the case may be) agrees to be bound by the terms of
     the Finance Documents.

27.5 Reference Banks

     If a Reference Bank (or, if a Reference Bank is not a Bank, the Bank of
     which it is an Affiliate) ceases to be one of the Banks, the Agent shall
     (in consultation with the Company) appoint another Bank or an Affiliate of
     a Bank to replace that Reference Bank.

27.6 Register

     The Agent shall keep a register of all the Parties and shall supply any
     other Party (at that Party's expense) with a copy of the register on
     request.

27.7 Change of Facility Office

     No Bank will change its Facility Office if, at the time of the change,
     circumstances exist which would oblige the Company to pay that Bank any
     amount under Clause 11.1 (Taxes) or Clause 13 (Increased costs) which it
     would not have been obliged to pay if that Bank had retained the same
     Facility Office.

28.  DISCLOSURE OF INFORMATION

(a)  A Bank may disclose to one of its Affiliates or any person with whom it is
     proposing to enter, or has entered into, any kind of transfer,
     participation or other agreement in relation to this Agreement:

     (i)   a copy of any Finance Document; and

     (ii)  any information which that Bank has acquired under or in connection
           with any Finance Document.

     Provided that any such Affiliate or person has agreed in writing to
     maintain the confidentiality of any such document or information on the
     same terms (with appropriate consequential changes) as set out in paragraph
     (c) below.

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(b)  The prior written consent of the Company is required for any disclosure
     under paragraph (a) above unless:

     (i)   that person is another Bank or an Affiliate of a Bank; or

     (ii)  a Default is outstanding.

     However, the prior consent of the Company must not be unreasonably withheld
     or delayed and will be deemed to have been given if, within 10 Business
     Days of receipt by an Obligor of an application for consent, it has not
     been expressly refused.

(c)  Subject to paragraph (a) above, each Bank shall keep confidential and not,
     without the prior written consent of the Company, use any information
     (other than information which is publicly available unless as a result of a
     breach of this Clause 28) supplied by or on behalf of an Obligor under this
     Agreement otherwise than in connection with this Agreement.  However, each
     Bank is entitled to disclose any information:

     (i)   in connection with any legal proceedings arising out of or in
           connection with this Agreement; or

     (ii)  if required to do so by an order of a court of competent jurisdiction
           whether in pursuance of any procedure for discovering documents or
           otherwise; or

     (iii) pursuant to any law or regulation in accordance with which that Bank
           is required to act; or

     (iv)  to any governmental, banking or taxation authority of competent
           jurisdiction; or

     (v)   to its auditors or legal or other professional advisers.

29.  SET-OFF

     A Finance Party may set off any matured obligation owed by an Obligor under
     this Agreement (to the extent beneficially owned by that Finance Party)
     against any obligation (whether or not matured) owed by that Finance Party
     to that Obligor, regardless of the place of payment, booking branch or
     currency of either obligation.  If the obligations are in different
     currencies, the Finance Party may convert either obligation at a market
     rate of exchange in its usual course of business for the purpose of the
     set-off.  If either obligation is unliquidated or unascertained, the
     Finance Party may set off in an amount estimated by it in good faith to be
     the amount of that obligation.

30.  PRO RATA SHARING

30.1 Redistribution

     If any amount owing by an Obligor under this Agreement to a Finance Party
     (the "recovering Finance Party") is discharged by payment, set-off or any
     other manner other than through the Agent in accordance with Clause 10
     (Payments) (a "recovery"), then:

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                                      60
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     (a)  the recovering Finance Party shall, within three Business Days, notify
          details of the recovery to the Agent;

     (b)  the Agent shall determine whether the recovery is in excess of the
          amount which the recovering Finance Party would have received had the
          recovery been received by the Agent and distributed in accordance with
          Clause 10 (Payments);

     (c)  subject to Clause 30.3 (Exception), the recovering Finance Party
          shall, within three Business Days of demand by the Agent, pay to the
          Agent an amount (the "redistribution") equal to the excess;

     (d)  the Agent shall treat the redistribution as if it were a payment by
          that Obligor under Clause 10 (Payments) and shall pay the
          redistribution to the Finance Parties (other than the recovering
          Finance Party) in accordance with Clause 10.7 (Partial payments); and

     (e)  after payment of the full redistribution, the recovering Finance Party
          will be subrogated to the portion of the claims paid under paragraph
          (d) above, and that Obligor will owe the recovering Finance Party a
          debt which is equal to the redistribution, immediately payable and of
          the type originally discharged.

30.2 Reversal of redistribution

     If under Clause 30.1 (Redistribution):

     (a)  a recovering Finance Party must subsequently return a recovery, or an
          amount measured by reference to a recovery, to an Obligor; and

     (b)  the recovering Finance Party has paid a redistribution in relation to
          that recovery,

     each Finance Party shall, within three Business Days of demand by the
     recovering Finance Party through the Agent, reimburse the recovering
     Finance Party all or the appropriate portion of the redistribution paid to
     that Finance Party. Thereupon the subrogation in Clause 30.1(e)
     (Redistribution) will operate in reverse to the extent of the
     reimbursement.

30.3 Exception

     A recovering Finance Party need not pay a redistribution to the extent that
     it would not, after the payment, have a valid claim against the Obligor
     concerned in the amount of the redistribution pursuant to Clause 30.1(e)
     (Redistribution).

31.  SEVERABILITY

     If a provision of any Finance Document is or becomes illegal, invalid or
     unenforceable in any jurisdiction, that shall not affect:

     (a)  the legality, validity or enforceability in that jurisdiction of any
          other provision of the Finance Documents; or

     (b)  the legality, validity or enforceability in other jurisdictions of
          that or any other provision of the Finance Documents.

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32.  COUNTERPARTS

     This Agreement may be executed in any number of counterparts, and this has
     the same effect as if the signatures on the counterparts were on a single
     copy of this Agreement.

33.  NOTICES

33.1 Giving of notices

     All notices or other communications under or in connection with this
     Agreement shall be given in writing or by facsimile.  Any such notice will
     be deemed to be given as follows:

     (a)  if in writing, when delivered; and

     (b)  if by facsimile, when received.

     However, a notice given in accordance with the above but received on a non-
     working day or after business hours in the place of receipt will only be
     deemed to be given on the next working day in that place.

33.2 Addresses for notices

(a)  The address and facsimile number of each Party (other than the Agent) for
     all notices under or in connection with this Agreement are:

     (i)  that notified by that Party for this purpose to the Agent on or before
          it becomes a Party; or

     (ii) any other notified by that Party for this purpose to the Agent by not
          less than five Business Days' notice.

(b)  The address and facsimile number of the Agent is:

     The Royal Bank of Scotland plc
     Loans Administration
     PO Box 450
     Corporate Banking Office
     5-10 Great Tower Street
     London EC3P 3HX

     Facsimile number: 020 7220 7370

     or such other as the Agent may notify to the other Parties by not less than
     five Business Days' notice.

(c)  The Agent shall, promptly upon request from any Party, give to that Party
     the address, telex number or facsimile number of any other Party applicable
     at the time for the purposes of this Clause.

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34.  GOVERNING LAW

     This Agreement is governed by English law.

35.  JURISDICTION

(a)  Each of the parties hereto irrevocably agrees, for the benefit of the Agent
     and the Banks, that the courts of England shall have jurisdiction to hear
     and determine any suit, action or proceeding, and to settle any disputes,
     which may arise out of or in connection with this Agreement and, for such
     purposes, irrevocably submits to the jurisdiction of such courts.

(b)  The Company irrevocably waives any objection which it might now or
     hereafter have to the courts referred to in paragraph (a) above being
     nominated as the forum to hear and determine any suit, action or
     proceeding, and to settle any disputes, which may arise out of or in
     connection with  this Agreement and agrees not to claim that any such court
     is not a convenient or appropriate forum.

(c)  The submission to the jurisdiction of the courts referred to in paragraph
     (a) above shall not (and shall not be construed so as to) limit the right
     of the Agent or the Banks to take proceedings in any other court of
     competent jurisdiction nor shall the taking of proceedings in any one or
     more jurisdictions preclude the taking of proceedings in any other
     jurisdiction, whether concurrently or not.

This Agreement has been entered into on the date stated at the beginning of this
Agreement.

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                                  SCHEDULE 1

                               ORIGINAL PARTIES

Name of Bank                                                        Commitments
                                                                      (Pounds)
The Bank of Tokyo-Mitsubishi, Ltd.                                   55,000,000
Commerzbank Aktiengesellschaft, London Branch                        55,000,000
The Chase Manhattan Bank                                             55,000,000
The Royal Bank of Scotland plc                                       55,000,000
Bank One, NA                                                         47,500,000
Bankgesellschaft Berlin AG, London Branch                            47,500,000
Barclays Bank PLC                                                    47,500,000
Bayerische Landesbank Girozentrale, London Branch                    47,500,000
BNP Paribas London Branch                                            47,500,000
Citibank, N.A.                                                       47,500,000
Credit Suisse First Boston                                           47,500,000
Danske Bank A/S                                                      47,500,000
Deutsche Bank AG London                                              47,500,000
Fleet National Bank                                                  47,500,000
HSBC Bank Plc                                                        47,500,000
ING Bank N.V.,  London Branch                                        47,500,000
National Australia Bank, ACN004044937                                47,500,000
Scotiabank (Ireland) Limited                                         47,500,000
The Dai-Ichi Kangyo Bank, Limited                                    21,250,000
The Fuji Bank, Limited                                               21,250,000
UBS AG                                                               42,500,000
Sumitomo Mitsui Banking Corporation                                  30,000,000

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

Total Commitments                                         (Pounds)1,000,000,000

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                                  SCHEDULE 2

                                    PART 1

             CONDITIONS PRECEDENT DOCUMENTS TO BE DELIVERED BEFORE
                                THE FIRST LOAN

1.   A copy of the memorandum and articles of association, certificate of
     incorporation and certificate of incorporation on change of name (if any)
     of the Company.

2.   A copy of a resolution of the board of directors of the Company:

     (i)   approving the terms of, and the transactions contemplated by the
           Finance Documents resolving that it execute the Finance Documents to
           which it is a party and any related and/or ancillary documents;

     (ii)  authorising a specified person or persons to execute the Finance
           Documents to which it is a party on its behalf; and

     (iii) authorising a specified person or persons, on its behalf, to sign
           and/or despatch all other documents and notices to be signed and/or
           despatched by it under or in connection with the Finance Documents.

3.   A certificate of a director of the Company certifying that the utilisation
     of the Facility in full would not cause any internal borrowing limit
     binding on the Company to be exceeded.

4.   A certificate of an authorised signatory of the Company certifying:

     (a)   that each copy document specified in this Part 1 of Schedule 2 is
           correct, complete and in full force and effect as at a date no
           earlier than the date of this Agreement; and

     (b)   the specimen signatures of its authorised signatories.

5.   A legal opinion of Allen & Overy, legal advisers to the Agent, addressed to
     the Finance Parties substantially in the form of Schedule 6.

6.   A legal opinion of Maclay Murray & Spens, legal advisers to the Agent in
     Scotland, addressed to the Finance Parties substantially in the form of
     Schedule 7.

Miscellaneous

7.   A copy of each Licence held by a member of the Group.

8.   Evidence that Existing Facility has been cancelled and any outstandings
     under the Existing Facility has been or will on the first Drawdown Date be
     repaid in full.

9.   Evidence that all fees and expenses then due and payable from the Company
     under this Agreement have been or will be paid by the first Drawdown Date.

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<PAGE>

                                      65
________________________________________________________________________________

10.  A copy of any other authorisation or other document, opinion or assurance
     which the Agent considers to be necessary or desirable in connection with
     the entry into and performance of, and the transactions contemplated by,
     any Finance Document or for the validity and enforceability of any Finance
     Document and which, in either case, is notified to the Company prior to the
     execution of this Agreement.

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<PAGE>

                                      66
________________________________________________________________________________

                                    PART 2

                        CONDITIONS PRECEDENT DOCUMENTS
              TO BE DELIVERED BY A GUARANTOR OR COUNTER GUARANTOR

Authorisations

1.   A copy of the memorandum and articles of association, certificate of
     incorporation and certificate of incorporation on change of name (if any)
     of each Guarantor or Counter Guarantor (as the case may be).

2.   A copy of a resolution of the board of directors of each Guarantor or
     Counter Guarantor (as the case may be):

     (a)  approving the terms of, and the transactions contemplated by the
          Guarantor Accession Agreement or Counter Guarantor Accession Agreement
          (as the case may be) and resolving that it execute the Guarantor
          Accession Agreement or Counter Guarantor Accession Agreement (as the
          case may be);

     (b)  authorising a specified person or persons to execute the Guarantor
          Accession Agreement or Counter Guarantor Accession Agreement (as the
          case may be) on its behalf; and

     (c)  authorising a specified person or persons, on its behalf, to sign
          and/or despatch all other documents and notices to be signed and/or
          despatched by it under or in connection with the Guarantor Accession
          Agreement or Counter Guarantor Accession Agreement (as the case may
          be).

3.   A certificate of a director of each Guarantor or Counter Guarantor (as the
     case may be) certifying that the execution of the Guarantor Accession
     Agreement or Counter Guarantor Accession Agreement (as the case may be)
     will not result in any breach or any restriction referred to in Clause 17.5
     (Non-conflict) binding on that Guarantor or Counter Guarantor (as the case
     may be).

4.   A certificate of an authorised signatory of each Guarantor or Counter
     Guarantor (as the case may be) certifying:

     (a)  that each copy document specified in Part 2 of this Schedule 2 is
          correct, complete and in full force and effect as at a date no earlier
          than the date of the Guarantor Accession Agreement or Counter
          Guarantor Accession Agreement (as the case may be); and

     (b)  the identity and specimen signatures of the directors, authorised
          signatories and secretary of that Guarantor or Counter Guarantor (as
          the case may be).

Legal opinion

5.   A legal opinion of Allen & Overy, legal advisers to the Agent, addressed to
     the Finance Parties.

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<PAGE>

                                      67
________________________________________________________________________________

6.   A legal opinion of Maclay Murray & Spens, legal advisers to the Agent in
     Scotland, addressed to the Finance Parties.

Miscellaneous

7.   Guarantor Accession Agreement or Counter Guarantor Accession Agreement (as
     the case may be) duly executed by the Guarantor or Counter Guarantor (as
     the case may be) .

8.   Written evidence that GEMA has consented to the Guarantor or Counter
     Guarantor (as the case may be) entering into the Guarantor Accession
     Agreement or Counter Guarantor Accession Agreement (as the case may be)
     notwithstanding the terms of any Licence held by such Guarantor or Counter
     Guarantor, together with details of any conditions to that consent.

9.   A copy of any other authorisation or other document, opinion or assurance
     which the Agent considers to be necessary in connection with the entry into
     and performance of the transactions contemplated by, the Guarantee or the
     Counter Guarantee (as the case may be) or for the validity and
     enforceability of the Guarantee or the Counter Guarantee (as the case may
     be).

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<PAGE>

                                      68
________________________________________________________________________________

                                  SCHEDULE 3

                       CALCULATION OF THE MANDATORY COST

(a)  The Mandatory Cost for each Loan for each period in respect of which
     interest is payable is the rate determined by the Agent to be equal to the
     rate notified by the Agent and calculated in accordance with the following
     formulae:

     in relation to a Loan denominated in Sterling:

     BY + S(Y-Z) + F x 0.01 % per annum = Mandatory Cost
     ----------------------
         100-(B + S)

     in relation to any other Loan:

     F x 0.01 % per annum = Mandatory Cost
     --------
        300

     where on the day of application of the formula:

     B     is the percentage of the Agent's eligible liabilities which the Bank
           of England requires the Agent to hold on a non-interest-bearing
           deposit account in accordance with its cash ratio requirements;

     Y     is the rate at which Sterling deposits are offered by the Agent to
           leading banks in the London interbank market at or about 11.00 a.m.
           on that day for the Term or Interest Period;

     S     is the percentage of the Agent's eligible liabilities which the Bank
           of England requires the Agent to place as a special deposit;

     Z     is the interest rate per annum allowed by the Bank of England on
           special deposits; and

     F     is the charge payable by the Agent to the Financial Services
           Authority under paragraph 2.02 or 2.03 (as appropriate) of the Fees
           Regulations (but where for this purpose, the figure in paragraph
           2.02b and 2.03b will be deemed to be zero) expressed in pounds per
           (Pounds)1 million of the fee base of the Agent.

(b)  For the purposes of this Schedule 3:

     (i)   "eligible liabilities" and "special deposits" have the meanings given
           to them at the time of application of the formula by the Bank of
           England;

     (ii)  "fee base" has the meaning given to it in the Fees Regulations;

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<PAGE>

                                      69
________________________________________________________________________________

     (iii) "Fees Regulations" means:

           (A)  prior to 31st March, 1999, the Banking Supervision (Fees)
                Regulations 1998; and

           (B)  on and after 31st March, 1999, any regulations governing the
                payment of fees for banking supervision.

(c)  In the application of the formula, B, Y, S and Z are included in the
     formula as figures and not as percentages, e.g. if B = 0.5% and Y = 15%, BY
     is calculated as 0.5 x 15.

(d)  (i)   The formula is applied on the first day of each relevant period
           comprised in the relevant Term.

     (ii)  Each rate calculated in accordance with the formula is, if necessary,
           rounded upward to the nearest four decimal places.

(e)  (i)   The relevant rate for a Bank lending from a Facility Office in a
           Participating Member State is the percentage rate per annum notified
           by that Bank to the Agent as its cost of complying with the minimum
           reserve requirements of the European Central Bank.

     (ii)  If a Bank fails to specify a rate under sub paragraph (i) above, the
           Agent will assume that the Bank has not incurred any such cost.

(f)  If the Agent determines (after consultation with the Banks) that a change
     in circumstances has rendered, or will render, the formula inappropriate,
     the Agent shall notify the Company of the manner in which the Mandatory
     Cost will subsequently be calculated.  The manner of calculation so
     notified by the Agent shall, in the absence of manifest error, be binding
     on all the parties to this Agreement.

________________________________________________________________________________
<PAGE>

                                      70

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

                                  SCHEDULE 4

                                FORM OF REQUEST

To:   THE ROYAL BANK OF SCOTLAND PLC as Agent

From: SCOTTISH POWER UK PLC
                                                            Date: [           ]

          Scottish Power UK plc-(Pounds)1,000,000,000 Revolving Credit Agreement
                  dated [                              ], 2001

1.    We wish to borrow a Loan as follows:

      (a) Drawdown Date: [             ]

      (b) Original Sterling Amount:  (Pounds)[             ]

      (c) Currency:  [                 ]

      (d) Term: [                   ]

      (e) Payment instructions: [               ]

2.    We confirm that each condition specified in Clause 4.2(a) (Further
      conditions precedent) (except as specified in paragraph (b) of that
      Clause) is satisfied on the date of this Request.

3.    We confirm that the Loan will be used [in accordance with Clause 3
      (Purpose)/solely for the purposes of repayment of commercial paper which
      is due for repayment on the Drawdown Date/outstanding amounts under the
      Existing Facility].

4.    We confirm that the borrowing of the above referenced Loan will not cause
      any borrowing limit binding on Scottish Power UK plc to be exceeded.

By:

SCOTTISH POWER UK PLC
Authorised Signatory

--------------------------------------------------------------------------------
<PAGE>

                                      71

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

                                  SCHEDULE 5

                         FORM OF NOVATION CERTIFICATE

To:   THE ROYAL BANK OF SCOTLAND PLC as Agent

From: [THE EXISTING BANK] and [THE NEW BANK]  Date: [          ]

      Scottish Power UK plc - (Pounds)1,000,000,000 Revolving Credit Agreement
                     dated [          ], 2001

We refer to Clause 27.3 (Procedure for novations).

1.    We [ ] (the "Existing Bank") and [      ] (the "New Bank") agree to the
      Existing Bank and the New Bank novating all the Existing Bank's rights and
      obligations referred to in the Schedule in accordance with Clause 27.3
      (Procedure for novations).

2.    The specified date for the purposes of Clause 27.3(c) is [date of
      novation].

3.    The Facility Office and address for notices of the New Bank for the
      purposes of Clause 33.2 (Addresses for notices) are set out in the
      Schedule.

4.    This Novation Certificate is governed by English law.

                                 THE SCHEDULE

                     Rights and obligations to be novated

[Details of the rights and obligations of the Existing Bank to be novated].

[New Bank]

[Facility Office             Address for notices]

[Existing Bank]           [New Bank]           THE ROYAL BANK OF SCOTLAND PLC

By:                       By:                  By:

Date:                     Date:                Date:

--------------------------------------------------------------------------------
<PAGE>

                                      72
________________________________________________________________________________

                                  SCHEDULE 6

                    FORM OF LEGAL OPINION OF ALLEN & OVERY

To:   The Royal Bank of Scotland plc
      135 Bishopsgate
      London EC2M 3UR

      (as Agent for the Finance Parties)

                                                                 [       ], 2001
Dear Sirs,

      Scottish Power UK plc (the "Company") - (Pounds)1,000,000,000 Revolving
               Credit Agreement dated [       ], 2001 (the "Credit Agreement")

We have acted as legal advisers in England to The Royal Bank of Scotland plc
(the "Agent") in connection with a Credit Agreement dated [ ], 2001 (the "Credit
Agreement") made between the Company as borrower, The Bank of Tokyo-Mitsubishi,
Ltd., Commerzbank Aktiengesellschaft, London Branch, J.P. Morgan plc and The
Royal Bank of Scotland plc as Joint Arrangers, the Banks (as defined therein)
and the Agent.

Terms defined in the Credit Agreement have the same meanings when used in this
opinion.

We have received instructions from and participated in discussions with the
Agent about the provisions contained in the Credit Agreement.

We have examined the following documents:

(a)   an executed copy of the Credit Agreement; and

(b)   the legal opinion of Maclay Murray & Spens legal advisers to the Agent in
      Scotland dated [       ], 2001 and addressed to the Finance Parties.

Except as stated above we have not examined any contracts, instruments or other
documents entered into by or affecting the Company or any corporate records of
the Company and have not made any other enquiries concerning the Company.

In giving this opinion, we have assumed:

(i)   the genuineness of all signatures;

(ii)  the authenticity and completeness of all documents submitted to us as
      originals;

(iii) the conformity to original documents of all documents submitted to us as
      copies and the authenticity and completeness of such original documents;

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<PAGE>

                                      73
________________________________________________________________________________

(iv)  the power and authority to execute and the due execution of the Credit
      Agreement by the Company, each Bank, each Joint Arranger and the Agent,
      and that the obligations expressed to be assumed by each Bank, each Joint
      Arranger and the Agent under the Credit Agreement are legally valid;

(v)   that, so far as the laws of Scotland are concerned, the Credit Agreement
      constitutes a valid and legally binding obligation of the Company in
      accordance with its terms; and

(vi)  that the certificates and other documents dated earlier than the date
      hereof and on which we have expressed reliance remain accurate and that
      there have been no variations to any such certificates or documents.

We have not investigated the laws of any country other than England and this
opinion is given only with respect to English law. We assume that no foreign law
which may apply with respect to the Credit Agreement or the transactions and
matters contemplated thereby would be such as to affect any of the conclusions
stated herein. We express no opinion as to matters of fact.

Based upon and subject to the foregoing and subject to any matters not disclosed
to us we are of the opinion that, so far as the present laws of England are
concerned and subject to the qualifications set out below:

(A)   Legal validity  The Credit Agreement constitutes valid and legally binding
      obligations of the Company.

(B)   Stamp duties  No stamp or registration duty or similar taxes or charges
      are payable in the United Kingdom in respect of the execution or delivery
      of the Credit Agreement.

(C)   Registrations  It is not necessary to register the Credit Agreement in any
      public office or elsewhere in England.

Notwithstanding the foregoing this opinion is subject to the following
qualifications:

(i)   The validity, performance and enforcement of the Credit Agreement may be
      limited by bankruptcy, insolvency, reorganisation or similar laws
      affecting creditors' rights generally.

(ii)  Remedies such as specific performance or the issue of an injunction are
      available only at the discretion of the court. Specific performance is not
      usually granted and an injunction is not usually issued where damages
      would be an adequate alternative.

(iii) The Credit Agreement provides for interest to be paid on overdue amounts.
      Such interest may amount to a penalty under English law and may therefore
      not be recoverable.

(iv)  We express no opinion as to the enforceability of Clause 30 (Pro rata
      sharing) of the Credit Agreement.

(v)   An English court may stay proceedings if concurrent proceedings are being
      brought elsewhere.

(vi)  There could be circumstances in which an English court would not treat as
      conclusive those certificates and determinations which the Credit
      Agreement states are to be so treated.

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<PAGE>

                                      74
________________________________________________________________________________

(vii)  The obligations contained in Clause 23 (Stamp duties) of the Agreement
       may be void in respect of stamp duty payable in the United Kingdom.

(viii) Clause 31 (Severability) of the Credit Agreement may not be effective in
       certain circumstances depending on the nature of the prohibition or
       unenforceability in question.

(ix)   The Credit Agreement may be amended orally by the parties thereto
       notwithstanding provisions therein to the contrary.

(x)    English courts may not give effect to any provision for reimbursement of
       legal costs incurred by an unsuccessful litigant.

(xi)   The effectiveness of terms exculpating a party from a liability or duty
       otherwise owed may be limited by law.

(xii)  There is no authority as to whether or not an English court would give
       effect to the currency indemnity contained in Clause 24.1 (Currency
       indemnity) of the Credit Agreement. However, the English courts will now
       render judgments in foreign currencies.

(xiii) On the assumption that a Novation Certificate is duly completed,
       executed, authorised and delivered to the Agent in accordance with the
       Credit Agreement and any conditions to which the Novation Certificate is
       expressed to be subject are satisfied, then the provisions of Clause 27.3
       (Procedure for novations) will operate in accordance with its terms.
       However, without prejudice to the preceding sentence, no opinion is
       expressed with respect to any Novation Certificate issued after the date
       of this opinion because we do not know the identity of the parties
       concerned and this opinion is given only as at today's date. In any
       event, it should be noted that in certain circumstances transactions
       employing Novation Certificates and assignments or transfers of interests
       in the Credit Agreement may require compliance with the Financial
       Services Act 1986.

(xiv)  A person may not be able to enforce a provision of the Credit Agreement
       expressed to be in his favour unless he is a party.

This opinion is given for the sole benefit of the Agent, the Joint Arrangers and
the Banks which are the original parties to the Credit Agreement and may not be
disclosed to, or relied upon by, any other person or be quoted or made public in
any way without our prior written consent.

Yours faithfully,

________________________________________________________________________________
<PAGE>

                                      75
________________________________________________________________________________

                                  SCHEDULE 7

                FORM OF LEGAL OPINION OF MACLAY MURRAY & SPENS

Ref: RJL/SMK
[        ], 2001

The Royal Bank of Scotland plc (the "Agent")
135 Bishopsgate
London EC2M 3UR
(as agent for the Finance Parties)

Dear Sirs,

You have asked for our opinion in connection with an agreement of even date with
this opinion between Scottish Power UK plc as borrower (the "Company"), The Bank
of Tokyo Mitsubishi, Ltd., Commerzbank Aktiengesellschaft, London Branch, J.P.
Morgan plc and The Royal Bank of Scotland plc as Joint Arrangers, the Banks (as
defined therein) and the Agent (the "Facility Agent").

Unless otherwise defined in this opinion, words and expressions defined in the
Facility Agreement shall bear the same meanings in this opinion.

For the purposes of this opinion, we have examined copies of and base our
opinion on the following documents, copies of which we have signed and attach
for the purposes of identification (other than the Company Search):

(a)  an executed copy of the Facility Agreement;

(b)  a certified copy of the Memorandum and Articles of Association of the
     Company;

(c)  a microfiche of the files of the Company obtained from the Registrar of
     Companies in Edinburgh on [        ], 2001 (the "Company Search");

(d)  a certified copy of the minutes of a meeting of the board of directors of
     the Company held on [        2001] (the "Directors' Minutes");

(e)  a certificate of a director of the Company confirming that the utilisation
     by the Company of the said Facility (as defined in the Facility Agreement)
     (the "Director Certificate") in full would not cause any internal borrowing
     limit binding on the Company to be exceeded; and

(f)  a certificate of an authorised signatory of the Company (the "Authorised
     Signatory Certificate") certifying that each of the items in paragraphs (b)
     and (d) is correct, complete and in full force. The Director Certificate
     and Authorised Signatory Certificate are herein together referred to as
     "the Certificates").

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<PAGE>

                                      76
________________________________________________________________________________

We have not made any other enquiries concerning the Company and in particular we
have not concerned ourselves with investigating or verifying any matters of fact
or opinion (whether set out in any of the documents referred to above or
elsewhere) other than as expressly stated herein.

We have assumed for the purposes of this opinion:

(i)    the capacity, power and authority of each of the Joint Arrangers, the
       Banks and the Agent to enter into and perform their respective
       obligations under the Facility Agreement and the due execution and
       delivery of the Facility Agreement by each of the Joint Arrangers, the
       Banks and the Agent;

(ii)   that the Facility Agreement has been signed by [        ] and [       ]
       on behalf of the Company and that the Facility Agreement has been duly
       delivered;

(iii)  the conformity to original documents of all documents supplied to us as
       photocopies, specimen or facsimile copies;

(iv)   that each of the statements contained in the Certificates (on which we
       have relied without further inquiry) is true and correct as at the date
       hereof;

(v)    that the meeting of the board of directors of the Company held on [    ],
       2001 was duly convened and held;

(vi)   that the information disclosed by the Company Search was accurate in all
       respects and that such Search did not fail to disclose any material
       information which had been delivered for registration but which did not
       appear on the microfiche supplied by the Companies Registry in Edinburgh;

(vii)  the Company has not passed a voluntary winding-up resolution, no petition
       has been presented or order made by the Court for the winding up,
       dissolution or administration of the Company and no receiver, trustee,
       administrator or similar official has been appointed in relation to the
       Company or any of its assets or revenues; and

(viii) that the Facility Agreement constitutes a legal, valid and binding
       obligation of the parties thereto under English law to which it is
       expressed to be subject and that the performance of the obligations
       thereunder is not illegal or unenforceable by virtue of the law of any
       jurisdiction (other than Scotland) in which they are to be performed.

We have not made any investigation of and do not express any opinion as to the
laws of any jurisdiction outside Scotland and this opinion relates only to the
laws of Scotland as they exist at the date hereof.

Based upon and subject to the foregoing and subject to the reservations
hereinafter referred to and to any matters not disclosed to us, we are of the
opinion that:

1.     The Company is a limited liability company duly incorporated under the
       laws of Scotland and has full corporate power and authority to execute,
       deliver and perform its obligations under the Facility Agreement.

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<PAGE>

                                      77
________________________________________________________________________________

2.   The execution and delivery by the Company of the Facility Agreement and the
     performance of its obligations thereunder have been duly authorised by all
     requisite corporate action on its part.

3.   The obligations of the Company under the Facility Agreement are valid and
     binding obligations of the Company under the law of Scotland and would be
     so treated in the Courts of Scotland.

4.   The entry into and performance of the Facility Agreement by the Company and
     the transaction and matters to be implemented thereunder do not violate (i)
     Scottish Law or (ii) the Memorandum and Articles of Association of the
     Company.

5.   It is not necessary to file, register or record the Facility Agreement with
     any court or authority in Scotland.

6.   No stamp, registration or other similar taxes or charges are payable in
     Scotland with respect to the execution or delivery of the Facility
     Agreement.

7.   The choice of English law to govern the Facility Agreement is valid and
     effective under the private international law of Scotland. Subject to the
     usual exceptions affecting such matters as procedure, the availability of
     remedies and any provision which is repugnant to the law of Scotland, the
     law of England will accordingly be applied by the Courts of Scotland if any
     dispute arising from or contractual claim connected with the Facility
     Agreement comes under their jurisdiction. A judgment rendered against the
     Company by a competent court in England and registered in Scotland pursuant
     to the provisions of the Civil Jurisdiction and Judgments Act 1982 will be
     enforceable by the Scottish Courts.

8.   The submission by the Company to the jurisdiction of the courts of England
     is valid and binding on the Company.

The foregoing opinion is subject to the following qualifications:

(a)  We do not express any view on the particular remedies available on
     enforcement, such as specific implement or interdict, which are
     discretionary remedies.

(b)  The enforcement of the Facility Agreement may be limited by applicable laws
     relating to prescription, limitation, bankruptcy, liquidation,
     receivership, administration, insolvency or other laws relating to
     creditors' rights generally or by the application of rules of equity or
     public policy.

(c)  A Scottish court may refuse to give effect to any provisions of the
     Facility Agreement providing for the payment of legal costs and other
     costs, charges and expenses in respect of the cost of unsuccessful
     litigation brought before such court or where that court has itself made an
     order for costs.

(d)  Any provision contained in the Facility Agreement to the effect that a
     calculation and/or certification will be conclusive and binding may not be
     effective if such calculation or certification is fraudulent or erroneous
     on its face and will not necessarily prevent judicial enquiry into the
     merit of any claim under the relative document.

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<PAGE>

                                      78
________________________________________________________________________________

(e)  Any provision in the Facility Agreement relating to default interest would
     be unenforceable if it were held to constitute a penalty and not a genuine
     and reasonable pre-estimate of the damage likely to be suffered as a result
     of the default in payment of the amount in question.

(f)  We express no opinion whether any provision in the Facility Agreement
     conferring on any party thereto a right of set off or similar right would
     be effective against a liquidator or creditor.

(g)  We have not been asked to advise you in connection with the preparation of
     the Facility Agreement and we therefore express no opinion on the
     implications of the Facility Agreement or on whether the Facility Agreement
     gives effect to the commercial intentions of the parties.

(h)  Any undertakings or indemnities in relation to United Kingdom stamp duties
     given by the Company may be void under the provisions of Section 117 of the
     Stamp Act 1891.

(i)  A Scottish court may stay proceedings if concurrent proceedings are being
     brought elsewhere.

(j)  The effectiveness of terms exculpating a party from a liability or duty
     otherwise owed is limited by law.

This opinion shall be governed by and construed in accordance with the law of
Scotland.

This opinion is strictly limited to the matters specifically stated herein and
is not to be read as extending by implication to any other matter.

This opinion is provided solely for the benefit of the person to which it is
addressed and may not be communicated to or relied upon by any other person,
firm or corporation whatsoever.

Yours faithfully,

________________________________________________________________________________
<PAGE>

                                      79
________________________________________________________________________________

                                  SCHEDULE 8

                                    PART 1

                         GUARANTOR ACCESSION AGREEMENT

To:   THE ROYAL BANK OF SCOTLAND plc as Agent

From: [GUARANTOR]

     Scottish Power UK plc (the "Company") - (Pounds)1,000,000,000 Revolving
                Credit Agreement dated [        ], 2001 (the "Credit Agreement")

We refer to Clause 27.4 (Accession) of the Credit Agreement.

We, [GUARANTOR] of [        ] agree to become, with effect from the date of this
Deed, a Guarantor under the Credit Agreement and to be bound by the terms of the
Finance Documents as an Obligor in accordance with Clause 27.4 (Accession).

Our address for notices for the purposes of Clause 33.2 (Addresses for notices)
is:

[

                 ]

This Agreement is intended to take effect as a deed under English law.

THE COMMON SEAL of          )
[GUARANTOR]                 )
was affixed in              )
the presence of:            )

Director

Director/Secretary

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                                      80
________________________________________________________________________________

                                    PART 2

                     COUNTER GUARANTOR ACCESSION AGREEMENT

To:   THE ROYAL BANK OF SCOTLAND plc as Agent

From: COUNTER GUARANTOR]

      Scottish Power UK plc (the "Company") - (Pounds)1,000,000,000 Revolving
               Credit Agreement dated [         ], 2001 (the "Credit Agreement")

We refer to Clause 27.4 (Accession) of the Credit Agreement.

We, [COUNTER GUARANTOR] of [        ] (Registered no. [        ]) agree to
become, with effect from the date of this Deed, a Counter Guarantor under the
Credit Agreement and to be bound by the terms of the Finance Documents as an
Obligor in accordance with Clause 27.4 (Accession).

Our address for notices for the purposes of Clause 33.2 (Addresses for notices)
is:

[

                 ]

This Agreement is intended to take effect as a deed under English law.

THE COMMON SEAL of            )
[COUNTER GUARANTOR]           )
was affixed in                )
the presence of:              )

Director

Director/Secretary

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<PAGE>

                                      81
________________________________________________________________________________

                                  SCHEDULE 9

                          FORM OF MARGIN CERTIFICATE

To:   The Royal Bank of Scotland plc

From: Scottish Power UK plc

Date: [        ]

     Scottish Power UK plc - (Pounds)1,000,000,000 Revolving Credit Agreement
               dated [             ], 2001 (the "Credit Agreement")

1.   We refer to the Credit Agreement. This is a Margin Certificate.

2.   We confirm that as at [end date of relevant financial half year]:

     (a)  Total Consolidated Net Borrowings for the preceding twelve month
          period ending on that date was [        ];

     (b)  Consolidated EBITDA for the preceding twelve month period ending on
          that date was [        ];

     (c)  in accordance with Clause 8.2(d) (Margin adjustment) the Applicable
          Margin for any Loan during a Term with a Rate Fixing Day falling after
          the date of this certificate but on or before the delivery of the next
          Margin Certificate will be: [        ].

Scottish Power UK plc

By:                                By:

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<PAGE>

                                      82
________________________________________________________________________________

                     SIGNATORIES TO THE FACILITY AGREEMENT

Company

SCOTTISH POWER UK PLC

By:  A. J. M. COATS

Joint Arrangers

THE BANK OF TOKYO-MITSUBISHI, LTD.

By:  D. DALLISON

COMMERZBANK AKTIENGESELLSCHAFT, LONDON BRANCH

By:  J. THOMSON     J. R. BOURNE

J.P. MORGAN PLC

By:  M. TOULAN

THE ROYAL BANK OF SCOTLAND PLC

By:  J. H. M. HARE

Agent

THE ROYAL BANK OF SCOTLAND PLC

By:  J. H. M. HARE

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<PAGE>

                                      83
________________________________________________________________________________

Banks

THE BANK OF TOKYO-MITSUBISHI, LTD.

By:  D. DALLISON

COMMERZBANK AKTIENGESELLSCHAFT, LONDON BRANCH

By:  J. THOMSON     J. R. BOURNE

THE CHASE MANHATTAN BANK

By:  M. TOULAN

THE ROYAL BANK OF SCOTLAND PLC

By:  J. H. M. HARE

BANK ONE, NA

By:  DAVID G. ROBERTS

BANKGESELLSCHAFT BERLIN AG, LONDON BRANCH

By:  J. H. M. HARE (power of attorney)

BARCLAYS BANK PLC

By:  J. A. C. BATTERS

BAYERISCHE LANDESBANK GIROZENTRALE, LONDON BRANCH

By:  M. R. L. WILLIAMS

BNP PARIBAS LONDON BRANCH

By:  J. H. M. HARE (power of attorney)

CITIBANK, N.A.

By:  R. A. WELFORD

________________________________________________________________________________
<PAGE>

                                      84
________________________________________________________________________________

CREDIT SUISSE FIRST BOSTON

By:  N. BURNHAM     G. LYNSKEY

DANSKE BANK A/S

By:  J. H. M. HARE (power of attorney)

DEUTSCHE BANK AG LONDON

By:  M. STARMER-SMITH

FLEET NATIONAL BANK

By:  R. S. SULLIVAN

HSBC BANK PLC

By:  ANDREW AITKEN

ING BANK N.V., LONDON BRANCH

By:  ANJILA SHARMA

NATIONAL AUSTRALIA BANK, ACN004044937

By:  DAVID RAWSON

SCOTIABANK (IRELAND) LIMITED

By:  J. H. M. HARE (power of attorney)

THE DAI-ICHI KANGYO BANK, LIMITED

By:  TREVOR C. BAILEY

THE FUJI BANK, LIMITED

By:  KATSUNORI NOZUWA

________________________________________________________________________________
<PAGE>

                                      85
________________________________________________________________________________

UBS AG

By:  ANNETTE P. ALFORD

SUMITOMO MITSUI BANKING CORPORATION

By:  JEREMY P. G. SLATER

________________________________________________________________________________
<PAGE>

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

                                     INDEX

Clause                                                                    Page

1.   Interpretation.....................................................     1
2.   The Facility.......................................................    16
3.   Purpose............................................................    17
4.   Conditions precedent...............................................    17
5.   Drawdown...........................................................    18
6.   Repayment..........................................................    19
7.   Prepayment and cancellation........................................    19
8.   Interest...........................................................    20
9.   Optional Currencies................................................    22
10.  Payments...........................................................    22
11.  Taxes..............................................................    25
12.  Market disruption..................................................    26
13.  Increased Costs....................................................    27
14.  Illegality and mitigation..........................................    28
15.  Guarantee..........................................................    29
16.  Counter Guarantee..................................................    31
17.  Representations and warranties.....................................    34
18.  Undertakings.......................................................    36
19.  Default............................................................    42
20.  The Agent and the Joint Arrangers..................................    47
21.  Fees...............................................................    51
22.  Expenses...........................................................    52
23.  Stamp duties.......................................................    53
24.  Indemnities........................................................    53
25.  Evidence and calculations..........................................    54
26.  Amendments and waivers.............................................    54
27.  Changes to the Parties.............................................    55
28.  Disclosure of information..........................................    58
29.  Set-Off............................................................    59
30.  Pro Rata Sharing...................................................    59
31.  Severability.......................................................    60
32.  Counterparts.......................................................    61
33.  Notices............................................................    61
34.  Governing law......................................................    62
35.  Jurisdiction.......................................................    62

-------------------------------------------------------------------------------
<PAGE>

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

Schedules
<TABLE>
<CAPTION>
<S>                                                                                               <C>
1.   Original Parties..........................................................................   63
2.   Part 1  Conditions precedent documents to be delivered before the first Loan..............   64
     Part 2  Conditions precedent documents to be delivered by a Guarantor or
     Counter-Guarantor.........................................................................   66
3.   Calculation of the Mandatory Cost.........................................................   68
4.   Form of Request...........................................................................   70
5.   Form of Novation Certificate..............................................................   71
6.   Form of legal opinion of Allen & Overy....................................................   72
7.   Form of legal opinion of Maclay Murray & Spens............................................   75
8.   Part 1 - Guarantor Accession Agreement....................................................   79
     Part 2 - Counter Guarantor Accession Agreement............................................   80
9.   Form of Margin Certificate................................................................   81

Signatories....................................................................................   82
</TABLE>
--------------------------------------------------------------------------------<PAGE>

                                                                     EXHIBIT 4.7

                          THE COMPETITIVE ELECTRICITY

                               MARKET FROM 1998:

                           GENERATION, TRANSMISSION

                         AND PUBLIC ELECTRICITY SUPPLY

                                   LICENCES

                                      for

                              SCOTTISH POWER plc
<PAGE>

                                    PREFACE

1.   This document illustrates the licence obligations which presently apply
     under the Generation, Transmission and Public Electricity Supply Licences
     held by Scottish Power plc (excluding only the schedules relating to
     transmission price restraints). The document comprises conditions contained
     in the original Licence Document granted on 28 March 1990 and subsequent
     modifications made to that Licence Document.

2.   OFFER wishes to make clear that this is not a legally binding document but
     has been produced as a working copy of Scottish Power plc's Generation,
     Transmission and PES Licences. It is hoped that this document accurately
     reflects the present Licence Document, but it is not a substitute for the
     original Licence Document and the subsequent schedules of modifications
     issued to Scottish Power plc and held by OFFER's library.
<PAGE>

                               TABLE OF CONTENTS
                               -----------------

        (Schedules marked * are not fully reproduced in this document)

<TABLE>
<S>                                                                                                         <C>
PART I.  TERMS OF THE LICENCES                                                                                1

PART II. CONDITIONS APPLICABLE TO EACH LICENCE                                                                3

   Condition 1. Scope of application of Part II                                                               3

   Condition 2: Interpretation and construction                                                               4

   Condition 2A: Power to Bring Conditions into Effect                                                       31

   Condition 3: Separate Accounts for Separate Businesses                                                    33

   Condition 3A: Restriction on activity                                                                     40

   Condition 4: Prohibition of cross-subsidies                                                               41

   Condition 5: Security arrangements                                                                        42

   Condition 6: Health and safety of employees                                                               43

   Condition 7: Submission of certain agreements                                                             44

   Condition 8: Provision of information to the Director                                                     49

   Condition 9: Payment of fees                                                                              51

PART III. CONDITIONS APPLICABLE TO THE GENERATION LICENCE                                                    54

   Condition 1: Scope of application of Part III                                                             54

   Condition 2: Compulsory acquisition of land                                                               55

   Condition 3: Power to carry out road works etc.                                                           57

   Condition 4: Planning of Licensee's ancillary system                                                      61

   Condition 5: Compliance with Scottish Grid codes                                                          63

   Condition 6: Compliance with Scottish Distribution Codes                                                  64

   Condition 7: Compliance with Trading Code                                                                 65

   Condition 8: Connection to and use of ancillary system - requirement to offer terms                       66

   Condition 8A: Connection to and use of ancillary system - functions of the Director                       72

   Condition 9: Generation outages                                                                           74

   Condition 10: Supplementary Conditions in relation to England and Wales                                   75

PART IV. CONDITIONS APPLICABLE TO THE TRANSMISSION LICENCE                                                   76

   Condition 1: Scope of application of Part IV                                                              76

   Condition 2: Transmission charge restriction conditions                                                   77
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                                         <C>
   Condition 3: Grid Code                                                                                    78

   Condition 4: Transmission System security standard and quality of service                                 82

   Condition 5: Trading Code                                                                                 85

   Condition 6: Compliance with Distribution Codes                                                           92

   Condition 7: Disposal of relevant assets                                                                  93

   Condition 8: Restriction on use of certain information                                                    96

   Condition 8A. Independence of and Appointment of Managing Director of the Transmission Business           99

   Condition 9: Transmission System outages                                                                 104

PART V. CONDITIONS APPLICABLE TO THE PUBLIC ELECTRICITY SUPPLY LICENCE                                      105

   SECTION A. GENERAL OBLIGATIONS                                                                           105

   Condition 1: Scope of application of Part V                                                              105

   Condition 2: Public electricity supply charge restriction Conditions                                     106

   Condition 3: Prohibition of discrimination in electricity sale contracts                                 107

   Condition 3A: Prohibition of discrimination in selling electricity                                       108

   Condition 3B: Prohibition of discrimination in supply                                                    109

   Condition 3C: Duration of discrimination conditions                                                      115

   Condition 4: Tariffs                                                                                     117

   Condition 4A: Arrangements for informing customers on revocation of Licence                              118

   Condition 4B: The Programme Implementation Agreement                                                     120

   Condition 5: Generation security standard                                                                124

   Condition 6: Obligation on economic purchasing                                                           132

   Condition 7: Distribution System planning standard and quality of service                                136

   Condition 7A: Security and safety of supplies                                                            137

   Condition 7B: Procedures for the detection and prevention of theft, damage and meter interference        140

   Condition 7C: Provisions relating to the connection of metering equipment                                142

   Condition 7D: Agreements for the provision of meters                                                     144

   Condition 8: Distribution Code                                                                           145

   Condition 8A: The Metering Point Administration Service and the Master Registration Agreement            149

   Condition 8B: Establishment of a Data Transfer Service                                                   153

   Condition 8C: Requirement to offer terms for the provision of Metering and Data Services                 157

   Condition 8D: Non-discrimination in the provision of Metering and Data Services                          161
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                                         <C>
   Condition 8E: Basis of charges for Metering and Data Services: requirements for transparency             162

   Condition 8F: Functions of the Director                                                                  164

   Condition 9. Restriction on use of certain information and independence of the Distribution Business     166

   Condition 9A: Restriction on use of certain information relating to the Supply Business                  173

   Condition 10: Conditions of supply affecting customers' statutory rights                                 178

   Condition 11: Licensee's apparatus on customers' side of meter                                           180

   Condition 12: Code of practice on payment of bills and guidance for dealing with customers in difficulty 181

   Condition: 12A: Code of practice on the use of prepayment meters                                         183

   Condition 13: Record of and report on performance                                                        185

   Condition 13A: Provision of services for persons who are blind or deaf                                   187

   Condition 14: Provision of services for persons who are of pensionable age or disabled or chronically
   sick                                                                                                     188

   Condition 14A: Code of practice on procedures with respect to site access                                190

   Condition 15: Standards of performance                                                                   191

   Condition 16: Efficient use of electricity                                                               192

   Condition 17: Complaint handling procedure                                                               194

   Condition 17A: Preparation, review of and compliance with customer service codes                         195

   Condition 17B: Information given to Designated Customers                                                 197

   Condition 17C: Publication of information to customers                                                   198

   Condition 18: Relations with the Relevant Consumers' Committee                                           200

   Condition 19: Provision of information to the Director and provision of comments to the Director on
   information and advice                                                                                   201

   Condition 20: Disposal of relevant assets                                                                203

   Condition 21: Compliance with Grid Codes                                                                 206

   Condition 22: Compliance with Trading Code                                                               207

   Condition 23: Arrangements relating to supplies to premises within the Licensee's                        208

   authorised supply area by persons other than the Licensee                                                208

   Condition 24: The Settlement Agreement for Scotland                                                      212

   Condition 25: Designated Premises                                                                        215

   Condition 26: Terms for supply of electricity incompatible with Licence Conditions                       217

   Condition 27: Limitation on requirements for termination fees                                            218

   Condition 28: Revision of the Contract Terms Conditions                                                  219
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                                         <C>
   SECTION B. THE CONTRACT TERMS CONDITIONS                                                                 223

   Condition 29: Designated Supply Contracts                                                                223

   Condition 30: Contractual terms                                                                          225

   Condition 31: Notification of terms                                                                      227

   Condition 32: Security deposits                                                                          229

   Condition 33: Termination of contracts on notice                                                         231

   Condition 34: Termination of contracts in specified circumstances                                        233

   Condition 35: Assignment of outstanding charges                                                          235

   Condition 36: Modification of provisions under Conditions 33 and 35                                      237

   Condition 37: Marketing of electricity to Designated Customers                                           239

PART VI. CONDITIONS APPLICABLE TO THE TRANSMISSION LICENCE AND THE PUBLIC ELECTRICITY SUPPLY LICENCE        245

   Condition 1: Scope of application of Part VI                                                             245

   Condition 2: Basis of charges for top-up and standby supplies or sales of electricity, exempt supply
   services, use of system and connection to system: requirements for transparency                          247

   Condition 2A: Non-discrimination in the provision of top-up or standby supplies or sales of electricity,
   exempt supply services, use of system and connection to system                                           257

   Condition 2B: Requirement to offer terms                                                                 259

   Condition 2C: Requirement to offer Standard Terms of Connection                                          267

   Condition 2D: Functions of the Director                                                                  269

   Condition 3: Basis of charges for use of the Scottish interconnection                                    272

   Condition 3A: Non-discrimination in the provision of use of the Scottish interconnection                 280

   Condition 3B: Requirement to offer terms                                                                 283

   Condition 3C: Functions of the Director                                                                  288

   Condition 4: Requests for Transit                                                                        290

   Condition 5. Appointment of Compliance Officer                                                           292

SCHEDULE 1                                                                                                  296

   Authorised transmission area                                                                             296

SCHEDULE 2                                                                                                  297

   Authorised supply area                                                                                   297

SCHEDULE 3                                                                                                  298

   Revocation                                                                                               298

SCHEDULE 4                                                                                                  301
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                                         <C>
   Supplementary conditions in relation to England and Wales                                                301

SCHEDULE 5                                                                                                  312

   Transmission charge restriction conditions                                                               312

SCHEDULE 5A                                                                                                 326

   Transmission charge restriction conditions                                                               326

SCHEDULE 6                                                                                                  344

   Public electricity supply charge restriction conditions                                                  344

SCHEDULE 6A                                                                                                 387

   Restraints on supply charges                                                                             384
</TABLE>
<PAGE>

                        PART I.  TERMS OF THE LICENCES
                        ------------------------------

1.   The Secretary of State, in exercise of the powers conferred by Sections
     6(1), 6(6), 7 and 10 of the Electricity Act 1989 (hereinafter referred to
     as "the Act") hereby grants to Scottish Power plc:

     (a)  a licence to generate electricity for the purpose of giving a supply
          to any premises or enabling a supply to be so given, during the period
          specified in paragraph 3, subject to the Conditions set out in Parts
          II and III and Schedule 4;

     (b)  a licence to transmit electricity for the purpose of giving a supply
          to any premises or enabling a supply to be so given in the authorised
          transmission area designated in paragraph 1 of Schedule 1, during the
          period specified in paragraph 3, subject to the Conditions set out in
          Parts II, IV and VI and Schedule 5;

     (c)  a licence as public electricity supplier to supply electricity to any
          premises in the authorised supply area designated in paragraph 1 of
          Schedule 2, during the period specified in paragraph 3, subject to the
          Conditions set out in Parts II, V and VI and Schedule 6.

2.   The Conditions referred to above are subject to modification or amendment
     in accordance with their terms or with Sections 11, 14 or 15 of the Act.
     Each of the licences hereby granted is further subject to the terms as to
     revocation specified in Schedule 3.

3.   Each of the licences hereby granted shall come into force on the transfer
     date appointed under Section 67(3) of the Act and, unless revoked in
     accordance with the terms specified in Schedule 3, shall continue in force
     until determined by not less than 25 years' notice in writing given by the
     Secretary of State to the Licensee in relation to that licence, such notice
     not to be served earlier than the tenth anniversary of the transfer date
     appointed under Section 67(3) of the Act.

                                       1
<PAGE>

28 March 1990                                 Secretary of State for Scotland

                                       2
<PAGE>

                PART II. CONDITIONS APPLICABLE TO EACH LICENCE
                ----------------------------------------------

Condition 1. Scope of application of Part II
--------------------------------------------

1.   Each of the licences granted by this Licence Document is subject to the
     Conditions in Part II (including where such Conditions relate to activities
     other than those authorised by such licences) but so that:

     (a)  where any provision in Part II is expressed as relating to each of
          such licences, it shall be construed as applying separately to each
          such licence and shall not impose any obligation on the Licensee as
          holder of any such licence to comply with that provision as it applies
          to any other such licence; and

     (b)  to the extent that any provision in Part II is expressed as relating
          to any one licence specified in that provision, such provision shall
          be given effect in relation to that licence only.

                                       3
<PAGE>

Condition 2: Interpretation and construction
--------------------------------------------

1.   Unless the contrary intention appears, words and expressions used in this
     or any of the following Parts of this document or in the Schedules below
     shall be construed as if they were in an Act of Parliament and the
     Interpretation Act 1978 applied to them and references to an enactment
     shall include any statutory modification or re-enactment thereof after the
     date when the licences granted by this Licence Document come into force.

2.   Any word or expression defined for the purposes of any provision of Part I
     of the Act shall, unless the contrary intention appears, have the same
     meaning when used in this or any of the following Parts of this document or
     in the Schedules below.

3.   In this or any of the following Parts of this document and in the Schedules
     below, unless otherwise specified or the context otherwise requires:

<TABLE>
     <S>                                     <C>
     "Act"                                   Means the Electricity Act 1989.

     "Active Energy"                         means the electrical energy produced, flowing or
                                             supplied by an electric circuit during a time
                                             interval, (being integral with respect to time of
                                             the instantaneous power), measured in units of
                                             watt-hours (Wh) and standard multiples thereof,
                                             that is:

                                             1,000 Wh                  = 1 Kilowatt-hour (kWh)

                                             1,000 kWh                = 1 megawatt-hour (MWh)

                                             1,000 MWh               = 1 gigawatt-hour (GWh)
</TABLE>

                                       4
<PAGE>

<TABLE>
<S>                                          <C>
                                             1,000 GWh               = 1 terawatt-hour (TWh)

"affiliate"                                  In relation to the Licensee means any holding
                                             company of the Licensee, any subsidiary of the
                                             Licensee or any subsidiary of a holding company
                                             of the Licensee.

"ancillary lines"                            Means any electric lines of the Licensee except
                                             (a) electric lines which are comprised in the
                                             Licensee's Transmission System or Distribution
                                             System and (b) electric lines through which the
                                             Licensee supplies electricity to premises
                                             pursuant to a Licence granted under Section
                                             6(2)(a) of the Act.

"ancillary system"                           means ancillary lines and any electrical plant
                                             and meters of the Licensee which are used in
                                             connection with the transport of electricity
                                             through ancillary lines.

"Auditors"                                   means the Licensee's auditors for the time being
                                             holding office in accordance with the
                                             requirements of the Companies Act 1985.

"authorised"                                 in relation to any business or activity means
                                             authorised by licence granted under Section 6 or
                                             by exemption granted under Section 5 of the Act.

"Authorised Electricity Operator"            means any person (other than the Licensee) who is
                                             authorised to generate, transmit or
</TABLE>

                                       5
<PAGE>

<TABLE>
<S>                                          <C>
"Operator"                                   supply electricity and for the purposes of
                                             Conditions 2A to 2C inclusive of Part VI
                                             shall include any person who has made an
                                             application to be so authorised which has
                                             not been refused.

"authorised supply area"                     in relation to the Licensee means the area from
                                             time to time comprised in paragraph 1 of Schedule
                                             2; and in relation to any other person means the
                                             authorised area of that person under any licence
                                             held by that person under Section 6(1)(c) of the
                                             Act.

"authorised transmission area"               in relation to the Licensee means the area from
                                             time to time comprised in paragraph 1 of Schedule
                                             1; and in relation to any other person means the
                                             authorised area of that person under any Licence
                                             held by that person under Section 6(1)(b) of the
                                             Act.

"bulk supply point"                          means a point of supply from the Licensee's
                                             Transmission System to:

                                             (i) a Distribution System; or

                                             (ii) an Independent Distribution Network; or

                                             (iii) a site connected to the Licensee's
                                             Transmission System at which:

                                               (a) Active Energy is exported to a Distribution
                                                   System or a Transmission
</TABLE>

                                       6
<PAGE>

<TABLE>
<S>                                          <C>
                                                   System; and

                                               (b) Active Energy is imported from a
                                                   Distribution System or a Transmission
                                                   System for purposes other than the
                                                   generation of electrical energy

"Condition"                                  means a Condition set out in Parts II, III, IV, V
                                             and VI of this Licence.

"connection charges"                         means charges made or levied or to be made or
                                             levied for the carrying out (whether before or
                                             after the date on which the licences granted by
                                             this Licence Document come into force) of works
                                             and provision and installation of electrical
                                             plant, electric lines and ancillary meters in
                                             constructing or modifying entry and exit points
                                             on the Licensee's Transmission System or
                                             Distribution System together with charges in
                                             respect of maintenance and repair of such items
                                             insofar as not otherwise recoverable as use of
                                             system charges and in respect of disconnection
                                             and the removal of electrical plant, electric
                                             lines and ancillary meters following
                                             disconnection, all as more fully described in
                                             paragraphs 9 and 10 of Condition 2 of Part VI,
                                             whether or not such charges are annualised.

"contract"                                   in relation to the supply of electricity by the
                                             Licensee to a customer at premises, means a
                                             special agreement in accordance with Section
</TABLE>

                                       7
<PAGE>

<TABLE>
<S>                                          <C>
                                             22 of the Act.

"Contract Terms Conditions"                  means, as the context requires, either the
                                             Conditions contained in Section B of Part V of
                                             this Licence Document or those Conditions
                                             together with the equivalent Conditions contained
                                             in the licences of all other Electricity
                                             Suppliers.

"customer"                                   means any person supplied or requiring to be
                                             supplied with electricity at premises within the
                                             authorised area whether by the Licensee
                                             (including any affiliate or related undertaking
                                             of the Licensee) or, where the context requires,
                                             by another Electricity Supplier, but shall not
                                             include any Authorised Electricity Operator in
                                             its capacity as such.

"data aggregation services"                  has the meaning given at sub-paragraph 1(e) of
                                             Condition 8C of Part V.

"data processing services"                   has the meaning given at sub-paragraph 1(d) of
                                             Condition 8C of Part V.

"data retrieval services"                    has the meaning given at sub-paragraph 1(c) of
                                             Condition 8C of Part V.

"Data Transfer Catalogue"                    has the meaning given at sub-paragraph 6(c) of
                                             Condition 8A of Part V.

"Data Transfer Service"                      means the service to be established, operated and
                                             maintained by the Licensee, in conjunction and
                                             co-operation with all other
</TABLE>

                                       8
<PAGE>

<TABLE>
<S>                                          <C>
                                             public electricity suppliers, in accordance with
                                             Condition 8B of Part V.

"data transfer services"                     means the services of the Data Transfer Service
                                             established in accordance with Condition 8B of
                                             Part V.

"date of the contract"                       means, in respect of any contract, the date on
                                             which that contract is entered into.

"deposit"                                    means a deposit of money by way of security for
                                             the payment of charges for the supply of
                                             electricity.

"designated by the Secretary of State"       in respect of any agreement or notice, means
                                             designated by or on behalf of the Secretary of
                                             State by such means as he may consider
                                             appropriate, but so that any such agreement or
                                             notice may at the discretion of the Secretary of
                                             State cease to be so designated if amended or
                                             modified in any material respect.

"Designated Customer"                        means a customer supplied or requiring to be
                                             supplied with electricity at Designated Premises
                                             (but excluding such customer in so far as he is
                                             supplied or requires to be supplied at premises
                                             other than Designated Premises).

"Designated Premises"                        has the meaning determined in accordance with
                                             Condition 25 of Part V.
</TABLE>

                                       9
<PAGE>

<TABLE>
<S>                                          <C>
"Designated Supply Contract"                 has the meaning given in Condition 29 of Part V.

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

"distribution by any person"                 means the distribution of electricity through
                                             that person's Distribution System (whether for
                                             its own account or that of third parties).

"Distribution Business"                      means the business of the Licensee or any
                                             affiliate or related undertaking comprising or
                                             ancillary to:

                                             (a) the distribution (whether for its own account or
                                                 that of third parties) of electricity through the
                                                 Licensee's Distribution System, including any
                                                 business in providing connections to such system;
                                                 and

                                             (b) the provision of Metering and Data Services,
                                                 other than:

                                                 .  prepayment meter services

                                                 .  data processing services
</TABLE>

                                      10
<PAGE>

<TABLE>
<S>                                          <C>
                                                 .  data aggregation services, and

                                                 .  data retrieval services

"Distribution Code"                          means the Distribution Code required to be
                                             prepared pursuant to Condition 8 of Part V and
                                             approved by the Director, as from time to time
                                             revised with the approval of the Director, except
                                             that where the expression is used in relation to
                                             any public electricity supplier (other than the
                                             Licensee), it shall mean the Distribution Code
                                             required to be prepared by such supplier and
                                             approved by the Director as from time to time
                                             revised with the approval of the Director.

"Distribution System"                        in relation to the Licensee means all electric
                                             lines of the Licensee within the Licensee's
                                             authorised supply area (excepting lines forming
                                             part of the Licensee's Transmission System) and
                                             any other electric lines which the Director may
                                             specify as forming part of the Licensee's
                                             Distribution System, and includes any electrical
                                             plant and meters of the Licensee which are used
                                             in connection with the distribution of
                                             electricity by the Licensee; and, in relation to
                                             any other public electricity supplier, it shall
                                             have the same meaning as it has in the licence
                                             held by such supplier under Section 6(1)(c) of
                                             the Act (and so that for this purpose the
                                             Licensee shall be deemed to be another public
                                             electricity supplier in relation to any
                                             authorised area not included in the
</TABLE>

                                      11
<PAGE>

<TABLE>
<S>                                          <C>
                                             Licensee's authorised supply area for which the
                                             Licensee is the public electricity supplier).

"Domestic Customer"                          means a customer supplied or requiring to be
                                             supplied with electricity at Domestic Premises
                                             (but excluding such customer in so far as he is
                                             supplied or requires to be supplied at premises
                                             other than Domestic Premises).

"Domestic Premises"                          means premises at which a supply is taken wholly
                                             or mainly for domestic purposes.

"electricity purchase contract"              includes any contract or arrangement, other than
                                             for the supply of electricity to a customer at
                                             premises, under which provision is made for the
                                             making or receipt of payments by reference to the
                                             difference between an amount specified or
                                             ascertainable under the terms of such contract or
                                             arrangement; and the price at which electricity is
                                             sold or purchased under the Pooling and Settlement
                                             Agreement or the trading system established by
                                             the Trading Code or any component of any of such
                                             prices; and

"electricity sale contract"                  shall be construed accordingly.

"Electricity Supplier"                       means either a Second Tier Supplier or a public
                                             electricity supplier.
</TABLE>

                                      12
<PAGE>

<TABLE>
<S>                                          <C>
"equivalent megawatt"                        in circumstances where demand is measured only in
                                             megavolt amperes means megavolt amperes converted
                                             into megawatts using for this purpose a power
                                             factor of 0.9 megawatts per megavolt ampere or
                                             such other factor as may with the approval of the
                                             Director be taken as being appropriate having
                                             regard to electrical characteristics of the
                                             supply, and cognate expressions shall be
                                             construed accordingly.

"established connection"                     means, in relation to any premises, an existing
                                             connection to the Licensee's Distribution System
                                             which does not require modification, or a new or
                                             modified connection to such system in respect of
                                             which all works have been completed, such that in
                                             either case electricity is able to be supplied to
                                             the premises in accordance with the terms of the
                                             relevant supply agreement.

"Exempt Supplier"                            means a person who is authorised to supply
                                             electricity by virtue of an exemption granted
                                             under Section 5 of the Act.

"exempt supply services"                     means the services detailed at paragraph 5 of
                                             Condition 2B of Part VI, as provided by the
                                             Licensee to Exempt Suppliers in respect of
                                             premises within the authorised area.
</TABLE>

                                      13
<PAGE>

<TABLE>
<S>                                          <C>
"financial year"                             bears the meaning given to it at paragraph 1 of
                                             Condition 3 of Part II.

"fixed term period"                          means, in relation to any Designated Supply
                                             Contract, a specified period of more than 12
                                             months during which the Principal Terms of that
                                             contract may not be varied by the Licensee other
                                             than by agreement with the customer.

"Generation Business"                        means the business (if any) of the Licensee (as
                                             holder of the Generation Licence), or any
                                             affiliate or related undertaking of the Licensee,
                                             in the generation of electricity, other than the
                                             Manweb Generation Business.

"Generation Licence"                         means the Licence granted in sub-paragraph 1(1)
                                             of Part I.

"generation set"                             means any plant or apparatus for the production
                                             of electricity and shall where appropriate
                                             include a generating station comprising more than
                                             one generation set.

"goods or services"                          includes electric lines and electric plant, and
                                             goods or services designed or calculated to
                                             promote the efficient use of electricity, but
                                             excludes meters, meter operation and prepayment
                                             systems, and data retrieval and related services.

"Grid Code"                                  means the Grid Code required to be prepared
                                             pursuant to Condition 3 of Part IV and
</TABLE>

                                      14
<PAGE>

<TABLE>
<S>                                          <C>
                                             approved by the Director as from time to time
                                             revised with the approval of the Director, except
                                             that where the expression is used in relation to any
                                             Transmission Licensee (other than the Licensee)
                                             it shall mean the Grid Code required to be
                                             prepared by such Transmission Licensee and
                                             approved by the Director as from time to time
                                             revised with the approval of the Director.

"half-hourly metering equipment"             means metering equipment which is configured to
                                             record the quantity of electricity (to be
                                             calculated in kWh) supplied to premises during
                                             each half hour period of supply
                                             and "non-half-hourly metering equipment" shall be
                                             construed accordingly.

"holding company"                            means a holding company within the meaning of
                                             Sections 736, 736A and 736B of the Companies Act
                                             1985.

"Independent Distribution Network"           means a distribution system consisting wholly or
                                             mainly of electric lines operated other than
                                             under the Public Electricity Supply Licences
                                             issued to Scottish and Southern Energy plc and
                                             Scottish Power plc respectively.

"Licence Document"                           means this document comprising Parts I to VI
                                             inclusive and Schedules 1 to 6 inclusive
                                             (including Schedules 5A and 6A).
</TABLE>

                                      15
<PAGE>

<TABLE>
<S>                                          <C>
"Licensee"                                   means Scottish Power plc (registered number: Sc
                                             117120) and (where the context so requires) shall
                                             include any business in respect of which the
                                             Licensee is a successor company.

"Manweb"                                     means Manweb plc (registered in England and Wales
                                             under number 2366937).

"Manweb Licence"                             means the Licence granted to Manweb under Section
                                             6(1)(c) of the Act.

"Manweb Distribution Business"               bears the meaning given to Distribution Business
                                             in the Manweb Licence.

"Manweb Generation Business"                 bears the meaning given to Generation Business in
                                             the Manweb Licence.

"Manweb Second Tier Supply Business"         bears the meaning given to Second Tier Supply
                                             Business in the Manweb Licence.

"Manweb Supply Business"                     bears the meaning given to Supply Business in the
                                             Manweb Licence.

"Manweb Group"                               means Manweb and its subsidiaries, subsidiary
                                             undertakings, associated companies (including any
                                             joint venture, partnership, firm, company or
                                             unincorporated association in which any such
                                             subsidiary, subsidiary undertaking or associated
                                             company is interested) and related undertakings
                                             other than the Licensee.
</TABLE>

                                      16
<PAGE>

<TABLE>
<S>                                          <C>
"Master Registration Agreement"              means the agreement of that title to be prepared
                                             by the Licensee, in conjunction and co-operation
                                             with all other public electricity suppliers, in
                                             accordance with and comprising such matters as
                                             are set out in Condition 8A of Part V.

"megawatt" or "MW"                           includes an equivalent megawatt.

"meter operation services"                   has the meaning given at sub-paragraph 1(b) of
                                             Condition 8C of Part V.

"meter provision services"                   has the meaning given at sub-paragraph 1(a) of
                                             Condition 8C of Part V.

"Metering and Data Services"                 has the meaning given in Condition 8C of Part V.

"metering equipment"                         includes any meter and any associated equipment
                                             which materially affects the operation of that
                                             meter.

"Metering Point Administration Service"      means the service to be established, operated and
                                             maintained by the Licensee in accordance with
                                             Condition 8A of Part V.

"metering point administration services"     means the services of the Metering Point
                                             Administration Service established in accordance
                                             with Condition 8A of Part V or, where the context
                                             requires, means the equivalent services provided
                                             by any other public electricity supplier in
                                             accordance with the provisions of its Public
                                             Electricity Supply
</TABLE>

                                      17
<PAGE>

<TABLE>
<S>                                          <C>
                                             Licence.

"notice"                                     means (unless otherwise specified) notice given
                                             in writing or by any other reasonable means.

"other Scottish Public Electricity           means any public electricity supplier (other than
 Supplier"                                   the Licensee) who holds a Licence under Section
                                             6(1)(c) of the Act for an authorised area in
                                             Scotland.

"other Scottish Transmission Licensee"       means any person (other than the Licensee) who
                                             holds a Licence under Section 6(1)(b) of the Act
                                             for an authorised area in Scotland.

"other Transmission Licensee"                means any person (other than the Licensee) who
                                             holds a Licence under Section 6(1)(b) of the Act.

"participating interest"                     bears the meaning ascribed to that expression by
                                             Section 260 of the Companies Act 1985.

"Pooling and Settlement Agreement"           means the agreement of that title approved by the
                                             Secretary of State as from time to time amended
                                             with the approval of the Director (where so
                                             required pursuant to its terms).

"Portfolio Generator"                        means any person who:

                                             (a) is authorised to generate electricity and
                                                 owns or operated a generating station
</TABLE>

                                      18
<PAGE>

<TABLE>
<S>                                          <C>
                                                 situated in Scotland; or

                                             (b) is authorised to generate or supply
                                                 electricity and is contracted to
                                                 purchase the output of one or more
                                                 generating stations situated in
                                                 Scotland.

"prepayment meter services"                  has the meaning given at sub-paragraph 1(f) of
                                             Condition 8C of Part V.

"Principal Terms"                            means, in respect of any form of Designated
                                             Supply Contract, those terms which relate to:

                                             (a) charges for the supply of electricity;

                                             (b) any requirement to pay charges for the
                                                 supply by prepayment through a prepayment
                                                 meter;

                                             (c) any requirement for a security deposit;

                                             (d) the duration of the contract;

                                             (e) the rights to terminate the contract
                                                 (including any obligation to pay a
                                                 termination fee); and

                                             (f) the obligation to enter into an agreement
                                                 on the Standard Terms of Connection,

                                             and such other terms as may reasonably be
                                             considered significantly to affect the evaluation
                                             of the contract.

"Public Electricity Supply                   means the Licence granted in sub-paragraph
</TABLE>

                                      19
<PAGE>

<TABLE>
<S>                                          <C>
Licence"                                     1(3) of Part I.

"related undertaking"                        in relation to any person means any undertaking
                                             in which that person has a participating interest.

"Relevant Consumers' Committee"              means the committee appointed by the Director
                                             under Section 2 of the Act for the area
                                             consisting of or including the Licensee's
                                             authorised supply area.

"relevant premises"                          in relation to a Designated Supply Contract,
                                             means any premises supplied with electricity
                                             under the terms of the contract.

"restructuring agreement"                    means at anytime any agreement in force at that
                                             time which prior to that time has been entered
                                             into and submitted to the Director pursuant to
                                             Condition 7 of Part II (as such agreement may be
                                             amended from time to time with the approval of
                                             the Director given pursuant to such Condition).

"representation"                             includes any objection or any other proposal made
                                             in writing.

"Retail Price Index"                         means the general index of retail prices
                                             published by the Office for National Statistics
                                             each month in respect of all items or:

                                             (a) if the index for any month in any year shall
                                                 not have been published on or before the last
                                                 day of the third month after such
</TABLE>

                                      20
<PAGE>

<TABLE>
<S>                                          <C>
                                                 month, such index for such month or months as
                                                 the Director may after consultation with the
                                                 Licensee determine to be appropriate in the
                                                 circumstances; or

                                             (b) if there is a material change in the basis of
                                                 the index, such other index as the Director may
                                                 after consultation with the Licensee determine
                                                 to be appropriate in the circumstances.

"Scottish Public Electricity Supplier"       means a person who holds a Licence under Section
                                             6(1)(c) of the Act for an authorised supply area
                                             in Scotland.

"Scottish Transmission Licensee"             means a person who holds a Licence under Section
                                             6(1)(b) of the Act for an authorised transmission
                                             area in Scotland.

"Second Tier Supplier"                       means a person authorised to supply electricity
                                             pursuant to Section 6(2) of the Act.

"Second Tier Supply Business"                means the authorised business (if any) of the
                                             Licensee or any affiliate or related undertaking
                                             as a private electricity supplier.

"security period"                            means a period commencing on the date on which
                                             any direction issued by the Secretary of State
                                             under Section 34 of the Act enters effect and
                                             terminating on such date (being not earlier than
                                             the date such direction, as varied, is revoked or
                                             expires) as the Director, after consultation with
                                             such persons (including,
</TABLE>

                                      21
<PAGE>

<TABLE>
<S>                                          <C>
                                             without limitation, Licence holders liable to be
                                             principally affected) as he shall consider
                                             appropriate, may with the consent of the Secretary
                                             of State by notice to all Licence holders determine
                                             after having regard to the views of such persons.

"Separate Business"                          means each of:

                                             - the Generation Business,

                                             - the Transmission Business,

                                             - the Distribution Business,

                                             - the Supply Business,

                                             - the Second Tier Supply Business,

                                             - the Wholesaling Business.

                                             each taken separately from one another and from
                                             any other business of the Licensee or any
                                             affiliate or related undertaking of the Licensee,
                                             but so that where all or any part of such
                                             business is carried on by an affiliate or related
                                             undertaking of the Licensee such part of the
                                             business as is carried on by that affiliate or
                                             related undertaking shall be consolidated with
                                             any other such business of the Licensee (and of
                                             any other affiliate or related undertaking of the
                                             Licensee) so as to
</TABLE>

                                      22
<PAGE>

<TABLE>
<S>                                          <C>
                                             form a single Separate Business.

"Settlement Agreement for Scotland"          means the agreement of that title to be prepared
                                             in accordance with, and comprise such matters as
                                             are set out in, Condition 24 of Part V.

"settlement purposes"                        means for the purposes of settlement as set out
                                             in the Pooling and Settlement Agreement or the
                                             Settlement Agreement for Scotland.

"SHE"                                        means Scottish Hydro-Electric plc (registered
                                             number: Sc 117119).

"SNL"                                        means Scottish Nuclear Limited (registered
                                             number: Sc 117121).

"Standard Terms of Connection"               means the terms approved by the Director, in
                                             accordance with Condition 2C of Part VI, for the
                                             retention of an established connection to the
                                             Licensee's Distribution System.

"standby"                                    means the periodic or intermittent supply or sale
                                             of electricity:

                                             (a) to an Authorised Electricity Operator to make
                                                 good any shortfall in the availability of
                                                 electricity to that operator for the purposes of
                                                 its supply of electricity to persons seeking such
                                                 supply; or
                                             (b) to a customer of the Licensee, to make good any
                                                 shortfall between the customer's
</TABLE>

                                      23
<PAGE>

<TABLE>
<S>                                          <C>
                                                 total supply requirements and that met either
                                                 by its own generation or by electricity
                                                 supplied by an Authorised Electricity Operator
                                                 other than the Licensee

                                             such standby supply or sale being provided at such
                                             point on the Licensee's Transmission System or
                                             Distribution System as the operator or customer
                                             may request.

"subsidiary"                                 means a subsidiary within the meanings of
                                             Sections 736, 736A and 736B of the Companies Act
                                             1985.

"subsidiary undertaking"                     means a subsidiary undertaking within the meaning
                                             of Section 258 of the Companies Act 1985.

"Supply Business"                            means the authorised business of the Licensee as
                                             public electricity supplier (including prepayment
                                             meter services, data processing services, data
                                             aggregation services and data retrieval services)
                                             in the Licensee's authorised supply area, but
                                             excluding any activities forming part of the
                                             Distribution Business.

"Supply/Distribution Business"               means the Supply and Distribution Businesses
                                             taken together.

"termination fee"                            means any sum of money or other penalty (whether
                                             financial or otherwise) which may be
</TABLE>

                                      24
<PAGE>

<TABLE>
<S>                                          <C>
                                             demanded of a customer solely in consequence
                                             of the termination of a contract to supply
                                             electricity to premises.

"top-up"                                     means the supply or sale of electricity on a
                                             continuing or regular basis:

                                             (a) to an Authorised Electricity Operator to
                                                 make good any shortfall in the availability
                                                 of electricity (including, where that operator
                                                 is using the Licensee's Distribution System or
                                                 Transmission System, to make good any
                                                 distribution or transmission losses on that
                                                 system) to that operator for the purposes of its
                                                 supply of electricity to persons seeking such
                                                 supply; or

                                             (b) to a customer of the Licensee, to make good any
                                                 shortfall between the customer's total supply
                                                 requirements and that met either by its own
                                                 generation or by electricity supplied by an
                                                 Authorised Electricity Operator other than the
                                                 Licensee

                                             such top-up supply or sale being provided at such
                                             point on the Licensee's Distribution System or
                                             Transmission System as the operator or customer
                                             may request.

"Trading Code"                               means the Trading Code required to be adopted
                                             pursuant to Condition 5 of Part IV as
</TABLE>

                                      25
<PAGE>

<TABLE>
<S>                                          <C>
                                             from time to time revised with the approval of
                                             the Director.

"transfer scheme"                            means a transfer scheme made under Section 67(1)
                                             of the Act and approved by the Secretary of State
                                             (and whether or not he has modified it before
                                             approving it).

"transmission by any person"                 means the transmission of electricity through
                                             that person's Transmission System (whether for
                                             its own account or that of third parties).

"Transmission Business"                      means the authorised business of the Licensee (as
                                             holder of the Transmission Licence) or any
                                             affiliate or related undertaking of the Licensee
                                             in the planning, development, construction and
                                             maintenance of the Licensee's Transmission System
                                             (whether or not pursuant to directions of the
                                             Secretary of State made under Section 34 or 35 of
                                             the Act) and the operation of such system for
                                             transmission by the Licensee, including any
                                             business in providing connections to the
                                             Licensee's Transmission System, but shall not
                                             include any other business (whether or not a
                                             Separate Business) of the Licensee or any
                                             affiliate or related undertaking of the Licensee
                                             in the provision of services to or on behalf of
                                             any one or more persons.

"Transmission Company"                       means The National Grid Company plc or any other
                                             Transmission Licensee who holds a Licence under
                                             Section 6(1)(b) of the Act for
</TABLE>

                                      26
<PAGE>

<TABLE>
<S>                                          <C>
                                             an authorised area in England and Wales.

"Transmission Licence"                       means the Licence granted in sub-paragraph 1(2)
                                             of Part I.

"Transmission Licensee"                      means a person who holds a Licence under Section
                                             6(1)(b) of the Act.

"Transmission System"                        in relation to the Licensee means the system of
                                             electric lines comprising the Licensee's high
                                             voltage lines within the Licensee's authorised
                                             transmission area (except any such lines which
                                             the Director may approve as being part of the
                                             Licensee's Distribution System) and any other
                                             electric lines which the Director may specify as
                                             forming part of the Licensee's Transmission
                                             System and includes any electrical plant and
                                             meters of the Licensee which are used in
                                             connection with transmission by the Licensee;
                                             and, in relation to any other Transmission
                                             Licensee, it has the same meaning as it has in
                                             the Licence held by such Transmission Licensee
                                             under Section 6(1)(b) of the Act (and so that for
                                             this purpose the Licensee shall be deemed to be
                                             another Transmission Licensee in relation to any
                                             authorised area not included in the Licensee's
                                             authorised transmission area for which the
                                             Licensee holds a Licence under Section 6(1)(b) of
                                             the Act).

"undertaking"                                bears the meaning ascribed to that expression by
                                             Section 259 of the Companies
</TABLE>

                                      27
<PAGE>

                                             Act 1985.

         "unmetered supply"                  means a supply of electricity to
                                             premises which is not, for the
                                             purpose of calculating the charges
                                             for electricity supplied to the
                                             customer at such premises, measured
                                             by metering equipment.

         "use of system"                     in relation to the Transmission
                                             Licence, means: use of the
                                             Licensee's Transmission System for
                                             the transmission of electricity by
                                             the Licensee for the Generation,
                                             Supply and Wholesaling Businesses
                                             or for any other person; in
                                             relation to the Public Electricity
                                             Supply Licence, means use of the
                                             Licensee's Distribution System for
                                             the distribution of electricity by
                                             the Licensee for the Supply and
                                             Wholesaling Businesses or for any
                                             other Authorised Electricity
                                             Operator; and in relation to the
                                             Generation Licence means use of the
                                             ancillary system for the transport
                                             of electricity provided by or for
                                             the Licensee or any other person

         "use of system charges"             in relation to the Transmission
                                             Licence, means: charges made or
                                             levied or to be made or levied for
                                             the provision of services as part
                                             of the Transmission Business to any
                                             person or to the Licensee for the
                                             purposes of its Supply Business or
                                             Second Tier Supply Business or
                                             Wholesaling Business, as referred
                                             to at Condition 2 of Part VI and at
                                             paragraph 5.2 of Schedule 5, but
                                             shall not

                                      28
<PAGE>

                                             include connection charges; and in
                                             relation to the Public Electricity
                                             Supply Licence, means: charges made
                                             or levied or to be made or levied
                                             for the provision of services as
                                             part of the Distribution Business
                                             to any person or to the Licensee
                                             for the purposes of its Supply
                                             Business or Second Tier Supply
                                             Business or Wholesaling Business,
                                             as referred to at Condition 2 of
                                             Part VI and at paragraph 9.2.2 of
                                             Schedule 6, but shall not include
                                             connection charges.

         "valid notice of termination"       has the meaning given in Condition
                                             33 of Part V.

         "Wholesaling Business"              means the business (if any) of the
                                             Licensee or any affiliate or
                                             related undertaking of the Licensee
                                             in the supply or sale of
                                             electricity to Authorised
                                             Electricity Operators (including in
                                             the form of top-up and stand-by)
                                             other than to SHE pursuant to the
                                             restructuring agreements.

         "year"                              means a period of 12 months
                                             commencing on 1 January.

    4.   Unless otherwise specified, any reference to a numbered Condition (with
         or without a suffix letter) is a reference to the Condition bearing
         that number in the Part of this Licence Document in which the reference
         occurs, any reference to a numbered Schedule is a reference to the
         Schedule bearing that number in this Licence Document and any reference
         to a numbered paragraph (with or

                                      29
<PAGE>

     without a suffix letter) is a reference to the paragraph bearing that
     number in the Condition or Schedule in which the reference occurs.

5.   In construing the provisions of this Licence Document, the heading or title
     of any Part, Section, Condition, Schedule or paragraph shall be
     disregarded.

6.   Where any obligation of the Licensee is required to be performed by a
     specified date or within a specified period, and where the Licensee has
     failed so to perform, such obligation shall continue to be binding and
     enforceable after the specified date or after the expiry of the specified
     period (but without prejudice to all rights and remedies available against
     the Licensee by reason of the Licensee's failure to perform by that date or
     within that period).

7.   The provisions of Section 109 of the Act shall apply for the purposes of
     the delivery or service of any documents, directions or notices to be
     delivered or served pursuant to any Condition or Schedule of this Licence
     Document, and directions issued by the Director pursuant to any Condition
     or Schedule of this Licence Document shall be delivered or served as
     aforesaid.

8.   This Condition or parts of it shall cease to have effect on the date
     specified in a direction tot hat effect made pursuant to paragraph 4 of
     Condition 2A in Part II.

                                      30
<PAGE>

Condition 2A: Power to Bring Conditions into Effect
---------------------------------------------------

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

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

3.   The Conditions to which paragraph 1 applies are:

     Part V Condition 3A         (Prohibition of discrimination in selling
                                 electricity)
     Schedule 4 paragraphs 9-17  (Balancing and Settlement Code and NETA
                                 Implementation)
     Schedule 4 paragraphs 18-20 (Change Co-ordination for NETA)
     Schedule 4 paragraphs 21-24 (Pooling and Settlement Agreement Run-off).

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

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

                                      31
<PAGE>

6.   The Conditions to which paragraph 4 applies are:

     Part II Condition 2         (Interpretation and construction)
     Part V Condition 3          (Prohibition of discrimination in electricity
                                 sale contracts)
     Schedule 4 Paragraphs 9-12  (Central Despatch, Merit Order and Pooling and
                                 Settlement)

7.   For the purposes of Condition 2A, the meaning of the term Condition shall
     include the Supplementary Conditions in Schedule 4 of the licence or parts
     of those Supplementary Conditions.

                                      32
<PAGE>

Condition 3: Separate Accounts for Separate Businesses
------------------------------------------------------

1.   The first financial year of the Licensee shall run from 1st April 1990 to
     31st March 1991 and thereafter each financial year of the Licensee shall
     run from 1st April to the following 31st March.

2.   The remaining paragraphs of this Condition apply for the purpose of
     ensuring that the Licensee (and any affiliate or related undertaking of the
     Licensee) maintains accounting and reporting arrangements which enable
     separate accounts to be prepared for each Separate Business and showing the
     financial affairs of each such Separate Business.

3.   The Licensee shall in respect of each Separate Business:

     (a)  keep or cause to be kept for the period referred to in Section
          222(5)(b) of the Companies Act 1985 and in the manner referred to in
          that Section such accounting records in respect of each Separate
          Business as would by Section 221 of the Companies Act 1985 be required
          to be kept in respect of each such business if it were carried on by a
          separate company so that the revenues and costs, assets, liabilities,
          reserves and provisions of, or reasonably attributable to, each
          Separate Business are separately identifiable in the books of the
          Licensee (and any affiliate or related undertaking of the Licensee)
          from those of any other business; and

     (b)  prepare on a consistent basis from such accounting records in respect
          of:

          (i)  the financial year commencing on 1st April 1990 and each
               subsequent financial year, accounting statements comprising a
               profit and loss account, a balance sheet and a statement of
               source and application of funds, together with notes thereto, and
               showing separately in respect of each Separate Business and in

                                      33

<PAGE>

               appropriate detail the amounts of any revenue, cost, asset,
               liability, reserve or provision which has been either:

               (aa) charged from or to any other business (whether or not a
                    Separate Business) together with a description of the basis
                    of that charge; or

               (bb) determined by apportionment or allocation between any
                    Separate Business and any other business (whether or not a
                    Separate Business) together with a description of the basis
                    of the apportionment or allocation; and

          (ii) the first 6 months of the financial year commencing on 1st April,
               1990 and of each subsequent financial year, an interim profit and
               loss account;

     (c)  procure, in respect of the accounting statements prepared in
          accordance with this Condition in respect of a financial year, a
          report by the Auditors and addressed to the Director stating whether
          in their opinion those statements have been properly prepared in
          accordance with this Condition and give a true and fair view of the
          revenues, costs, assets, liabilities, reserves and provisions of, or
          reasonably attributable to, the Separate Business to which the
          statements relate; and

     (d)  deliver to the Director a copy of the account referred to in sub-
          paragraph (b)(ii) above, the Auditors' report referred to in sub-
          paragraph (c) above and the accounting statements referred to in
          sub-paragraph (b)(i) above as soon as reasonably practicable, and in
          any event not later than three months after the end of the period to
          which it relates in the case of the account referred to in
          sub-paragraph (b)(ii) above and six months after the end of the
          financial year to which they relate in the case of the accounting
          statements and Auditors' report referred to in sub- paragraphs (b)(i)
          and (c) above.

                                      34
<PAGE>

4.   The Licensee shall prepare and deliver to the Director audited consolidated
     accounting statements for each of:

     (a)  the Distribution Business and Manweb Distribution Business;

     (b)  the Generation Business and Manweb Generation Business;

     (c)  the Supply Business and Manweb Supply Business;

     (d)  the Second Tier Supply Business and Manweb Second Tier Supply
          Business,

on a consistent basis with, and at the same time as, the accounts prepared for
     each Separate Business under the terms of this Condition.

5.   The Licensee shall not in relation to the accounting statements in respect
     of a financial year change the bases of charge, apportionment or allocation
     referred to in sub-paragraph (b)(i) of paragraph 3 from those applied in
     respect of the previous financial year, unless the Director shall
     previously have issued directions for the purposes of this Condition
     directing the Licensee to change such bases in a manner set out in the
     directions or the Director gives his prior written approval to the change
     in such bases. The Licensee shall comply with any directions issued for the
     purposes of this Condition.

6.   Where, in relation to the accounting statements in respect of a financial
     year, the Licensee has changed such bases of charge, apportionment or
     allocation from those adopted for the immediately preceding financial year,
     the Licensee shall, if so directed in directions issued by the Director for
     the purposes of this Condition, in addition to preparing accounting
     statements on those bases which it has adopted, prepare such accounting
     statements on the bases which applied in respect of the immediately
     preceding financial year.

                                      35
<PAGE>

7.   Accounting statements in respect of a financial year prepared under sub-
     paragraph (b)(i) of paragraph 3 shall, so far as reasonably practicable and
     unless otherwise approved by the Director having regard to the purposes of
     this Condition:

     (a)  have the same content and format (in relation to each Separate
          Business) as the annual accounts of the Licensee (and any affiliate or
          related undertaking of the Licensee) prepared under Section 226 and,
          where appropriate, Section 227 of the Companies Act 1985 and conform
          to the best commercial accounting practices including Statements of
          Accounting Practice issued by the member bodies of the Consultative
          Committee of Accounting Bodies currently in force; and

     (b)  state the accounting policies adopted; and

     (c)  (with the exemption of the part of such statements which shows
          separately the amounts charged, apportioned or allocated and describes
          the bases of charge or apportionment or allocation respectively, and
          with the exception of the accounting statements relating to the Second
          Tier Supply Business and the Wholesaling Business), be published with
          the annual accounts of the Licensee.

8.   Unless the accounting statements prepared under sub-paragraph (b)(i) of
     paragraph 3 are prepared on the current cost basis as provided by the
     alternative accounting rules, the Licensee shall unless otherwise agreed by
     the Director in addition to preparing those accounting statements under
     that paragraph, prepare accounting statements for each Separate Business
     covering the same period, which shall comprise and show separately:

     (a)  a profit and loss account, a balance sheet and a statement of source
          and application of funds, together with notes thereto, which shall:

                                      36
<PAGE>

          (i)  include in respect of current cost assets amounts determined on
               the current cost basis as provided by the alternative accounting
               rules; and

          (ii) show or disclose the information and other matters required by
               the alternative accounting rules to be shown or disclosed in
               accounts where the amounts included in respect of assets covered
               by any items shown in those accounts have been determined on any
               basis mentioned in paragraph 31 of Section C of Part II of
               Schedule 4 to the Companies Act 1985;

     (b)  in respect of each Separate Business the adjusted amount of any such
          provision for depreciation as is referred to in paragraph 32(2) of
          Section C of Part II of Schedule 4 to the Companies Act 1985 and the
          items shown in the profit and loss account of the Separate Business
          for the relevant period which are affected by the determination of
          amounts on the current cost basis as provided by the alternative
          accounting rules, including the profit (or loss) before taxation; and

     (c)  such other current cost information as is referred to in the Handbook
          as the Director may reasonably require

and shall deliver the same, together with an Auditors' report prepared in
     relation to the current cost basis accounting statements in the form
     referred to in sub-paragraph (c) of paragraph 3, to the Director within the
     time limits referred to in sub-paragraph (d) of paragraph 3, and shall
     (with the exception of the part of such statements which shows separately
     the amounts charged, apportioned or allocated and describes the bases of
     charge or apportionment or allocation respectively and with the exception
     of the accounting statements relating to the Second Tier Supply Business
     and the Wholesaling Business) publish the same with the annual accounts of
     the Licensee.

                                      37
<PAGE>

9.   References in this Condition to costs or liabilities of, or reasonably
     attributable to, any Separate Business shall be construed as excluding
     taxation, capital liabilities which do not relate principally to a
     particular Separate Business, and interest thereon; and references to any
     accounting statement shall be construed accordingly.

10.  Without prejudice to paragraph 1 of Condition 2, references in this
     Condition to provisions of the Companies Act 1985 are references to those
     provisions as amended, substituted or inserted by the relevant provisions
     of the Companies Act 1989 and if such provisions of the Companies Act 1989
     are not in force at the date of grant of this Licence Document shall be
     construed as if such provisions were in force at such date.

11.  For the purposes of paragraph 8:

     "alternative accounting rules"         means the rules set out in Section C
                                            of Part II of Schedule 4 to the
                                            Companies Act 1985.

     "current cost assets"                  means assets of any description
                                            mentioned in paragraph 31 of Section
                                            C of Part II of Schedule 4 to the
                                            Companies Act 1985.

     "the Handbook"                         means the handbook issued by the
                                            Accounting Standards Committee of
                                            the Consultative Committee of
                                            Accounting Bodies (CCAB Limited) or
                                            any successor body entitled
                                            "Accounting for the effects of
                                            changing prices: a Handbook" in its
                                            current edition for the time being
                                            or in the event that no such
                                            handbook shall be in issue such
                                            guidance or publication as may be
                                            issued in replacement or
                                            substitution
                                      38
<PAGE>

                                               therefor.

1.   The Licensee's obligations to comply with this Condition shall be deemed to
     arise and be enforceable as follows:

     (a)  under the Generation Licence, to the extent that this Condition
          relates to the Generation Business;

     (b)  under the Transmission Licence, to the extent that this Condition
          relates to the Transmission Business; and

     (c)  under the Public Electricity Supply Licence, in relation to all
          matters other than those referred to in sub-paragraphs (a) and (b)
          above.

                                      39
<PAGE>

Condition 3A: Restriction on activity
-------------------------------------

1.   The Licensee shall not, at any time during the subsistence of the
     Generation Licence, the Transmisison Licence or the Public Electricity
     Supply Licence, conduct or carry on any Non-Core Business or Non-Core
     Businesses, if the turnover of such Non-Core Business or the aggregate
     turnover of such Non-Core Businesses, as the case may be, in any financial
     year of the Licensee exceeds 5% of the Turnover of the Licensee for the
     immediately preceding financial year, but this Condition shall not prevent
     such Non-Core Business or Non-Core Businesses being carried on by an
     affiliate or related undertaking of the Licensee.

2.   In this Condition:

     "Core Business"                        means each of those parts of the
                                            Separate Businesses and any other
                                            business carried on by the Licensee
                                            (but not by an affiliate or related
                                            undertaking of the Licensee) which
                                            is regulated under the Act or any
                                            other business which was conducted
                                            or carried on by the Licensee (but
                                            not by an affiliate or related
                                            undertaking of the Licensee) on 19
                                            July 1996.

     "Non-Core Business"                    means any business or activity of
                                            any kind, other than a Core
                                            Business.

     "Turnover"                             means the aggregate turnover of the
                                            Core Businesses taken as a whole in
                                            any financial year of the Licensee
                                            but excluding that part of such
                                            turnover which is attributable to
                                            transactions entered into between
                                            one Core Business and another
                                      40
<PAGE>

                                            Core Business.

Condition 4: Prohibition of cross-subsidies
-------------------------------------------

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

2.   Nothing which the Licensee is obliged to do or not to do pursuant to this
     Licence Document or any other document which grants a licence to the
     Licensee under the Act, shall be regarded as a cross-subsidy for the
     purposes of this Condition.

                                      41
<PAGE>

Condition 5: Security arrangements
----------------------------------

1.   If so directed in directions issued by the Director for the purposes of
     this Condition, the Licensee shall, not later than such date as it shall be
     directed so to do in the directions, enter into an agreement designated by
     the Secretary of State for the purposes of this Condition relating to the
     compliance with directions issued by the Secretary of State under Section
     34 and/or Section 35 of the Act.

2.   The Licensee shall comply with and perform its obligations under any
     agreement which it enters into pursuant to paragraph 1.

                                      42
<PAGE>

Condition 6: Health and safety of employees
-------------------------------------------

1.   The Licensee shall, together with all other licensees, consult with
     appropriate representatives of persons employed by itself and by those
     licensees in order to establish and maintain an appropriate machinery or
     forum for the joint consideration of matters of mutual concern in respect
     of the health and safety of such persons.

2.   In this Condition:

     "licensees"                            means all holder of licences granted
                                            under Sections 6(1)(a), 6(1)(b),
                                            6(1)(c) and 6(2) of the Act.

                                      43
<PAGE>

Condition 7: Submission of certain agreements
---------------------------------------------

1.   The Licensee shall enter into the specified agreements as soon as
     practicable after the date of grant of this Licence Document and shall, not
     later than 1 June 1990 or such later date (if any) as the Secretary of
     State shall agree, submit the specified agreements so entered into to the
     Director.

2.   The Licensee shall, if required so to do by notice given by the Secretary
     of State within 60 days after the date of submission of the last of the
     specified agreements under paragraph 1, as soon as practicable (and in any
     event not later than 10 days) after receipt of the notice:

     (a)  enter into such proposed specified agreements as are described in the
          notice; and

     (b)  submit the proposed specified agreements so entered into to the
          Director.

3.   The Licensee shall not make or enter into any agreement (other than an
     agreement which the Licensee is required to enter into pursuant to
     paragraph 2) which amends an agreement which has been submitted to the
     Director pursuant to paragraph 1 or 2, or any agreement the making or
     entering into of which has been approved pursuant to this paragraph, except
     in each case with the prior written approval of the Director.

4.   The Licensee shall comply with the relevant provisions of the nuclear
     energy agreement.

5.   For the purposes of this Condition:

     "specified agreements"                 means agreements relating to the
                                            following matters, namely:

                                      44
<PAGE>

                                            (a) the provision by the Licensee to
                                            SHE of 576MW of capacity from the
                                            Longannet and Cockenzie Power
                                            Stations;

                                            (b) the provision by SHE to the
                                            Licensee of 200 MW of hydro-
                                            generated capacity;

                                            (c) the provision by SHE to the
                                            Licensee of a 50% share of the
                                            capacity of Peterhead Power Station
                                            (including rights and obligations
                                            relative to the consumption of
                                            electricity generated from 50% (or
                                            70% in peak periods) of the gas
                                            supplied to Peterhead Power Station
                                            from the Miller Field);

                                            (d) the provision by the Licensee to
                                            SHE of a share (initially 46%) of
                                            the export and import capacity of
                                            the Interconnector with England and
                                            Wales (after deduction of an
                                            allowance for the share of such
                                            capacity dedicated to the existing
                                            agreement between South of Scotland
                                            Electricity Board and British
                                            Nuclear Fuels plc relative to the
                                            transmission of output from
                                            Chapelcross Power Station);

                                            (e) the provision by SHE to the
                                            Licensee of a 74.9% share of any
                                            electricity supplied by the United
                                            Kingdom Atomic Energy Authority
                                            pursuant to the

                                      45
<PAGE>

                                            existing agreement between such
                                            Authority and North of Scotland
                                            Hydro-Electric Board;

                                            (f) the provision by SNL to the
                                            Licensee and SHE (in the respective
                                            proportions of 74.9% and 25.1%) of
                                            all electricity generated by SNL
                                            from the nuclear stations at
                                            Hunterston and Torness (net of
                                            electricity consumed by such
                                            stations themselves); and

                                            (g) operational provisions for the
                                            implementation of all or some of the
                                            agreements relating to the matters
                                            referred to in (a) to (f) above;
                                            provisions supporting the co-
                                            ordination, planning and operation
                                            of an electricity supply system
                                            within Scotland; an operational
                                            basis to support trading
                                            relationships between SHE and the
                                            Licensee and/or between either of
                                            them and any third party and/or
                                            between third parties using the
                                            electricity Transmission Systems in
                                            Scotland; and a framework for
                                            accommodating generators of
                                            electricity using the electricity
                                            Transmission System of SHE and the
                                            Licensee.

     "proposed specified agreement"         means an agreement designated by the
                                            Secretary of State for the purposes
                                            of this Condition which relates to a
                                            matter

                                      46
<PAGE>

                                            referred to in the definition of
                                            "specified agreements" and which the
                                            Secretary of State proposes be
                                            entered into between the Licensee
                                            and SHE or, in the case of the
                                            matter referred to in sub-paragraph
                                            (f) of the definition of "specified
                                            agreements", among SNL, the Licensee
                                            and SHE in substitution for, and to
                                            the exclusion of, a specified
                                            agreement relating to that matter
                                            submitted to the Director pursuant
                                            to paragraph 1.

     "amendment"                            in relation to any agreement shall
                                            (without limiting the generality)
                                            include the making, entering into
                                            and granting of:

                                            (a) any agreement which terminates,
                                            extends the duration of, varies or
                                            has the effect of affecting in any
                                            other way any right and/or
                                            obligation (or the enforceability of
                                            any right and/or obligation) of any
                                            person under the first mentioned
                                            agreement; and

                                            (b) any waiver or purported waiver
                                            (whether or not constituted or
                                            evidenced by any written document,
                                            and whether express, implied or
                                            otherwise) of any right of any
                                            person under that agreement.

     "agreement"                            includes any contract or arrangement
                                            (whether or not constituted or
                                            evidenced

                                      47
<PAGE>

                                            by any written document).

     "nuclear energy agreement"             means the specified agreement
                                            relating to the matter referred to
                                            in sub-paragraph (f) of the
                                            definition of "specified agreements"
                                            submitted to the Director pursuant
                                            to paragraph 1 (or, if a proposed
                                            specified agreement relating to that
                                            matter is entered into pursuant to
                                            paragraph 2, that proposed specified
                                            agreement), as amended from time to
                                            time with the approval of the
                                            Director given pursuant to this
                                            Condition.

     "relevant provisions of the nuclear    means such provisions of the nuclear
     energy agreement                       energy agreement" agreement as are
                                            set out in a notice designated by
                                            the Secretary of State for the
                                            purpose of this Condition which is
                                            given to the Licensee not later than
                                            60 days after: (i) the date on which
                                            the nuclear energy agreement is
                                            submitted to the Director pursuant
                                            to paragraph 1; or (ii) (if the
                                            nuclear energy agreement is entered
                                            into and submitted pursuant to
                                            paragraph 2) the date on which it is
                                            submitted to the Director pursuant
                                            to that paragraph, and such
                                            provisions shall have effect as if
                                            they were set out in this Condition.

                                      48
<PAGE>

Condition 8: Provision of information to the Director
-----------------------------------------------------

1.   Subject to paragraphs 3 and 4, the Licensee shall, in relation to each
     licence granted by this Licence Document, furnish to the Director, in such
     manner and at such times as the Director may require, such information and
     shall procure and furnish to him such reports, as the Director may consider
     necessary in the light of the Conditions applicable to that licence or as
     he may require for the purpose of performing:

     (a)  the functions assigned to him by or under the Act; and

     (b)  any functions transferred to him under the Act.

2.   Without prejudice to the generality of paragraph 1, the Director may call
     for the furnishing of accounting information which is more extensive than
     or differs from that required to be prepared and supplied to the Director
     under Condition 3.

3.   The Licensee may not be required by the Director to furnish him under this
     Condition with information for the purpose of the exercise of his functions
     under Section 48 of the Act.

4.   The Licensee may not be required by the Director to furnish him under this
     Condition with any information in relation to an enforcement matter which
     the Licensee could not be compelled to produce or give under Section 28(3)
     of the Act.

5.   The power of the Director to call for information under paragraph 1 is in
     addition to the power of the Director to call for information under or
     pursuant to any other Condition.

                                      49
<PAGE>

6.   In paragraphs 1 to 5, "information" shall include any documents, accounts,
     estimates, returns or reports (whether or not prepared specifically at the
     request of the Director) of any description specified by the Director.

                                      50
<PAGE>

Condition 9: Payment of fees
----------------------------

1.   The Licensee shall at the times stated hereunder pay to the Secretary of
     State fees of the amount specified in or determined under this Condition.

2.   In respect of the year beginning on 1 April 1991 and in each subsequent
     year, the Licensee shall pay to the Secretary of State in relation to each
     licence granted by this Licence Document a fee which is the aggregate of
     the following amounts:

     (a)  an amount equal to the proportion which the Director shall determine
          in relation to that licence of the amount estimated by the Director,
          according to a method which has previously been disclosed in writing
          to the Licensee, as likely to be his total costs during the coming
          year;

     (b)  in relation to the Public Electricity Supply Licence only, the amount
          (or, where the Relevant Consumer's Committee in question is the
          consumers' committee for more than one public electricity supplier,
          the amount which is a proportion as determined by the Director,
          according to a method which has previously been disclosed in writing
          to the Licensee, of such amount) estimated by the Director (having
          regard to any statement under paragraph 8(2) of Schedule 2 to the Act)
          as being likely to be the costs during the coming year of the Relevant
          Consumers' Committee in the exercise of the functions assigned to it
          by or under the Act and any other such functions as it has been or may
          be required to exercise by the Director;

     (c)  an amount which is a proportion as determined by the Director of the
          amount estimated by the Director (in consultation with the Monopolies
          Commission) as having been incurred in the calendar year immediately
          preceding the 1st April in question by the Monopolies Commission in
          connection with references made to it under Section 12 of the Act with
          respect:

                                      51
<PAGE>

          (i)    (in relation to the Generation Licence only) to the Generation
                 Licence or any other licence granted under Section 6(1)(a) of
                 the Act;

          (ii)   (in relation to the Transmission Licence only) to the
                 Transmission Licence or any other licence granted under Section
                 6(1)(b) of the Act; and

          (iii)  (in relation to the Public Electricity Supply Licence only) the
                 Public Electricity Supply Licence or any other licence granted
                 under Section 6(1)(c) of the Act; and

     (d)  the difference (being a positive or negative amount), if any, between:

          (i)    the amount of the fee paid by the Licensee in respect of the
                 year immediately preceding the 1st April in question in
                 relation to that licence; and

          (ii)   the amount which that fee would have been in respect of that
                 year:

                 (aa) had the amount comprised therein under sub-paragraph 2(a)
                      been calculated by reference to the actual total costs of
                      the Director during that year, and the proportion thereof
                      attributable to that licence; and

                 (bb) (in the case of the Public Electricity Supply Licence
                      only) had the amount comprised therein under sub-paragraph
                      2(b) been calculated by reference to the actual total
                      costs of the Relevant Consumer's Committee during that
                      year and, where appropriate, the proportion thereof
                      attributable to the Licensee

                                      52
<PAGE>

          (such costs being apportioned in each case as determined by the
               Director according to a method previously disclosed in writing to
               the Licensee),

and the fee shall be paid by the Licensee to the Secretary of State within one
     month of the Director giving notice to the Licensee of its amount if that
     notice is given within 6 months of the beginning of the year in respect of
     which the fee is payable.

3.   The Licensee's obligations to comply with this Condition shall be deemed to
     arise and be enforceable as follows:

     (a)  under the Generation Licence, to the extent that this Condition
          relates to fees payable in relation to the Generation Licence;

     (b)  under the Transmission Licence, to the extent that this Condition
          relates to fees payable in relation to the Transmission Licence; and

     (c)  under the Public Electricity Supply Licence, in relation to all
          matters other than those referred to in sub-paragraphs 3(a) and (b).

                                      53
<PAGE>

           PART III. CONDITIONS APPLICABLE TO THE GENERATION LICENCE
           ---------------------------------------------------------

Condition 1: Scope of application of Part III
---------------------------------------------

1.   The Generation Licence is subject to the Conditions in Part III (including
     where such Conditions refer to activities other than those authorised by
     that licence).

2.   The Transmission Licence and the Public Electricity Supply Licence are not
     subject to the Conditions in Part III.

                                      54
<PAGE>

Condition 2: Compulsory acquisition of land
-------------------------------------------

1.   The powers and rights conferred by or under the provisions of Schedule 3 to
     the Act (compulsory acquisition of land etc) shall have effect for the
     purposes set out in paragraph 2.

2.   The purposes referred to in paragraph 1 are:

     (a)  the construction or extension of a generating station;

     (b)  activities connected with the construction or extension of a
          generating station or connected with the operation of a generating
          station; and

     (c)  the installation, maintenance, removal or replacement of ancillary
          lines, and electrical plant associated with them, connecting a
          generating station with -

          (i)  the Transmission System of the Licensee or any other Transmission
               Licensee; or

          (ii) the Distribution System of the Licensee or any other public
               electricity supplier or the system for the distribution of
               electricity of any other person authorised to supply electricity.

3.   In paragraph 2:

     (a)  the references to "generating station" are to an electricity
          generating station which

          (i)  has, or will have when its construction or extension is
               completed, a capacity of not less than 50 megawatts or such other
               capacity as may be specified in relation thereto by Order of the
               Secretary of State under Section 36(3) of the Act; and

                                      55
<PAGE>

          (ii) is, or will be when its construction or extension is completed,
               operated by or for the Licensee; and

     (b)  "extension" in relation to a generating station includes the use by
          the person operating the station of any land (wherever situated) for a
          purpose directly related to the generation of electricity by that
          station.

                                      56
<PAGE>

Condition 3: Power to carry out road works etc.
-----------------------------------------------

1.   For the purpose of enabling the Licensee to carry on the authorised
     activities, the powers and rights conferred by or under the provisions of
     Schedule 4 to the Act (other powers etc of licence holders) shall, subject
     to paragraphs 3 and 4, have effect and may, subject to paragraph 5, be
     exercised by carrying out works:

     (a)  in relation to, or in pursuance of, the installation, inspection,
          maintenance, adjustment, repair, alteration, replacement and removal
          of:

          (i)  electric lines specified in paragraph 2;

          (ii) electrical plant associated with such lines; and

          (iii) any structures for housing or covering such lines or plant;

     (b)  in relation to the installation of electrical plant to be used in
          connection with a generating station or the operation thereof; and

     (c)  in relation to electric lines or electrical plant referred to in
          sub-paragraphs (a) and (b) above as if the references to them in
          Schedule 4 to the Act included pipes used or intended to be used for
          conveying heat produced in association with electricity and steam
          produced from air and water heated by such heat and associated works
          in relation to such pipes and as if "associated works" had the meaning
          given in Section 10(3) of the Act.

2.   Electric lines are specified for the purposes of sub-paragraph (a) of
     paragraph 1:

                                      57
<PAGE>

     (a)  if they are ancillary lines and connect, or will connect when
          installed, a generating station with:

          (i)  the Transmission System of the Licensee or any other Transmission
               Licensee; or

          (ii) the Distribution System of the Licensee or any other public
               electricity supplier or the system for the distribution of
               electricity of any other person authorised to supply electricity;
               or

     (b)  where "electric lines" has the extended meaning given by paragraph
          1(c), if they connect a generating station with any premises.

3.   Paragraph 10 of Schedule 4 to the Act shall apply to the Licensee if -

     (a)  it wishes to exercise its rights of entry on land for the purpose of
          establishing whether or not the land is suitable for the construction
          or extension of a generating station; and

     (b)  it obtains the consent of the Director before exercising those rights.

4.   Works which are under, over, in, on, along or across any road, which for
     the purposes of the Roads (Scotland) Act 1984 constitutes a public road may
     be undertaken in pursuance of paragraph 1 subject to the following
     conditions -

     (a)  that such works shall not be carried out except with the consent,
          which shall not be unreasonably withheld, of the roads authority and
          in accordance with such reasonable conditions as may be attached to
          such consent;

     (b)  that any question as to whether or not a consent of the roads
          authority is unreasonably withheld, or as to the reasonableness of
          conditions

                                      58
<PAGE>

          attached to such consent, shall be determined by a single arbiter to
          be appointed -

          (i)  by agreement between the Licensee and the roads authority; or

          (ii) in default of such agreement, by the Director on the application
               of either party.

5.   The provisions of Schedule 4 of the Act shall have effect in relation to
     works of the kind described in paragraph 1 which are executed -

     (a)  in Scotland except for such of those provisions as extend only to
          England and Wales; and

     (b)  in England and Wales except for such of those provisions as extend
          only to Scotland

and in its application to works executed in England and Wales this Condition
     shall have effect as if for "road, which for the purposes of the Roads
     (Scotland) Act 1984 constitutes a public road" there was substituted
     "street, which for the purposes of the Highways Act 1980 constitutes a
     highway or part of a highway maintainable at the public expense", for
     "Roads (Scotland) Act 1984" there was substituted "Highways Act 1980", for
     "roads authority" there was substituted "highway authority" and for
     "arbiter" there was substituted "arbitrator".

6.   In this Condition:

     "authorised activities"                Means the activities which the
                                            Licensee is authorised by the
                                            Generation Licence to carry on, and
                                            shall include any purpose connected
                                            with the supply to any premises of
                                            heat produced in association with
                                            electricity and steam produced from
                                            air

                                      59
<PAGE>

                                            and water heated by such heat.

     "generating station" and
     "extension"                            Have the meanings given in paragraph
                                            3 of Condition 2.

                                      60
<PAGE>

Condition 4: Planning of Licensee's ancillary system
----------------------------------------------------

1.   The Licensee shall plan and develop each part of the ancillary system in
     accordance with a standard not less than the relevant standard insofar as
     applicable to it, or such other standard of planning as the Licensee may,
     following consultation with such (if any) Authorised Electricity Operators
     as the Director shall consider appropriate and with the approval of the
     Director, adopt from time to time.

2.   The Director may (following consultation with the Licensee and such other
     (if any) Authorised Electricity Operators as the Director shall consider
     appropriate) issue directions relieving the Licensee of its obligations
     under paragraph 1 in respect of such parts of the ancillary system and to
     such extent as may be specified in the directions.

In this Condition:

     "relevant standard"                    Means, in relation to each part of
                                            the ancillary system, which ever of
                                            the following standards is
                                            applicable to that part, namely:

                                            (a) the standard in accordance with
                                                which the Transmission Licensee
                                                within whose authorised
                                                transmission area that part is
                                                situated is required under the
                                                licence held by it under Section
                                                6(1)(b) of the Act to plan and
                                                develop its Transmission System;
                                                or

                                            (b) the standard in accordance with
                                                which the public electricity
                                                supplier within whose authorised
                                                supply area that part is
                                                situated is required under the

                                      61
<PAGE>

                                            licence held by it under Section
                                            6(1)(c) of the Act to plan and
                                            develop its Distribution System.

                                      62
<PAGE>

Condition 5: Compliance with Scottish Grid codes
------------------------------------------------

1.   The Licensee shall comply with the provisions of the Grid Code and the Grid
     Code of each other Scottish Transmission Licensee insofar as applicable to
     its business in generating electricity in pursuance of the Generation
     Licence or to the electricity generated in the course of that business.

2.   The Director may (following consultation with the Licensee and such other
     Scottish Transmission Licensees as the Director shall consider appropriate)
     issue directions relieving the Licensee of its obligation under paragraph 1
     in respect of such parts of the Grid Code or the Grid Code of any other
     Scottish Transmission Licensee and, in each case, to such extent as may be
     specified in those directions.

                                      63
<PAGE>

Condition 6: Compliance with Scottish Distribution Codes
--------------------------------------------------------

1.   The Licensee shall comply with the provisions of the Distribution Code and
     the Distribution Code of each other Scottish Public Electricity Supplier
     insofar as applicable to its business in generating electricity in
     pursuance of the Generation Licence or to the electricity generated in the
     course of that business.

2.   The Director may (following consultation with the Licensee and such other
     Scottish Public Electricity Suppliers as the Director shall consider
     appropriate) issue directions relieving the Licensee of its obligation
     under paragraph 1 in respect of such parts of the Distribution Code of any
     other Scottish Public Electricity Supplier and, in each case, to such
     extent as may be specified in those directions.

                                      64
<PAGE>

Condition 7: Compliance with Trading Code
-----------------------------------------

1.   The Licensee shall comply with the provisions of the Trading Code insofar
     as applicable to its business in generating electricity in pursuance of the
     Generation Licence or to the electricity generated in the course of that
     business, including any requirements thereunder for the Director's approval
     or consent, for compliance with directions issued by the Director or
     relating to determinations made by the Director.

2.   The Director may (following consultation with such members of the trading
     system established by the Trading Code as the Director shall consider
     appropriate) issue directions relieving the Licensee of its obligation
     under paragraph 1 in respect of such parts of the Trading Code and to such
     extent as may be specified in those directions.

                                      65
<PAGE>

Condition 8: Connection to and use of ancillary system - requirement to offer
-----------------------------------------------------------------------------
     terms
     -----

1.   In this Condition and Condition 8A, "system" means the ancillary system.

2.   The Licensee shall, subject to paragraphs 7 and 8:

     (a)  offer to enter into an agreement to provide a connection to the system
          with any person who has made application for connection to the system;
          and

     (b)  offer to enter into an agreement for the modification of a connection
          to the system with any person who has made application for
          modification of a connection to the system; and

     (c)  offer to enter into an agreement with any person who has made
          application for use of system:

          (i)  to accept into the system at such entry point and in such
               quantities as may be specified in the application electricity to
               be provided by or for the person; and

          (ii) to deliver electricity equal in quantity to that accepted into
               the system (less only any losses incurred in the course of
               transporting such electricity through the system) from such exit
               points on the system and in such quantities as may be specified
               in the application to such person as the person making the
               application may specify.

3.   The Licensee shall, subject to paragraphs 7 and 8, offer terms for an
     agreement in accordance with paragraph 2 as soon as practicable and in any
     event not more than the period specified in paragraph 9 after receipt by
     the Licensee of an application from the person containing all such
     information as

                                      66
<PAGE>

     the Licensee may reasonably require for the purpose of formulating the
     terms of its offer.

4.   Each offer made in accordance with paragraph 1 shall:

     (a)  make detailed provision regarding such of the following matters as are
          relevant for the purposes of the agreement:

          (i)    the carrying out of works (if any) required for the
                 construction or modification of the entry point to connect the
                 system to the Transmission System of the Licensee or any other
                 Transmission Licensee or the Distribution System of the
                 Licensee or any other public electricity supplier and/or the
                 system for the distribution of electricity of any other person
                 authorised to supply electricity or in connection with the
                 construction or modification of any exit point for the delivery
                 of electricity as specified in the application, and for the
                 obtaining of any consents necessary for such purposes;

          (ii)   the carrying out of works (if any) for the provision of
                 electrical plant or for the extension or reinforcement of the
                 system which are required to be undertaken for the provision of
                 connection to and/or use of system to the person and for the
                 obtaining of any consents necessary for such purposes;

          (iii)  the installation of appropriate meters or other apparatus (if
                 any) required to enable the Licensee to measure electricity
                 being accepted into the system at the specified entry point and
                 leaving the system at the specified exit points;

          (iv)   the installation of such switchgear or other apparatus (if any)
                 as may be required for interrupting the use of system should
                 there be a failure by or for a person to provide electricity at
                 its entry

                                      67
<PAGE>

               point on the system for delivery to the person specified by the
               person making the application from the exit points on the system;

          (v)  the date by which any works required so as to permit access to
               the system (including for this purpose any works for its
               extension or reinforcement) shall be completed and so that,
               unless otherwise agreed by the person making the application, a
               failure to complete such works by such date shall be a material
               breach of the agreement entitling the person to rescind the
               agreement; and

          (vi) the charges to be paid by the person making the application for
               the provision of electrical plant, for connections to or
               modification of connections to, or the extension or reinforcement
               of the system, for the installation of meters, switchgear or
               other apparatus and for their maintenance, for disconnection from
               the system and the removal of electrical plant, electric lines
               and meters following disconnection and for use of system which
               shall, unless manifestly inappropriate, be set in conformity with
               paragraph 5; and

     (b)  contain such other provisions as may be appropriate for the purposes
          of the agreement in the circumstances in which it is likely to be
          entered into.

5.   The charges referred to in paragraph 4 to be contained in every agreement
     the subject of an offer by the Licensee shall be such that:

     (a)  charges for the provision of electrical plant, charges for connection
          to the system, charges for modification of connections, charges for
          disconnection from the system and the removal of electrical plant,
          electric lines and meters following disconnection and charges for

                                      68
<PAGE>

          extension or reinforcement of the system and for use of system are set
          at a level which will enable the Licensee to recover no more than:

          (i)  an appropriate proportion (taking account of the factors referred
               to in paragraph 6) of the costs directly or indirectly incurred
               by the Licensee; and

          (ii) a reasonable rate of return on the capital represented by such
               costs; and

     (b)  charges for the installation of meters, switchgear or other apparatus
          and for their maintenance shall not exceed the costs thereof and a
          reasonable rate of return on the capital represented by such cost.

6.   For the purpose of determining an appropriate proportion of the costs
     directly or indirectly incurred in carrying out works, the Licensee shall
     have regard to:

     (a)  the benefit (if any) to be obtained or likely in the future to be
          obtained by the Licensee or any other person as a result of the
          carrying out of such works whether by virtue of the provision of
          electrical plant, the reinforcement or extension of the system, or the
          provision of additional entry or exit points on the system or
          otherwise; and

     (b)  the ability or likely future ability of the Licensee to recoup a
          proportion of such costs from other persons.

7.   The Licensee shall not be obliged pursuant to this Condition 8 to offer to
     enter into any agreement where, by reason of the capacity of the system and
     the use made or reasonably expected to be made of it, the Licensee would be
     required to expand or reinforce the capacity of the system.

8.   The Licensee shall not be obliged pursuant to this Condition 8 to offer to
     enter into any agreement with any person if:

                                      69
<PAGE>

     (a)  to do so would be likely to involve the Licensee in breach of:

          (i)  the Grid Code or the Grid Code of any other Transmission
               Licensee; or

          (ii) the Distribution Code or the Distribution Code of any other
               public electricity supplier; or

          (iii) the Electricity Supply Regulations 1988 or any regulations made
               under Section 29 of the Act; or

          (iv) any other enactment relating to safety or standards applicable to
               the system; or

     (b)  the person does not undertake to be bound, insofar as applicable, by
          the terms of the Codes referred to in sub-paragraphs (a)(i) and
          (a)(ii) above, as from time to time in force.

9.   For the purpose of paragraph 3, the period specified shall be:

     (a)  in the case of persons seeking use of system only, 28 days; and

     (b)  in the case of persons seeking connection or modification of an
          existing connection or seeking use of system in conjunction with
          connection, 3 months.

10.  The Licensee shall within 28 days following receipt of a request from any
     person, give or send to such person such information in the possession of
     the Licensee as may be reasonably required by such person for the purpose
     of completing paragraph 8 of Part 1 and paragraphs 2(v) and (vi) of Part 2
     of Schedule 2 to the Electricity (Application for Licences and Extensions
     of Licences) Regulations 1990 or such provisions to like effect contained
     in any

                                      70
<PAGE>

     further regulations then in force made pursuant to Sections 6(3), 60 and
     64(1) of the Act.

                                      71
<PAGE>

Condition 8A: Connection to and use of ancillary system - functions of the
--------------------------------------------------------------------------
     Director
     --------

1.   If, after a period which appears to the Director to be reasonable for the
     purpose, the Licensee has failed to enter into an agreement with a person
     entitled or claiming to be entitled thereto pursuant to an application in
     accordance with Condition 8, the Director may, pursuant to Section 7(3) of
     the Act, on the application of such person or the Licensee, settle any
     terms of the agreement in dispute between the Licensee and the person in
     such manner as appears to the Director to be reasonable having (insofar as
     relevant) regard, in particular, to the following considerations:

     (a)  that the person should pay to the Licensee the whole or an appropriate
          proportion (as determined in accordance with paragraph 6 of Condition
          8) of the costs directly or indirectly incurred by the Licensee in the
          carrying out of any works or in providing or doing any other thing
          under the agreement in question calculated in accordance with the
          principles set out in paragraph 4 of Condition 8 together with a
          reasonable rate of return on the capital represented by such costs;

     (b)  that the performance by the Licensee of its obligations under the
          agreement should not cause it to be in breach of any other Condition
          to which the Generation Licence is subject;

     (c)  that any methods by which the system is connected to the Transmission
          System of the Licensee or any other Transmission Licensee or the
          Distribution System of the Licensee or any other public electricity
          supplier or the system for the distribution of electricity of any
          other person authorised to supply electricity accords with good
          engineering principles and practices; and

     (d)  that the terms and conditions of agreements entered into by the
          Licensee pursuant to an application in accordance with Condition 8

                                    72
<PAGE>

          should be, so far as circumstances allow, as similar in substance and
          form as is practicable.

2.   If the person wishes to proceed on the basis of the agreement as settled by
     the Director, the Licensee shall forthwith enter into and implement such
     agreement in accordance with its terms.

3.   If the Licensee proposes to vary the contractual terms of any agreement
     entered into pursuant to Condition 8 or this Condition in any manner
     provided for under such agreement, the Director may, at the request of the
     Licensee or other party to such agreement, settle any dispute relating to
     such variation in such manner as appears to the Director to be reasonable.

                                      73
<PAGE>

Condition 9: Generation outages
-------------------------------

1.   The Licensee shall notify the Director in writing forthwith in the event
     that the Licensee and SHE have not agreed a programme of planned outages
     for their respective generation sets for the financial year commencing on 1
     April 1991 or any subsequent financial year on or before the 1st day of
     January prior to the commencement of the relevant financial year.

                                      74
<PAGE>

Condition 10: Supplementary Conditions in relation to England and Wales
-----------------------------------------------------------------------

1.   The Conditions set out in Schedule 4 shall apply in respect of any
     generating station which the Licensee shall construct or operate in England
     and Wales.

                                      75
<PAGE>

           PART IV. CONDITIONS APPLICABLE TO THE TRANSMISSION LICENCE
           ----------------------------------------------------------

Condition 1: Scope of application of Part IV
--------------------------------------------

1.   The Transmission Licence is subject to the Conditions in Part IV (including
     where such Conditions relate to activities other than those authorised by
     that Licence).

2.   The Generation Licence and the Public Electricity Supply Licence are not
     subject to the Conditions in Part IV.

                                      76
<PAGE>

Condition 2: Transmission charge restriction conditions
-------------------------------------------------------

1.   The Transmission Licence is subject to the Conditions in Schedule 5 and
     from 1 April 2000 shall be subject to the Conditions contained in Schedule
     5A, (which Conditions shall be deemed for the purposes of the Transmission
     Licence and the Public Electricity Supply Licence to be included in
     Schedule 5 and any references to Schedule 5 therein and in other licences
     granted under the Licence Document, as from that date, shall be deemed to
     be Schedule 5 containing the provisions of Schedule 5A and be construed
     accordingly.

2.   The Generation Licence and the Public Electricity Supply Licence are not
     subject to the Conditions in Schedule 5.

                                      77
<PAGE>

Condition 3: Grid Code
----------------------

1.   The Licensee shall in consultation with Authorised Electricity Operators
     liable to be materially affected thereby prepare and at all times have in
     force and (subject to paragraph 11) shall implement and comply with a Grid
     Code:

     (a)  covering all material technical aspects relating to connections to and
          the operation and use of the Licensee's Transmission System or
          (insofar as relevant to the operation and use of that Transmission
          System) the operation of electric lines and electrical plant connected
          to the Transmission System of the Licensee or any other Transmission
          Licensee or the Distribution System of the Licensee or any other
          public electricity supplier or the system for the distribution of
          electricity of any other person authorised to supply electricity and
          (without prejudice to the foregoing) making express provision as to
          the matters referred to in paragraph 5; and

     (b)  which is designed so as:

          (i)  to permit the development, maintenance and operation of an
               efficient, co-ordinated and economical system for the
               transmission of electricity;

          (ii) to facilitate the Licensee's Transmission System being made
               available to persons authorised to supply or generate electricity
               on terms which neither prevent nor restrict competition in the
               supply or generation of electricity; and

          (iii) subject to sub-paragraphs (i) and (ii), to promote the security
               and efficiency of the electricity generation, transmission and
               Distribution System in Scotland as a whole.

                                      78
<PAGE>

2.   The Grid Code in force at the date of the coming into force of the
     Transmission Licence shall be sent to the Director for his approval.
     Thereafter the Licensee shall in consultation with Authorised Electricity
     Operators liable to be materially affected thereby periodically review
     (including upon the request of the Director) the Grid Code and its
     implementation. Following any such review, the Licensee shall send to the
     Director:

     (a)  a report on the outcome of such review; and

     (b)  any proposed revisions to the Grid Code from time to time as the
          Licensee (having regard to the outcome of such review) reasonably
          thinks fit for the achievement of the objectives referred to in
          sub-paragraph (b) of paragraph 1; and

     (c)  any written representations or objections from Authorised Electricity
          Operators (including any proposals by such operators for revisions to
          the Grid Code not accepted by the Licensee in the course of the
          review) arising during the consultation process and subsequently
          maintained.

3.   Revisions to the Grid Code proposed by the Licensee and sent to the
     Director pursuant to paragraph 2 shall require to be approved by the
     Director.

4.   Having regard to any written representations or objections referred to in
     sub-paragraph (c) of paragraph 2, and following such further consultation
     (if any) as the Director may consider appropriate, the Director may issue
     directions requiring the Licensee to revise the Grid Code in such manner as
     may be specified in the directions, and the Licensee shall forthwith comply
     with any such directions.

5.   The Grid Code shall include:

     (a)  connection conditions specifying the technical, design and operational
          criteria to be complied with by the Licensee and by any person

                                      79
<PAGE>

          connected or seeking connection with the Licensee's Transmission
          System;

     (b)  an operating code specifying the conditions under which the Licensee
          shall operate the Licensee's Transmission System, under which the
          Licensee shall operate its plant and Distribution System and other
          persons shall operate their plant and/or systems for the distribution
          of electricity in relation to the Licensee's Transmission System,
          insofar as the imposition of such conditions is necessary to protect
          the security and quality of supply and safe operation of the
          Licensee's Transmission System under both normal and abnormal
          operating conditions;

     (c)  a planning code specifying the technical and design criteria and
          procedures to be applied by the Licensee in the planning and
          development of the Licensee's Transmission System and to be taken into
          account by the Licensee and other persons connected or seeking
          connection with the Licensee's Transmission System in the planning and
          development of their own plant and systems;

     (d)  a scheduling and despatch code specifying procedures for the
          scheduling and despatch of generating stations connected to the
          Licensee's Transmission System; and

     (e)  procedures relating to outages of generation sets.

6.   The Licensee shall give or send a copy of the Grid Code (as from time to
     time revised) to the Director.

7.   The Licensee shall (subject to paragraph 8) give or send a copy of the Grid
     Code (as from time to time revised) to any person requesting the same.

8.   The Licensee may make a charge for any copy of the Grid Code (as from time
     to time revised) given or sent pursuant to paragraph 7 of an amount which
     will

                                      80
<PAGE>

     not exceed any amount specified for the time being for the purposes of this
     Condition in directions issued by the Director.

9.   In preparing, implementing and complying with the Grid Code, (including in
     respect of the scheduling of maintenance of the Licensee's Transmission
     System) the Licensee shall not unduly discriminate against or unduly
     prefer:

     (a)  any one or any group of persons; or

     (b)  the Licensee in the conduct of any business other than the
          Transmission Business

     in favour of or as against any one other or any other group of persons.

10.  The Licensee shall keep and maintain such records concerning its
     implementation of and compliance with the Grid Code as are, in the opinion
     of the Director, sufficient to enable the Director to assess whether the
     Licensee is performing the obligation imposed upon it under paragraph 9
     concerning these matters and the Licensee shall furnish to the Director
     such records (or such of these as the Director may require) in such manner
     and at such times as the Director may require.

11.  The Director may (following consultation with the Licensee) issue
     directions relieving the Licensee of its obligations under the Grid Code in
     respect of such parts of the Licensee's Transmission System and to such
     extent as may be specified in the directions.

                                      81
<PAGE>

Condition 4: Transmission System security standard and quality of service
-------------------------------------------------------------------------

1.   The Licensee shall:

     (a)  plan and develop its Transmission System in accordance with the
          document number TDM13/10,001 and entitled Security of Supply (Issue 2
          dated October 1985) (incorporating Engineering Recommendation P2/5
          (October 1978 revision) of the Electricity Council Chief Engineers'
          Conference) and the planning document numbered NSP366 entitled
          Security of the 400kV and 275kV Systems in Scotland (each such
          document being as submitted by or on behalf of the Licensee to the
          Director on or before the date of grant of this Licence Document or
          such later date as the Director shall agree) as appropriate to the
          purpose under consideration, and the Grid Code or such other standard
          of planning as the Licensee may, following consultation with any
          Authorised Electricity Operator liable to be materially affected
          thereby and with the approval of the Director, adopt from time to
          time; and

     (b)  operate its Transmission System in accordance with the document
          entitled Grid Control Instruction (System) BI - SSEB Operational
          Standards of Security of Supply (dated 30 March 1981) and (each such
          document being as submitted by or on behalf of the Licensee to the
          Director on or before the date of grant of this Licence Document), as
          appropriate to the purpose under consideration and the Grid Code or
          such other standard of operation as the Licensee may, following
          consultation with any Authorised Electricity Operator liable to be
          materially affected thereby and with the approval of the Director,
          adopt from time to time.

2.   The Licensee shall, in consultation with Authorised Electricity Operators
     liable to be materially affected thereby, review the documents (other than
     the Grid Code) referred to in paragraph 1 and their implementation on each
     occasion

                                      82
<PAGE>

     that it carries out a review of the Grid Code in accordance with paragraph
     2 of Condition 3. Following any such review, the Licensee shall send to the
     Director:

     (a)  a report on the outcome of such review; and

     (b)  any revision which the Licensee proposes to make to such documents
          from time to time (having regard to the outcome of such review); and

     (c)  any written representations or objections from Authorised Electricity
          Operators (including any proposals by such operators for revisions to
          such documents not accepted by the Licensee in the course of the
          review) arising during the consultation process and subsequently
          maintained.

3.   Revisions to the documents (other than the Grid Code) referred to in
     paragraph 1 proposed by the Licensee and sent to the Director pursuant to
     paragraph 2 shall require to be approved by the Director.

4.   Having regard to any written representations or objections referred to in
     sub-paragraph (c) of paragraph 2, and following such further consultation
     (if any) as the Director may consider appropriate, the Director may issue
     directions requiring the Licensee to revise the documents (other than the
     Grid Code) referred to in paragraph 1 in such manner as may be specified in
     the directions, and the Licensee shall forthwith comply with any such
     directions.

5.   The Licensee shall within 3 months after the Transmission Licence comes
     into force draw up and submit to the Director for his approval a statement
     setting out criteria by which the performance of the Licensee in
     maintaining Transmission System security and availability and quality of
     service may be measured.

                                      83
<PAGE>

6.   The Licensee shall within 2 months after the end of each financial year
     submit to the Director a report providing details of the performance of the
     Licensee during the previous financial year against the criteria referred
     to in paragraph 5.

7.   The Director may (following consultation with the Licensee and any
     Authorised Electricity Operator liable to be materially affected thereby)
     issue directions relieving the Licensee of its obligations under paragraph
     1 in respect of such parts of the Licensee's Transmission System and to
     such extent as may be specified in the directions.

8.   The Licensee shall give or send a copy of the documents (other than the
     Grid Code) referred to in paragraph 1 (as from time to time revised) to the
     Director.

9.   The Licensee shall (subject to paragraph 10) give or send a copy of such
     documents (as from time to time revised) to any person requesting the same.

10.  The Licensee may make a charge for any copy given or sent pursuant to
     paragraph 9 of an amount which will not exceed any amount specified for the
     time being for the purposes of this Condition in directions issued by the
     Director.

                                      84
<PAGE>

Condition 5: Trading Code
-------------------------

1.   The Licensee shall, jointly with the other Founder Member, adopt a Trading
     Code designated by the Director for the purposes of this Condition not
     later than such date as shall be specified in directions issued by the
     Director for the purposes of this Condition and the Licensee shall comply
     with the terms of such Trading Code as from time to time revised (including
     any directions, consents, approvals or determinations thereunder by the
     Director).

2.   The Trading Code shall include:

     (a)  arrangements for the establishment of facilities and procedures for
          effecting trading of electricity between the Founder Members and
          between and among the Founder Members and other persons who become
          members of the trading system after the date of the coming into force
          of the Trading Code;

     (b)  arrangements for effecting trading of electricity between members of
          the trading system;

     (c)  arrangements for the establishment of a Trading Committee to carry out
          the general management and supervision of the trading system and its
          operation;

     (d)  arrangements for the admission to membership of the trading system of:

          (i)  any person authorised to generate electricity by a licence
               granted under Section 6(1)(a) of the Act:

               (aa) who operates a generating station of a net capacity not less
                    than 50MW (or such other net capacity as the Director shall
                    direct from time to time); and

                                      85
<PAGE>

               (bb) who satisfies such other (if any) requirements as the
                    Director shall direct from time to time; and

               (cc) applies for such membership and agrees to be bound by the
                    provisions of the Trading Code; and

               (dd) whose said licence contains a Condition requiring it to
                    comply with the provisions of the Trading Code in the terms
                    mutatis mutandis of Condition 7 of Part III; and

          (ii) any licence holder specified or of a description specified by the
               Director:

               (aa) who applies for such membership and agrees to be bound by
                    the provisions of the Trading Code; and

               (bb) whose licence contains a Condition requiring it to comply
                    with the provisions of the Trading Code in the terms mutatis
                    mutandis of Condition 7 of Part III;

     (e)  arrangements for charging members for the costs of the trading system;

     (f)  provisions for the giving of directions by the Director to the members
          of the trading system including (without limitation) directions in
          relation to the responsibilities of the Trading Committee, the
          contents of reports to be prepared by the Trading Committee pursuant
          to the Trading Code, the confidentiality and prevention of disclosure
          of information and matters relating to the trading system and trading
          of electricity under the trading system and the criteria for
          membership of the trading system;

     (g)  provisions for the approval by the Director of certain matters
          including (without limitation) approval of the resignation of a
          Founder Member from membership of the trading system, the cessation of
          the

                                      86
<PAGE>

          membership of other members in certain circumstances, the admission of
          persons to membership in certain circumstances and any adjustment by
          the Trading Committee to the amount of the membership contributions or
          other sums payable by members pursuant to the Trading Code;

     (h)  provisions for referring certain matters to the Director for his
          determination including (without limitation) certain disagreements
          arising under the Trading Code concerning the admission of persons to
          membership of the trading system and the cessation of the membership
          of members;

     (i)  provisions for delivering to the Director copies of reports prepared
          by the Trading Committee pursuant to the Trading Code;

     (j)  administration procedures for the trading system.

3.   In complying with the Trading Code the Licensee:

     (a)  shall have regard to its duty to facilitate competition as specified
          in Section 9(2) and (3) of the Act; and

     (b)  shall not unduly discriminate against or unduly prefer:

          (i)  any one or any group of members; or

          (ii) the Licensee in the conduct of any business other than the
               Transmission Business

     (c)  in favour of or as against any one other or any other group of
          members.

4.   The Licensee shall, jointly with each other Scottish Transmission Licensee
     and in consultation with the members of the trading system, review the
     Trading

                                      87
<PAGE>

     Code and its operation from time to time after the date of the
     coming into force of the Transmission Licence and the Licensee shall do so
     whenever requested by the Director and in accordance with the terms of such
     request (including any requirement to prepare such revisions to the Trading
     Code as shall be necessary in order to give effect to such matters as shall
     be specified in the request). Any revision to the Trading Code resulting
     from the carrying out of any review shall be sent to the Director for his
     approval and no revision to the Trading Code shall become effective until
     the Director has approved the revision.

5.   The Licensee shall give or send a copy of the Trading Code (as from time to
     time revised) to the Director.

6.   The Licensee shall (subject to paragraph 7) give or send a copy of the
     Trading Code (as from time to time revised) to any Authorised Electricity
     Operator who requests it.

7.   The Licensee may make a charge for any copy of the Trading Code (as from
     time to time revised) given or sent pursuant to paragraph 6 of an amount
     which will not exceed any amount specified for the time being for the
     purpose of this Condition in directions issued by the Director.

8.   If there shall be any disagreement between the Licensee and any other
     Scottish Transmission Licensee as to the terms of any revision which is to
     be made to the Trading Code pursuant to paragraph 4 then:

     (a)  the Licensee shall refer the matter to the Director for determination;

     (b)  the Licensee shall jointly with each other Scottish Transmission
          Licensee forthwith prepare such revision on the basis of the terms so
          determined by the Director; and

                                      88
<PAGE>

     (c)  a revision so prepared shall for all the purposes of this Condition be
          deemed to have been prepared in accordance with paragraph 4.

9.   For the purposes of this Condition:

     "trading of electricity"                   means sales and purchases of
                                                electricity pursuant to short
                                                term contracts.

     "short term contract"                      means a contract under which a
                                                person has a right or an
                                                obligation (whether or not
                                                conditional or contingent) to
                                                receive or provide electricity
                                                other than:

                                                (a)   a contract:

                                                         (i)  which is performed
                                                           without the use of
                                                           any part of the
                                                           Scottish Transmission
                                                           System; and

                                                         (ii) under which the
                                                           purchaser is not a
                                                           person authorised to
                                                           supply electricity in
                                                           Scotland or, if so
                                                           authorised,
                                                           undertakes to the
                                                           seller to use the
                                                           electricity received
                                                           or provided pursuant
                                                           to the contract only
                                                           for purposes other
                                                           than supply to
                                                           premises in Scotland

                                                or

                                                (b)   a contract under which no
                                                      person has a right or an
                                                      obligation (whether or not

                                      89
<PAGE>

                                                      conditional or contingent)
                                                      to receive or provide
                                                      electricity on a day
                                                      earlier than the 29th day
                                                      after the date on which
                                                      the contract is made or
                                                      entered into
                                                or

                                                (c)   a contract under which:

                                                         (i)  a person has a
                                                              right or an
                                                              obligation
                                                              (whether or not
                                                              conditional or
                                                              contingent) to
                                                              receive or provide
                                                              electricity on any
                                                              one or more of the
                                                              28 days after the
                                                              date on which the
                                                              contract is made
                                                              or entered into;
                                                              and

                                                         (ii) that person has a
                                                              right or an
                                                              obligation to
                                                              receive or provide
                                                              on the 29th (or
                                                              any later) day
                                                              after such date
                                                              (and on the same
                                                              terms as the
                                                              highest daily
                                                              amount referred to
                                                              below) an amount
                                                              of electricity not
                                                              less than the
                                                              highest daily
                                                              amount of
                                                              electricity which
                                                              it has a right or
                                                              an obligation to
                                                              receive or provide
                                                              during the period
                                                              of 28 days
                                                              referred to in (i)
                                                              above.

     "the trading system"                       means the facilities and
                                                procedures established under the
                                                Trading Code for the

                                      90
<PAGE>

                                                trading of electricity.

     "the Founder Members"                      means the Licensee and SHE
                                                together.

     "the Scottish Transmission System"         means the Transmission Systems
                                                of the Licensee and other
                                                Scottish Transmission Licensees
                                                taken together, but excluding
                                                any part thereof which is not
                                                situated in Scotland.

     "contract"                                 shall include any contract
                                                whether or not in, or evidenced
                                                by, writing but shall not
                                                include the Pooling and
                                                Settlement Agreement or any
                                                contract made or entered into
                                                pursuant to the Pooling and
                                                Settlement Agreement.

                                      91
<PAGE>

Condition 6: Compliance with Distribution Codes
-----------------------------------------------

1.   The Licensee shall comply with the provisions of the Distribution Code and
     the Distribution Code of each other public electricity supplier insofar as
     applicable to the authorised business of the Licensee referred to in the
     definition of "Transmission Business" in paragraph 3 of Condition 2 in Part
     II.

2.   The Director may (following consultation with the Licensee and such other
     public electricity suppliers as the Director shall consider appropriate)
     issue directions relieving the Licensee of its obligation under paragraph 1
     in respect of such parts of the Distribution Code or the Distribution Code
     of any other public electricity supplier and, in each case, to such extent
     as may be specified in those directions.

                                      92
<PAGE>

Condition 7: Disposal of relevant assets
----------------------------------------

1.   The Licensee shall not dispose of or relinquish operational control over
     any relevant asset otherwise than in accordance with the following
     paragraphs of this Condition.

2.   Save as provided in paragraph 3, the Licensee shall give to the Director
     not less than 2 months' prior written notice of its intention to dispose of
     or relinquish operational control over any relevant asset, together with
     such further information as the Director may request relating to such asset
     or the circumstances of such intended disposal or relinquishment of control
     or to the intentions in regard thereto of the person proposing to acquire
     such asset or operational control over such asset.

3.   Notwithstanding paragraphs 1 and 2, the Licensee may dispose of or
     relinquish operational control over any relevant asset:

     (a)  where:

          (i)  the Director has issued directions for the purposes of this
               Condition containing a general consent (whether or not subject to
               conditions) to;

               (aa) transactions of a specified description; and/or

               (bb) the disposal of or relinquishment of operational control
                    over relevant assets of a specified description; and

          (ii) the disposal or relinquishment of operational control in question
               is effected pursuant to a transaction of a description specified
               in the directions or the relevant asset in question is of a
               description so specified and the disposal of relinquishment of
               operational control

                                      93
<PAGE>

               is in accordance with any conditions to which the consent is
               subject; or

     (b)  where the disposal or relinquishment of operational control in
          question is required by or under any enactment or subordinate
          legislation or by or under a transfer scheme.

4.   Notwithstanding paragraph 1, the Licensee may dispose of or relinquish
     operational control over any relevant asset specified in any notice given
     under paragraph 2 in circumstances where:

     (a)  the Director confirms in writing that he consents to such disposal or
          relinquishment (which consent may be made subject to the acceptance by
          the Licensee or any third party in favour of whom the relevant asset
          is proposed to be disposed or operational control is proposed to be
          relinquished of such conditions as the Director may specify); or

     (b)  the Director does not inform the Licensee in writing of any objection
          to such disposal or relinquishment of control within the notice period
          referred to in paragraph 2.

5.   In this Condition:

     "disposal"                                  includes any sale, gift, lease,
                                                 licence, the grant of any right
                                                 of possession, loan, security,
                                                 mortgage, charge or the grant
                                                 of any other encumbrance or the
                                                 permitting of any encumbrance
                                                 to subsist or any other
                                                 disposition to a third party
                                                 and "dispose" shall be
                                                 construed accordingly.

     "relevant asset"                            means any asset for the time
                                                 being forming part of the
                                                 Licensee's

                                      94
<PAGE>

                                                 Transmission System, any
                                                 control centre for use in
                                                 conjunction therewith and any
                                                 right, title or interest in
                                                 land upon which any of the
                                                 foregoing is situtate.

                                      95
<PAGE>

Condition 8: Restriction on use of certain information
------------------------------------------------------

1.   Any information relating to or deriving from the management or operation of
     the Transmission Business shall, for the purposes of this Condition, be
     treated as confidential information.

2.   The Licensee shall not (and shall procure that its affiliates and related
     undertakings shall not) disclose or authorise access to confidential
     information:

     (a)  save to the extent provided by sub-paragraphs 3(b) to (d), to such of
          its (or its affiliates' or related undertakings') employees, agents,
          advisers, consultants or contractors as are engaged in, or in respect
          of, the management or operation of any other business (whether or not
          a Separate Business) of the Licensee; or

     (b)  save to the extent permitted by paragraph 3, to any other person.

3.   Subject to paragraphs 9 to 12 of Condition 8A, the Licensee shall (and
     shall procure that its affiliates and related undertakings shall) disclose
     or authorise access to confidential information only:

     (a)  in the following circumstances, namely;

          (i)  to such of its (or its affiliates' or related undertakings')
               employees, agents, advisers, consultants or contractors as are
               engaged in, or in respect of, the management or operation of the
               Transmission Business or any external transmission activities and
               require access to the information for that purpose;

          (ii) to personnel of any holder of a public electricity supply licence
               (a PES licence holder) or a transmission licence holder engaged
               in the external distribution activities of that PES licence
               holder, or the external transmission activities of that
               transmission licence holder (as the case may be), to the extent
               necessary for the performance by such personnel of those external
               distribution activities, or those external transmission

                                      96
<PAGE>

               activities (as the case may be), and the use by such personnel of
               that information for that purpose;

          provided that effective arrangements are maintained in place at all
          times for ensuring that no further disclosure of any information
          supplied or obtained pursuant to this paragraph is made and that such
          information is used only for the purpose of the Transmission Business
          or any external transmission activities of the Licensee;

          (b)  where the Licensee (or any affiliate or related undertaking of
               the Licensee) is required or permitted to disclose such
               information by virtue of:

               (i)  any requirement of a Competent Authority;

               (ii) the conditions of any licence granted under the Act or any
                    document referred to in such a licence with which it is
                    required by virtue of the Act or that licence to comply;

               (iii) any other requirement of law; or

               (iv) the rules of the Electricity Arbitration Association or of
                    any judicial or other arbitral process or tribunal of
                    competent jurisdiction;

     (c)  where such information was provided by or relates to any person who
          has notified (or otherwise agreed with) the Licensee that it need not
          be treated as confidential; or

     (d)  where such information, not being information provided by or relating
          to any person other than the Licensee, is placed by the Licensee in
          the public domain

     and in each case the Licensee shall disclose or authorise access to the
     confidential information only insofar as is necessary or appropriate in all
     the circumstances.

4.   Subject to paragraphs 9 to 12 of Condition 8A, the Licensee shall use all
     reasonable endeavours to ensure that any person who is in possession of or
     has access to confidential information in accordance with sub-paragraph
     3(a)

                                      97
<PAGE>

     shall use such information only for the purposes of the Transmission
     Business or any external transmission activities.

5.   In this condition:

        "Competent Authority"                    means the Secretary of State,
         -------------------                     the Director, the Compliance
                                                 Officer, the Stock Exchange,
                                                 the Panel on Take-overs and
                                                 Mergers, or any local or
                                                 national agency, regulatory
                                                 body, authority, department,
                                                 inspectorate, minister,
                                                 ministry, official or public or
                                                 statutory person (whether
                                                 autonomous or not) of, or of
                                                 the government of, the United
                                                 Kingdom, the United States of
                                                 America or the European
                                                 Community

     "confidential information"                  bears the meaning given at
                                                 paragraph 1

     "Electricity Arbitration Association"       means the unincorporated
                                                 members' club of that name
                                                 formed inter alia to promote
                                                 the efficient and economic
                                                 operation of the procedure for
                                                 the resolution of disputes
                                                 within the electricity supply
                                                 industry by means of
                                                 arbitration or otherwise in
                                                 accordance with its arbitration
                                                 rules

     "external distribution activities"          has the meaning given to that
                                                 term in Condition 9 of part V
                                                 of this licence

     "external transmission activities"          has the meaning given to that
                                                 term in Condition 8A of this
                                                 part of this licence.

                                      98
<PAGE>

Condition 8A. Independence of and Appointment of Managing Director of the
-------------------------------------------------------------------------
Transmission Business
---------------------

1    (a)  The Licensee shall establish and shall thereafter maintain the full
          managerial and operational independence of the Transmission Business
          and any external transmission activities from each other business
          (whether or not a Separate Business) of the Licensee and of its
          affiliates and related undertakings.

     (b)  No later than 31 May 2000 the Licensee shall appoint an officer
          (hereafter referred to as "the Managing Director of Transmission") to
          be responsible for the conduct of the Transmission Business and any
          external transmission activities.

2.   The Licensee shall ensure that the Managing Director of Transmission shall
     not be a director of the Licensee or of any affiliate or related
     undertaking of the Licensee and that he shall not be engaged by the
     Licensee in any other capacity than as Managing Director of Transmission.

3.   The Licensee shall arrange for the Managing Director of Transmission in the
     course of discharging his responsibility under paragraph 1 to be provided
     from time to time with:

     (a)  the services of such persons (as the Managing Director of Transmission
          may from time to time select), whose services:

          (i)  may be dispensed with at the sole discretion (subject to
               compliance with relevant UK employment legislation) of the
               Managing Director of Transmission; and

          (ii) will only be utilised if such persons execute a contract of or
               for services containing an appropriate confidentiality clause
               regarding that information which may be acquired by such person
               whilst working for the Transmission Business and any external
               transmission activities;

     (b)  such premises, systems, equipment, facilities, property, personnel,
          data and management resources; and

                                      99
<PAGE>

     (c)  such finance;

     as may be reasonably required by the Managing Director of Transmission for
     the efficient and effective management and operation of the Transmission
     Business in accordance with the Licensee's duty under Section 9(2)(a) of
     the Act and the Transmission Licence.

4.   The Licensee shall direct the Managing Director of Transmission:

     (a)  to inform the directors of the Licensee, in writing, if, at any time,
          he is of the opinion that the provision of those items specified in
          paragraph 3 are not sufficient to enable the Licensee to comply with
          its duties under Section 9(2)(a) of the Act and the Transmission
          Licence; and

     (b)  as soon as practicable after the end of the year 2000 and of each
          subsequent calendar year, to furnish to the directors of the Licensee:

          (i)  an informative report on the provision of those matters made in
               respect of that year; and

          (ii) a statement of his opinion whether adequate arrangements have
               been or are likely to be made for the provision of those matters
               which will be required in respect of the ensuing calendar year to
               enable the Licensee to comply with those duties including, in
               particular, a description of the differences in the provision of
               those matters made or likely to be made in that year compared
               with the provision made in respect of the preceding year and the
               reasons for those differences.

5.   On receipt of any information under paragraph 4(a) or report and statement
     under paragraph 4(b), the Licensee shall, subject to compliance with the
     listing rules (within the meaning of Part IV of the Financial Services Act
     1986 (c.60)) of the Stock Exchange:

     (a)  give to the Director forthwith that information or report and
          statement; and

     (b)  where such a report is received, publish it in such form and manner as
          the Director may direct.

                                      100
<PAGE>

6.   Except insofar as the Director consents to the Licensee doing so, the
     Licensee shall only give directions to the Managing Director of
     Transmission as to the discharge of his responsibilities under paragraph 1:

     (a)  where:

          (i)  in the bona fide and reasonable opinion of the Licensee the
               statutory, licence and contractual obligations of the Licensee;
               or

          (ii) in the bona fide opinion of the directors, their duties; so
               require; or

     (b)  to ensure compliance with paragraph 4.

7.   The Licensee shall give directions under paragraph 6(a) above by notice in
     writing, specifying in the notice the statutory, licence or contractual
     obligations of the Licensee or duty of the directors of the Licensee which
     require the Licensee to give directions, which notice shall be copied to
     the Director.

8.   Except in so far as the Director consents to the Licensee not doing so, the
     Licensee shall, subject to paragraph 9 below, ensure that:

     (a)  no business of the Licensee (or of any affiliate or related
          undertaking of the Licensee), other than the Transmission Business or
          any external transmission activities, may use or have access to:

          (i)  premises or parts of premises occupied by persons engaged in, or
               in respect of, the management or operation of the Transmission
               Business or any external transmission activities;

     (ii) systems for the recording, processing or storage of data to which
          persons engaged in, or in respect of, the management or operation of
          the Transmission Business or any external transmission activities also
          have access;

     (iii) equipment, facilities or property employed for the management or
          operation of the Transmission Business or any external transmission
          activities; or

     (iv) the services of persons who are (whether or not as their principal
          occupation) engaged in, or in respect of, the

                                      101
<PAGE>

          management or operation of the Transmission Business or any external
          transmission activities; and

     (b)  it can and does, insofar as is legally possible, prevent any person
          who has ceased to be engaged in, or in respect of, the management or
          operation of the Transmission Business from being engaged in, or in
          respect of, the activities of any other business of the Licensee (or
          of any affiliate or related undertaking of the Licensee) until the
          expiry of an appropriate time from the date on which he ceased to be
          engaged by the Transmission Business.

9.   The Director may, upon the written request of the Licensee, issue a
     direction relieving the Licensee of its obligations under Condition 8 and
     under paragraphs 1(a), 2 and 8 of this Condition, to such extent and
     subject to such terms and conditions as he may specify in that direction,
     where:

     (a)  it is not reasonably practicable for the Licensee to comply with any
          aspect of those obligations;

     (b)  in the case of paragraphs 2 to 4 of Condition 8, a failure to comply
          with any aspect of those obligations would be of a trivial nature; or

     (c)  in the case of paragraphs 1(a) and 8 of this condition, any
          arrangements for the use of or access to premises, systems, equipment,
          facilities, property or personnel by both the Transmission Business
          and any other business of the Licensee (or of any affiliate or related
          undertaking of the Licensee):

          (i)  do not involve a cross-subsidy being either given to the
               Transmission Business by such other business or received from the
               Transmission Business by such other business;

          (ii) obtain for the Transmission Business, in the most efficient and
               economical manner possible, the use of the relevant premises,
               systems, equipment, facilities, property or personnel; and

          (iii) do not restrict, distort or prevent competition in the
               generation or supply of electricity,

                                      102
<PAGE>

provided that the Licensee shall not thereby be relieved of any obligation
        imposed on it by Directive 96/92/EC.

10.  Where, subsequent to the issue of a direction pursuant to paragraph 9, the
     criteria set out at sub-paragraph 9(a), (b) or (c) cease to be satisfied,
     the Director may withdraw the direction or modify any terms and conditions
     which may be specified in it.

11.  For the purposes of paragraphs 9 and 10 the Director shall, following
     consultation with the Licensee, determine any question as to whether the
     criteria set out at sub-paragraph 9(a), (b) or (c) are or continue to be
     satisfied.

12.  If the Director is requested to issue any direction pursuant to paragraph 9
     relating to the Transmission Business being managed or operated by the
     Licensee together with any distribution business then that direction may
     provide that for the purposes of this Condition and of Condition 8 the
     Transmission Business shall be taken to include any such distribution
     business and for the Managing Director of Transmission to take part in the
     management of and/or to be a director of any company carrying on any such
     distribution business.

13.  In this Condition:

     "appropriate time"                       means 3 months, or such shorter
                                              period as the Director may approve
                                              in respect of any person or class
                                              of persons.

     "external transmission activities"       means any business of the Licensee
                                              or any affiliate or related
                                              undertaking of the Licensee
                                              comprising or ancillary to the
                                              maintenance, repair or operation
                                              in an emergency of any electricity
                                              distribution or transmission
                                              system other than the Licensee's
                                              Transmission System.

                                      103
<PAGE>

Condition 9: Transmission System outages
----------------------------------------

1.   The Licensee shall notify the Director in writing forthwith in the event
     that the Licensee and SHE have not agreed a programme of planned outages
     for their respective Transmission Systems for the financial year commencing
     on 1 April 1991 or any subsequent financial year on or before the 1st day
     of January prior to the commencement of the relevant financial year.

                                      104
<PAGE>

PART V. CONDITIONS APPLICABLE TO THE PUBLIC ELECTRICITY SUPPLY LICENCE
----------------------------------------------------------------------

                        SECTION A. GENERAL OBLIGATIONS
                        ------------------------------

Condition 1: Scope of application of Part V
-------------------------------------------

1.   The Public Electricity Supply Licence is subject to the Conditions in Part
     V (including where such Conditions relate to activities other than those
     authorised by that Licence).

2.   The Generation Licence and the Transmission Licence are not subject to the
     Conditions in Part V.

                                      105
<PAGE>

Condition 2: Public electricity supply charge restriction Conditions
--------------------------------------------------------------------

1.   The Public Electricity Supply Licence is subject to the Conditions in
     Schedule 6 and with effect from 1 April 2000 shall be subject to the
     additional Conditions in Schedule 6A (which Conditions shall be deemed for
     the purposes of the Public Electricity supply Licence and the other
     licences granted under the Licence Document to be included in Schedule 6
     and any references to Schedule 6 therein, as from that date, shall be
     deemed to include reference to the additional Conditions in Schedule 6A and
     be construed accordingly).

2.   The Generation Licence and the Transmission Licence are not subject to the
     Conditions in Schedule 6.

                                      106
<PAGE>

Condition 3: Prohibition of discrimination in electricity sale contracts
------------------------------------------------------------------------

1.   The Licensee shall not, and shall procure that no affiliate or related
     undertaking of the Licensee shall, sell or offer to sell electricity under
     any electricity sale contract to any one relevant purchaser or person
     seeking to become a relevant purchaser on terms as to price which are
     materially more or less favourable than those on which it sells or offers
     to sell electricity under any electricity sale contract to comparable
     relevant purchasers. For these purposes, due regard shall be had to the
     circumstances of sale to such purchasers including (without limitation)
     volumes, load factors, conditions of interruptibility and the dates and
     duration of the relevant agreements.

2.   For the purposes of paragraph 1:

     "relevant purchaser"                   means any purchaser of electricity
                                            from the Licensee or any affiliate
                                            or related undertaking of the
                                            Licensee under an electricity
                                            purchase contract, other than SHE in
                                            its capacity as a purchaser of
                                            electricity from the Licensee under
                                            any of the restructuring agreements.

3.   This Condition or parts of it shall cease to have effect on the date
     specified in a direction to that effect made pursuant to paragraph 4 of
     Condition 2A in Part II.

                                      107
<PAGE>

Condition 3A: Prohibition of discrimination in selling electricity
------------------------------------------------------------------

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

2.   For the purposes of paragraph 1, references to selling or sale of
     electricity:

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

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

     (c)  do not include the sale of electricity to SHE in its capacity as a
          purchaser of electricity from the Licensee under any of the
          restructuring agreements,

     and "purchaser", "purchasing" and "purchase" shall be construed
     accordingly.

3.   This Condition or parts of it shall not come into effect until the date
     specified in a direction to that effect made pursuant to paragraph 1 of
     Condition 2A in Part II.

                                      108
<PAGE>

Condition 3B: Prohibition of discrimination in supply
-----------------------------------------------------

1.   This Condition applies where the Licensee is in a dominant position in a
     market for the supply of electricity to customers at premises.

2.   Where this Condition applies the Licensee shall not supply or offer to
     supply electricity to customers in any market in which it is dominant on
     terms which are predatory.

3.   Where this Condition applies, but subject to paragraph 4, the Licensee
     (taken together with its affiliates and related undertakings) shall not, in
     supplying or offering terms for the supply of electricity to customers in
     any market in which it is dominant:

     (a)  show undue preference to any person (or class of persons) within such
          market;

     (b)  exercise undue discrimination between any persons (or classes of
          person) within such market; or

     (c)  set terms which are unduly onerous.

4.   Nothing in paragraph 3 shall prohibit the Licensee, within any area or
     class of customers (the "relevant area or class") in respect of which there
     is established competition in the supply of electricity, from supplying or
     offering to supply electricity on terms which are reasonably necessary to
     meet that competition, save that the Licensee (taken together with its
     affiliates and related undertakings) shall not, in supplying or offering
     terms for the supply of electricity:

     (a)  show undue preference to any person (or class of persons) or exercise
          undue discrimination between any persons (or classes of person) within
          the relevant area or class of customers; or

                                      109
<PAGE>

     (b)  set terms in respect of any person (or class of persons) in a market
          in which the Licensee is dominant, save such persons who are within
          the relevant area or class of customers, which are unduly onerous.

5.   For the purposes of this Condition, terms are unduly onerous if the revenue
     from the supply of electricity to customers on those terms:

     (a)  significantly exceeds the costs of that supply; and

     (b)  exceeds such costs to a significantly greater degree than the revenue
          from supply to all other customers of the Licensee (and of its
          affiliates and related undertakings) within the same market exceeds
          the costs of supply to those customers.

6.   For the purposes of this Condition, a market may be defined by reference to
     a geographical area, or to a class of customer or both, save that no market
     defined by reference to Designated Customers shall comprise fewer than
     50,000 such customers.

7.   In determining, for the purposes of this Condition, whether any persons
     constitute a class of person, due regard shall be had to the circumstances
     of supply to such persons including (without limitation) volumes, load
     factors, conditions of interruptibility, location of premises being
     supplied and date and duration of the supply contract.

8.   For the purposes of this Condition, the Director shall determine any
     question as to:

     (a)  whether any area or class of customers constitutes a market for the
          supply of electricity;

     (b)  whether the Licensee is dominant in any market for the supply of
          electricity;

                                      110
<PAGE>

     (c)  whether there is established competition in respect of the supply of
          electricity in any area or to any class of customers; and

     (d)  whether any terms are predatory, having due regard to whether such
          terms:

          (i)  incorporate charges which do not reasonably cover the avoidable
               costs incurred in consequence of supplying the customers in
               question; and

          (ii) are intended or are likely to restrict, distort or prevent
               competition in the supply of electricity.

9.   The Director may determine that the Licensee is dominant in a specified
     market:

     (a)  at any time prior to this Condition coming into force; or

     (b)  having first consulted with the Licensee and such other persons as he
          considers appropriate (and having taken into account any
          representations made to him), at any time after this Condition has
          come into force,

and where the Director does make such a determination he shall immediately
     notify the Licensee.

10.  Where the Director has notified the Licensee of his determination in
     accordance with paragraph 9 that it is dominant in a specified market, the
     provisions of paragraphs 11 to 16 shall apply in respect of that market.

11.  Where this paragraph applies the Licensee shall, prior to supplying or
     offering to supply electricity under a tariff or Designated Supply Contract
     on any new

                                      111
<PAGE>

     terms, give to the Director at least 28 days' notice in writing of its
     intention to supply on such terms.

12.  For the purposes of this Condition, a tariff or Designated Supply Contract
     is on "new terms" if:

     (a)  it is a form of tariff or Designated Supply Contract under which the
          Licensee has not previously supplied or offered to supply electricity;

     (b)  it is a tariff or Designated Supply Contract in respect of which the
          Licensee is varying the terms as to price; or

     (c)  it is a tariff or Designated Supply Contract in respect of which the
          Licensee is varying any other terms in such a manner as to
          significantly affect the evaluation of that tariff or contract.

13.  Where the Licensee has given notice to the Director of its intention to
     supply on new terms it shall not supply or offer to supply electricity on
     such terms until either the period of notice given to the Director has
     expired and:

     (a)  the Director has not given or sent to the Licensee a counter-notice
          (the "counter-notice") in accordance with paragraph 14; or

     (b)  prior to the expiry of such period, the Director has informed the
          Licensee that he will not issue a counter-notice in respect of such
          terms.

14.  The Director may issue a counter-notice where, having considered the new
     terms and having had regard to the likely effects of issuing such counter-
     notice (including, but not limited to, the likely effect upon the business
     of the Licensee), he determines that further consideration is required to
     assess whether such terms are in breach of the provisions of this
     Condition.

                                      112
<PAGE>

15.  Where the Director issues a counter notice in respect of any new terms the
     Licensee shall not supply or offer to supply electricity on such terms
     until either:

     (a)  a period of 3 months from the date of the counter-notice has expired;
          or

     (b)  prior to the expiry of such period, the Director indicates to the
          Licensee that he has no present intention of taking enforcement action
          under Section 25 of the Act in respect of such terms.

16.  Where the Director issues a counter-notice he may:

     (a)  give or send a copy of that counter-notice to any Interested Person;

     (b)  invite representations from Interested Persons as to the matters to
          which the counter-notice relates; and

     (c)  require the Licensee, within a reasonable period determined by the
          Director, to provide him with such further information relating to the
          new terms as he may specify (save that he may not by virtue of this
          paragraph require the Licensee to furnish him with information for the
          purpose of exercising his functions under Section 48 of the Act),

and the Director shall take into account any representations made to him by the
     Licensee in respect of such terms.

17.  The Director may, at any time after notifying the Licensee of his
     determination in accordance with paragraph 9 that it is dominant in a
     specified market, determine that the Licensee is no longer dominant in that
     market, and where he does make such a determination:

     (a)  the Director shall immediately notify the Licensee; and

                                      113
<PAGE>

     (b)  the provisions of paragraphs 11 to 16 shall cease to apply in respect
          of the specified market.

18.  For the purposes of this Condition, any reference to the Licensee being
     dominant in a market for the supply of electricity shall be treated as a
     reference to the Licensee, taken together with its affiliates and related
     undertakings, being so dominant.

19.  In this Condition:

     "Interested Persons"                    means all Electricity Suppliers
                                             which supply electricity within the
                                             market or area or to the class of
                                             customers in question, the Relevant
                                             Consumers' Committee and such other
                                             persons or bodies as in the opinion
                                             of the Director have a legitimate
                                             interest in the terms on which the
                                             Licensee supplies electricity.

     "terms"                                 means all the terms on which a
                                             supply of electricity is offered or
                                             provided which significantly affect
                                             the evaluation of that supply, and
                                             shall include all terms as to
                                             price.

                                      114
<PAGE>

Condition 3C: Duration of discrimination conditions
---------------------------------------------------

1.   Condition 3B shall cease to have effect (in whole or in part, as the case
     may be) if the Licensee makes a disapplication request in accordance with
     this Condition and:

     (a)  the Director agrees in writing to that request; or

     (b)  the application of Condition 3B (in whole or in part) is terminated by
          notice given by the Licensee in accordance with paragraph 4 or 5 of
          this Condition.

2.   A disapplication request pursuant to this Condition may be made by the
     Licensee only where the Director has notified it, in accordance with
     paragraph 9 of Condition 3B, of his determination that the Licensee is
     dominant in a specified market, and any such request shall:

     (a)  be made in writing to the Director;

     (b)  specify whether the request relates to the whole of Condition 3B or
          any part or parts thereof; and

     (c)  state the date (the "disapplication date") from which the Licensee
          wishes the specified provisions of Condition 3B to cease to have
          effect, which date shall be in accordance with paragraph 3 and not
          earlier than 12 months after the date on which the request is made.

3.   Where the Licensee was notified by the Director prior to this Condition
     coming into force of his determination that the Licensee is dominant in a
     specified market, no disapplication request made by the Licensee shall be
     effective to disapply any of the provisions of Condition 3B prior to 31
     March 2000.

                                      115
<PAGE>

4.   If the Director has not by the date which is 6 months prior to the
     disapplication date made a reference to the Monopolies Commission (under
     Section 12 of the Act) relating to the modification of Condition 3B, the
     Licensee may give to the Director a notice in writing terminating the
     application of such of the provisions of Condition 3B as are specified in
     the disapplication request with effect from the disapplication date or from
     any later date specified in the notice.

5.   If the Monopolies Commission reports on a reference made by the Director
     relating to the modification of Condition 3B and does not conclude that the
     disapplication of any of the provisions of that Condition (being provisions
     specified in the disapplication request) would or may be expected to
     operate against the public interest, the Licensee may within 30 days of the
     publication of the report under Section 13 of the Act give to the Director
     notice in writing terminating the application of such provisions with
     effect from the disapplication date or any later date specified in the
     notice.

                                      116
<PAGE>

Condition 4: Tariffs
--------------------

1.   The Licensee shall ensure that any tariffs fixed under Section 18 of the
     Act shall be so framed as separately to identify:

     (a)  the element for use of the Licensee's Transmission System in the
          Licensee's charges;

     (b)  the element for use of the Licensee's Distribution System in the
          Licensee's charges; and

     (c)  the element in respect of the supply of electricity to tariff
          customers in the Licensee's charges.

2.   Where the Director considers that by reason of the complexity of any such
     tariffs fixed by the Licensee, simplified explanatory statements are
     required or expedient for the understanding of tariff customers, the
     Director may direct the Licensee to draw up such explanatory statements and
     thereafter to publish them with the tariffs to which they relate.

                                      117
<PAGE>

Condition 4A: Arrangements for informing customers on revocation of Licence
---------------------------------------------------------------------------

1.   The Licensee shall comply with a direction from the Director in the
     following terms where the Director:

     (a)  is, or is aware that the Secretary of State is, about to revoke a
          Licence granted to another Electricity Supplier to supply electricity
          (in this Condition known as the "First Supplier"); and

     (b)  considers that the Licensee is able to supply electricity to the
          customers of the First Supplier without significantly prejudicing the
          supplies of electricity which the Licensee makes or is contracted to
          make.

2.   The Director shall only issue a direction in accordance with paragraph 1
     when the Secretary of State or, as the case may be, the Director has served
     the First Supplier with a notice that he is revoking the First Supplier's
     Licence to supply electricity in accordance with the terms of the First
     Supplier's Licence, or such earlier date as the Director may agree with the
     First Supplier.

3.   A direction issued in accordance with paragraph 1 shall require that the
     Licensee shall, within the period specified by the Director, send a written
     notice in a form approved by the Director to each of the persons or
     premises specified or described in the direction:

     (a)  informing the customer in question that, notwithstanding any contract
          he may have with the First Supplier, the First Supplier is no longer
          supplying him with electricity and has not done so since the
          revocation took effect or, where the notice has been sent before the
          revocation has taken effect, will be no longer supplying him with
          electricity when it takes effect;

                                      118
<PAGE>

     (b)  informing the customer that the customer must from the moment the
          revocation takes effect enter into a new contract for supply with
          another Electricity Supplier of the customer's choice, and that he is
          free to request a supply from the Licensee; and

     (c)  setting out the terms upon which the Licensee is prepared to supply
          electricity if requested.

                                      119
<PAGE>

Condition 4B: The Programme Implementation Agreement
----------------------------------------------------

1.   The Licensee shall, where the Director has given it a written direction to
     do so, enter into and comply with the Programme Implementation Agreement
     established in accordance with paragraph 4.

2.   The Programme Implementation Agreement shall be concerned with matters
     relating to the effective implementation of trading and other arrangements
     between the Licensee and other Relevant Parties which, in the reasonable
     opinion of the Director following consultation with all Relevant Parties,
     are or are likely to be necessary and appropriate to provide for the
     effective and timely facilitation of competition in the supply of
     electricity.

3.   The Programme Implementation Agreement may include provisions relating to:

     (a)  the operation and management of procedures for the testing, trialing
          and integration of those systems, processes and procedures required to
          facilitate competition in the supply of electricity;

     (b)  the obligations of each of the Relevant Parties in respect of the
          procedures defined under sub-paragraph (a);

     (c)  limitations of the liability of the Licensee and of such other persons
          as are specified in the Agreement in respect of actions taken in
          connection with the Agreement;

     (d)  the provision of information as between Relevant Parties and to other
          persons specified in the Agreement;

     (e)  the determination of the specification of systems, processes and
          procedures to be tested, trialed and integrated in accordance with the
          Agreement, except in those circumstances where the Director

                                      120
<PAGE>

          considers that any of the Relevant Parties has entered into another
          agreement which adequately provides for such specification to be
          otherwise determined;

     (f)  the settling by the Director of disputes between Relevant Parties in
          relation to matters covered by the Agreement; and

     (g)  the establishment of a board (the "Implementation Board"), comprising
          appropriate persons appointed by the Director following consultation
          with the Relevant Parties, which shall:

          (i)    oversee the conduct of the Agreement;

          (ii)   advise the Director and the Relevant Parties of any matters
                 upon which they may reasonably seek advice in relation to
                 matters covered by the Agreement, including the operation and
                 management of procedures established under the Agreement; and

          (iii)  undertake such other functions as in the reasonable opinion of
                 the Director are necessary to provide for the effective and
                 timely facilitation of competition in electricity supply.

4.   The Programme Implementation Agreement shall be that established by
     agreement between the Relevant Parties with the approval of the Director
     or, where the Relevant Parties cannot agree (or where in the opinion of the
     Director such agreement is unlikely to be reached within a reasonable
     period) and where:

     (a)  the Director has sent to each of the Relevant Parties a notice (the
          "proposals notice") setting out his own proposals in relation to the
          content of the Programme Implementation Agreement; and

                                      121
<PAGE>

          (b)  following consideration of any comments received from any of the
               Relevant Parties within 21 days of the issue of the proposals
               notice, and having made such changes to his proposals as the
               Director considers appropriate, the Director has given to each of
               the Relevant Parties a notice setting out his final proposals
               (the "confirmation notice"),

the Programme Implementation Agreement shall, unless within 7 days of the issue
     of the confirmation notice the parties have reached agreement with the
     approval of the Director as to an alternative, be established in accordance
     with the terms of the Director's confirmation notice.

5.   With regard to the provisions of paragraphs 1 to 4, and following
     consultation with the Relevant Parties and with such other persons or
     bodies as appear to the Director to represent the interests of those likely
     to be affected, the Director may issue a direction that specified parts of
     the Relevant Conditions shall take effect at such time and in such cases or
     circumstances as he shall direct.

6.   In issuing a direction in accordance with paragraph 5 the Director shall
     have regard to the need to provide for effective arrangements to facilitate
     competition in the supply of electricity to customers and for the effective
     maintenance of existing trading arrangements in respect of the supply of
     electricity.

7.   This Condition shall cease to be in force on whichever is the latest of the
     following dates:

     (a)  30 September 1998;

     (b)  the date which is 6 months after the latest date upon which any
          provision in accordance with paragraph 3 (but excluding sub- paragraph
          3(c)) ceases to have effect; or

                                      122
<PAGE>

     (c)  such other date as may be agreed between the Director and the
          Licensee.

8.   In this Condition:

     "Relevant Conditions"                 means Conditions 4A, 4B, 7A, 8A to
                                           8F, 12 to 17C, 25 to 28 and Section B
                                           of Part V, and Condition 2B and 2C of
                                           Part VI of this Licence Document.

     "Relevant Parties"                    means the Licensee, other Authorised
                                           Electricity Operators, the
                                           Electricity Pool of England and Wales
                                           and Scottish Electricity Settlements
                                           Ltd.

                                      123
<PAGE>

Condition 5: Generation security standard
-----------------------------------------

1.   The Licensee shall make arrangements sufficient to meet the generation
     security standard.

2.   Not later than 3 months before the end of each financial year, commencing
     with the financial year ending on 31 March 1991, the Licensee shall provide
     to the Director a statement complying with the provisions of paragraph 3.

3.   The statement to be provided to the Director under paragraph 2 shall:

     (a)  be signed by 2 directors of the Licensee;

     (b)  describe the arrangements made or to be made by the Licensee to meet
          the generation security standard in each of the 7 succeeding financial
          years;

     (c)  state the planning margin or margins adopted by the Licensee for the
          purpose of the above arrangements and set out the methodology and
          calculations used in arriving at such margin or margins;

     (d)  refer to data, assumptions and demand forecasts (including insofar as
          relevant those relating to diversity of demand, own generation,
          arrangements for trading energy and capacity with other persons,
          arrangements with qualifying customers and relevant purchasers,
          including those permitting interruption and reduction of supply,
          forecast maximum demand from qualifying customers and relevant
          purchasers, the maximum demand which the Licensee can meet without
          failing to meet the generation security standard, contracted
          availability of generation, and load management (if any) of qualifying
          customers and relevant purchasers); and

                                      124
<PAGE>

     (e)  include such other matters as the Director shall specify in directions
          issued by the Director to the Licensee for the purpose of this
          Condition not later than 6 months before the end of the financial year
          in which the statement is provided.

4.   The Licensee shall upon request by the Director provide to the Director
     such information as the Director may require for the purpose of monitoring
     compliance with this Condition and to enable the Director (having regard to
     his statutory duties) to review the operation of the generation security
     standard.

5.   The Licensee shall not make or agree any alteration, other than an
     alteration to which paragraph 7 applies, to the arrangements described in
     any statement provided to the Director under paragraph 2 as having been
     made by the Licensee to meet the generation security standard for the first
     financial year covered by such statement.

6.   The Licensee shall:

     (a)  procure that, except to the extent that the Director shall otherwise
          approve, arrangements described in any statement provided to the
          Director under paragraph 2 as falling to be made by the Licensee to
          meet the generation security standard for the first financial year
          covered by such statement shall be made; and

     (b)  not make or agree any alteration, other than an alteration to which
          paragraph 7 applies to the arrangements so made.

7.   This paragraph applies to an alteration which the Director considers is
     unlikely to result in the Licensee failing to meet the generation security
     standard.

8.   Save as required by law, the Licensee shall not enter into any contract for
     the supply of electricity if the entering into of the contract would cause
     demand in the first year covered by the statement most recently provided to
     the Director

                                      125
<PAGE>

     under paragraph 2 to exceed the maximum demand which the Licensee can meet
     in that year without failing to meet the generation security standard as
     referred to in such statement, unless the Director shall consider that the
     entering into of the contract is unlikely to result in the Licensee failing
     to meet the generation security standard.

9.   Subject to paragraph 10, the Licensee shall not:

     (a)  enter into any contract to supply electricity to a person other than a
          qualifying customer if the Licensee has interrupted or reduced the
          supply of electricity to any qualifying customer (other than by reason
          of relevant constraints) and the interruption or reduction continues
          during the period or any part of the period in which electricity would
          otherwise be supplied under such contract; or

     (b)  interrupt or reduce the supply of electricity to any qualifying
          customer (except to the extent that such interruption or reduction is
          made by reason of relevant constraints) if at or shortly before the
          time of the interruption or reduction the Licensee enters into any
          contract to supply electricity to a person other than a qualifying
          customer during the period or part of the period that the supply is
          interrupted or reduced; or

     (c)  interrupt or reduce the supply of electricity to any qualifying
          customer in circumstances where:

          (i)  electricity is available for purchase under the terms of the
               Pooling and Settlement Agreement or the trading system
               established by the Trading Code at a price less than Value of
               Lost Load; and

          (ii) the Licensee is not prevented from purchasing such electricity by
               reason of relevant constraints.

                                      126
<PAGE>

10.  Notwithstanding paragraph 9, the Licensee may interrupt or reduce a supply
     of electricity in circumstances where it is necessary to do so by reason of
     planned maintenance undertaken on the Licensee's Distribution System or
     Transmission System or by reason of a fault on or affecting either the
     Licensee's Distribution System or Transmission System or the quantities of
     electricity delivered into that system.

11.  In the event that the Director, after consultation with the Licensee, shall
     at any time or from time to time issue a direction to the Licensee for the
     purpose of this Condition to the effect that, in the opinion of the
     Director, it is desirable that the Licensee make arrangements such as are
     specified in the direction to meet the generation security standard, then
     the duty imposed by paragraph 1 shall not be capable of being discharged by
     the Licensee after such date as shall be specified for the purpose in the
     direction except by the Licensee making the arrangements so specified.

12.  The Director, after consultation with the Licensee, may at any time and
     from time to time by directions issued to the Licensee for the purpose of
     this Condition make such modifications to this Condition or any other
     Condition to which the Public Electricity Supply Licence is subject as, in
     the opinion of the Director, are the most appropriate to ensure that the
     Licensee's supply charges are restricted in circumstances where the
     Licensee fails to meet demand from its qualifying customers by reason of an
     insufficiency of electricity generation available for the purposes of
     supply by the Licensee to such customers.

13.  The duty of the Licensee under paragraph 1 may, in relation to qualifying
     customers whose premises are located in isolated areas, be discharged by
     the making of arrangements sufficient to meet a standard of generation
     security (other than the generation security standard) agreed between the
     Licensee and the Director.

14.  The provisions of this Condition are without prejudice to the duties of the
     Licensee under the Electricity Supply Regulations 1988.

                                      127
<PAGE>

15.  In this Condition:

     "generation security standard"                  means:

                                                     (a)  such standard of
                                                          generation security as
                                                          will ensure:

                                                          (i)  that the supply
                                                               of electricity to
                                                               qualifying
                                                               customers will
                                                               not be
                                                               discontinued in
                                                               more than 9 years
                                                               in any period of
                                                               100 years; and

                                                          (ii) that the voltage
                                                               or frequency of
                                                               electricity
                                                               supplied to
                                                               qualifying
                                                               customers will
                                                               not be reduced
                                                               below usual
                                                               operational
                                                               limits in more
                                                               than 30 years in
                                                               any period of 100
                                                               years.

                                                          by reason of
                                                          insufficiency of
                                                          electricity generation
                                                          available for the
                                                          purposes of supply by
                                                          the Licensee to its
                                                          qualifying customers
                                                          at times of annual
                                                          system peak demand;
                                                          and

                                                     (b)  sufficient electricity
                                                          generation being
                                                          available for the
                                                          purposes of supply by
                                                          the Licensee to its
                                                          qualifying customers
                                                          at times other than
                                                          times of annual system
                                                          peak

                                      128
<PAGE>

                                                          demand to ensure that
                                                          the standard of
                                                          generation security at
                                                          each such time will be
                                                          not less than that
                                                          referred to in sub-
                                                          paragraph (a) above
                                                          for times of annual
                                                          system peak demand.

     "qualifying customer"                           means any purchaser from
                                                     the Licensee entitled and
                                                     requiring at any time to be
                                                     supplied by the Licensee at
                                                     premises within the
                                                     authorised supply area of
                                                     the Licensee but shall
                                                     exclude:

                                                     (a)  a purchaser under an
                                                          interruptible contract
                                                          or a contract
                                                          containing load
                                                          management terms to
                                                          the extent that
                                                          supplies to that
                                                          purchaser may be
                                                          interrupted or reduced
                                                          in accordance with the
                                                          terms of that
                                                          contract; and

                                                     (b)  a tariff customer on
                                                          special tariffs which
                                                          restrict supplies to
                                                          particular time
                                                          periods to the extent
                                                          that supplies to that
                                                          customer may be
                                                          interrupted or reduced
                                                          in accordance with
                                                          such tariff

     "relevant constraints"                          constraints on the
                                                     Transmission System of the
                                                     Licensee or any other
                                                     Transmission Licensee or on
                                                     the interconnector or on
                                                     the Distribution System of
                                                     the Licensee.

                                      129
<PAGE>

     "relevant purchaser"                            means any purchaser from
                                                     the Licensee who is not a
                                                     qualifying customer.

     "Value of Lost Load"                            means, in respect of the
                                                     first financial year, the
                                                     sum of (Pounds)2 per kWh
                                                     and, in respect of each
                                                     succeeding financial year,
                                                     the sum which corresponds
                                                     to (Pounds)2 per kWh as
                                                     adjusted to reflect the
                                                     percentage change in the
                                                     Retail Price Index between
                                                     the index published or
                                                     determined in respect of
                                                     the December prior to the
                                                     start of that financial
                                                     year and the index
                                                     published or determined for
                                                     December 1989.

     "contract"                                      includes any agreements or
                                                     arrangement (whether or not
                                                     constituted or evidenced by
                                                     any written document).

     "contract for the supply of electricity"        includes any contract which
                                                     amends another contract so
                                                     as to provide for the
                                                     Licensee to supply
                                                     quantities of electricity
                                                     in excess of that supplied
                                                     under the last mentioned
                                                     contract.

     "modification"                                  shall have the same meaning
                                                     as in Section 111 of the
                                                     Act.

     "interconnector"                                means the electric lines
                                                     and electrical plant and
                                                     meters owned or operated
                                      130
<PAGE>

                                                     by the Transmission Company
                                                     solely for the transfer of
                                                     electricity to or from
                                                     Scotland from or to the
                                                     Transmission Company's
                                                     Transmission System.

                                      131
<PAGE>

Condition 6: Obligation on economic purchasing
----------------------------------------------

1.   Subject to paragraph 2, the Licensee shall:

     (a)  itself purchase;

     (b)  procure any affiliate of the Licensee to purchase; and

     (c)  insofar as it is able through the exercise of voting rights or
          otherwise to do so, procure any related undertaking of the Licensee to
          purchase

electricity at the best effective price reasonably obtainable having regard to
     the sources available.

2.   In the discharge of its obligations under paragraph 1, the Licensee may
     additionally have regard to any considerations liable to affect its ability
     and that of any affiliate or related undertaking of the Licensee to
     discharge its obligations under this Condition in the future, including the
     future security, reliability and diversity of sources of fuel for own
     generation and of electricity available for purchase.

3.   In addition, and without prejudice to, the Licensee's obligations under
     paragraph 1:

     (a)  the Licensee shall purchase electricity under the terms of the Pooling
          and Settlement Agreement during any period that the Licensee is a pool
          member under the Pooling and Settlement Agreement (and, in its
          capacity as a member of the trading system established by the Trading
          Code, the Licensee shall make offers to purchase electricity and
          offers to acquire options to purchase electricity, and accept offers
          to sell electricity and offers to grant options to purchase
          electricity under such trading system) in the manner which is best
          designed to secure that the short term electricity requirements of the
          Licensee are met at the best

                                      132
<PAGE>

          effective price reasonably obtainable having regard to the sources
          available; and

     (b)  the Licensee shall procure that any affiliate of the Licensee which is
          a pool member under the Pooling and Settlement Agreement or a member
          of such trading system and (insofar as it is able through the exercise
          of voting rights or otherwise to do so) procure that any related
          undertaking of the Licensee which is a pool member under the Pooling
          and Settlement Agreement or a member of such trading system shall
          purchase electricity (or, in the case of such trading system, make and
          accept offers such as are referred to in sub-paragraph (a) above) in
          the manner which is best designed to secure that the short term
          electricity requirements of the affiliate or related undertaking are
          met at the best effective price reasonably obtainable having regard to
          the sources available.

4.   In determining the effective price at which electricity is purchased by the
     Licensee or any affiliate or related undertaking of the Licensee, regard
     shall be had to any payments made or received or to be made or received for
     the grant of or pursuant to any electricity purchase contract.

5.   Paragraphs 1 to 4 shall apply mutatis mutandis where the Licensee (or any
     affiliate or related undertaking of the Licensee) exercises a discretion or
     (by agreement or otherwise) varies the terms of an existing agreement
     (whether or not entered into prior to the date on which the Public
     Electricity Supply Licence comes into force) in such a manner as to alter
     the effective price under such agreement.

6.   The Licensee shall not be in breach of this Condition by reason only of
     performing a must-take obligation to purchase electricity under a relevant
     electricity agreement or acquiring electricity from own generation in
     circumstances where the Licensee has a must-take obligation to purchase the

                                      133
<PAGE>

     fossil fuel which is used to generate the electricity in question under a
     relevant fuel agreement.

7.   For the purpose of this Condition, an agreement which imposes an obligation
     on the Licensee to make a payment to another party to the agreement in the
     event that the Licensee does not purchase electricity (or a minimum
     quantity of electricity) under the agreement shall be deemed to be an
     agreement under which the Licensee has a must-take obligation to purchase
     electricity and any quantity of electricity purchased by the Licensee
     pursuant to the agreement shall be deemed to have been purchased in
     performance of a must-take obligation to purchase electricity if the
     Licensee would have been obliged to make a payment to another party to the
     agreement had it not purchased such quantity of electricity.

8.   For the purpose of this Condition:

     "purchase"                                      includes the acquisition of
                                                     electricity from any source
                                                     whether by own-generation,
                                                     or any other means.

     "relevant electricity agreement"                means a restructuring
                                                     agreement or any agreement
                                                     under which the Licensee
                                                     has a must-take obligation
                                                     to purchase electricity and
                                                     which is (a) entered into
                                                     prior to the relevant date
                                                     and (b) submitted by the
                                                     Licensee to, and approved
                                                     by, the Director as a
                                                     relevant electricity
                                                     agreement.

     "relevant fuel agreement"                       means any agreement under
                                                     which the Licensee has a
                                                     must-take obligation to
                                                     purchase fossil fuel and
                                                     which is submitted by the
                                                     Licensee to,

                                      134
<PAGE>

                                                     and approved by, the
                                                     Director as a relevant fuel
                                                     agreement.

     "relevant date"                                 means the date on which the
                                                     Public Electricity Supply
                                                     Licence comes into force.

                                      135
<PAGE>

Condition 7: Distribution System planning standard and quality of service
-------------------------------------------------------------------------

1.   The Licensee shall plan and develop its Distribution System in accordance
     with a standard not less than that set out in Engineering Recommendation
     P.2/5 (October 1978 revision) of the Electricity Council Chief Engineers'
     Conference, insofar as applicable to it, or such other standard of planning
     as the Licensee may, following consultation with such (if any) other
     Transmission Licensees as the Director shall consider appropriate and with
     the approval of the Director, adopt from time to time.

2.   The Licensee shall within 3 months after the Public Electricity Supply
     Licence comes into force draw up and submit to the Director for his
     approval a statement setting out criteria by which the quality of
     performance of the Licensee in maintaining Distribution System security and
     availability and quality of service may be measured.

3.   The Licensee shall within 2 months after the end of each financial year
     submit to the Director a report providing details of the performance of the
     Licensee during the previous financial year against the criteria referred
     to in paragraph 2.

4.   The Director may (following consultation with the Licensee and such (if
     any) other licence holders as the Director shall consider appropriate)
     issue directions relieving the Licensee of its obligation under paragraph 1
     in respect of such parts of the Licensee's Distribution System and to such
     extent as may be specified in the directions.

                                      136
<PAGE>

Condition 7A: Security and safety of supplies
---------------------------------------------

1.   The Licensee shall establish and operate an enquiry service for use by any
     person for the purposes of receiving reports and offering information,
     guidance or advice about any matter or incident that:

     (a)  causes danger or requires urgent attention, or is likely to cause
          danger or require urgent attention, in relation to the supply or
          distribution of electricity in the Licensee's authorised area; or

     (b)  affects, or is likely to affect the maintenance of the security,
          availability and quality of service of the Licensee's Distribution
          System.

2.   The service established by the Licensee in accordance with paragraph 1
     shall:

     (a)  be provided without charge by the Licensee to the user at the point of
          use;

     (b)  ensure that all reports and enquiries are processed in a prompt and
          efficient manner whether made by telephone, in writing or in person;

     (c)  be available to receive and process telephone reports and enquiries at
          all times on every day of each year; and

     (d)  be operational no later than 31 March 1998.

3.   In the establishment and operation of the enquiry service in accordance
     with paragraph 1 the Licensee shall not discriminate:

     (a)  between any persons or class or classes thereof; or

                                      137
<PAGE>

     (b)  between the Licensee (in the provision of such services by the
          Licensee as part of its Distribution Business to itself for the
          purpose of its Supply Business) and any private electricity supplier
          or any customer thereof.

4.   In the establishment and operation of the enquiry service in accordance
     with paragraph 1 the Licensee shall not restrict, distort or prevent
     competition in the supply of electricity.

5.   The Licensee shall by 1 January 1998 prepare and submit to the Director for
     his approval a statement setting out details of the service to be provided
     in accordance with paragraph 1, and the Licensee shall, following the
     Director's approval, give or send a copy of such statement to any person
     requesting it.

6.   The Licensee shall give to the Director notice of any amendments it
     proposes to make to the statement prepared under paragraph 5, and shall not
     make such amendments until either:

     (a)  a period of one month from the date of the notice has expired; or

     (b)  prior to the expiry of such period, the Licensee has obtained the
          written approval of the Director to the amendments.

7.   The Licensee shall make arrangements to keep each of its customers informed
     of a postal address and telephone number at which the service established
     in accordance with paragraph 1 may be contacted.

8.   The Licensee may discharge the duty imposed by paragraph 7 by providing the
     requisite information to each of its customers:

     (a)  on the occasion of the customer first commencing to take a supply from
          the Licensee; and

                                      138
<PAGE>

     (b)  either:

          (i)  where bills or statements in respect of charges for the supply of
               electricity are rendered to the customer, on a quarterly basis
               (it being sufficient that the information is included on or with
               that bill or statement); or

          (ii) where no bills or statements in respect of charges for the supply
               of electricity are rendered to the customer, on an annual basis

and by publishing such information in such manner as will in the opinion of
     the Licensee secure adequate publicity for it.

9.   The Licensee shall take steps to inform each of its customers, and each
     Authorised Electricity Operator which uses the service, of any change to
     the address or telephone number of the service established in accordance
     with paragraph 1 as soon as is practicable prior to such change becoming
     effective.

                                      139
<PAGE>

Condition 7B: Procedures for the detection and prevention of theft, damage and
------------------------------------------------------------------------------
meter interference
------------------

1.   The Licensee shall (and shall ensure that its agents) take all reasonable
     steps to detect and prevent:

     (a)  the theft of electricity at premises which are supplied by it;

     (b)  damage to any electrical plant, electric line or electricity meter
          through which such premises are supplied; and

     (c)  interference with any electricity meter through which such premises
          are supplied.

2.   Where a person other than the Licensee is the owner of any electrical
     plant, electric lines or meter the Licensee shall, as soon as is reasonably
     practicable, inform that person of any incident where it has reason to
     believe:

     (a)  there has been damage to such electrical plant, electric line or
          meter; or

     (b)  there has been interference with the meter to alter its register or
          prevent it from duly registering the quantity of electricity supplied.

3.   Where a person other than the Licensee is the supplier of electricity to
     premises within the authorised area the Licensee shall, as soon as is
     reasonably practicable, inform that person of any incident where it has
     reason to believe:

     (a)  there has been damage to any electrical plant, electric line or meter
          through which such premises are supplied with electricity; or

                                      140
<PAGE>

     (b)  there has been interference with the meter through which such premises
          are supplied to alter its register or prevent it from duly registering
          the quantity of electricity supplied.

                                      141
<PAGE>

Condition 7C: Provisions relating to the connection of metering equipment
-------------------------------------------------------------------------

1.   On application made by any person the Licensee shall, subject to paragraph
     5, offer to enter into an agreement authorising that person to connect
     metering equipment to the Licensee's Distribution System.

2.   In making an offer to enter into an agreement specified in paragraph 1, the
     Licensee shall set out:

     (a)  the date from which the applicant is authorised to undertake
          connections;

     (b)  the procedures to be adopted by the applicant when making connections,
          with particular regard to those relating to safety; and

     (c)  such other detailed terms as are or may be appropriate for the
          purposes of the agreement.

3.   The Licensee shall offer terms for agreements in accordance with paragraph
     1 as soon as practicable and (save where the Director consents to a longer
     period) in any event not more than 28 days after receipt by the Licensee
     from any person of an application containing all such information as the
     Licensee may reasonably require for the purpose of formulating the terms of
     the offer.

4.   In the offering of the terms in accordance with paragraph 1, the Licensee
     shall not show undue preference to or exercise undue discrimination against
     any person or class of persons.

5.   The Licensee shall not be obliged pursuant to this Condition to offer to
     enter or to enter into any agreement:

     (a)  (in respect of non-half-hourly metering equipment) which comes into
          effect prior to 1 April 2000; or

                                      142
<PAGE>

     (b)  where to do so would be likely to cause the Licensee to be in breach
          of those provisions referred to at sub-paragraph 7(a) of Condition 2B
          of Part VI.

6.   If, after a period which appears to the Director to be reasonable for the
     purpose, the Licensee has failed to enter into an agreement with any person
     entitled or claiming to be entitled thereto pursuant to a request under
     this Condition, the Director may, on the application of such person or the
     Licensee, settle any terms of the agreement in dispute between the Licensee
     and that person in such manner as appears to the Director to be reasonable.

7.   In so far as any person entitled or claiming to be entitled to an offer
     under this Condition wishes to proceed on the basis of the agreement as
     settled by the Director, the Licensee shall forthwith enter into and
     implement such agreement in accordance with its terms.

8.   If the Licensee or other party to such agreement proposes to vary the terms
     of any agreement entered into pursuant to this Condition in any manner
     provided for under such agreement, the Director may, at the request of the
     Licensee or other party to such agreement, settle any dispute relating to
     such variation in such manner as appears to the Director to be reasonable.

                                      143
<PAGE>

Condition 7D: Agreements for the provision of meters
----------------------------------------------------

1.   The Licensee shall not, in the course if its Supply Business, enter into an
     agreement with any person for the provision of an electricity meter at any
     premises (whatever the nature of that agreement) which is intended or is
     likely to restrict, distort or prevent competition in the supply of
     electricity.

                                      144
<PAGE>

Condition 8: Distribution Code
------------------------------

1.   The Licensee shall in consultation with Authorised Electricity Operators
     liable to be materially affected thereby prepare and at all times have in
     force and (subject to paragraph 10) shall implement and comply with a
     Distribution Code:

     (a)  covering all material technical aspects relating to connections to and
          the operation and use of the Licensee's Distribution System or
          (insofar as relevant to the operation and use of the Licensee's
          Distribution System) the operation of electric lines and electrical
          plant connected to the Distribution System of the Licensee or any
          other public electricity supplier or the system for the distribution
          of electricity of any other person authorised to supply electricity
          and (without prejudice to the foregoing) making express provision as
          to the matters referred to in paragraph 5; and

     (b)  which is designed so as:

          (i)  to permit the development, maintenance and operation of an
               efficient, co-ordinated and economical system for the
               distribution of electricity; and

          (ii) to facilitate competition in the generation and supply of
               electricity.

2.   The Distribution Code in force at the date of the coming into force of the
     Public Electricity Supply Licence shall be sent to the Director for his
     approval. Thereafter the Licensee shall (in consultation with Authorised
     Electricity Operators liable to be materially affected thereby)
     periodically review (including upon the request of the Director) the
     Distribution Code and its implementation. Following any such review, the
     Licensee shall send to the Director:

     (a)  a report on the outcome of such review;

                                      145
<PAGE>

     (b)  any proposed revisions to the Distribution Code from time to time as
          the Licensee (having regard to the outcome of such review) reasonably
          thinks fit for the achievement of the objectives referred to in
          sub-paragraph (b) of paragraph 1; and

     (c)  any written representations or objections from Authorised Electricity
          Operators (including any proposals by such operators for revisions to
          the Distribution Code not accepted by the Licensee in the course of
          the review) arising during the consultation process and subsequently
          maintained.

3.   Revisions to the Distribution Code proposed by the Licensee and sent to the
     Director pursuant to paragraph 2 shall require to be approved by the
     Director.

4.   Having regard to any written representations or objections referred to in
     sub-paragraph (c) of paragraph 2, and following such further consultation
     (if any) as the Director may consider appropriate, the Director may issue
     directions requiring the Licensee to revise the Distribution Code in such
     manner as may be specified in the directions, and the Licensee shall
     forthwith comply with any such directions.

5.   The Distribution Code shall include:

     (a)  a distribution planning and connection code containing:

          (i)  connection conditions specifying the technical, design and
               operational criteria to be complied with by any person connected
               or seeking connection with the Licensee's Distribution System;
               and

          (ii) planning conditions specifying the technical and design criteria
               and procedures to be applied by the Licensee in the planning and
               development of the Licensee's Distribution System and to be

                                      146
<PAGE>

               taken into account by persons connected or seeking connection
               with the Licensee's Distribution System in the planning and
               development of their own plant and systems; and

     (b)  a distribution operating code specifying the conditions under which
          the Licensee shall operate the Licensee's Distribution System and
          under which persons shall operate their plant and/or systems for the
          distribution of electricity in relation to the Licensee's Distribution
          System, insofar as the imposition of such conditions is necessary to
          protect the security and quality of supply and safe operation of the
          Licensee's Distribution System under both normal and abnormal
          operating conditions.

6.   The Licensee shall give or send a copy of the Distribution Code (as from
     time to time revised) to the Director.

7.   The Licensee shall (subject to paragraph 8) give or send a copy of the
     Distribution Code (as from time to time revised) to any person requesting
     the same.

8.   The Licensee may make a charge for any copy of the Distribution Code (as
     from time to time revised) given or sent pursuant to paragraph 7 of an
     amount which will not exceed any amount specified for the time being for
     the purposes of this Condition in directions issued by the Director.

9.   In preparing, implementing and complying with the Distribution Code
     (including in respect of the scheduling of maintenance of the Licensee's
     Distribution System), the Licensee shall not unduly discriminate against or
     unduly prefer:

     (a)  any one or any group of persons; or

     (b)  the Licensee in the conduct of any business other than the
          Distribution Business

                                      147
<PAGE>

in favour of or as against any one other or any other group of persons.

10.  The Director may (following consultation with the Licensee) issue
     directions relieving the Licensee of its obligations to implement and
     comply with the Distribution Code in respect of such parts of the
     Licensee's Distribution System and to such extent as may be specified in
     the directions.

11.  Compliance with this Condition shall not require the Licensee to impose any
     contractual obligation on tariff customers to comply with the Distribution
     Code (as from time to time revised).

                                      148
<PAGE>

Condition 8A: The Metering Point Administration Service and the Master
----------------------------------------------------------------------
Registration Agreement
----------------------

1.   The Licensee shall establish, and shall subsequently operate and maintain,
     a service to be known as the Metering Point Administration Service.

2.   The Metering Point Administration Service shall, within the authorised
     area, fulfil the following functions:

     (a)  the maintenance of such a register of technical and other data as is
          necessary to facilitate supply by any Electricity Supplier or Exempt
          Supplier to all premises within the authorised area and to meet the
          reasonable requirements of Electricity Suppliers in respect of such
          premises for information for settlement purposes, including (where so
          required):

          (i)   the identity of the Electricity Supplier responsible under the
                Settlement Agreement for Scotland for the supply to each such
                premises;

          (ii)  the type of metering equipment installed at each such premises;
                and

          (iii) the address of each such premises;

     (b)  the amendment of the register maintained in accordance with sub-
          paragraph (a) to reflect changes of supplier in respect of any
          premises;

     (c)  the provision, in a timely and efficient manner, of such data
          contained in the register as is reasonably required and requested to:

          (i)  any Electricity Supplier or agent thereof;

                                      149
<PAGE>

          (ii)  any person identified in the Settlement Agreement for Scotland
                as an appropriate person for the receipt of data for settlement
                purposes; and

          (iii) any person identified in the Master Registration Agreement as
                entitled to such data for the purpose of facilitating changes of
                supplier in respect of any premises; and

     (d)  the maintenance of an enquiry service for the provision to any
          customer of an Electricity Supplier, on request and free of charge to
          that customer, of such data contained in the register as is relevant
          to the supply of electricity to premises which are (or are to be)
          owned or occupied by the customer, and the taking of such steps as
          will in the opinion of the Licensee secure adequate publicity for the
          operation of the enquiry service.

3.   In fulfilling its obligation in accordance with paragraph 1 the Licensee
     shall not restrict, distort or prevent competition in the provision of
     meter operation, data retrieval, data processing, data aggregation or
     prepayment meter services.

4.   The Licensee shall use its best endeavours, in conjunction and co-operation
     with all other public electricity suppliers, to prepare a form of agreement
     to be known as the Master Registration Agreement.

5.   The Master Registration Agreement shall be an agreement made between:

     (a)  on the one part, the Licensee and all other public electricity
          suppliers in their capacity as providers of metering point
          administration services; and

     (b)  on the other part, all Electricity Suppliers who require the provision
          of metering point administration services from at least one public

                                      150
<PAGE>

          electricity supplier, together with such other persons as are, for
          settlement purposes, appropriate parties to the agreement

and shall comprise all the matters set out at paragraph 6.

6.   The Master Registration Agreement shall comprise:

     (a)  terms for the provision of metering point administration services in
          accordance with the requirements of paragraph 2 and the equivalent
          requirements in the licences of all other public electricity
          suppliers;

     (b)  provisions to facilitate, and procedures and practices to be followed
          by Electricity Suppliers in relation to changes of Electricity
          Supplier in respect of any premises;

     (c)  a catalogue of definitions, flows and forms of such data as may
          require to be transferred by or to parties to the Master Registration
          Agreement, or as between any persons for settlement purposes or for
          any related purposes (the "Data Transfer Catalogue");

     (d)  arrangements for the variation of the Master Registration Agreement
          following consultation with the parties, or representatives of the
          parties, to that agreement;

     (e)  provisions (which shall require to be approved in advance by the
          Director) by virtue of which the whole or specified parts of the
          Master Registration Agreement shall not be capable of variation
          without the prior approval of the Director; and

     (f)  such other matters as are or may be appropriate for the development,
          maintenance and operation of an efficient, co-ordinated and economical
          system for the supply of electricity and for the purpose of
          facilitating competition in electricity supply.

                                      151
<PAGE>

7.   The Licensee shall be a party to and shall comply with the provisions of
     the Master Registration Agreement.

                                      152
<PAGE>

Condition 8B: Establishment of a Data Transfer Service
------------------------------------------------------

1.   The Licensee shall use its best endeavours, in conjunction and co-
     operation with all other public electricity suppliers:

     (a)  to establish, or to procure the establishment by a third party of, a
          service to be known as the Data Transfer Service; and

     (b)  subsequently to operate and maintain, or to procure the subsequent
          operation and maintenance by a third party of such Data Transfer
          Service in accordance with the provisions of this Condition.

2.   The Data Transfer Service shall:

     (a)  provide a network over which may be made all of the electronic data
          transfers specified at paragraph 3;

     (b)  operate and maintain that network; and

     (c)  provide a connection to that network, on request, to any person who is
          or will be a party to any of the electronic data transfers specified
          at paragraph 3.

3.   The electronic data transfers specified at this paragraph are those which
     are reasonably required for any of the purposes set out at paragraph 4 and
     which are made between:

     (a)  a Metering Point Administration Service (MPAS) Operator and an
          Electricity Supplier (including the Licensee acting in the course of
          its Supply Business) or any agent thereof;

     (b)  an MPAS Operator and any person identified in the Pooling and
          Settlement Agreement or the Settlement Agreement for Scotland as

                                      153
<PAGE>

          an appropriate person for the receipt of data from the MPAS Operator
          for settlement purposes;

     (c)  the Electricity Pool of England and Wales or Scottish Electricity
          Settlements Limited (or any agent thereof) and an Electricity Supplier
          (or any agent thereof);

     (d)  an Electricity Supplier (or any agent thereof) and another Electricity
          Supplier (or any agent thereof);

     (e)  an Electricity Supplier and any of its agents;

     (f)  different agents of the same Electricity Supplier;

     (g)  public electricity suppliers (or their agents) and generators (or
          their agents) which are parties to the Settlement Agreement for
          Scotland; and

     (h)  Scottish Electricity Settlements Limited (or any agent thereof) and
          generators which are parties to the Settlement Agreement for Scotland.

4.   The purposes of this paragraph are:

     (a)  meeting obligations with respect to the transfer of data for
          settlement purposes;

     (b)  communicating meter reading and meter standing data;

     (c)  facilitating the provision of metering point administration services;

     (d)  communicating distribution use of system information; and

                                      154
<PAGE>

     (e)  fulfilling such other requirements relating to the transfer of data as
          may be requisite for the supply of electricity to customers and
          compliance by Electricity Suppliers with the Master Registration
          Agreement.

5.   The Data Transfer Service shall, where relevant, transmit data in a form
     which complies with the provisions of the Data Transfer Catalogue.

6.   In fulfilling its obligation under paragraph 1 the Licensee shall not, or
     (if appropriate) shall ensure that the third party shall not, restrict,
     distort or prevent competition in the provision of meter operation, data
     retrieval, data processing, data aggregation or prepayment meter services.

7.   Any obligation placed on the Licensee under Conditions 8C to 8F in respect
     of the provision of data transfer services shall (for the purposes of those
     Conditions) be treated as a requirement on the Licensee to use its best
     endeavours, in conjunction and co-operation with all other public
     electricity suppliers, to fulfil that obligation or to procure the
     fulfilment of that obligation by a third party, and Conditions 8C to 8F
     shall apply mutatis mutandis to the provision of data transfer services.

8.   Further, in relation to the provision of data transfer services the
     reference at paragraph 1 of Condition 8F to the Licensee failing to enter
     into an agreement shall be a reference to the Licensee, in conjunction with
     all other public electricity suppliers, failing to enter into or failing to
     procure that a third party enters into an agreement.

9.   In this Condition:

"Metering Point Administration Service      means the Licensee or any other
(MPAS) Operator"                            public electricity supplier in its
                                            capacity as a provider of metering
                                            point administration services.

                                      155
<PAGE>

Condition 8C: Requirement to offer terms for the provision of Metering and Data
-------------------------------------------------------------------------------
Services
--------

1.   On application made by any private electricity supplier, or in the case of
     sub-paragraphs 1(a) and (b) by any person, the Licensee shall (subject to
     paragraph 6) offer to enter into an agreement for the provision within its
     authorised area of such of the following services as may be required:

     (a)  the provision of metering equipment whether, at the discretion of the
          Licensee, by way of sale, hire or loan ("meter provision services");

     (b)  the installation, commissioning, testing, repair and maintenance of
          metering equipment ("meter operation services");

     (c)  the retrieval and verification of meter reading data from electricity
          meters and the delivery of such data to any relevant person for the
          purpose of data processing ("data retrieval services");

     (d)  the:

          (i)  processing, validation and (where necessary) estimation of meter
               reading data; and

          (ii) creation, processing and validation of data in respect of the
               consumption of electricity at premises which receive an unmetered
               supply,

     and in each case the delivery of such data to any relevant person for
          the purpose of data aggregation ("data processing services");

     (e)  the collation and summation of meter reading data (whether actual or
          estimated) and of data in respect of the consumption of electricity at
          premises which receive an unmetered supply, and the delivery of such

                                      156
<PAGE>

          data to any relevant person for settlement purposes ("data aggregation
          services"); and

     (f)  the access to a system which supports the supply of electricity to
          Designated Customers with prepayment meters ("prepayment meter
          services"), such system providing as may be reasonably appropriate for
          prepayment meters which require tokens, cards or keys for their
          operation and comprising facilities for:

          (i)    (where requested) the purchase by private electricity suppliers
                 and/or encoding with data of tokens, cards or keys;

          (ii)   the use by customers of local outlets for the purchase of
                 tokens and the crediting with value of cards or keys;

          (iii)  the making of payments to suppliers in respect of sums received
                 by the Licensee on behalf of customers; and

          (iv)   where relevant, the transfer of customer data to private
                 electricity suppliers.

2.   On application made by any Electricity Supplier the Licensee shall (subject
     to paragraph 6) offer to provide metering point administration services
     within the authorised area pursuant to and in accordance with the Master
     Registration Agreement.

3.   On application made by any person the Licensee shall (subject to paragraph
     6) offer to enter into an agreement for the provision of data transfer
     services.

4.   In making an offer to enter into any agreement specified in paragraphs 1 to
     3, the Licensee shall set out:

                                      157
<PAGE>

     (a)  the date by which the services required shall be provided (time being
          of the essence unless otherwise agreed between parties);

     (b)  the charges to be paid in respect of the services required, such
          charges (unless manifestly inappropriate):

          (i)  to be presented in such a way as to be referable to the
               statements prepared in accordance with paragraph 1 of Condition
               8E or any revision thereof; and

          (ii) to be set in conformity with the requirements of Condition 8E;
               and

     (c)  such other detailed terms in respect of each of the services required
          as are or may be appropriate for the purpose of the agreement.

5.   The Licensee shall offer terms for agreements in accordance with paragraphs
     1 to 3 as soon as practicable and (save where the Director consents to a
     longer period) in any event not more than 28 days after receipt by the
     Licensee from any person of an application containing all such information
     as may reasonably be required for the purpose of formulating the terms of
     the offer.

6.   The Licensee shall not be obliged pursuant to this Condition to offer to
     enter or to enter into any agreement if to do so would be likely to cause
     the Licensee to be in breach of any of the provisions referred to at
     sub-paragraph 7(a) of Condition 2B of Part VI.

7.   The Licensee shall undertake each of the services referred to in paragraphs
     1 to 3 in the most efficient and economic manner practicable having regard
     to the alternatives available and the other requirements of this Licence
     and of the Act in so far as they relate to the provision of those services.

                                      158
<PAGE>

8.   In the provision of any of the services referred to in paragraphs 1 to 3
     (excepting prepayment meter services) the Licensee shall not restrict,
     distort or prevent competition in the supply of electricity.

9.   The services referred to in paragraphs 1 to 3 shall collectively be
     described as Metering and Data Services.

                                      159
<PAGE>

Condition 8D: Non-discrimination in the provision of Metering and Data Services
-------------------------------------------------------------------------------

1.   In the provision of any of the Metering and Data Services the Licensee
     shall not discriminate:

     (a)  between any persons or class or classes thereof; or

     (b)  as between the Licensee (in the provision of such services by the
          Licensee as part of its Distribution Business to itself for the
          purpose of its Supply or Second Tier Supply Business) and any persons
          or class or classes thereof.

2.   Without prejudice to paragraph 1, and subject to the provisions of
     Condition 8E, the Licensee shall not make charges for the provision of any
     of the Metering and Data Services to any person or class or classes thereof
     which differ from the charges for such provision:

     (a)  to any other person or class or classes of person; or

     (b)  to the Licensee in the provision of such services by the Licensee (as
          part of its Distribution Business to itself for the purposes of its
          Supply or Second Tier Supply Business)

     except in so far as such differences reasonably reflect differences in the
     costs associated with such provision.

3.   In relation to the provision of prepayment meter services, data processing
     services, data aggregation services and data retrieval services paragraphs
     1 and 2 shall have effect as if after "Distribution Business" were inserted
     therein "or any other business."

                                      160
<PAGE>

Condition 8E: Basis of charges for Metering and Data Services: requirements for
-------------------------------------------------------------------------------
transparency
------------

1.   The Licensee shall as soon as reasonably practicable prepare statements in
     a form approved by the Director setting out:

     (a)  the basis upon which charges for the provision of each of the Metering
          and Data Services will be made; and

     (b)  information relating to the other terms that will apply to the
          provision of each service,

in each case in such form and with such detail as shall be necessary to
     enable any person to make a reasonable estimate of the charges to which he
     would become liable for the provision of such services and of the other
     terms, likely to have a material impact on the conduct of his business,
     upon which the service would be provided and (without prejudice to the
     foregoing) including the information set out in paragraph 2.

2.   The statements referred to in paragraph 1 shall include:

     (a)  a schedule of charges for such services; and

     (b)  an explanation of the methods by which and the principles on which
          such charges will be calculated.

3.   The Director may, upon the written request of the Licensee, issue a
     direction relieving the Licensee of its obligations under paragraphs 1 and
     2 to such extent and subject to such terms and conditions as he may specify
     in that direction.

4.   The Licensee shall not in setting its charges for or in setting the other
     terms that will apply to the provision of any of the Metering and Data
     Services

                                      161
<PAGE>

     restrict, distort or prevent competition in the generation, distribution or
     supply of electricity or in the provision of meter operation, data
     retrieval, data processing or data aggregation services.

5.   The Licensee may periodically review the information set out in and, with
     the approval of the Director, alter the form of the statements prepared in
     accordance with paragraph 1 and shall, at least once in every year that
     this Licence is in force, make any necessary revisions to such statements
     in order that the information set out in the statements shall continue to
     be accurate in all material respects.

6.   The Licensee shall send a copy of the statements prepared in accordance
     with paragraph 1, and of each revision of such statements in accordance
     with paragraph 5, to the Director.

7.   The Licensee shall give or send a copy of the statements prepared in
     accordance with paragraph 1, or (as the case may be) of the latest revision
     of such statements in accordance with paragraph 5, to any person who
     requests a copy of such statement or statements.

8.   The Licensee may make a charge for any statement given or sent pursuant to
     paragraph 7 of an amount which shall not exceed the amount specified in
     directions issued by the Director for the purposes of this Condition based
     on the Director's estimate of the Licensee's reasonable costs of providing
     such a statement.

                                      162
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Condition 8F: Functions of the Director
---------------------------------------

1.   If, after a period which appears to the Director to be reasonable for the
     purpose, the Licensee has failed to enter into an agreement with any person
     entitled or claiming to be entitled thereto pursuant to a request under
     Condition 8C, the Director may, on the application of such person or the
     Licensee, settle any terms of the agreement in dispute between the Licensee
     and that person in such manner as appears to the Director to be reasonable
     having (in so far as relevant) regard in particular to the following
     considerations:

     (a)  that such person should pay in respect of the services required the
          whole or the appropriate proportion of such sum as is determined in
          accordance with paragraph 4 of Condition 8E;

     (b)  that the performance by the Licensee of its obligations under the
          agreement should not cause it to be in breach of those provisions
          referred to at sub-paragraph 7(a) of Condition 2B of Part VI ; and

     (c)  that the terms and conditions of the agreement so settled by the
          Director and of any other agreements entered into pursuant to a
          request under Condition 8C should be, so far as circumstances allow,
          in as similar a form as is practicable.

2.   In so far as any person entitled or claiming to be entitled to an offer
     under Condition 8C wishes to proceed on the basis of the agreement as
     settled by the Director, the Licensee shall forthwith enter into and
     implement such agreement in accordance with its terms.

3.   If any party to such agreement proposes to vary the contractual terms of
     any agreement for any Metering and Data Services entered into pursuant to
     Condition 8C or this Condition in any manner provided for under such
     agreement, the Director may, at the request of that party, settle any
     dispute

                                      163
<PAGE>

     relating to such variation in such manner as appears to the Director to be
     reasonable.

4.   The Director may (following consultation with the Licensee) issue
     directions relieving the Licensee of its obligations under Condition 8C in
     respect of such parts of that Condition and to such extent as may be
     specified in the directions.

                                      164
<PAGE>

Condition 9. Restriction on use of certain information and independence of the
------------------------------------------------------------------------------
Distribution Business
---------------------

1.   Any information relating to or deriving from the management or operation of
     the Distribution Business shall, for the purposes of this Condition, be
     treated as confidential information.

2.   The Licensee shall not (and shall procure that its affiliates and related
     undertakings shall not) disclose or authorise access to confidential
     information:

     (a)  save to the extent provided by sub-paragraphs 3(b) to (d), to such of
          its (or its affiliates' or related undertakings') employees, agents,
          advisers, consultants or contractors as are engaged in, or in respect
          of, the management or operation of the Supply Business; or

     (b)  save to the extent permitted by paragraph 3, to any other person.

3.   The Licensee shall (and shall procure that its affiliates and related
     undertakings shall) disclose or authorise access to confidential
     information only:

     (a)  In the following circumstances, namely;

          (i)  to such of its (or its affiliates' or related undertakings')
               employees, agents, advisers, consultants or contractors as are
               engaged in, or in respect of, the management or operation of the
               Distribution Business or any external distribution activities and
               require access to the information for that purpose;

          (ii) to personnel of any other holder of a public electricity supply
               licence ( a PES licence holder) engaged in the external
               distribution activities of that PES licence holder to the extent
               necessary for the performance by such personnel of those

                                      165
<PAGE>

                 external distribution activities, and the use by such personnel
                 of that information for that purpose;

          provided that effective arrangements are maintained in place at all
          times for ensuring that no further disclosure of any information
          supplied or obtained pursuant to this paragraph is made and that such
          information is used only for the purpose of the Distribution Business
          or any external distribution activities of the Licensee;

     (b)  where the Licensee (or any affiliate or related undertaking of the
          Licensee) is required or permitted to disclose such information by
          virtue of:

          (i)    any requirement of a Competent Authority;

          (ii)   the conditions of any licence granted under the Act or any
                 document referred to in such a licence with which it is
                 required by virtue of the Act or that licence to comply;

          (iii)  any other requirement of law; or

          (iv)   the rules of the Electricity Arbitration Association or of any
                 judicial or other arbitral process or tribunal of competent
                 jurisdiction;

     (c)  where such information was provided by or relates to any person who
          has notified (or otherwise agreed with) the Licensee that it need not
          be treated as confidential; or

     (d)  where such information, not being information provided by or relating
          to any person other than the Licensee, is placed by the Licensee in
          the public domain

                                      166
<PAGE>

     and in each case the Licensee shall disclose or authorise access to the
     confidential information only insofar as is necessary or appropriate in all
     the circumstances.

4.   The Licensee shall use all reasonable endeavours to ensure that any person
     who is in possession of or has access to confidential information in
     accordance with sub-paragraph 3(a) shall use such information only for the
     purposes of the Distribution Business or any external distribution
     activities.

5.   For the purpose of facilitating its compliance with paragraphs 1 to 4, the
     Licensee shall establish and shall thereafter maintain the full managerial
     and operational independence of the Distribution Business and any external
     distribution activities from each other business (whether or not a Separate
     Business) of the Licensee and of its affiliates and related undertakings.

6.   In order to facilitate its compliance with paragraphs 1 to 5, the Licensee
     shall ensure that:

     (a)  the Distribution Business is provided with such premises, systems,
          equipment, facilities, property, personnel, data and management
          resources as are necessary for the efficient and effective management
          and operation of the Business;

     (b)  no business of the Licensee (or of any affiliate or related
          undertaking of the Licensee), other than the Distribution Business or
          any external distribution activities, may use or have access to:

          (i)    premises or parts of premises occupied by persons engaged in,
               or in respect of, the management or operation of the Distribution
               Business or any external distribution activities;

          (ii)   systems for the recording, processing or storage of data to
               which persons engaged in, or in respect of, the management or

                                      167
<PAGE>

                operation of the Distribution Business or any external
                distribution activities also have access;

          (iii)   equipment, facilities or property employed for the management
                or operation of the Distribution Business or any external
                distribution activities; or

          (iv)    the services of persons who are (whether or not as their
                principal occupation) engaged in, or in respect of, the
                management or operation of the Distribution Business or any
                external distribution activities; and

     (c)  it can and does, insofar as is legally possible, prevent any person
          who has ceased to be engaged in, or in respect of, the management or
          operation of the Distribution Business from being engaged in, or in
          respect of, the activities of any other business of the Licensee (or
          of any affiliate or related undertaking of the Licensee) until the
          expiry of an appropriate time from the date on which he ceased to be
          engaged by the Distribution Business.

7.   The Director may, upon the written request of the Licensee, issue a
     direction relieving the Licensee of its obligations under paragraphs 1 to
     6, to such extent and subject to such terms and conditions as he may
     specify in that direction, where:

     (a)  it is not reasonably practicable for the Licensee to comply with any
          aspect of those obligations;

     (b)  in the case of paragraphs 2 to 4, a failure to comply with any aspect
          of those obligations would be of a trivial nature; or

     (c)  in the case of paragraph 5 and sub-paragraph 6(b), any arrangements
          for the use of or access to premises, systems, equipment, facilities,

                                      168
<PAGE>

          property or personnel by both the Distribution Business and any other
          business of the Licensee (or of any affiliate or related undertaking
          of the Licensee):

          (i)    do not involve a cross-subsidy being either given to the
                 Distribution Business by such other business or received from
                 the Distribution Business by such other business;

          (ii)   obtain for the Distribution Business, in the most efficient and
                 economical manner possible, the use of the relevant premises,
                 systems, equipment, facilities, property or personnel; and

          (iii)  do not restrict, distort or prevent competition in the
                 generation or supply of electricity,

     provided that the Licensee shall not thereby be relieved of any obligation
     imposed on it by Directive 96/92/EC.

8.   Where, subsequent to the issue of a direction pursuant to paragraph 7, the
     criteria set out at sub-paragraph 7(a), (b) or (c) cease to be satisfied,
     the Director may withdraw the direction or modify any terms and conditions
     which may be specified in it.

9.   For the purposes of paragraphs 7 and 8 the Director shall, following
     consultation with the Licensee, determine any question as to whether the
     criteria set out at sub-paragraph 7(a), (b) or (c) are or continue to be
     satisfied.

10   (a)  This paragraph applies only in circumstances in which the Licensee
          does not itself carry out any of the Metering and Data Services
          attributed to the Distribution Business ("Distribution Business
          Metering and Data Services") but those services are provided for it by
          an agent acting independently of the Licensee which is not an
          affiliate of the

                                      169
<PAGE>

          Licensee and in which the Licensee holds no shares or other financial
          interest ("a metering agent")

     (b)  Where paragraph (a) applies, the Licensee may disclose confidential
          information to its metering agent notwithstanding that the metering
          agent provides Metering and Data Services to the Supply Business or to
          others, provided that the Licensee maintains, and procures that the
          metering agent also maintains, in place at all times effective
          arrangements so that the metering agent does not disclose information
          relating to the Distribution Business to the Licensee in its capacity
          as electricity supplier except to the extent necessary for the
          metering agent to provide Metering Services as part of the
          Distribution Business to the Supply Business of the Licensee.

11.  In this Condition:

     "appropriate time"                  means 3 months, or such shorter period
                                         as the Director may approve in respect
                                         of any person or class of persons.

     "Competent Authority"               means the Secretary of State, the
                                         Director, the Compliance Officer, the
                                         Stock Exchange, the Panel on Take-overs
                                         and Mergers, or any local or national
                                         agency, regulatory body, authority,
                                         department, inspectorate, minister,
                                         ministry, official or public or
                                         statutory person (whether autonomous or
                                         not) of, or of the government of, the
                                         United Kingdom, the United States of
                                         America or the European Community.

                                      170
<PAGE>

     "confidential information"          bears the meaning given at paragraph 1.

     "Electricity Arbitration            means the unincorporated members' club
      Association"                       of that name formed inter alia to
                                         promote the efficient and economic
                                         operation of the procedure for the
                                         resolution of disputes within the
                                         electricity supply industry by means of
                                         arbitration or otherwise in accordance
                                         with its arbitration rules.

     "external distribution activities"  means any business of the Licensee or
                                         any affiliate or related undertaking of
                                         the Licensee comprising or ancillary to
                                         the maintenance, repair or operation
                                         of, or other activities in connection
                                         with any electricity distribution or
                                         transmission system other than the
                                         Licensee's Distribution System ("an
                                         external distribution system").

                                      171
<PAGE>

Condition 9A: Restriction on use of certain information relating to the Supply
------------------------------------------------------------------------------
Business
---------

1.   Where the Licensee or any affiliate or related undertaking of the Licensee
     or any agent or other person acting on its behalf receives, in the course
     of providing Metering and Data Services on behalf of the Supply Business,
     information from any person, such information shall be treated as relevant
     information for the purposes of this Condition and, subject to paragraph 7,
     the provisions of this Condition shall apply to that information, save
     where the person providing the information notifies (or otherwise agrees
     with) the Licensee that the information need not be treated as relevant.

2.   The Licensee shall not (and shall procure that its affiliates and related
     undertakings and any person acting on its or their behalf shall not) use
     relevant information in a manner which may obtain for the Licensee or any
     affiliate or related undertaking of the Licensee any commercial advantage
     in the operation of the Supply Business.

3.   The Licensee shall not (and shall procure that its affiliates or related
     undertakings and any person acting on its or their behalf shall not)
     authorise access to relevant information to any of its (or its affiliates'
     and related undertakings') employees, agents, consultants or contractors
     save insofar as such persons require access to the information for the
     effective operation of the Metering and Data Services provided by the
     Supply Business.

4.   The Licensee shall use all reasonable endeavors to ensure that any person
     with authorised access to relevant information in accordance with paragraph
     3 shall use such information only for the purposes for which it was
     provided.

                                      172
<PAGE>

5.   The Licensee shall not (and shall procure that its affiliates and related
     undertakings and any person acting on its or their behalf shall not)
     disclose relevant information other than:

     (a)  subject to paragraph 6, to any professional or other advisers who
          require such information for the purpose of providing advice which is
          necessary for the effective operation of the Metering and Data
          Services provided by the Supply Business;

     (b)  to the Director; and

     (c)  where the Licensee ( or any affiliate or related undertaking of the
          Licensee) is required or permitted to disclose such information:

          (i)   in compliance with its duties under the Act or any other
                requirement of a Competent Authority;

          (ii)  in compliance with the conditions of any licence granted under
                the Act or any document referred to in such a licence with which
                it is required by virtue of the Act or that licence to comply;

          (iii) in compliance with any other requirement of law;

          (iv)  in response to a requirement of any Stock Exchange, the Panel on
                Take-overs and Mergers or any regulatory authority; or

          (v)   pursuant to the arbitration rules for the Electricity
                Arbitration Association or pursuant to any judicial or other
                arbitral process or tribunal of competent jurisdiction.

                                      173
<PAGE>

6.   Where relevant information is disclosed in accordance with sub-paragraph
     5(a), the Licensee shall ensure that any persons to whom that information
     is disclosed are aware that it is relevant information, and shall take
     reasonable steps to ensure that such persons do not disclose that
     information save in accordance with the provisions of this Condition.

7.   The Director may, upon the written request of the Licensee, issue a
     direction relieving the Licensee of its obligations under paragraphs 1 to 6
     to such extent and subject to such terms and conditions as he may specify
     in that direction.

8.   The Licensee shall no later than 31 May 2000 prepare a statement in a form
     approved by the Director setting out the practices, procedures and systems
     the Licensee has adopted (or intends to adopt) to ensure its compliance:

          (a)  with paragraphs 2 to 6 of this Condition; and

          (b)  in the provision of Metering and Data Services as part of the
               Supply Business, with its obligations not to restrict, distort or
               prevent competition.

9.   The Licensee may periodically revise the information set out in and, with
     the approval of the Director, alter the form of the statement prepared in
     accordance with paragraph 8 and shall, at least once every year during
     which this Licence is in force, review such statement in order that the
     information set out therein shall continue to be accurate in all material
     respects.

10.  The Licensee shall take all reasonable steps to ensure that it complies
     with the practices and procedures set out in the statement prepared in
     accordance with paragraph 8 (as from time to time revised).

                                      174
<PAGE>

11.  The Licensee shall send a copy of the statement prepared in accordance with
     paragraph 8, and of each revision of such statement in accordance with
     paragraph 9, to the Director.

12.  The Licensee shall give or send a copy of the statement prepared in
     accordance with paragraph 8, or (as the case may be) of the latest revision
     of such statement in accordance with paragraph 9, to any person who
     requests a copy of such statement.

13.  Wherever required by the Director to do so (but not more than once in each
     calendar year) the Licensee shall produce a report as to its compliance
     with the practices and procedures set out in the statement prepared in
     accordance with paragraph 8, and such report shall:

          (a)  detail the procedures followed by the Licensee for monitoring its
               compliance with paragraph 10;

          (b)  refer to such other matters as are or may be appropriate in
               relation to the operation of the practices, procedures and
               systems adopted by the Licensee;

          (c)  outline the content of any representations received by the
               Licensee in respect of the practices and procedures set out in
               the statement prepared in accordance with paragraph 8, and detail
               such steps as were taken by the Licensee in response to those
               representations; and

          (d)  specify any remedial action taken by the Licensee to ensure its
               conformity with the statement prepared in accordance with
               paragraph 8.

                                      175
<PAGE>

14.  The Licensee shall submit to the Director a copy of the report produced in
     accordance with paragraph 13, and shall give or send a copy of the report
     to any person who requests such a copy.

15.  In this Condition:

     "Competent Authority"            means the Secretary of State, the Director
                                      and any local or national agency,
                                      authority, department, inspectorate,
                                      minister, ministry, official or public or
                                      statutory person (whether autonomous or
                                      not) of, or of the government of, the
                                      United Kingdom, the United States of
                                      America or the European Community.

     "Electricity Arbitration         means the unincorporated members' club of
                                      that

     Association"                     name formed inter alia to promote the
                                      efficient and economic operation of the
                                      procedure for the resolution of disputes
                                      within the electricity supply industry by
                                      means of arbitration or otherwise in
                                      accordance with its arbitration rules.

     "relevant information"           means all information required to be
                                      treated as such under paragraph 1, but
                                      shall exclude all information that is in
                                      or enters into the public domain otherwise
                                      than as a consequence of unauthorised
                                      disclosure by the Licensee or any
                                      affiliate or related undertaking of the
                                      Licensee (or by any person to whom the
                                      same is disclosed or suffered to be
                                      disclosed by the Licensee or such
                                      affiliate or related undertaking).

                                      176
<PAGE>

Condition 10: Conditions of supply affecting customers' statutory rights
------------------------------------------------------------------------

1.   The Licensee shall not include in or send with any notice given under
     Section 16(3) of the Act, or any form provided to customers for use in
     giving notice under Section 16(2) of the Act, or any notice sent to
     customers prior to their entering into a tariff or special agreement, an
     invitation to agree to anything which, by virtue of the Act, may only be
     done or (as the case may be) not done:

     (a)  with the agreement of that customer; or

     (b)  in any case where that customer withholds his agreement or makes that
          agreement subject to terms and conditions to which the Licensee
          objects, with the approval or consent or by order of the Secretary of
          State

unless the form and terms of such invitation have first been submitted to and
     approved by the Director.

2.   Nothing in paragraph 1 shall prevent the Licensee from:

     (a)  inviting or requiring a customer to take a supply of electricity under
          a special agreement in accordance with Section 22 of the Act;

     (b)  including in any such notice any provision or condition which the
          Licensee is required or permitted to include in such notice by virtue
          of Section 16(4) of the Act; or

     (c)  including in any such notice concerning the provision of a supply to
          premises:

          (i)  not previously supplied by the Licensee; or

                                      177
<PAGE>

          (ii) where any modification is required to any electric line,
               electrical plant or electric meter through which such premises
               are supplied, or where any change is required to the location
               thereof

     an invitation to any customer to agree to any provision or condition
          concerning the installation or location of any or all of an electric
          line, electrical plant or an electric meter

in any such case without having submitted the form and terms of such agreement
     or notice to the Director.

3.   The Licensee shall include in any form provided to a customer for use in
     giving notice under Section 16(2) of the Act a prominent statement of the
     right of such customer to apply to the Director for the determination of
     any dispute arising out of the proposed terms of supply.

                                      178
<PAGE>

Condition 11: Licensee's apparatus on customers' side of meter
--------------------------------------------------------------

1.   This Condition applies where the Licensee, whether on its own behalf or as
     a provider of meter operation services to another Electricity Supplier,
     installs a second meter or other apparatus for the purpose of ascertaining
     or regulating the amount of electricity supplied, the period of supply, or
     any other quantity or time connected with the supply on the customer's side
     of the non-half-hourly metering equipment registering the quantity of the
     supply to that customer.

2.   Any second meter or other apparatus installed by the Licensee in the
     position and for a purpose described in paragraph 1 shall be such that the
     power consumed by it, when aggregated with the power consumed by any other
     meter or apparatus installed by the Licensee in the like position and for a
     like purpose in relation to the customer, does not exceed 10 watts except
     where otherwise agreed with the customer.

                                      179
<PAGE>

Condition 12: Code of practice on payment of bills and guidance for dealing with
--------------------------------------------------------------------------------
customers in difficulty
-----------------------

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

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

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

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

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

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

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

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

                                      180
<PAGE>

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

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

     (b)  to the interests of relevant customers who are of pensionable age or
          disabled or chronically sick and to the purpose of avoiding, in so far
          as is practicable, the disconnection of premises occupied by such
          customers during the winter months of each year,

     and the procedures shall be designed for the achievement of such purposes.

4.   This Condition is subject to the provisions of Condition 17A.

                                      181
<PAGE>

Condition: 12A: Code of practice on the use of prepayment meters
----------------------------------------------------------------

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

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

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

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

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

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

     (b)  arrange for the calibration of any prepayment meter provided in
          accordance with sub-paragraph 2(f) of Condition 12 so as to take into
          account, having due regard to all information available to the
          Licensee (including any information provided by other persons or
          organisations), the relevant customer's ability to pay any charges due
          from him under the

                                      182
<PAGE>

          arrangements contemplated by that Condition in addition to the other
          charges lawfully being recovered through the prepayment meter;

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

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

          (ii) generally, following changes in the price at which the Licensee
               supplies electricity to prepayment meter customers; and

     (d)  remove prepayment meters, setting out the timescale and the conditions
          under which such removal might be expected to take place.

3.   This Condition is subject to the provisions of Condition 17A.

                                      183
<PAGE>

Condition 13: Record of and report on performance
-------------------------------------------------

1.   The Licensee shall keep a record of its general operation of the
     arrangements mentioned in Conditions 12, 12A, 13A, 14, 15, 16 and 17 and if
     the Director so directs in writing, of its operation of any particular
     cases specified, or of a description specified, by him.

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

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

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

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

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

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

                                      184
<PAGE>

5.   The report shall be presented, so far as is reasonably practicable, in a
     standard form designated by the Director for the purposes of this
     Condition.

                                      185
<PAGE>

Condition 13A: Provision of services for persons who are blind or deaf
----------------------------------------------------------------------

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

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

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

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

3.   This Condition is subject to the provisions of Condition 17A.

                                      186
<PAGE>

Condition 14: Provision of services for persons who are of pensionable age or
-----------------------------------------------------------------------------
disabled or chronically sick
----------------------------

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

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

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

     (c)  give advice on the use of electricity;

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

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

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

                                      187
<PAGE>

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

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

          (ii) advance notice of planned interruptions to the supply of
               electricity;

     (b)  notify its customers at least once each year of the existence of the
          Priority Service Register and of how they may be included on it; and

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

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

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

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

3.   This Condition is subject to the provisions of Condition 17A.

                                      188
<PAGE>

Condition 14A: Code of practice on procedures with respect to site access
-------------------------------------------------------------------------

1.   The Licensee shall, no later than 1 January 1998, prepare and submit to the
     Director for his approval a code of practice setting out the principles and
     procedures the Licensee will follow in respect of any person acting on its
     behalf who requires access to customers' premises.

2.   The code of practice shall include procedures calculated to ensure that
     persons visiting customers' premises on behalf of the Licensee:

     (a)  possess the skills necessary to perform the required duties;

     (b)  are readily identifiable to members of the public;

     (c)  use passwords provided for vulnerable customers;

     (d)  are appropriate persons to visit and enter customers' premises; and

     (e)  are able to inform customers, on request, of a contact point for help
          and advice they may require in relation to the supply of electricity.

3.   This Condition is subject to the provisions of Condition 17A.

                                      189
<PAGE>

Condition 15: Standards of performance
--------------------------------------

1.   The Licensee shall conduct its Supply and Distribution Businesses in the
     manner which it reasonably considers to be best calculated to achieve any
     standards of overall performance or standards of performance in connection
     with the promotion of the efficient use of electricity by customers, as may
     be determined by the Director pursuant to Sections 40 and 41 respectively
     of the Act.

2.   The Licensee shall not enter into a use of system agreement with any
     Electricity Supplier that does not provide for the Licensee to make
     payments in respect of the performance of the Distribution Business to the
     Electricity Supplier for the benefit of any customer of that Electricity
     Supplier equivalent to such sums as would have been paid pursuant to the
     standards of performance prescribed by the Director in accordance with
     regulations made under Section 39 of the Act had that customer been a
     customer of the Licensee in those situations where the Licensee would have
     been obliged to make such a payment.

3.   In making payments in accordance with any standards of performance or in
     accordance with paragraph 2, the Licensee shall not discriminate:

     (a)  between any persons or class or classes thereof; or

     (b)  as between the Licensee and any persons or class or classes thereof.

                                      190
<PAGE>

Condition 16: Efficient use of electricity
------------------------------------------

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

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

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

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

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

                                      191
<PAGE>

          Government in connection with measures to promote the efficiency of
          energy use.

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

     (a)  review and prepare a revision of the code of practice;

     (b)  take steps to bring to the attention of customers information on the
          efficient use of electricity supplied to them; and

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

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

4.   This Condition is subject to the provisions of Condition 17A.

                                      192
<PAGE>

Condition 17: Complaint handling procedure
------------------------------------------

1.   The Licensee shall, no later than 1 January 1998, prepare and submit to the
     Director for his approval a code of practice detailing the procedure for
     handling complaints from customers about the manner in which the Licensee
     conducts its Supply and Distribution Businesses.

2.   Any procedure established in accordance with this Condition shall specify
     the periods within which it is intended that different descriptions of
     complaint should be processed and resolved.

3.   This Condition is subject to the provisions of Condition 17A.

                                      193
<PAGE>

Condition 17A: Preparation, review of and compliance with customer service codes
--------------------------------------------------------------------------------

1.   This Condition applies to any code of practice required to be prepared by
     the Licensee pursuant to Conditions 12, 12A, 13A, 14, 14A, 16 and 17 of
     this Licence.

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

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

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

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

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

                                      194
<PAGE>

7.   The Licensee shall:

         (a)  as soon as practicable following the preparation of any code or
              any revision made to it send to the Director and the Relevant
              Consumers' Committee' a copy of such code or such revision (in
              each case in the form approved by the Director);

         (b)  at least once in each year, draw the attention of those of its
              customers to whom such code applies to the existence of the code
              and of each substantive revision of it and to the means by which
              they may inspect a copy of such code in its latest form; and

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

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

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

                                      195
<PAGE>

Condition 17B: Information given to Designated Customers
--------------------------------------------------------

1.   The Licensee shall keep each of its Designated Customers (save insofar as
     he receives an unmetered supply) informed of the amount of electricity
     which, since he was last informed, its records show as having been consumed
     by that customer:

     (a)  according to the meter through which he is supplied; or

     (b)  where no meter reading is available, according to the estimate of the
          Licensee.

2.   The Licensee shall keep each of its Designated Customers informed:

     (a)  that the Relevant Consumers' Committee or the Director can assist in
          resolving complaints which the Licensee has not resolved to the
          customer's satisfaction; and

     (b)  of how the appropriate office of the Committee or the Director can be
          contacted.

3.   The Licensee may discharge its duties under paragraphs 1 and 2 by providing
     the relevant information on or with each bill or statement given to a
     customer in respect of charges for the supply of electricity, and annually
     to each customer to whom no such bills or statements are rendered.

                                      196
<PAGE>

Condition 17C: Publication of information to customers
------------------------------------------------------

1.   Subject to paragraph 5, the Licensee shall by 31 December 1997 inform each
     customer of a number or numbers ("the Supply Number(s)") relevant to the
     registration, under the Master Registration Agreement, of a supplier of
     electricity to the premises owned or occupied by such customer.

2.   The Licensee shall, at the same time as it informs a customer of the
     relevant Supply Number in accordance with paragraph 1, send to that
     customer a statement in writing which provides a clear and sufficient
     explanation of the nature and function of the Supply Number, such statement
     having received the prior approval of the Director.

3.   The Supply Number shall consist of a number of data items, each of which
     shall be represented by a numerical identifier which shall:

     (a)  have the number of digits specified in a direction issued by the
          Director;

     (b)  be approved by the Director; and

     (c)  be used by the Licensee in common with all Electricity Suppliers.

4.   Subject to paragraph 5, the Licensee shall inform each of its customers of
     the Supply Number relevant to such customer:

     (a)  in a form in accordance with the terms of a direction issued by the
          Director, on each bill or statement given to the customer in relation
          to the supply of electricity; and

     (b)  annually where the customer does not receive such a bill or statement.

                                      197
<PAGE>

5.   The Director may issue a direction relieving the Licensee of its obligation
     under paragraphs 1 and 4 to such extent and subject to such terms and
     conditions as he may specify in that direction.

                                      198
<PAGE>

Condition 18: Relations with the Relevant Consumers' Committee
--------------------------------------------------------------

1.   The Licensee shall meet with the Relevant Consumers' Committee whenever
     requested to do so by that committee, up to a maximum of 6 times in every
     year during the period of the Public Electricity Supply Licence.

2.   Without prejudice to paragraph 1, the Licensee shall meet the Relevant
     Consumers' Committee at least once in every year during the period of the
     Public Electricity Supply Licence.

3.   In at least one meeting with the Relevant Consumers' Committee in every
     year during the period of the Public Electricity Supply Licence, the
     Licensee shall be represented by one or more directors of the Licensee.

                                      199
<PAGE>

Condition 19: Provision of information to the Director and provision of comments
--------------------------------------------------------------------------------
to the Director on information and advice
-----------------------------------------

1.   The Licensee shall, if so requested by the Director, give reasoned comments
     on the accuracy and text of any information and advice, so far as relating
     to the Supply/Distribution Business, which the Director proposes to publish
     pursuant to Section 48 of the Act.

2.   "[No longer used]".

3.   The Licensee may not be required by the Director to furnish him under this
     Condition with information for the purpose of the exercise of his functions
     under Section 48 of the Act.

4.   The Licensee may not be required by the Director to furnish him under this
     Condition with any information in relation to an enforcement matter which
     the Licensee could not be compelled to produce or give under Section 28(3)
     of the Act.

5.   The power of the Director to call for information under paragraph 2 is in
     addition to the power of the Director to call for information under or
     pursuant to any other Condition.

6.   In paragraphs 2 to 5, "information" shall include any documents, accounts,
     estimates, returns or reports (whether or not prepared specifically at the
     request of the Director) of any description specified by the Director.

7.   For the purpose of this Condition:

     "excluded premises"                     means premises within the
                                             Licensee's authorised supply area
                                             which were at the relevant time
                                             occupied by any person holding a

                                    200
<PAGE>

                                             licence granted under Section 6 of
                                             the Act (or any predecessor of such
                                             persons) for the purpose of
                                             carrying on its licensed activities
                                             (or, in the case of any
                                             predecessor, activities comparable
                                             to its licensed activities).

                                      201
<PAGE>

Condition 20: Disposal of relevant assets
-----------------------------------------

1.   The Licensee shall not dispose of or relinquish operational control over
     any relevant asset otherwise than in accordance with the following
     paragraphs of this Condition.

2.   Save as provided in paragraph 3, the Licensee shall give to the Director
     not less than 2 months' prior written notice of its intention to dispose of
     or relinquish operational control over any relevant asset, together with
     such further information as the Director may request relating to such asset
     or the circumstances of such intended disposal or relinquishment of control
     or to the intentions in regard thereto of the person proposing to acquire
     such asset or operational control over such asset.

3.   Notwithstanding paragraphs 1 and 2, the Licensee may dispose of or
     relinquish operational control over any relevant asset:

     (a)  where:

          (i)  the Director has issued directions for the purposes of this
               Condition containing a general consent (whether or not subject to
               conditions) to:

               (aa) transactions of a specified description; and/or

               (bb) the disposal of or relinquishment of operational control
                    over relevant assets of a specified description; and

          (ii) the disposal or relinquishment of operational control in question
               is effected pursuant to a transaction of a description specified
               in the directions or the relevant assets in question is of a
               description so specified and the disposal or relinquishment of
               operational control

                                      202
<PAGE>

               is in accordance with any conditions to which the consent is
               subject; or

     (b)  where the disposal or relinquishment of operational control in
          question is required by or under any enactment or subordinate
          legislation or by or under a transfer scheme.

4.   Notwithstanding paragraph 1, the Licensee may dispose of or relinquish
     operational control over any relevant asset specified in any notice given
     under paragraph 2 in circumstances where:

     (a)  the Director confirms in writing that he consents to such disposal or
          relinquishment (which consent may be made subject to the acceptance by
          the Licensee or any third party in favour of whom the relevant asset
          is proposed to be disposed or operational control is proposed to be
          relinquished of such conditions as the Director may specify); or

     (b)  the Director does not inform the Licensee in writing of any objection
          to such disposal or relinquishment of operational control within the
          notice period referred to in paragraph 2.

5.   In this Condition:

     "disposal"                       includes any sale, gift, lease, licence,
                                      the grant of any right of possession,
                                      loan, security, mortgage, charge or the
                                      grant of any other encumbrance or the
                                      permitting of any encumbrance to subsist
                                      or any other disposition to a third party
                                      and "dispose" shall be construed
                                      accordingly.

     "relevant asset"                 means any asset for the time being forming
                                      part of the Licensee's Distribution

                                      203
<PAGE>

                                      System, any control centre for use in
                                      conjunction therewith and any right, title
                                      or interest in land upon which any of the
                                      foregoing is situate.

                                      204
<PAGE>

Condition 21: Compliance with Grid Codes
----------------------------------------

1.   The Licensee shall comply with the provisions of the Grid Code and the Grid
     Code of each other Transmission Licensee insofar as applicable to the
     businesses of the Licensee referred to in the definitions of "Supply
     Business", "Wholesaling Business" and "Distribution Business" in paragraph
     3 of Condition 2 of Part II.

2.   The Director may (following consultation with the Licensee and such other
     Transmission Licensees as the Director shall consider appropriate) issue
     directions relieving the Licensee of its obligations under paragraph 1 in
     respect of such parts of the Grid Code or the Grid Code of any other
     Transmission Licensee and, in each case, to such extent as may be specified
     in those directions.

                                      205
<PAGE>

Condition 22: Compliance with Trading Code
------------------------------------------

1.   The Licensee shall comply with the provisions of the Trading Code insofar
     as applicable to the businesses of the Licensee referred to in the
     definitions of "Supply Business", "Wholesaling Business" and "Distribution
     Business" in paragraph 3 of Condition 2 of Part II including any
     requirements thereunder for the Director's approval or consent, for
     compliance with directions issued by the Director or relating to
     determinations made by the Director.

2.   The Director may (following consultation with such members of the trading
     system established by the Trading Code as the Director shall consider
     appropriate) issue directions relieving the Licensee of its obligations
     under paragraph 1 in respect of such parts of the Trading Code and to such
     extent as may be specified in those directions.

                                      206
<PAGE>

Condition 23: Arrangements relating to supplies to premises within the
----------------------------------------------------------------------
     Licensee's
     ----------

authorised supply area by persons other than the Licensee
---------------------------------------------------------

1.   The Licensee shall, as soon as practicable after the Public Electricity
     Supply Licence has come into force and, in any event, not later than such
     date as the Director shall specify, establish relevant second tier supply
     arrangements.

2.   The Licensee shall implement and comply with the relevant second tier
     supply arrangements established in accordance with paragraph 1.

3.   The Licensee shall, in consultation with relevant second tier suppliers,
     periodically review (including upon the request of the Director) the
     relevant second tier supply arrangements established in accordance with
     paragraph 1. Following any such review, the Licensee shall send to the
     Director:

     (a)  a report on the outcome of such review;

     (b)  any proposed revisions to the relevant second tier supply arrangements
          established in accordance with paragraph 1 as the Licensee (having
          regarding to the outcome of such review) reasonably thinks fit for the
          achievement of the objective referred to in sub-paragraph (a) of
          paragraph 10; and

     (c)  any written representations or objections from relevant second tier
          suppliers (including any proposals by such suppliers for revisions to
          the relevant second tier supply arrangements established in accordance
          with paragraph 1 not accepted by the Licensee in the course of the
          review) arising during the consultation process and subsequently
          maintained.

                                      207
<PAGE>

4.   Revisions to the relevant second tier supply arrangements established in
     accordance with paragraph 1 proposed by the Licensee and sent to the
     Director pursuant to paragraph 3 shall require to be approved by the
     Director.

5.   Having regard to any written representations or objections referred to in
     sub-paragraph (c) of paragraph 3, and following such further consultation
     (if any) as the Director may consider appropriate, the Director may issue
     directions requiring the Licensee to revise the relevant second tier supply
     arrangements established in accordance with paragraph 1 in such manner as
     may be specified in the directions, and the Licensee shall forthwith comply
     with any such directions.

6.   The Licensee shall give or send a copy of the relevant second tier supply
     arrangements established in accordance with paragraph 1 to the Director.

7.   The Licensee shall (subject to paragraph 8) give or send a copy of the
     relevant second tier supply arrangements established in accordance with
     paragraph 1 to any person requesting the same.

8.   The Licensee may make a charge for any copy given or sent pursuant to
     paragraph 7 of an amount which will not exceed any amount specified for the
     time being for the purposes of this Condition in directions issued by the
     Director.

9.   In establishing, implementing and complying with the relevant second tier
     supply arrangements established in accordance with paragraph 1, the
     Licensee shall not unduly discriminate against or unduly prefer any one or
     any group of persons in favour of or as against any one other or any other
     group of persons.

10.  In this Condition:

     relevant second tier supply arrangements"    means arrangements which the
                                                  Director shall agree to be the
                                                  most appropriate for

                                      208
<PAGE>

                                               securing the objective of
                                               eliminating barriers to the
                                               economic and efficient supply of
                                               electricity by relevant second
                                               tier suppliers to relevant
                                               premises caused by relevant
                                               constraints (and, where the
                                               context admits, it means such
                                               arrangements as from time to time
                                               revised).

"relevant second tier supplier"                means a person authorised to
                                               supply electricity to relevant
                                               premises by a licence granted
                                               under Section 6(2)(a) of the Act.

"relevant premises"                            means premises situated within
                                               the Licensee's authorised supply
                                               area.

"relevant constraints"                         means constraints arising from
                                               the costs of implementing
                                               technical arrangements for
                                               ensuring that the amount of
                                               electricity which is delivered by
                                               or for a relevant second tier
                                               supplier into a system at any
                                               given time for the purpose of
                                               giving a supply to any relevant
                                               premises matches the level of
                                               demand of these relevant premises
                                               at that time.

"system"                                       means the Transmission System of
                                               the Licensee or any other
                                               Transmission Licensee or the
                                               Distribution System of the
                                               Licensee or any other public
                                               electricity supplier or the
                                               system for the distribution of
                                               electricity of any person
                                               authorised to

                                      209
<PAGE>

                              supply electricity.

                                      210
<PAGE>

Condition 24: The Settlement Agreement for Scotland
---------------------------------------------------

1.   The Licensee shall use its best endeavours, in conjunction and co-operation
     with the other Scottish Public Electricity Supplier:

     (a)  to establish, or to procure the establishment by a third party of, a
          system (the "settlement system") which shall - to the extent required
          to facilitate the proper functioning of arrangements established in
          accordance with Condition 23, or as otherwise agreed by the Licensee
          and the other Scottish Public Electricity Supplier - fulfil the
          objects set out at paragraph 2;

     (b)  subsequently to operate and maintain, or to procure the subsequent
          operation and maintenance by a third party of, the settlement system;

     (c)  to prepare (or procure the preparation of) a form of agreement, to be
          known as the Settlement Agreement for Scotland, which shall contain
          terms on which the settlement system will be made available and shall
          comply with the other requirements of this Condition; and

     (d)  to offer (or procure that a third party offers) to make available the
          settlement system, pursuant to and in accordance with the Settlement
          Agreement for Scotland, to any person applying for the use of such
          system who is a private electricity supplier or Portfolio Generator or
          is otherwise an appropriate user of the system in accordance with the
          objects set out at paragraph 2.

2.   The objects set out at this paragraph are:

     (a)  to enable private electricity suppliers to have their volumetric
          purchases of electricity from Portfolio Generators and from parties to
          the Pooling and Settlement Agreement correctly allocated to them;

                                      211
<PAGE>

     (b)  to enable private electricity suppliers and Portfolio Generators,
          other than the Licensee and the other Scottish Public Electricity
          Supplier, to have their volumetric residual electricity requirements
          and provisions correctly allocated to them;

     (c)  to enable public and private electricity suppliers to have their
          volumetric supplies of electricity to customers correctly allocated to
          them;

     (d)  to facilitate the calculation of accurate information regarding the
          aggregate amount of electricity provided to each Scottish Public
          Electricity Supplier by itself in its capacity as a Portfolio
          Generator; and

     (e)  to provide for such other matters ancillary to those specified in sub-
          paragraphs (a) to (d) as are or may be appropriate to facilitate
          competition in electricity supply in Scotland.

3.   The Settlement Agreement for Scotland shall provide - to the extent
     required to facilitate the proper functioning of arrangements established
     in accordance with Condition 23, or as otherwise agreed by the Licensee and
     the other Scottish Public Electricity Supplier - for the fulfilment of the
     objects set out at paragraph 2, and shall also comprise provisions (which
     shall require to be approved in advance by the Director):

     (a)  which relate to the level and method of recovery of charges payable by
          parties to the Settlement Agreement for Scotland in respect of the
          establishment, operation and maintenance of the settlement system,
          such charges to be set so as to reflect the Director's estimate of the
          reasonable costs of efficiently establishing, operating and
          maintaining such a system;

                                      212
<PAGE>

     (b)  which provide for the variation of the Settlement Agreement for
          Scotland following consultation with the parties, or representatives
          of the parties, to that agreement; and

     (c)  by virtue of which the whole or (following consultation with
          representatives of all of the parties to the agreement) specified
          parts of the Settlement Agreement for Scotland shall not be capable of
          variation without the prior approval of the Director.

4.   The Licensee shall be a party to and shall comply with the provisions of
     the Settlement Agreement for Scotland.

                                      213
<PAGE>

Condition 25: Designated Premises
---------------------------------

1.   For the purposes of this Licence, the question whether any premises are
     "Designated Premises" shall be determined in accordance with the provisions
     of this Condition.

2.   Premises are Designated Premises if they are either:

     (a)  Domestic Premises; or

     (b)  premises at which, in the reasonable expectation of the Licensee at
          the time of entering into a contract for the supply of electricity to
          such premises, the normal annual consumption of electricity will
          amount to no more than 12,000 kWh,

but excluding premises referred to at sub-paragraph (b) which receive an
     unmetered supply, or which are supplied through half-hourly or maximum
     demand metering equipment or under the terms of a multi-site contract.

3.   For the purposes of this Condition, a "multi-site contract" is a contract
     for the supply of electricity both to any premises which do not fall within
     the terms of sub-paragraphs 2(a) or (b) and to one or more other premises
     (not being Domestic Premises), all of which premises are owned or occupied
     by:

     (a)  the same person or body of persons whether corporate or unincorporate;
          or

     (b)  an undertaking (the "principal undertaking") and any holding company,
          subsidiary, or subsidiary of the holding company of that principal
          undertaking, or any other undertaking in which the principal
          undertaking has a participating interest.

                                      214
<PAGE>

4.   Any premises supplied by the Licensee which (in accordance with paragraphs
     1 to 3) were not Designated Premises at the time at which the Licensee
     entered into a contract for their supply shall, notwithstanding subsequent
     changes to the nature or level of the consumption of electricity at those
     premises, not become Designated Premises for the purposes of this Licence
     prior to the time at which they cease to be supplied by the Licensee.

5.   Any premises supplied by the Licensee which (in accordance with paragraphs
     1 to 3) were Designated Premises at the time at which the Licensee entered
     into a contract for their supply shall cease to be Designated Premises for
     the purposes of this Licence where:

     (a)  they have been continuously supplied by the Licensee for a period of
          at least 12 months and:

          (i)  they are not, or are no longer, Domestic Premises; and

          (ii) it is reasonably to be expected that the normal annual
               consumption of electricity at the premises will amount to more
               than 12,000 kWh; or

     (b)  (not being, or being no longer, Domestic Premises) the premises
          commence receipt of an unmetered supply or a supply through half-
          hourly or maximum demand metering equipment or under the terms of a
          multi-site contract.

6.   In this Condition:

     "maximum demand metering equipment"     means metering equipment which is
                                             capable of recording the demand for
                                             electricity supplied to premises
                                             during the half hour of maximum
                                             demand in any period of supply.

                                      215
<PAGE>

Condition 26: Terms for supply of electricity incompatible with Licence
-----------------------------------------------------------------------
Conditions
----------

1.   Without prejudice to its rights and obligations under the Act, the Licensee
     shall not enter into, offer to enter into or enter into a variation of any
     contract for the supply of electricity to a customer at Designated Premises
     otherwise than on terms which comply with the Licensee's obligations under
     this Licence.

2.   The Licensee shall not enforce or take advantage of any term of a contract
     for the supply of electricity to a customer at Designated Premises if the
     inclusion of that term was in breach of the provisions of this Licence.

3.   The Licensee shall not take advantage of the omission of any term from a
     contract for the supply of electricity to a customer at Designated Premises
     if the omission of that term was in breach of the provisions of this
     Licence.

                                      216
<PAGE>

Condition 27: Limitation on requirements for termination fees
-------------------------------------------------------------

1.   Where the Licensee enters into any Designated Supply Contract in the
     circumstances set out at paragraph 2 it may not in such contract provide
     for the payment of any termination fee by the Designated Customer.

2.   Paragraph 1 applies in respect of any Designated Supply Contract entered
     into prior to the date which is 90 days following the earliest date
     specified (and not subsequently withdrawn or varied to a later date) in any
     direction or variation of a direction issued by the Director, pursuant to
     condition 3 of the licence held by any Second Tier Supplier, in relation to
     the supply of electricity to all premises within the authorised area.

                                      217
<PAGE>

Condition 28: Revision of the Contract Terms Conditions
-------------------------------------------------------

1.   The Director, in accordance with the provisions of this Condition, may from
     time to time review (in whole or in part) the provisions and operation of
     the Contract Terms Conditions in the licences of all Electricity Suppliers
     with a view to establishing whether any revision should be made to the
     Contract Terms Conditions in all such licences.

2.   At the commencement of any review by the Director, the Director shall:

     (a)  give to all Relevant Parties a notice in writing which sets out the
          terms of the review and of any proposals in connection therewith and
          which invites the submission of any representations by a specified
          date (being not less than 28 days after the date of the notice); and

     (b)  publish such notice or an accurate summary of it in a manner which
          will, in the opinion of the Director, secure adequate publicity for
          it.

3.   On receiving from the Director notice of such a review the Licensee may
     submit any representations on matters within the terms of the review by the
     date specified in the notice.

4.   As soon as practicable following the completion of any such review, the
     Director shall send to each Relevant Party, and to any person who has made
     representations to him by virtue of the notice published under sub-
     paragraph 2(b), a copy of:

     (a)  a report on the outcome of such review;

     (b)  any revisions which he proposes to make, having regard to any
          representations received during such review, to the Contract Terms
          Conditions in the licences of all Electricity Suppliers;

                                      219
<PAGE>

     (c)  a statement of his reasons for proposing those revisions; and

     (d)  a notice specifying the time (being not less than 28 days from the
          date the Director issues the notice) within which Electricity
          Suppliers which are entitled to supply electricity to Designated
          Premises shall state whether or not they consent to the proposed
          revisions to the Contract Terms Conditions in their licences.

5.   A revision proposed to be made by the Director to the Contract Terms
     Conditions of all Electricity Suppliers may be made only where the Director
     is satisfied that the figures determined in accordance with paragraphs 6
     and 7 (expressed as a percentage) are each not less than 90 per cent.

6.   The figure determined in accordance with this paragraph shall be calculated
     under the following formula:

                         C   x 100
                       -----
                        C+N

where:

     C =  the number of Designated Premises supplied on contract by consenting
          Electricity Suppliers; and

     N =  the number of Designated Premises supplied on contract by non-
          consenting Electricity Suppliers

as estimated (in each case) by the Director on the basis of the information most
     recently available to him.

7.   The figure determined in accordance with this paragraph shall be calculated
     under the following formula:

                                      219
<PAGE>

                                C  x 100
                              -----
                               C+N

where:

     C =  the number of consenting Electricity Suppliers; and

     N =  the number of non-consenting Electricity Suppliers.

8.   In paragraphs 6 and 7 the expressions "consenting" and "non-consenting"
     refer (as the case may be) to the consent or otherwise of Electricity
     Suppliers which are entitled to supply electricity to Designated Premises
     to the proposed revision to the Contract Terms Conditions in their
     licences.

9.   Where the Director is satisfied that the figures determined in accordance
     with paragraphs 6 and 7 (expressed as a percentage) are each not less than
     90 per cent the Director may amend the Contract Terms Conditions of the
     Licensee in accordance with the proposed revision.

10.  No revision made to the Contract Terms Conditions by virtue of this
     Condition may introduce an obligation in respect of any matter other than
     one which:

     (a)  is provided for, or is reasonably ancillary to a matter provided for,
          under the Contract Terms Conditions on the date on which such
          Conditions come into force;

     (b)  concerns the terms of contracts offered or entered into by the
          Licensee for the supply of electricity to Designated Premises; or

     (c)  concerns any dealings with customers by or on behalf of the Licensee
          prior to and for the purpose of offering or entering into contracts
          for the supply of electricity to Designated Premises.

                                      220
<PAGE>

11.  In this Condition:

     "Relevant Parties"                     means the Licensee, all other
                                            Electricity Suppliers, the
                                            Electricity Consumers' Committees
                                            and such other persons or bodies as
                                            in the opinion of the Director are
                                            representative of those likely to be
                                            affected by a revision to the
                                            Contract Terms Conditions.

                                      221
<PAGE>

                   SECTION B. THE CONTRACT TERMS CONDITIONS
                   ----------------------------------------

Condition 29: Designated Supply Contracts
-----------------------------------------

1.   A Designated Supply Contract is a contract for the supply of electricity to
     Designated Premises, as varied from time to time, which complies with the
     provisions of this Condition.

2.   Without prejudice to its rights and obligations under the Act, the Licensee
     shall not supply electricity to Designated Premises on contract except
     under a Designated Supply Contract.

3.   A Designated Supply Contract shall:

     (a)  be in a standard form, save that there may (subject to paragraph 4) be
          different forms for different areas, cases and circumstances;

     (b)  set out all the terms and conditions, including terms as to price, on
          which the Licensee will supply electricity in the relevant case; and

     (c)  contain terms reflecting the termination provisions of Conditions 33
          and 34.

4.   Where the Secretary of State has specified an area of Scotland by an order
     made pursuant to section 3(2)(a) of the Act, a Designated Supply Contract
     for the supply of electricity to premises within that area shall be on
     terms as to price which are the same as those for an equivalent supply to
     any other premises within that area.

5.   Any Designated Supply Contract for both the supply of electricity and the
     provision of goods or services shall identify separately the charge for
     that supply from the charge for the goods or services.

                                      222
<PAGE>

6.   Where a Designated Supply Contract may be terminated by a customer by
     virtue of any provision included in that contract in compliance with
     Conditions 33 and 34, the Licensee may at its discretion accept a lesser
     period of notice than is specified in that provision.

7.   Nothing in this Licence shall prevent the Licensee from entering into a
     Designated Supply Contract which contains provisions for its termination
     that are additional to and do not derogate from those set out at Conditions
     33 and 34.

                                      223
<PAGE>

Condition 30: Contractual terms
-------------------------------

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

     (a)  by prepayment through a prepayment meter;

     (b)  by different methods, including:

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

          (ii)  by cheque, and

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

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

          (ii)  paying monthly a predetermined sum; and

          (iii) paying quarterly in arrears.

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

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

                                      224
<PAGE>

4.   The Licensee shall send copies of each of the forms of Designated Supply
     Contract (as revised from time to time) under which it supplies or offers
     to supply electricity:

     (a)  on receipt of a request, to any person; and

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

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

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

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

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

                                      225
<PAGE>

Condition 31: Notification of terms
-----------------------------------

1.   Before entering into any Designated Supply Contract the Licensee shall take
     all reasonable steps to draw the attention of the customer to the Principal
     Terms of the contract.

2.   Where the Licensee has entered into a Designated Supply Contract it shall
     (except where it has already done so) provide the customer within 2 working
     days of the date of the contract with a copy of its full terms and
     conditions.

3.   Subject to paragraph 4 the Licensee shall, at least 30 days before any
     Designated Supply Contract to supply electricity for a specified period is
     due to expire, send to the customer:

     (a)  a written offer to enter into a new contract for supply from the date
          of expiry of the existing contract, drawing the attention of the
          customer to the Principal Terms relevant to that offer;

     (b)  an accurate summary of the Principal Terms of other contracts which
          the Licensee will make available to the customer; and

     (c)  details of how the customer can obtain continuity of supply from the
          Licensee.

4.   Paragraph 3 shall not apply where:

     (a)  the customer has informed the Licensee that he does not wish to
          continue to be supplied by it after the expiry of the existing
          contract; or

     (b)  it is not reasonable in all the circumstances for the Licensee to be
          required to continue to supply that customer and the Licensee has (at
          least 30 days before the contract was due to expire) both notified the

                                      226
<PAGE>

          customer to that effect and informed him that he must make
          arrangements to obtain a supply from another Electricity Supplier.

5.   Where a Designated Supply Contract allows for its unilateral variation (in
     any respect) by the Licensee and is so varied to the significant
     disadvantage of the customer, the Licensee shall within 10 days of the
     variation give to the customer written notice:

     (a)  of the variation;

     (b)  of the customer's right to terminate the contract; and

     (c)  of the effect of paragraph 6.

6.   Where a customer gives to the Licensee a valid notice of termination within
     14 days of receiving notice under paragraph 5, the Licensee shall treat the
     variation as ineffective and shall neither enforce nor take advantage of
     it.

7.   Where the Licensee believes that any of its customers no longer occupies or
     is about to vacate Designated Premises to which it supplies electricity, it
     shall as soon as reasonably practicable provide any new occupier of those
     premises with an accurate summary of the Principal Terms of contracts it
     will make available to him.

                                      227
<PAGE>

Condition 32: Security deposits
-------------------------------

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

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

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

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

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

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

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

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

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

                                      228
<PAGE>

6.   Sub-paragraph 5(a) shall not apply where it is reasonable in all the
     circumstances for the Licensee to retain the deposit.

7.   Any dispute arising under this Condition between the Licensee and a
     Designated Customer may be referred by either party to the Director. The
     Director shall determine any such dispute, following such practice and
     procedure as he considers appropriate.

                                      229
<PAGE>

Condition 33: Termination of contracts on notice
------------------------------------------------

1.   Each Designated Supply Contract shall contain a term allowing the customer
     to terminate such contract at any time by:

     (a)  giving to the Licensee a valid notice of termination; and

     (b)  subject to paragraph 6, paying to the Licensee on demand a termination
          fee.

2.   A notice of termination is valid where it is given at least 28 days in
     advance of the date on which it is to take effect and where, not later than
     that date, the requirements of paragraphs 3 and (unless the Licensee
     expressly agrees to waive it) 4 are satisfied.

3.   The requirement of this paragraph is that either:

     (a)  another Electricity Supplier commences a supply of electricity to the
          relevant premises; or

     (b)  the relevant premises are cut off because the customer at those
          premises has ceased to require a supply.

4.   The requirement of this paragraph is that no charges for electricity
     supplied to the customer (whether at the relevant premises or at any
     premises previously occupied by him), having been demanded in writing prior
     to the notice of termination being given, remain owing to the Licensee more
     than 28 days after that demand was made.

5.   Each Designated Supply Contract shall provide that a notice of termination
     which is not valid shall not be effective to terminate such contract.

6.   A termination fee shall not be demanded of a customer where:

                                      230
<PAGE>

     (a)  the contract was terminated under any provision of Condition 34;

     (b)  the contract was a contract of indefinite length, and was terminated
          other than during a fixed term period;

     (c)  the Licensee notified the customer, under paragraph 5 of Condition 31,
          of a unilateral variation of the contract and the customer gave notice
          of termination in accordance with paragraph 6 of that Condition; or

     (d)  the contract was a contract to which paragraph 4 of Condition 34
          applied and the Licensee did not, before entering into it, take all
          reasonable steps to draw the attention of the customer to the effect
          of the term set out at that paragraph.

7.   Where a termination fee is payable, it shall be of an amount not greater
     than that which the Licensee may in all the circumstances reasonably
     require.

                                      231

<PAGE>

Condition 34: Termination of contracts in specified circumstances
-----------------------------------------------------------------

1.   Each Designated Supply Contract shall provide that the contract will
     terminate:

     (a)  on the date on which the customer ceases to own or occupy the relevant
          premises, having given the Licensee at least 2 working days' notice of
          that date; or

     (b)  where the customer has ceased to own or occupy the premises without
          giving the Licensee at least 2 working days' notice, on the first in
          time of:

          (i)  the second working day after he has given notice to the Licensee;

          (ii) the next day on which the meter is due to be read; and

          (iii) the date on which any subsequent owner or occupier enters into a
                contract or tariff agreement for the supply of electricity to
                the premises.

2.   Each Designated Supply Contract shall provide that where it is terminated
     by virtue of a term included in the contract in compliance with paragraph
     1, the customer shall remain liable for any charges for the supply of
     electricity until the date of termination.

3.   Each Designated Supply Contract shall provide that it may be terminated
     immediately by either party at any time after the Director or the Secretary
     of State has revoked this Licence.

4.   Any Designated Supply Contract which:

                                      232
<PAGE>

     (a)  provides for the Licensee to supply electricity for a specified period
          of more than 12 months; or

     (b)  contains an initial fixed term period,

     shall provide that it may be terminated immediately by the customer at any
     time within 5 working days of the date of the contract.

5.   Where a Designated Supply Contract is for both the supply of electricity
     and the provision of goods or services:

     (a)  any reference in the Contract Terms Conditions to its termination is a
          reference to its termination in respect of the supply of electricity
          alone; and

     (b)  on its termination by virtue of any provision of the Contract Terms
          Conditions, the Licensee may require the customer to give any
          reasonable security for his future compliance with the contract for
          the provision of goods or services.

                                      233
<PAGE>

Condition 35: Assignment of outstanding charges
-----------------------------------------------

1.   This Condition shall apply where:

     (a)  the Licensee has commenced the supply of electricity to Domestic
          Premises at which a supply was previously given to its customer by the
          Previous Supplier;

     (b)  the customer has failed to pay, within 28 days of receiving a demand
          in writing, any charges due from him to the Previous Supplier for the
          supply of electricity at those premises;

     (c)  that failure occurred after either the Previous Supplier was informed
          of the change of supplier or the Licensee commenced supply to the
          premises (whichever is the earlier);

     (d)  the Previous Supplier has given written notice to the customer that it
          proposes to assign the debt to the Licensee, which may be entitled to
          reclaim from him its costs in recovering the debt; and

     (e)  the Licensee has received from the Previous Supplier a notice in
          accordance with paragraph 2.

2.   A notice in accordance with this paragraph is one which:

     (a)  is given at least 14 days after the notice referred to at sub-
          paragraph 1(d) and is received by the Licensee within 90 days of it
          commencing a supply to the premises;

     (b)  specifies the amount of the debt which remains unpaid;

                                      234
<PAGE>

     (c)  states that the Previous Supplier has used all reasonable endeavours
          to recover the debt, which remains unpaid at least 42 days after being
          demanded in writing; and

     (d)  states that the Previous Supplier intends to assign to the Licensee
          the debt, up to a maximum sum of one-third of the value (calculated in
          accordance with the charges of the Previous Supplier to the customer
          immediately before it ceased to supply him) of the average annual
          consumption reasonably expected of the customer.

3.   Where this Condition applies the Licensee shall, within 60 days of
     receiving a notice under paragraph 2 and in consideration of the assignment
     of the debt, pay to the Previous Supplier the sum specified under sub-
     paragraph 2(d) (less, where they cannot be reclaimed from the customer, its
     reasonable costs of recovering that debt).

4.   For the purposes of this Condition, a customer shall not be regarded as
     being in debt to the Previous Supplier to the extent to which that debt is
     genuinely in dispute.

5.   In this Condition:

     "Previous Supplier"                means, in relation to any premises, the
                                        Electricity Supplier which supplied
                                        electricity to those premises
                                        immediately prior to the commencement of
                                        supply by the Licensee.

                                      235
<PAGE>

Condition 36: Modification of provisions under Conditions 33 and 35
-------------------------------------------------------------------

1.   In this Condition, the "relevant provisions" are the provisions of
     paragraph 4 of Condition 33 and Condition 35 of Part V (or any of them).

2.   Where the Director considers (having regard to any representations made to
     him) that in any specified class of cases the relevant provisions do not
     fulfil the requirements of paragraph 4, he may direct that they shall cease
     to have effect in that class of cases.

3.   Where a direction under paragraph 2 has been made and the Director
     considers (having regard to any representations made to him) that in the
     specified class of cases the relevant provisions would fulfil the
     requirements of paragraph 4, he may direct that they shall again have
     effect in those cases.

4.   The requirements of this paragraph are that, in the specified class of
     cases, the operation of the relevant provisions:

     (a)  significantly reduces the number of unrecovered debts otherwise to be
          expected; or

     (b)  involves expenditure in debt recovery which is less than the reduction
          in the value of unrecovered debts which it achieves.

5.   Any direction under paragraphs 2 or 3 shall be made by a notice given to
     the Relevant Parties which shall specify:

     (a)  the relevant provisions to which it applies;

     (b)  the class of cases to which it applies; and

     (c)  the date on which it shall have effect (being, in a direction under
          paragraph 3, at least 3 months after the notice is given).

                                      236
<PAGE>

6.   In this Condition:

     "Relevant Parties"                  means the Licensee, all other
                                         Electricity Suppliers, the Electricity
                                         Consumers' Committees and such other
                                         persons or bodies as in the opinion of
                                         the Director are representative of
                                         those likely to be affected by a
                                         revision to the relevant provisions.

                                      237
<PAGE>

Condition 37: Marketing of electricity to Designated Customers
--------------------------------------------------------------

1.   This Condition applies to the marketing activities of the Licensee in
     respect of the supply or the proposed supply of electricity to the
     Designated Premises.

2.   This Condition shall cease to have effect on a date (the "termination
     date") which shall be 31 March 2000, provided that:

     (a)  if the Director, after consultation with the Licensee, all other
          Electricity Suppliers, the electricity consumers' committees and such
          other persons or bodies as in the opinion of the Director are
          representative of those likely to be affected, gives notice for the
          purposes of this Condition generally:

          (i)  by publishing the notice in such a manner as the Director
               considers appropriate for the purpose of bringing it to the
               attention of persons likely to be affected by it; and

          (ii) by sending a copy of the notice to all Electricity Suppliers and
               electricity consumers' committees,

     that he considers that the development of competition in electricity supply
          is such as to require the continuation of any part of this Condition
          until such date - not later than two years from the termination date -
          as may be specified in the notice (the "new termination date"), then
          such part of this Condition as may be specified in the notice shall
          continue to apply as if for the termination date there were
          substituted the new termination date; and

     (b)  notice under sub-paragraph (a) may be given on more than one occasion.

                                      238
<PAGE>

3.   The Licensee shall:

     (a)  set up appropriate procedures for the selection of staff employed or
          engaged in roles the principal duties of which involve oral
          communication with Designated Customers for the purposes of the
          marketing activities of the Licensee;

     (b)  take all reasonable steps to ensure that each such person is trained
          so as to have a sufficient understanding of:

          (i)  the arrangements for competition in electricity supply in
               Scotland; and

          (ii) the Principal Terms of Designated Supply Contracts made available
               by the Licensee;

     such that any relevant advice given by him to Designated Customers is not
          misleading;

     (c)  take all reasonable steps to ensure that:

          (i)  a Designated Customer may readily identify the Licensee whenever
               he is contacted by a representative of the Licensee; and

          (ii) any unsolicited contact made on behalf of the Licensee with any
               Designated Customer takes place at a reasonable time; and

     (d)  take all reasonable steps to ensure that any agents or sub-contractors
          of the Licensee set up equivalent procedures and take equivalent steps
          to those set out at sub-paragraphs (a), (b) and (c).

                                      239
<PAGE>

4.   Where a contract has been entered into by a Designated Customer in the
     course either of a visit to his premises by a representative of the
     Licensee or of a telephone conversation between him and a representative of
     the Licensee, the Licensee shall, through a representative who is not
     engaged in activities leading to the making of contracts between the
     Licensee and customers, and not less than 24 hours nor more than 14 days
     after the date of the contract:

     (a)  use its reasonable endeavours to contact the customer by telephone or
          by letter seeking his confirmation that:

          (i)   he understands that he has entered into an electricity supply
                contract;

          (ii)  he is content to have entered into that contract; and

          (iii) he is content with the way in which the marketing activities of
                the Licensee were conducted;

     (b)  if in the course of such telephone contact, or within a reasonable
          period of the despatch of such a letter, the customer indicates that
          he is not content to have entered into the contract and wishes to
          terminate it, take all reasonable steps to ensure that the contract is
          terminated and, where reasonably practicable, that the Licensee does
          not commence a supply to the customer; and

     (c)  if the response of the customer, alone or when considered with the
          responses of other customers, suggests weaknesses in the methods,
          systems or personnel employed or engaged by the Licensee or its agents
          or sub-contractors for the purpose of its marketing activities, ensure
          that all reasonable steps to remedy the matter are taken.

                                      240
<PAGE>

5.   Where, by virtue of any Designated Supply Contract, electricity is not to
     be supplied to premises before the expiry of 60 days after the date of the
     contract, the Licensee shall take reasonable steps during the period after
     that date and prior to the commencement of supply to keep the customer
     informed that he has entered into an electricity supply contract with the
     Licensee.

6.   The complaint handling procedures to be established by the Licensee in
     accordance with Condition 17 shall provide in appropriate cases for the
     payment of compensation to Designated Customers adversely affected by
     failure by the Licensee to perform its obligations under this Condition.

7.   The Licensee shall keep a record of its compliance with its obligations
     under this Condition including-

     (a)  the contacting of customers in pursuance of sub-paragraph 4(a) and the
          response of customers to such contact;

     (b)  the termination of contracts in pursuance of sub-paragraph 4(b); and

     (c)  compensation paid in pursuance of paragraph 6.

8.   Except as the Director may for the purposes of this Condition determine, as
     soon as reasonably practicable after the end of each period of three months
     ending on 31 March, 30 June, 30 September and 31 December in every year,
     the Licensee shall submit to the Director and to all Relevant Electricity
     Consumers' Committees a report dealing with the matters specified in
     paragraph 7 in that period and shall:

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

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

                                      241
<PAGE>

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

9.   Reports in pursuance of paragraph 8 shall be presented by the Licensee, in
     so far as is reasonably practicable, in a standard format submitted to and
     approved by the Director for the purposes of this Condition.

10.  Except as the Director may approve:

     (a)  for the purpose of protecting the interests of any Designated Customer
          who, prior to the date on which this Condition came into force, may
          have made a payment in advance with a view to arranging a supply of
          electricity; or

     (b)  where any payment in advance is wholly or mainly for services other
          than arranging the supply of energy,

the Licensee shall not enter into any commercial relations connected with the
     supply of electricity to Designated Premises with any person who has
     sought, after the coming into force of this Condition, payment in advance
     (other than a security deposit) from any Designated Customer with a view to
     arranging a supply of electricity, and the Licensee shall not enter into a
     contract for the supply of electricity to any such customer made through
     the agency (either for the Licensee or for any customer) of such a person.

11.  In this Condition:

     "marketing activities"              means any activities of the Licensee
                                         directed at or incidental to the
                                         identification of and communication
                                         with Designated Customers supplied or
                                         to be supplied with

                                      242
<PAGE>

                                         electricity by the Licensee, and
                                         includes entering into contracts with
                                         such customers.

     "representative"                    in relation to the Licensee, means any
                                         person directly or indirectly
                                         authorised to represent the Licensee in
                                         its dealings with customers.

                                      243
<PAGE>

        PART VI. CONDITIONS APPLICABLE TO THE TRANSMISSION LICENCE AND
        --------------------------------------------------------------
                     THE PUBLIC ELECTRICITY SUPPLY LICENCE
                     -------------------------------------

Condition 1: Scope of application of Part VI
--------------------------------------------

1.   Except as stated in paragraphs 2 and 3 both the Transmission Licence and
     the Public Electricity Supply Licence are subject to the Conditions in Part
     VI (including where such Conditions relate to activities other than those
     authorised by such licences) but so that each provision in Part VI shall be
     construed as applying separately to each such Licence and shall not impose
     any obligation on the Licensee as holder of either Licence to comply with
     that provision as it applied to the other Licence.

2.   The Transmission Licence only is subject to the following:

     (a)  Sub-paragraph 1(b) of Condition 2;

     (b)  Paragraphs 4 and 11 of Condition 2;

     (c)  Paragraph 4 of Condition 2A;

     (d)  Sub-paragraph 1(b) of Condition 2D; and

     (e)  Conditions 3, 4 and 5.

3.   The Public Electricity Supply Licence only is subject to the following:

     (a)  Sub-paragraphs 1(a), (c) and (d) of Condition 2;

     (b)  Paragraphs 2, 3, 5, 6, 7, 12, 19 and 20 to 22 of Condition 2;

     (c)  Sub-paragraph 13(b) of Condition 2;

                                      244
<PAGE>

     (d)  Paragraphs 4 and 5 of condition 2B;

     (e)  Sub-paragraph 7(c) of Condition 2B;

     (f)  Condition 2C;

     (g)  Sub-paragraphs 1(a)(i) and (ii), 1(f) of Condition 2D; and

     (h)  Condition 5.

4.   For the purposes of applying the Conditions in Part VI to the Transmission
     Licence and the Public Electricity Supply Licence respectively references
     to the Licensee's System mean the Licensee's Transmission System and
     Distribution System respectively.

5.   The Generation Licence is not subject to the Conditions in Part VI.

6.   In this Condition and in Conditions 2A, 2B and 2D the expressions "use of
     the Licensee's System" and "use of the Licensee's Transmission System"
     shall be deemed to exclude use of the Scottish interconnection and cognate
     expressions shall be construed accordingly.

7.   In this Condition:

     "Scottish interconnection"       has the meaning given in sub-paragraph
                                      13(h) of Condition 3.
<PAGE>

Condition 2: Basis of charges for top-up and standby supplies or sales of
-------------------------------------------------------------------------
electricity, exempt supply services, use of system and connection to system:
----------------------------------------------------------------------------
requirements for transparency
-----------------------------

     Preparation of statements on basis of charging
     ----------------------------------------------

1.   The Licensee shall as soon as practicable after the Public Electricity
     Supply Licence and the Transmission Licence have come into force and, in
     any event, not later than such date as the Director shall specify prepare:

     (a)  a statement approved by the Director setting out the basis upon which
          charges will be made for the provision of top-up and standby supplies
          or sales of electricity (as part of the Supply Business or Second Tier
          Supply Business or Wholesaling Business);

     (b)  a statement approved by the Director setting out the basis upon which
          charges will be made for use of the Licensee's Transmission System and
          for connection to the Licensee's Transmission System (as part of the
          Transmission Business);

     (c)  a statement approved by the Director setting out the basis upon which
          charges will be made for the provision of exempt supply services (as
          part of the Supply Business); and

     (d)  a statement approved by the Director setting out the basis upon which
          charges will be made for use of the Licensee's Distribution System and
          for connection to the Licensee's Distribution System (as part of the
          Distribution Business)

each of such statements to be in such form and to contain such detail as shall
     be necessary to enable any person to make a reasonable estimate of the
     charges to which it would be come liable for the provision of such
     services, and (without prejudice to the foregoing) including such of the
     information set out in

                                      246
<PAGE>

     paragraphs 2, 4, 5, 7 and 9 as is required by such paragraphs to be
     included in the relevant statement.

Top-up and standby
------------------

2.   The statement referred to in sub-paragraph 1(a) shall set out the methods
     by which and the principles on which charges for the provision of each of
     top-up supplies or sales and standby supplies or sales will be made.

3.   The basis on which charges for the provision of top-up and standby supplies
     or sales of electricity shall be set shall reflect the costs directly
     incurred in the provision thereof, together with a reasonable rate of
     return on the capital represented by such costs.

Use of Licensee's Transmission System
-------------------------------------

4.   Except to the extent that the Director shall otherwise specify, the
     statement referred to in sub-paragraph 1(b) shall in respect of use of
     system include:

     (a)  a schedule of charges for the transmission of electricity under use of
          system;

     (b)  the charge for maintaining voltage and frequency within statutory
          limits;

     (c)  a schedule of adjustment factors to be made in respect of transmission
          losses, in the form of additional supplies required to cover those
          transmission losses;

     (d)  the methods by which and the principles on which charges (if any) for
          availability of transmission capacity on the Licensee's Transmission
          System will be made;

                                      247
<PAGE>

     (e)  a schedule of the charges (if any) which may be made for the provision
          and installation of any meters or electrical plant at entry or exit
          points, the provision and installation of which is ancillary to the
          grant of use of system, and for the maintenance of meters or
          electrical plant;

     (f)  the methods by which and the principles on which entry and exit
          charges for connections in operation before the date on which the
          Transmission Licence comes into force will be calculated; and

     (g)  such other matters as shall be specified in directions issued by the
          Director from time to time for the purposes of this Condition.

Exempt supply services
----------------------

5.   The statement referred to at sub-paragraph 1(c) shall, in respect of exempt
     supply services, set out the methods by which and the principles on which
     charges for the provision of such services will be made.

6.   The basis on which charges for the provision of exempt supply services
     shall be set shall reflect the costs directly incurred in the provision
     thereof, together with a reasonable rate of return on the capital
     represented by such costs.

Use of Licensee's Distribution System
-------------------------------------

7.   Except to the extent that the Director shall otherwise specify, the
     statement referred to in sub-paragraph 1(d) shall in respect of use of
     system include:

     (a)  a schedule of charges for the distribution of electricity under use of
          system;

     (b)  a schedule of adjustment factors to be made in respect of distribution
          losses, in the form of additional supplies required to cover those
          distribution losses;

                                      248
<PAGE>

     (c)  the methods by which and the principles on which the charges (if any)
          for availability of distribution capacity on the Licensee's
          Distribution System will be made;

     (d)  save to the extent that such matters are included in any statement
          prepared in accordance with Condition 8E of Part V:

          (i)  a schedule of charges in respect of meter reading, accounting and
               administrative services; and

          (ii) a schedule of the charges (if any) which may be made for the
               provision and installation of any meters or electrical plant at
               entry or exit points, the provision and installation of which is
               ancillary to the grant of use of system, and for the maintenance
               of such meters or electrical plant; and

     (e)  such other matters as shall be specified in directions issued by the
          Director from time to time for the purposes of this Condition.

8.   Use of system charges for those items referred to in paragraphs 4 and 7
     shall be determined on the same basis as is applied by the Licensee when
     determining the use of system element of tariffs fixed pursuant to Section
     18 of the Act and Condition 4 of Part V.

Connection to system
--------------------

9.   The statements referred to in sub-paragraphs 1(b) and (d) shall in respect
     of connections to the Licensee's System include (save to the extent that
     such matters are included in any statement prepared in accordance with
     Condition 8E of Part V):

     (a)  a schedule listing those items (including the carrying out of works
          and the provision and installation of electric lines or electrical
          plant or meters)

                                      249
<PAGE>

          of significant cost liable to be required for the purpose of
          connection (at entry or exit points) to the Licensee's System for
          which connection charges may be made or levied and including (where
          practicable) indicative charges for each such item and (in other
          cases) an explanation of the methods by which and the principles on
          which such charges will be calculated;

     (b)  the methods by which and the principles on which any charges will be
          made in respect of extension or reinforcement of the Licensee's System
          rendered (in the Licensee's discretion) necessary or appropriate by
          virtue of providing connection to or use of system to any person
          seeking connection;

     (c)  the methods by which and the principles on which connection charges
          will be made in circumstances where the electric lines or electrical
          plant to be installed are (at the Licensee's discretion) of greater
          size or capacity than that required for use of system by the person
          seeking connection;

     (d)  the methods by which and the principles on which any charges
          (including any capitalised charge) will be made for maintenance,
          replacement and repair required of electric lines, electrical plant or
          meters provided and installed for making a connection to the
          Licensee's System;

     (e)  the methods by which and principles on which any charges will be made
          for disconnection from the Licensee's System and the removal of
          electrical plant, electric lines and ancillary meters following
          disconnection; and

     (f)  such other matters as shall be specified in directions issued by the
          Director from time to time for the purposes of this Condition.

                                      250
<PAGE>

10.  Connection charges for those items referred to in paragraph 9 shall be set
     at a level which will enable the Licensee to recover:

     (a)  the appropriate proportion of the costs directly or indirectly
          incurred in carrying out any works, the extension or reinforcement of
          the Licensee's System or the provision and installation, maintenance,
          replacement and repair or (as the case may be) removal following
          disconnection of any electric lines, electrical plant, meters, special
          metering, telemetry, data processing equipment or other items; and

     (b)  a reasonable rate of return on the capital represented by such costs.

Preparation of statements on system capacity, etc.
--------------------------------------------------

11.  The Licensee shall as soon as practicable after the Transmission Licence
     has come into force and, in any event, not later than such date as the
     Director shall specify prepare a statement approved by the Director showing
     in respect of each of the 7 succeeding financial years circuit capacity,
     forecast power flows and loading on each part of its Transmission System
     and fault levels for each transmission node, together with:

     (a)  such further information as shall be reasonably necessary to enable
          any person seeking use of system to identify and evaluate the
          opportunities available when connecting to and making use of such
          system;

     (b)  a commentary prepared by the Licensee indicating the Licensee's views
          as to those parts of the Licensee's Transmission System most suited to
          new connections and the transmission of further quantities of
          electricity; and

     (c)  such other matters as shall be specified in directions issued by the
          Director from time to time for the purposes of this Condition.

                                      251
<PAGE>

12.  If so requested and subject to paragraphs 13 and 19, the Licensee shall, as
     soon as practicable and in any event within 28 days (or where the Director
     so approves such longer period as the Licensee may reasonably require
     having regard to the nature and complexity of the request) after the date
     referred to in paragraph 20, give or send to any person making such request
     a statement showing present and future circuit capacity, forecast power
     flows and loading on the part or parts of its Distribution System specified
     in the request and fault levels for each distribution node covered by the
     request and containing:

     (a)  such further information as shall be reasonably necessary to enable
          such person to identify and evaluate the opportunities available when
          connecting to and making use of the part or parts of the Licensee's
          Distribution System specified in the request; and

     (b)  if so requested, a commentary prepared by the Licensee indicating its
          views as to the suitability of the part or parts of the Licensee's
          Distribution System specified in the request for new connections and
          the distribution of further quantities of electricity.

13.  The Licensee shall include in every statement prepared or (as the case may
     be) given or sent under paragraphs 11 or 12 the information required by
     such paragraphs, save that:

     (a)  the Licensee may with the prior consent of the Director omit from any
          such statement any details as to circuit capacity, power flows,
          loading or other information, disclosure of which would, in the view
          of the Director, seriously and prejudicially affect the commercial
          interests of the Licensee or any third party; and

     (b)  the Licensee may omit from any statement given or sent under paragraph
          12 any information the disclosure of which would place the Licensee in
          breach of Condition 9 of Part V.

                                      252
<PAGE>

Preparation of new statements, circulation and charging
-------------------------------------------------------

14.  In addition to, and without prejudice to, the Licensee's obligations under
     paragraph 1, the Licensee shall, upon being directed to do so in directions
     issued by the Director from time to time for the purposes of this Condition
     and within such period as shall be specified in the directions, prepare a
     statement or statements approved by the Director providing that charges for
     the provision of top-up and standby supplies or sales of electricity, for
     the provision of exempt supply services, for use of the Licensee's
     Transmission System or Distribution System and/or for connection to the
     Licensee's Transmission System or Distribution System will be made on such
     basis as shall be specified in the directions and such statement or
     statements shall be in such form and contain such detail as shall be
     necessary to enable any person to make a reasonable estimate of the charges
     to which it would become liable for the provision of such services and
     (without prejudice to the foregoing) including such information as shall be
     specified in the directions. Each statement prepared in accordance with
     this paragraph shall, with effect from the date on which it is approved by
     the Director or such later date as the Director shall specify, replace the
     corresponding statement prepared by the Licensee in accordance with
     paragraph 1 or, as the case may be, this paragraph (as from time to time
     revised in accordance with paragraph 15) which is in force at such date and
     the Licensee shall, with effect from such date make charges in accordance
     with the statement (as from time to time revised in accordance with
     paragraph 15) which has replaced such corresponding statement.

15.  The Licensee may periodically revise the statements prepared in accordance
     with paragraphs 1, 11 and 14 and shall, at least once in every year the
     Transmission Licence and/or (as the case may be) the Public Electricity
     Supply Licence is in force, make any necessary revisions to such statements
     in order that the information set out in the statements shall continue to
     be accurate in all material respects.

                                      253
<PAGE>

16.  The Licensee shall send a copy of the statements prepared in accordance
     with paragraphs 1, 11 and 14, and of each revision of such statements in
     accordance with paragraph 15, to the Director. Each such revision shall
     require to be approved by the Director and shall not become effective until
     approved by the Director.

17.  The Licensee shall give or send a copy of the statements prepared in
     accordance with paragraphs 1, 11 and 14 or (as the case may be) of the
     latest revision of such statements in accordance with paragraph 15 approved
     by the Director pursuant to such paragraph to any person who requests a
     copy of such statement or statements.

18.  The Licensee may make a charge for any statement given or sent pursuant to
     paragraph 17 of an amount reflecting the Licensee's reasonable costs of
     providing such a statement which shall not exceed the maximum amount
     specified in directions issued by the Director for the purposes of this
     Condition.

19.  The Licensee may within 10 days after receipt of the request provide an
     estimate of its reasonable costs in the preparation of any statement
     referred to in paragraph 12, and its obligation to provide such statement
     shall be conditional on the person requesting such statement agreeing to
     pay the amount estimated or such other amount as the Director may, upon the
     application of the Licensee or the person requesting such statement,
     direct.

20.  For the purposes of paragraph 12, the date referred to shall be the later
     of:

     (a)  the date of receipt of the request referred to in paragraph 12; or

     (b)  the date on which the Licensee receives agreement from the person
          making the request to pay the amount estimated or on which an amount
          is determined by the Director (as the case may be) under paragraph 19.

                                      254
<PAGE>

21.  The Licensee shall, not less than 5 months prior to the date on which it
     proposes to amend its use of system charges in respect of any agreement for
     use of system, send to the Director a notice setting out the Licensee's
     proposals in relation to such amendment together with an explanation of the
     proposed amendment (including a statement of any assumptions on which such
     proposals are based), and the Licensee shall send a copy of such notice to
     any person who has entered into an agreement for use of system under
     Condition 2B.

22.  Except with the prior consent of the Director, the Licensee shall not amend
     its use of system charges in respect of any agreement for use of system
     save to the extent that it has given prior notice of the amendment in
     accordance with paragraph 21 and such amendment reflects the proposals made
     in the notice (subject only to revisions consequent upon material changes
     in the matters which were expressed, in the statement which accompanied the
     notice, to be assumptions on which the proposals were based).

                                      255
<PAGE>

Condition 2A: Non-discrimination in the provision of top-up or standby supplies
-------------------------------------------------------------------------------
or sales of electricity, exempt supply services, use of system and connection to
--------------------------------------------------------------------------------
system
------

1.   In the provision of top-up or standby supplies or sales of electricity or
     use of system or in the carrying out of works for the purpose of connection
     to the Licensee's System or in providing for the retention of a connection
     to its system the Licensee shall not discriminate:

     (a)  as between any persons or class or classes of person; or

     (b)  as between the Licensee (in the provision of use of system and
          connections by the Licensee as part of the Distribution Business or
          Transmission Business to itself for the purpose of the Supply
          Business, Second Tier Supply Business or Wholesaling Business) and any
          person or any class or classes of persons.

2.   In the provision of exempt supply services the Licensee shall not
     discriminate between any Exempt Suppliers or class or classes thereof.

3.   Without prejudice to paragraphs 1 or 2, and subject to paragraph 4, the
     Licensee shall not make charges for the provision of top-up or standby
     supplies or sales of electricity, for the provision of exempt supply
     services, or for use of system to any person or class or classes of persons
     which differ from the charges for such provision:

     (a)  (in the case of top-up or standby supplies or sales of electricity and
          exempt supply services) to any other person or class or classes of
          persons; or

     (b)  (in the case of use of system):

          (i)  to any other person or class or classes of persons; or

                                      256
<PAGE>

          (ii) to the Licensee (in the provision of use of system by the
               Licensee as part of the Distribution Business or Transmission
               Business to itself for the purposes of the Supply Business, the
               Second Tier Supply Business or the Wholesaling Business)

except insofar as such differences reasonably reflect differences in the costs
     associated with such provision.

4.   Notwithstanding paragraph 3, the Licensee shall not make or levy use of
     system charges in respect of any item of charge separately identified in
     the statement referred to at sub-paragraph 1(b) of Condition 2 on any
     person whose contract does not provide for him to receive the service to
     which such item of charge refers.

5.   The Licensee shall not in setting its charges for provision of top-up or
     standby supplies or sales of electricity, for exempt supply services or for
     use of system restrict, distort or prevent competition in the generation,
     transmission, distribution or supply of electricity.

                                      257
<PAGE>

Condition 2B: Requirement to offer terms
----------------------------------------

     Offer of terms for use of system
     --------------------------------

1.   On application made by any Authorised Electricity Operator, the Licensee
     shall (subject to paragraph 7) offer to enter into an agreement for use of
     system:

     (a)  to accept into the Licensee's System at such entry point or points and
          in such quantities as may be specified in the application, electricity
          to be provided by or on behalf of such Authorised Electricity
          Operator;

     (b)  to deliver such quantities of electricity as are referred to in sub-
          paragraph (a) (less any transmission or distribution losses) to such
          exit point or points on the Licensee's System and to such person or
          persons as the Authorised Electricity Operator may specify;

     (c)  specifying the use of system charges to be paid by the Authorised
          Electricity Operator, such charges (unless manifestly inappropriate)
          to be referable to the statement prepared in accordance with (as
          appropriate) sub-paragraph 1(b) or (d) (or, as the case may be,
          paragraph 14) of Condition 2 or any revision thereof and to be in
          conformity with the requirements of paragraph 8 of that Condition;

     (d)  containing (where appropriate) the provisions referred to in paragraph
          2 of Condition 15 of Part V;

     (e)  including terms requiring and entitling the Authorised Electricity
          Operator to act (where appropriate) as agent of the Licensee in order
          to procure an agreement on the Standard Terms of Connection between
          the Licensee and each customer of the Authorised Electricity Operator
          at premises which are to be supplied with electricity through an
          established connection;

                                      258
<PAGE>

     (f)  where the applicant is an Exempt Supplier, requiring such Exempt
          Supplier either to enter into an agreement with the Licensee for
          exempt supply services or to enter into an equivalent agreement with
          another Electricity Supplier; and

     (g)  containing such further terms as are or may be appropriate for the
          purposes of the agreement.

Offer of terms for connection
-----------------------------

2.   On application made by any person the Licensee shall (subject to paragraph
     7) offer to enter into an agreement for the provision of a connection or
     for the modification of an existing connection to the Licensee's System,
     and such offer shall make detailed provision regarding:

     (a)  the carrying out of works (if any) required to connect the Licensee's
          System to any other system for the transmission or distribution of
          electricity, and for the obtaining of any consents necessary for such
          purposes;

     (b)  the carrying out of works (if any) in connection with the extension or
          reinforcement of the Licensee's System rendered necessary or
          appropriate by reason of making the connection or modification to an
          existing connection and for the obtaining of any consents necessary
          for such purposes;

     (c)  (save to the extent that such matters are included in any agreement
          offered in accordance with Condition 8C of Part V) the installation of
          appropriate meters (if any) required to enable the Licensee to measure
          electricity being accepted into the Licensee's System at the specified
          entry point or points or leaving such system at the specified exit
          point or points;

                                      259
<PAGE>

     (d)  the installation of such switchgear or other apparatus (if any) as may
          be required for the interruption of supply where the person seeking
          connection or modification of an existing connection does not require
          the provision by the Licensee of top-up or standby supplies or sales
          of electricity;

     (e)  the date by which any works required so as to permit access to the
          Licensee's System (including for this purpose any works to reinforce
          or extend the Licensee's System) shall be completed and so that,
          unless otherwise agreed by the person making the application, a
          failure to complete such works by such date shall be a material breach
          of the agreement entitling the person to repudiate the agreement;

     (f)  the connection charges to be paid to the Licensee, such charges
          (unless manifestly inappropriate):

          (i)  to be presented in such a way as to be referable to the
               statements prepared in accordance with (as appropriate) sub-
               paragraph 1(b) or (d) (or, as the case may be, paragraph 14) of
               Condition 2 or any revision thereof; and

          (ii) to be set in conformity with the requirements of paragraph 10 of
               Condition 2 and (where relevant) of paragraph 3 of this
               Condition;

     (g)  (save to the extent that such matters are included in any agreement
          offered in accordance with Condition 8C of Part V) the installation of
          special metering, telemetry or data processing equipment (if any) for
          the purpose of enabling any person which is party to the Settlement
          Agreement for Scotland to comply with is obligations in respect to
          metering thereunder or the performance by the Licensee of any service
          in relation to such metering thereunder; and

                                      260
<PAGE>

     (h)  such further matters as are or may be appropriate for the purposes of
          the agreement.

3.   For the purpose of determining an appropriate proportion of the costs
     directly or indirectly incurred in carrying out works (or in relation to
     any of the other matters referred to in sub-paragraph 10(a) of Condition 2)
     under an agreement for making a connection or modification to an existing
     connection, the Licensee shall have regard to:

     (a)  the benefit (if any) to be obtained or likely in the future to be
          obtained by the Licensee or any other person as a result of the
          carrying out of such works (or of such other matters) whether by
          reason of the reinforcement or extension of the Licensee's System or
          the provision of additional entry or exit points on such system or
          otherwise;

     (b)  the ability or likely future ability of the Licensee to recoup a
          proportion of such costs from third parties; and

     (c)  the principles for connections to the Licensee's Distribution System:

          (i)   no charge will normally be made for reinforcement of the
                existing Distribution System if the new or increased load
                requirement does not exceed 25 per cent of the existing
                effective capacity at the relevant points on the system; and

          (ii)  charges will not generally take into account Distribution System
                reinforcement carried out at more than one voltage level above
                the voltage of connections.

Offer of terms for top-up or standby supplies or sales of electricity
---------------------------------------------------------------------

4.   The Licensee shall (subject to paragraph 7) offer to enter into an
     agreement with any person who requests the same to provide top-up or
     standby supplies

                                      261
<PAGE>

     or sales of electricity, such offer to make provision for the charges to be
     made in respect of top-up or standby supplies or sales of electricity,
     which shall:

     (a)  be presented in such a way as to be referable to the statement
          prepared in accordance with sub-paragraph 1(a) (or, as the case may
          be, paragraph 14) of Condition 2 or any revision of any such
          statement; and

     (b)  be set in conformity with the requirements of paragraph 3 of Condition
          2.

Offer of terms for exempt supply services
-----------------------------------------

5.   On application made by any Exempt Supplier the Licensee shall (subject to
     paragraph 7) offer to enter into an agreement for exempt supply services
     within its authorised area and such offer shall make detailed provision
     regarding:

     (a)  the making, maintenance and termination by the Licensee of
          registrations under and in accordance with the Master Registration
          Agreement in relation to premises to which the Exempt Supplier
          supplies or is required to supply electricity;

     (b)  the exchange between the Licensee and Exempt Supplier of such
          information as is required for the performance of the Licensee's
          obligations in accordance with sub-paragraph (a);

     (c)  the appointment by the Exempt Supplier of an appropriate provider of
          meter operation, data retrieval, data processing and data aggregation
          services in relation to premises to which it supplies electricity;

     (d)  the apportionment and settlement by the Licensee of charges incurred
          by it by virtue of registrations under the Master Registration
          Agreement which are made, maintained and terminated in accordance with
          sub-paragraph (a);

                                      262
<PAGE>

     (e)  the payment by the Exempt Supplier of charges for exempt supply
          services, such charges (unless manifestly inappropriate) to be
          referable to the statement prepared in accordance with sub-paragraph
          1(c) of Condition 2 or any revision thereof and to be in conformity
          with the requirements of paragraph 6 of Condition 2;

     (f)  the reimbursement by the Exempt Supplier (by way of indemnity) of all
          charges incurred by the Licensee by virtue of registrations made and
          maintained in accordance with sub-paragraph (a);

     (g)  the provision by the Exempt Supplier to the Licensee of reasonable
          security or collateral for the performance of its obligations under
          the agreement;

     (h)  the varying of the agreement, including the making of amendments
          necessary to give effect to any determination made by the Director in
          respect of the agreement; and

     (i)  such further matters as are or may be appropriate for the purposes of
          the agreement.

Offer of terms - general
------------------------

6.   The Licensee shall offer terms for agreements in accordance with paragraphs
     1, 2, 4 and 5 as soon as practicable and (save where the Director consents
     to a longer period) in any event not more than the period specified in
     paragraph 8 after receipt by the Licensee (or its agent) of all such
     information as the Licensee may reasonably require for the purpose of
     formulating the terms of the offer.

7.   The Licensee shall not be obliged pursuant to this Condition to offer to
     enter or to enter into any agreement:

                                      263
<PAGE>

     (a)  if to do so would be likely to involve the Licensee being:

          (i)   in breach of its duties under Section 9 of the Act;

          (ii)  in breach of the Electricity Supply Regulations 1988 or of any
                regulations made under Section 29 of the Act or of any other
                enactment relating to safety or standards applicable in respect
                to the Distribution Business or Transmission Business;

          (iii) in breach of the Conditions to which the Public Electricity
                Supply Licence or the Transmission Licence is subject; or

          (iv)  in breach of the Grid Code;

     (b)  (in the case of an application for use of, or connection to, the
          Licensee's Transmission System) if the person making the application
          does not undertake to be bound, insofar as applicable, by the terms of
          the Grid Code from time to time in force;

     (c)  (in the case of any other application) if to do so would involve the
          Licensee being in breach of the Distribution Code or if the person
          making the application does not undertake to be bound, insofar as
          applicable, by the terms of the Distribution Code or the Grid Code
          from time to time in force.

8.   For the purpose of paragraph 6, the period specified shall be:

     (a)  in the case of persons seeking use of system, exempt supply services
          or top-up or standby supplies or sales of electricity only, 28 days;

     (b)  in the case of persons seeking connection or a modification to an
          existing connection, 3 months; and

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<PAGE>

     (c)  in the case of person seeking use of system or top-up or standby
          supplies or sales of electricity in conjunction with connection, 3
          months.

9.   The Licensee shall within 28 days following receipt of a request from any
     person, give or send to such person such information in the possession of
     the Licensee as may be reasonably required by such person for the purpose
     of completing paragraph 8 of Part 1 and paragraphs 2(v) and (vi) of Part 2
     of Schedule 2 to the Electricity (Application for Licences and Extensions
     of Licences) Regulations 1990 or such provisions to like effect contained
     in any further regulations then in force made pursuant to Sections 6(3), 60
     and 64(1) of the Act.

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Condition 2C: Requirement to offer Standard Terms of Connection
---------------------------------------------------------------

1.   The Licensee shall, within 28 days after this Condition has come into
     force, prepare and submit to the Director for his approval the standard
     terms of an agreement (the "Standard Terms of Connection") to provide, as
     between the Licensee and any customer, for the retention of an established
     connection at premises which are to be supplied with electricity through
     such a connection.

2.   The Licensee may, subject to the approval of the Director, prepare
     different Standard Terms of Connection for different cases or classes of
     customer or premises, clearly identifying the criteria used to distinguish
     between such cases or classes.

3.   The Licensee shall from time or time, and whenever requested to do so by
     the Director, review the Standard Terms of Connection with a view to
     determining whether any revision should be made to such terms, and in the
     course of the review the Licensee shall consult with the Relevant
     Consumers' Committee, all other public electricity suppliers and all Second
     Tier Suppliers which supply electricity within the authorised area.

4.   At the conclusion of any review in accordance with paragraph 3 the Licensee
     shall submit to the Director:

     (a)  a proposal for the revision of the Standard Terms of Connection (or,
          where the Licensee considers it appropriate in all the circumstances,
          a proposal that no revision should be made to the Standard Terms of
          Connection); and

     (b)  the reasons for its proposal, together with a summary of responses
          received from such parties as were consulted by the Licensee.

5.   A proposal made by the Licensee in accordance with paragraph 4 shall
     require to be approved by the Director and, following such approval in
     writing,

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     the Licensee shall accordingly revise (or, as the case may be, shall make
     no revision to) the Standard Terms of Connection.

6.   The Licensee shall, in such manner as will in the opinion of the Licensee
     secure adequate publicity therefor:

     (a)  publish, no later than 31 December 1997, the Standard Terms of
          Connection approved by the Director in accordance with paragraph 1;
          and

     (b)  publish, within 21 days after receiving the approval of the Director,
          any revision to the Standard Terms of Connection in accordance with
          paragraph 5.

7.   The Licensee shall not:

     (a)  subject to paragraph 8, enter into a contract with a customer for the
          supply of electricity to premises which are to be supplied through an
          established connection without at the same time (in respect of such
          premises) entering into an agreement with the customer on the Standard
          Terms of Connection; or

     (b)  do anything to prevent the conclusion of an agreement on the Standard
          Terms of Connection between itself and a customer of any Authorised
          Electricity Operator which is acting as agent for the Licensee in
          accordance with an agreement for use of system.

8.   The Licensee may at any time agree with any person (by way of variation to
     the Standard Terms of Connection) terms for the retention of a particular
     established connection which differ from the Standard Terms of Connection
     where such different terms are appropriate in all the circumstances.

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Condition 2D: Functions of the Director
---------------------------------------

1.   If, after a period which appears to the Director to be reasonable for the
     purpose, the Licensee has failed to enter into an agreement with any person
     entitled or claiming to be entitled thereto pursuant to a request under
     Condition 2B or 2C, the Director may, on the application of that person or
     the Licensee, settle any terms of the agreement in dispute between the
     Licensee and that person in such manner as appears to the Director to be
     reasonable having (insofar as relevant) regard in particular to the
     following considerations:

     (a)  that such person should pay to the Licensee:

          (i)  in the case of the provision of top-up or standby supplies or
               sales of electricity, such sum as is determined in accordance
               with paragraph 3 of Condition 2;

          (ii) in the case of exempt supply services, such sum as is determined
               in accordance with paragraph 6 of Condition 2;

          (iii) in the case of provision of use of system, the use of system
               charges determined in accordance with paragraph 8 of Condition 2;
               and

          (iv) in the case of provision of a connection, or a modification to an
               existing connection, to the system the whole or an appropriate
               proportion (as determined in accordance with paragraph 3 of
               Condition 2B) of the costs referred to in sub-paragraph 10(a) of
               Condition 2, together with a reasonable rate of return on the
               capital represented by such costs;

     (b)  that no such person should pay any charges such as are referred to in
          sub-paragraph 9(b) of Condition 2 in respect of any connection to the
          Licensee's Transmission System or any modification to an existing

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<PAGE>

          connection made prior to such date as shall be specified in a
          direction issued by the Director for the purposes of this Condition
          and that no such charges should be paid in respect of any such
          connection or modification made after such date unless the Director is
          satisfied that the extension or reinforcement in respect of which the
          charges are to be paid was rendered necessary or appropriate by virtue
          of providing connection to or use of system to the person or making
          such a modification;

     (c)  that the performance by the Licensee of its obligations under the
          agreement should not involve the Licensee in a breach such as is
          referred to in sub-paragraph 7(a) of Condition 2B;

     (d)  that any methods by which the Licensee's System is connected to any
          other system for the transmission or distribution of electricity
          accord (insofar as applicable to the Licensee) with the Grid Code and
          with the Distribution Code;

     (e)  that the terms and conditions of the agreement so settled by the
          Director and of any other agreements entered into by the Licensee
          pursuant to an application under Condition 2B or 2C should be, so far
          as circumstances allow, in as similar a form as is practicable; and

     (f)  in the case of exempt supply services, that the agreement for the
          provision of exempt supply services should make provision for all the
          matters set out at paragraph 5 of Condition 2B.

2.   In so far as any person entitled or claiming to be entitled to an offer
     under Condition 2B or 2C wishes to proceed on the basis of the agreement as
     settled by the Director, the Licensee shall forthwith enter into and
     implement such agreement in accordance with its terms.

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<PAGE>

3.   If either party to such agreement proposes to vary the contractual terms of
     any agreement for exempt supply services, for the provision of a connection
     or for the modification of an existing connection to the Licensee's System,
     for the retention of an established connection to such system or for use of
     system entered into pursuant to Condition 2B or 2C or under this Condition
     in any manner provided for under such agreement, the Director may, at the
     request that party, settle any dispute relating to such variation in such
     manner as appears to the Director to be reasonable.

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Condition 3: Basis of charges for use of the Scottish interconnection
---------------------------------------------------------------------

1.   Unless (and except for so long as) the Director approves otherwise, charges
     for use of the Scottish interconnection shall be set at a level which will
     enable the Licensee to recover no more than a reasonable rate of return on
     the relevant proportion of the capital represented by the Scottish
     interconnection.

2.   The Licensee shall as soon as practicable after the Transmission Licence
     has come into force, and, in any event, not later than such date as the
     Director shall specify, prepare a statement approved by the Director
     setting out the basis upon which charges for use of the Scottish
     interconnection will be made, such statement to be in such form and to
     contain such detail as shall be necessary to enable any person to make a
     reasonable estimate of the charges to which it would become liable for use
     of the Scottish interconnection, and (without prejudice to the foregoing)
     including the information required to be included therein pursuant to
     paragraph 3.

3.   Except to the extent that the Director shall otherwise specify, the
     statement referred to in paragraph 2 shall include:

     (a)  a schedule of charges for transport of electricity under use of the
          Scottish interconnection;

     (b)  the charge for maintaining voltage and frequency within statutory
          limits;

     (c)  a schedule of the adjustment factors to be made in respect of
          transmission losses, in the form of additional supplies required to
          cover those transmission losses;

     (d)  the methods by which and the principles on which charges (if any) will
          be made for availability of capacity on the Scottish interconnection;
          and

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<PAGE>

     (e)  such other matters as shall be specified in directions issued by the
          Director from time to time for the purposes of this Condition.

4.   In addition to, and without prejudice to, the Licensee's obligations under
     paragraph 2, the Licensee shall, upon being directed to do so in directions
     issued by the Director from time to time for the purposes of this Condition
     and within such period as shall be specified in the directions, prepare a
     statement approved by the Director providing that charges for use of the
     Scottish interconnection will be made on such basis as shall be specified
     in the directions and such statement shall be in such form and contain such
     detail as shall be necessary to enable any person to make a reasonable
     estimate of the charges to which it would become liable for use of the
     Scottish interconnection and (without prejudice to the foregoing) including
     such information as shall be specified in the directions. Each statement
     prepared in accordance with this paragraph shall, with effect from the date
     on which it is approved by the Director or such later date as the Director
     shall specify, replace the corresponding statement prepared by the Licensee
     in accordance with paragraph 2 or, as the case may be, this paragraph (as
     from time to time revised in accordance with paragraph 5) which is in force
     at such date and the Licensee shall, with effect from such date, make
     charges for use of the Scottish interconnection in accordance with the
     statement (as from time to time revised in accordance with paragraph 5)
     which has replaced such corresponding statement.

5.   The Licensee may periodically revise the statement prepared in accordance
     with paragraph 2 or, in the event that the Licensee shall have prepared a
     statement in accordance with paragraph 4, that statement or the latest of
     such statements and shall, at least once in every year the Transmission
     Licence is in force, revise such statement in order that the information
     set out therein shall continue to be accurate in all material respects.
     Each such revision shall require to be approved by the Director and shall
     not become effective until approved by the Director.

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<PAGE>

6.   The Licensee shall as soon as practicable after the Transmission Licence
     has come into force and, in any event, not later than such date as the
     Director shall specify prepare a statement approved by the Director
     showing:

     (a)  the amount of the capacity of the Scottish interconnection which the
          Licensee anticipates will be available for the transfer of electricity
          from Scotland to England and England to Scotland during each remaining
          week of the year ending on 31 March 1991 as notified by the Licensee
          to SHE pursuant to the Interconnector Agreement;

     (b)  the amount of that capacity in relation to which SHE has a right to
          require the Licensee to receive and deliver electricity as referred to
          in sub-paragraph (b) of paragraph 13;

     (c)  the Licensee's forecast of the amount of the remainder of the capacity
          of the Scottish interconnection which will be used for the transfer of
          electricity from Scotland to England and from England to Scotland
          during each week referred to in sub-paragraph (a) above; and

     (d)  such other matters (if any) as the Director shall specify prior to his
          approval of the statement.

7.   The Licensee shall, as soon as practicable (and, in any event, within such
     period as the Director shall specify) after giving a notification such as
     is referred to in sub-paragraph (a) of paragraph 6 to SHE in respect of the
     year ending on 31 March 1992 and each subsequent year, prepare a statement
     approved by the Director showing the matters referred to in sub-paragraphs
     (a) to (d) of paragraph 6 in respect of that year.

8.   The Licensee shall send a copy of the statement prepared in accordance with
     paragraph 2 and any statement prepared in accordance with paragraph 4, and
     of each revision of such statements in accordance with paragraph 5, and of

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<PAGE>

     each statement prepared in accordance with paragraphs 6 and 7 and with
     paragraphs 3(a) and 8 of Condition 3B, to the Director.

9.   The Licensee shall give or send a copy of the statement prepared in
     accordance with paragraph 2, any statement prepared in accordance with
     paragraph 4 or (as the case may be) of the latest revision of the relevant
     statement in accordance with paragraph 5 approved by the Director pursuant
     to such paragraph and of each statement prepared in accordance with
     paragraphs 6 and 7 to any person who requests a copy of such statement.

10.  The Licensee shall also give or send a copy of each statement prepared in
     accordance with paragraphs 3(a) and 8 of Condition 3B to any person who
     requests a copy of such statement.

11.  The Licensee may make a charge for any statement given or sent pursuant to
     paragraph 9 of an amount reflecting the Licensee's reasonable costs of
     providing such a statement which shall not exceed the maximum amount
     specified in directions issued by the Director for the purposes of this
     Condition.

12.  The Licensee may within 10 days after receipt of the relevant request
     provide an estimate of its reasonable costs in the preparation of any
     statement referred to in paragraph 10, and its obligation to provide such
     statement shall be conditional on the person requesting such statement
     agreeing to pay the amount estimated or such other amount as the Director
     may, upon the application of the Licensee or the person requesting such
     statement, direct.

13.  For the purposes of this Condition and Conditions 3A to 3C and 4:

     "Interconnector Agreement"          means at any time the agreement
                                         relating to the matter referred to in
                                         sub-paragraph (a)(iv) of paragraph 5 of
                                         Condition 7 of Part II in force at that
                                         time which has been entered into and
                                         submitted to the Director pursuant

                                      274
<PAGE>

                                      to that Condition as the same may be
                                      amended from time to time with the
                                      approval of the Director given pursuant to
                                      such Condition.

     "use of the Scottish             shall exclude:
     interconnection"

                                      the rights conferred upon SHE under the
                                      Interconnector Agreement to require the
                                      Licensee:

                                      (a) to receive electricity from SHE at the
                                          Combined Delivery Point (and from
                                          certain generating stations referred
                                          to in the Interconnector Agreement)
                                          and deliver such electricity (less
                                          losses as referred to in the
                                          Interconnector Agreement) to the
                                          Transmission Company at the Southern
                                          Delivery Point; and/or

                                      (b) to receive electricity from the
                                          Transmission Company at the Southern
                                          Delivery Point and deliver such
                                          electricity (less losses as referred
                                          to in the Interconnector Agreement) to
                                          SHE at the Combined Delivery Point;
                                          and

                                      the rights conferred upon British Nuclear
                                      Fuels plc under the existing agreement
                                      referred to in sub-paragraph (a)(iv) of
                                      paragraph 5 of Condition 7 of Part II

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<PAGE>

     "relevant proportion of the capital     means at any time, a proportion of
      represented by the Scottish            such capital equal to the
      interconnection"                       percentage of the Reserved Share
                                             (as defined in the Interconnector
                                             Agreement) of the Licensee at that
                                             time.

     "Combined Delivery Point"               means the points at the boundary
                                             between the Licensee's authorised
                                             transmission area and SHE's
                                             authorised transmission area
                                             defined as such in the
                                             Interconnector Agreement.

     "Southern Delivery Point"               means the points at the boundary
                                             between the Licensee's authorised
                                             transmission area and the
                                             Transmission Company's authorised
                                             transmission area defined as such
                                             in the Interconnector Agreement.

     "Upgrade"                               means any alteration, modification
                                             or addition to the Interconnected
                                             Scottish Power System (as defined
                                             in the Interconnector Agreement)
                                             which is primarily designed to
                                             effect a permanent increase in one
                                             or more Particular Interconnection
                                             Capacities.

     "interconnection"                       means:

                                             the 275 kV transmission circuits
                                             between and including the
                                             associated switchgear at Harker
                                             sub-station in Cumbria and the
                                             associated switchgear at Strathaven
                                             sub-

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<PAGE>

                                       station in Lanarkshire;

                                       the 275 kV transmission circuit between
                                       and including the associated switchgear
                                       at Cockenzie in East Lothian and the
                                       associated switchgear at Stella in Tyne
                                       and Wear; and

                                       the 400 kV transmission circuit between
                                       and including the associated switchgear
                                       at Torness in East Lothian and the
                                       associated switchgear at Stella in Tyne
                                       and Wear

                                       all as existing at the date on which the
                                       Transmission Licence comes into force and
                                       as from time to time maintained, repaired
                                       or renewed, together with any alteration,
                                       modification or addition (other than
                                       maintenance, repair or renewal) which is
                                       primarily designed to effect a permanent
                                       increase in one or more Particular
                                       Interconnection Capacities as they exist
                                       immediately prior to such alteration,
                                       modification or addition and as from time
                                       to time maintained, repaired or renewed;
                                       and

                                       the 132 kV transmission circuit between
                                       and including (and directly connecting)
                                       the associated switchgear at Chapelcross
                                       and the associated switchgear at Harker
                                       sub-station in Cumbria; and

                                       132 kV transmission circuit between and

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<PAGE>

                                            including (and connecting, via
                                            Junction V) the associated
                                            switchgear at Chapelcross and the
                                            associated switchgear at Harker sub-
                                            station in Cumbria

                                            all as existing at the date on which
                                            the Transmission Licence comes into
                                            force and as from time to time
                                            maintained, repaired or renewed.

     "Scottish interconnection"             means such part of the
                                            interconnection as is situated in
                                            Scotland.

     "Particular Interconnection            means the capacity of the
      Capacity"                             interconnection for transferring
                                            electricity from Scotland to England
                                            or vice versa in respect of any
                                            particular system conditions.

     "co-operator"                          means any person other than the
                                            Licensee who owns assets which are
                                            used in conjunction with the
                                            interconnection or who is able to
                                            exercise jointly with the Licensee
                                            control over the use made of the
                                            interconnection.

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<PAGE>

Condition 3A: Non-discrimination in the provision of use of the Scottish
------------------------------------------------------------------------
interconnection
---------------

1.   In the provision of use of the Scottish interconnection the Licensee shall
     not discriminate:

     (a)  between any person or class or classes or persons; or

     (b)  between the Licensee (in the provision of use of the Scottish
          interconnection by the Licensee as part of the Transmission Business
          to itself for the purpose of the Supply Business, Second Tier Supply
          Business or Wholesaling Business) and any person or class or classes
          of persons.

2.   Without prejudice to paragraph 1, and subject to paragraph 3, the Licensee
     shall not make charges for the provision of use of the Scottish
     interconnection to any person or class or classes of persons which differ
     from the charges for such provision:

     (a)  to any other person or class or classes of persons; or

     (b)  to the Licensee (in the provision of use of the Scottish
          interconnection by the Licensee to itself for the purposes of the
          Supply Business, Second Tier Supply Business or Wholesaling Business);

except insofar as such differences reasonably reflect differences in the costs
     associated with such provision.

3.   Notwithstanding paragraphs 1 and 2, the Licensee shall not make charges for
     use of the Scottish interconnection in respect of any item of charge
     separately identified in any statement such as is referred to at paragraphs
     2 and 4 of Condition 3 on any person whose contract does not provide for it
     to receive the service to which such item of charge refers.

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<PAGE>

4.   The Licensee shall not in setting its charges for use of the Scottish
     interconnection restrict, distort or prevent competition in the
     transmission, supply, distribution or generation of electricity.

5.   The Licensee shall:

     (a)  comply with and perform its obligations under the Interconnector
          Agreement;

     (b)  exercise its rights and perform its obligations under the
          Interconnector Agreement in a manner which is designed to facilitate
          the carrying out of Upgrades proposed by SHE pursuant to the
          Interconnector Agreement (but, for the avoidance of doubt, so that the
          Licensee shall have no obligation to participate in any Upgrade
          proposed by SHE);

     (c)  not exercise or perform such rights or obligations in a manner which
          is designed to have the effect of inhibiting or preventing competition
          in the supply of electricity from Scotland to England or from England
          to Scotland; and

     (d)  not exercise or perform its rights or obligations under any related
          document in a manner which is designed to have the effect referred to
          in sub-paragraph (c) above.

6.   The Licensee shall not be in breach of this Condition or Conditions 3, 3B
     or 3C by reason only of a failure to do or not do any thing which it is
     prevented from doing or not doing by reason of a failure by SHE to comply
     with and perform its obligations under the Interconnector Agreement or by a
     party to a related document or a person who is obliged to comply with a
     related document to comply with and perform its obligations under the
     related document in question.

7.   The Licensee shall keep and maintain such records concerning the provision
     of use of the Scottish interconnection as are, in the opinion of the
     Director,

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<PAGE>

     sufficient to enable the Director to assess whether the Licensee is
     performing its obligations under paragraph 1 and the Licensee shall furnish
     to the Director such records (or such of these as the Director may
     require), in such manner and at such times as the Director may require.

8.   In this Condition:

     "related document"                        means any agreement, code, rules,
                                               or arrangement relating to the
                                               use of the E&W interconnection
                                               for the time being in force and
                                               to which the Licensee is a party
                                               or with which the Licensee is
                                               obliged to comply.

     "E&W interconnection"                     means such part of the
                                               interconnection as it not
                                               situated in Scotland.

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<PAGE>

Condition 3B: Requirement to offer terms
----------------------------------------

1.   On application made by any person, the Licensee shall (except in a case
     where paragraph 2 applies and subject to paragraph 7) offer to enter into
     an agreement for use of the Scottish interconnection to transport across
     the Scottish interconnection in such quantities and for such periods as may
     be specified in the application, electricity to be provided by or on behalf
     of such person:

     (a)  specifying the charges for use of the Scottish interconnection to be
          paid by the person seeking use of the Scottish interconnection, such
          charges to be referable to the statement referred to at paragraph 2 or
          (as the case may be) paragraph 4 of Condition 3 or any revision
          thereof; and

     (b)  containing such further terms as are or may be appropriate for the
          purposes of the agreement.

2.   This paragraph applies in any case where, on the application of the
     Licensee or any person entitled or claiming to be entitled to an offer
     pursuant to an application under paragraph 1, the Director shall determine
     that (having regard to the part of the capacity of the Scottish
     interconnection already contracted to persons other than the Licensee and
     affiliates and related undertakings of the Licensee and the part thereof
     approved by the Director as being reserved to the Licensee and affiliates
     and related undertakings of the Licensee for the purpose of the Supply
     Business, Second Tier Supply Business and Wholesaling Business) the
     capacity of the Scottish interconnection is insufficient to accommodate the
     requirements of the person who has made application for an offer pursuant
     to paragraph 1.

3.   In a case where paragraph 2 applies:

     (a)  the Licensee shall (subject to paragraph 12 of Condition 3), if
          requested by the person who has made application for an offer pursuant
          to

                                      282
<PAGE>

          paragraph 1 and within such period as the Director shall specify in
          his determination under paragraph 2, prepare a statement approved by
          the Director setting out the basis upon which charges will be made for
          the costs which the Licensee would incur if an Upgrade were to be
          carried out in accordance with the Interconnector Agreement to
          accommodate the requirements of the person who has made the
          application for an offer pursuant to paragraph 1, such statement to be
          in such form and to contain such detail as shall be necessary to
          enable such person to make a reasonable estimate of the charges to
          which he would become liable in respect of the Upgrade; and

     (b)  following the preparation of a statement under sub-paragraph (a)
          above, the Licensee shall, on the application of the person who has
          made the application for an offer pursuant to paragraph 1, offer to
          enter into:

          (i)  an agreement pursuant to which the Licensee undertakes to
               exercise its rights under the Interconnector Agreement to require
               the carrying out of an Upgrade; and

          (ii) an agreement such as is referred to in paragraph 1, but so that
               the Licensee shall not be bound to make use of the Scottish
               interconnection available pursuant to such agreement until the
               time of completion of the Upgrade.

4.   Charges in respect of Upgrades carried out pursuant to an agreement such as
     is referred to in sub-paragraph (b)(i) of paragraph 3 will be set at a
     level which will enable the Licensee to recover:

     (a)  the appropriate proportion of the costs directly incurred by the
          Licensee in connection with Upgrades; and

     (b)  a reasonable rate of return on the capital represented by such costs.

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<PAGE>

5.   For the purpose of determining an appropriate proportion of the costs
     directly incurred in connection with an Upgrade, the Licensee shall have
     regard to:

     (a)  the benefit (if any) to be obtained or likely in the future to be
          obtained by the Licensee or any other person from the increase in the
          capacity of the Scottish interconnection resulting from the Upgrade;
          and

     (b)  the ability or likely future ability of the Licensee to recoup a
          proportion of such costs from third parties.

6.   The Licensee shall offer terms for agreements in accordance with paragraph
     1 and paragraph 3(b) as soon as practicable and (save where the Director
     consents to a longer period) in any event not more than the period
     specified in paragraph 9 after receipt by the Licensee of an application
     containing all such information as the Licensee may reasonably require for
     the purpose of formulating the terms of the offer.

7.   The Licensee shall not be obliged pursuant to this Condition to offer to
     enter or to enter into any agreement:

     (a)  if to do so would involve the Licensee:

          (i)   in breach of its duties under Section 9 of the Act; or

          (ii)  in breach of the Electricity Supply Regulations 1988 or of any
                regulations made under Section 29 of the Act or of any other
                enactment relating to safety or standards applicable to the
                interconnection; or

          (iii) in breach of the Conditions to which the Transmission Licence is
                subject; or

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<PAGE>

     (b)  if the person making the application does not undertake to be bound by
          the terms of any code of general application or agreement between the
          Licensee and any co-operator of the interconnection governing the
          operation of and maintenance of the interconnection approved for the
          time being by the Director; or

     (c)  if (in the case of an application for an agreement for use of the
          Scottish interconnection to transport electricity from the Southern
          Delivery Point) the electricity to be so transported is to be
          transported from the northern end of the Scottish interconnection to
          the Combined Delivery Point under an agreement for use of the
          Licensee's Transmission System or Distribution System; or

     (d)  if (in the case of an application for an agreement for use of the
          Scottish interconnection to transport electricity to the Southern
          Delivery Point) the electricity to be so transported is to be
          transported from the Combined Delivery Point to the northern end of
          the Scottish interconnection under an agreement for use of the
          Licensee's Transmission System or Distribution System.

8.   If so requested by any person, the Licensee shall (subject to paragraph 12
     of Condition 3), as soon as practicable and in any event not later than the
     expiry of such period as the Director, on the application of the person
     making the request, shall determine for this purpose, give or send to such
     person a statement approved by the Director setting out the basis upon
     which charges will be made for the costs which the Licensee would incur if
     an Upgrade were to be carried out in accordance with the Interconnector
     Agreement to accommodate the requirements of such person as specified in
     the request, such statement to be in such form and to contain such detail
     as shall be necessary to enable such person to make a reasonable estimate
     of the charges to which it would become liable in respect of the Upgrade.

                                      285
<PAGE>

9.   For the purpose of paragraph 1, the period specified shall be 28 days. For
     the purpose of paragraph 3(b), the period specified shall be 3 months.

10.  The Licensee shall within 28 days following receipt of a request from any
     person, give or send to such person such information in the possession of
     the Licensee as may be reasonably required by such person for the purpose
     of completing paragraph 8 of Part 1 and paragraphs 2(v) and (vi) of Part 2
     of Schedule 2 to the Electricity (Application for Licences and Extensions
     of Licences) Regulations 1990 or such provisions to like effect contained
     in any further regulations then in force made pursuant to Sections 6(3), 60
     and 64(1) of the Act.

                                      286
<PAGE>

Condition 3C: Functions of the Director
---------------------------------------

1.   If, after a period which appears to the Director to be reasonable for the
     purpose the Licensee has failed to enter into an agreement with any person
     entitled or claiming to be entitled thereto pursuant to a request under
     Condition 3B the Director may, on the application of such person or the
     Licensee, settle any terms of the agreement in dispute between the Licensee
     and that person in such manner as appears to the Director to be reasonable
     having (insofar as relevant) regard in particular to the following
     considerations:

     (a)  that such person should pay to the Licensee charges determined in
          accordance with Conditions 3, 3A and 3B; and

     (b)  that the performance by the Licensee of its obligations under the
          agreement should not involve it in such a breach as is referred to in
          paragraph 7 of Condition 3B;

     (c)  that the obligations of the Licensee under the agreement should not be
          in conflict with the provisions of the Interconnector Agreement or any
          relevant document for the time being approved by the Director; and

     (d)  that the terms and conditions of the agreement so settled by the
          Director and of any other agreements entered into by the Licensee
          pursuant to a request under Condition 3B should be, so far as
          circumstances allow, in as similar a form as is practicable.

2.   If the person wishes to proceed on the basis of the agreement as settled by
     the Director, the Licensee shall forthwith enter into and implement such
     agreement in accordance with its terms.

3.   If the Licensee proposes to vary the contractual terms of any agreement
     entered into pursuant to Condition 3B or this Condition in any manner
     provided for under such agreement, the Director may, at the request of the
     Licensee or other party

                                      287
<PAGE>

     to such agreement, settle any dispute relating to such variation in such
     manner as appears to the Director to be reasonable.

                                      288
<PAGE>

Condition 4: Requests for Transit
---------------------------------

1.   In this Condition:

     "entity"                                means any of the entities referred
                                             to in Article 3.1 of the Directive
                                             of the Council of the European
                                             Communities, dated 29th October
                                             1990, (No.90/547/EEC) on the
                                             transit of electricity through
                                             transmission grids ("the
                                             Directive");

     "grid"                                  means any high-voltage electricity
                                             transmission grid for the time
                                             being listed in the Annex to the
                                             Directive;

     "Member State"                          means a Member State of the
                                             European Communities;

     "transit"                               means a transaction for the
                                             transport of electricity between
                                             grids where:

                                             (a)  the grid of origin or final
                                                  destination is situated in a
                                                  Member State; and

                                             (b)  the transport involves:

                                                  (i)   the crossing of at least
                                                        one frontier between
                                                        Member States; and

                                                  (ii)  the use of the
                                                        Licensee's Transmission
                                                        System and at least two
                                                        other grids.

                                      289
<PAGE>

2.   The Licensee shall, after receiving in connection with transit for a
     minimum duration of one year an application by an entity for an agreement
     for:

     (a)  use of system;

     (b)  connection to the Licensee's Transmission System or modification to an
          existing connection; or

     (c)  use of the Licensee's share of Scottish interconnection,

notify the Secretary of State, the Director and the Commission of the European
     Communities without delay of the matters set out in paragraph 3 below.

3.   The matters of which notification must be given are:

     (a)  the application;

     (b)  if an agreement has not been concluded within 12 months of the date of
          receipt of the application, the reasons for the failure to conclude
          it;

     (c)  the conclusion of the agreement, whether it is concluded before or
          after the expiry of the period mentioned in sub-paragraph (b) above.

4.   If, in relation to an application for transit by an entity, the Director
     has been requested to exercise his powers under Condition 2D and 3C, the
     Director may delay the exercise of his said powers until the terms have
     been considered by the body set up under Article 3.4 of the Directive and
     the Director may give such weight to the opinion (if any) of that body as
     he thinks fit in exercising his said powers.

                                      290
<PAGE>

Condition 5. Appointment of Compliance Officer
----------------------------------------------

1.   The Licensee shall no later than 31 May 2000 prepare a statement in a form
     approved by the Director setting out the practices, procedures and systems
     which the Licensee has adopted (or intends to adopt) to ensure its
     compliance with the Relevant Duties.

2.   The Licensee may periodically revise the information set out in and, with
     the approval of the Director, alter the form of the statement prepared in
     accordance with paragraph 1 and shall, at least once every year during
     which this Licence is in force, review such statement in order that the
     information set out therein shall continue to be accurate in all material
     respects.

3.   The Licensee shall send a copy of the statement prepared in accordance with
     paragraph 1, and of each revision of such statement in accordance with
     paragraph 2, to the Director.

4.   The Licensee shall, following consultation with the Director, appoint a
     competent person (who shall be known as the "Compliance Officer") for the
     purpose of facilitating compliance by the Licensee with the Relevant
     Duties.

5.   The Licensee shall at all times engage the services of the Compliance
     Officer for the performance of such duties and tasks as the Licensee
     considers it appropriate to assign to him for the purposes specified at
     paragraph 4, which duties and tasks shall include those set out at
     paragraph 8.

6.   The Licensee shall procure that the Compliance Officer:

     (a)  is provided with such staff, premises, equipment, facilities and other
          resources; and

     (b)  has such access to its premises, systems, information and
          documentation

                                      291
<PAGE>

     as, in each case, he might reasonably expect to require for the fulfilment
     of the duties and tasks assigned to him.

7.   The Licensee shall make available to the Compliance Officer a copy of any
     complaint or representation received by it from any person in respect of a
     matter arising under or by virtue of Part IV Conditions 8 or 8A or Part V
     Condition 9 or in relation to any of the practices, procedures and systems
     adopted by the Licensee in accordance with the statement referred to at
     paragraph 1.

8.   The duties and tasks assigned to the Compliance Officer shall include:

     (a)  providing relevant advice and information to the Licensee for the
          purpose of ensuring its compliance with the Relevant Duties;

     (b)  monitoring the effectiveness of the practices, procedures and systems
          adopted by the Licensee in accordance with the statement referred to
          at paragraph 1;

     (c)  investigating any complaint or representation made available to him in
          accordance with paragraph 7;

     (d)  recommending and advising upon the remedial action which any such
          investigation has demonstrated to be necessary or desirable;

     (e)  providing relevant advice and information to the Licensee for the
          purpose of ensuring its effective implementation of:

          (i)  the practices, procedures and systems adopted in accordance with
               the statement referred to at paragraph 1; and

          (ii) any remedial action recommended in accordance with sub-paragraph
               (d); and

                                      292
<PAGE>

     (f)  reporting annually to the directors of the Licensee - in respect of
          the year ending 31 December 2000 and of each subsequent year - as to
          his activities during the period covered by the report, including the
          fulfilment of the other duties and tasks assigned to him by the
          Licensee.

9.   As soon as is reasonably practicable following each annual report of the
     Compliance Officer, the Licensee shall produce a report:

     (a)  as to its compliance during the relevant year with the Relevant
          Duties; and

     (b)  as to its implementation of the practices, procedures and systems
          adopted in accordance with the statement referred to at paragraph 1.

10.  The report produced in accordance with paragraph 9 shall in particular:

     (a)  detail the activities of the Compliance Officer during the relevant
          year;

     (b)  refer to such other matters as are or may be appropriate in relation
          to the implementation of the practices, procedures and systems adopted
          in accordance with the statement referred to at paragraph 1; and

     (c)  set out the details of any investigations conducted by the Compliance
          Officer, including:

          (i)   the number, type and source of the complaints or representations
                on which such investigations were based;

          (ii)  the outcome of such investigations; and

          (iii) any remedial action taken by the Licensee following such
                investigations.

                                      293
<PAGE>

11.  The Licensee shall submit to the Director a copy of the report produced in
     accordance with paragraph 9, and shall give or send a copy of the report to
     any person who requests such a copy.

12.  In this Condition:

     "Relevant Duties"                     means the obligations set out in Part
                                           IV Conditions 8 and 8A and Part V
                                           Condition 9 and the terms and
                                           conditions of any directions issued
                                           pursuant to paragraph 9 of Part IV
                                           Condition 8A and paragraph 7 of Part
                                           V Condition 9.

                                      294
<PAGE>

SCHEDULE 1
----------

Authorised transmission area
----------------------------

1.   Scotland (except the area specified in the Electricity Act 1989 (North of
     Scotland Specified Area) Order 1990 made on 7 March 1990), the Cruachan
     Transmission Line, and the Dalmally Switching Station.

2.   In this Schedule:

     "the Cruachan Transmission Line"      means the double circuit 275 kV
                                           transmission line extending from the
                                           Cruachan Station Works, to the
                                           Dalmally Switching Station and
                                           thereafter to the Windyhill
                                           Substation together with all lattice
                                           towers, conductors, insulators,
                                           associated cables and connections,
                                           and all other items of plant or
                                           equipment making up or supporting
                                           said transmission line, with the
                                           benefit, subject to the applicable
                                           conditions therein, of all wayleaves
                                           and/or servitude rights relating
                                           thereto.

3.   Expressions used in the definition of the Cruachan Transmission Line which
     are defined in a transfer scheme shall have the same meaning in this
     Schedule as in such transfer scheme.

4.   If any part of the authorised transmission area is designated in a
     subsequent licence granted under Section 6(1)(b) of the Act, such part
     shall be excluded from the authorised transmission area.

                                      295
<PAGE>

SCHEDULE 2
----------

Authorised supply area
----------------------

1.   Scotland (except the area specified in The Electricity Act 1989 (North of
     Scotland Specified Area) Order 1990 made on 7 March 1990), the areas in the
     north of England supplied prior to 30 March 1990 by the South of Scotland
     Electricity Board and shown on the twelve boundary maps signed by
     representatives of South of Scotland Electricity Board, North Eastern
     Electricity Board and the North Western Electricity Board, and deposited
     with the Secretary of State for Scotland on 28 March 1990.

2.   In this Schedule "the twelve boundary maps" mean:

O.S. 1:50 000 Second Series, Sheet 80
O.S. 1:50 000 First Series, Sheets 74 + 75
O.S. NY 36 NW
O.S. NY 37 SW
O.S. NY 37 SE
O.S. NY 37 NE
O.S. NY 47 SW
O.S. NY 47 NW
O.S. NY 48 SE
O.S. NY 58 SW
O.S. NY 58 NW
O.S. NY 58 NE

3.   If any part of the authorised supply area is designated under a subsequent
     licence granted under Section 6(1)(c) of the Act, such part shall be
     excluded from the authorised supply area.

                                      296
<PAGE>

SCHEDULE 3
----------

Revocation
----------

1.   The Secretary of State may at any time revoke any of the licences granted
     by this Licence Document by not less than 30 days' notice in writing to the
     Licensee:

     (a)  if the Licensee agrees in writing with the Secretary of State that
          such licence should be revoked;

     (b)  if any amount payable under Condition 9 of Part II in relation to such
          licence is unpaid 30 days after it has become due and remains unpaid
          for a period of 14 days after the Secretary of State has given the
          Licensee notice that the payment is overdue provided that no such
          notice shall be given earlier than the sixteenth day after the day on
          which the amount payable became due;

     (c)  if the Licensee fails to comply with a final order (within the meaning
          of Section 25 of the Act) or with a provisional order (within the
          meaning of that Section which has been confirmed under that Section
          and which (in either case) has been made in respect of a contravention
          or apprehended contravention of a Condition to which such licence is
          subject or of any relevant requirement (within the meaning of that
          Section) imposed on the Licensee in its capacity as holder of such
          licence and (in either case) such failure is not rectified to the
          satisfaction of the Secretary of State within 3 months after the
          Secretary of State has given notice of such failure to the Licensee.
          Provided that no such notice shall be given by the Secretary of State
          before the expiration of the period within which an application under
          Section 27 of the Act could be made questioning the validity of the
          final or provisional order or before the proceedings relating to any
          such application are finally determined;

                                      297
<PAGE>

     (d)  if the Licensee fails to comply with any order made by the Secretary
          of State under Section 56, 73, 74 or 89 of the Fair Trading Act 1973
          or under Section 10(2)(a) of the Competition Act 1980;

     (e)  if any other licence granted by this Licence Document is revoked;

     (f)  if the Licensee:

          (i)   is unable to pay its debts (within the meaning of Section 123(1)
                or (2) of the Insolvency Act 1986, but subject to paragraph 3 of
                this Schedule) or if any voluntary arrangement is proposed in
                relation to it under Section 1 of that Act, or if it enters into
                any scheme of arrangement (other than for the purpose of
                reconstruction or amalgamation upon terms and within such period
                as may previously have been approved in writing by the Secretary
                of State);

          (ii)  has a receiver (which expression shall include an administrative
                receiver within the meaning of Section 251 of the Insolvency Act
                1986) of the whole or any material part of its assets or
                undertaking appointed;

          (iii) has an administration order under Section 8 of the Insolvency
                Act 1986 made in relation to it;

          (iv)  passes any resolution for winding-up other than a resolution
                previously approved in writing by the Secretary of State; or

          (v)   becomes subject to an order for winding-up by a court of
                competent jurisdiction; or

     (g)  if the Licensee is convicted of having committed an offence under
          Section 59 of the Act.

                                      298
<PAGE>

2.   The Secretary of State may at any time by not less than 30 days' notice in
     writing to the Licensee:

     (a)  revoke the Generation Licence if the Licensee ceases to carry on its
          business in generating electricity in pursuance of the Generation
          Licence;

     (b)  revoke the Transmission Licence if the Licensee ceases to carry on its
          business in the transmission of electricity; and

     (c)  revoke the Public Electricity Supply Licence if the Licensee ceases to
          carry on its business as a public electricity supplier.

3.   For the purposes of paragraph 1(f)(i) of this Schedule Section 123(1)(a) of
     the Insolvency Act 1986 shall have effect as if for "(Pounds)750" there was
     substituted "(Pounds)250,000" or such higher figure as the Director may
     from time to time determine by notice in writing to the Secretary of State
     and the Licensee.

4.   The Licensee shall not be deemed to be unable to pay its debts for the
     purposes of paragraph 1(f)(i) of this Schedule if any such demand as is
     mentioned in Section 123(1)(a) of the Insolvency Act 1986 is being
     contested in good faith by the Licensee with recourse to all appropriate
     measures and procedures or if any such demand is satisfied before the
     expiration of such period as may be stated in any notice given by the
     Secretary of State under paragraph 1 of this Schedule.

                                      299
<PAGE>

SCHEDULE 4
----------

Supplementary conditions in relation to England and Wales
---------------------------------------------------------

Definitions
-----------

1.   In this Schedule:

     "Ancillary Services"                      means:

                                               (a) such services as the Licensee
                                               may be required to have available
                                               in association with any E&W
                                               generation set pursuant to the
                                               England and Wales Grid Code and
                                               which may be offered for sale to
                                               the Transmission Company for the
                                               purpose of securing stability of
                                               operation on the Transmission
                                               Company's Transmission System and
                                               the system for the distribution
                                               of electricity of any Authorised
                                               Electricity Operator; and

                                               (b) such services as the Licensee
                                               may have agreed to have available
                                               in association with any E&W
                                               generation set pursuant to
                                               agreement made with the
                                               Transmission Company and which
                                               may be offered for sale to the
                                               Transmission Company for the
                                               purpose of securing stability of
                                               operation on the Transmission

                                      300
<PAGE>

                                                 Company's Transmission System
                                                 and the Distribution System of
                                                 any authorised electricity
                                                 operator.

     "England and Wales Distribution             means in relation to any
      Code"                                      England and Wales public
                                                 electricity supplier the
                                                 Distribution Code required to
                                                 be drawn up by such supplier
                                                 and approved by the Director as
                                                 from time to time revised with
                                                 the approval of the Director.

     "England and Wales Grid Code"               means the Grid Code required to
                                                 be drawn up by the Transmission
                                                 Company and approved by the
                                                 Director as from time to time
                                                 revised with the approval of
                                                 the Director.

     "England and Wales public electricity       means any public electricity
     supplier"                                   supplier who holds a licence
                                                 for an authorised area in
                                                 England and Wales.

     "E&W generation set"                        means a generation set in
                                                 England and Wales.

     "Fuel Security Code"                        means the document of that
                                                 title designated as such by the
                                                 Secretary of State as from time
                                                 to time amended.

                                      301
<PAGE>

Compliance with the England and Wales Grid Code
-----------------------------------------------

     2.   The Licensee shall comply with the provisions of the England and Wales
          Grid Code insofar as applicable to it.

     3.   The Director may (following consultation with the Transmission
          Company) issue directions relieving the Licensee of its obligation
          under paragraph 2 in respect of such parts of the England and Wales
          Grid Code and to such extent as may be specified in those directions.

Compliance with England and Wales Distribution Code
---------------------------------------------------

     4.   The Licensee shall comply with the provisions of the England and Wales
          Distribution Code of any England and Wales public electricity supplier
          insofar as applicable to it.

     5.   The Director may (following consultation with any England and Wales
          public electricity supplier directly affected thereby) issue
          directions relieving the Licensee of its obligation under paragraph 4
          in respect of such parts of the England and Wales Distribution Code of
          any England and Wales public electricity supplier and to such extent
          as may be specified in those directions.

Security Arrangements
---------------------

     6.   The Licensee shall comply with the provisions of the Fuel Security
          Code insofar as they relate to any generating station of the Licensee
          in England and Wales and such provisions shall have effect as if they
          were set out in the Generation Licence.

Ancillary Services
------------------

     7.   The Licensee shall from time to time upon request by the Transmission
          Company offer terms for the provision by the Licensee of Ancillary
          Services from any operating E&W generation set of the Licensee.

                                      302
<PAGE>

8.   The Licensee shall at any time upon request of the Director provide to the
     Director a report containing details of:

     (i)  prices offered pursuant to paragraph 7 for the provision of Ancillary
          Services from each E&W generation set of the Licensee; and

     (ii) an explanation of the factors justifying the prices offered including
          (without limitation) details of the Licensee's costs associated with
          making available such Ancillary Services in conformity with the
          England and Wales Grid Code and of providing the same to the
          Transmission Company.

Balancing and Settlement Code and NETA Implementation
-----------------------------------------------------

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

10.  The Licensee shall comply with the programme implementation scheme
     established in accordance with paragraph 11, as modified from time to time
     in accordance with paragraph 13.

11.  The programme implementation scheme shall be a scheme designated by the
     Secretary of State setting out the steps, including without limitation
     steps as to the matters referred to in paragraph 12, to be taken (or
     procured) by the Licensee (and/or by Authorised Electricity Operators)
     which are, in the Secretary of State's opinion, appropriate in order to
     give full and timely effect to:

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

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

                                      303
<PAGE>

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

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

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

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

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

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

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

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

     (g)  for the Director, in the circumstances set out in the scheme, to
          require that consideration be given to the making of a proposal to
          modify the BSC and, if so, to require the making of such proposal in
          the manner set out in the scheme, such power to be exercisable at any
          time within the period of 12 months after the Effective Time (as
          defined in paragraph 23).

13.  (a)  The Secretary of State may at any time direct, in accordance with the
          provisions of the programme implementation scheme, that the programme
          implementation scheme be modified in the manner set out

                                      304
<PAGE>

          in the direction, in order to give (or continue to give) full and
          timely effect to the matters described in paragraph 11.

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

14.  If there is any conflict between the requirements contained in the
     programme implementation scheme pursuant to paragraph 12(a) and imposed on
     the Licensee by paragraphs 10 and 13, and those imposed on the Licensee by
     any other Condition, Schedule or part thereof, the provisions of paragraph
     12(a) and paragraphs 10 and 13 shall prevail.

15.  Without prejudice to paragraph 10, the Licensee shall use all reasonable
     endeavours to do such things as may be requisite and necessary in order to
     give full and timely effect to the modifications made to this Licence as
     determined by the Secretary of State pursuant to the power vested in him
     under section 15A of the Act (and to give full and timely effect to the
     matters envisaged by such modifications).

16.  In paragraphs 9-17:

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

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

                                      305
<PAGE>

     "Core Industry Documents"               mean those documents which

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

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

17.  Paragraphs 9-16 or parts of them shall not come into effect until the date
     specified in a direction to that effect made pursuant to paragraph 1 of
     Condition 2A in Part II.

Change Co-ordination for NETA
-----------------------------

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

19.  In paragraph 18, Core Industry Documents has the meaning given in paragraph
     16.

20.  Paragraphs 18 and 19 or parts of them shall not come into effect until the
     date specified in a direction to that effect made pursuant to paragraph 1
     of Condition 2A in Part II.

                                      306
<PAGE>

Pooling and Settlement Agreement Run-off
----------------------------------------

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

22.  Paragraphs 21-23 shall apply to the extent that the Licensee was party to
     and a pool member under the Pooling and Settlement Agreement immediately
     prior to the Effective Time.

23.  In paragraphs 21-23:

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

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

24.  Paragraphs 21-23 or parts of them shall not come into effect until the date
     specified in a direction to that effect made pursuant to paragraph 1 of
     Condition 2A in Part II.

Central Despatch, Merit Order and Pooling and Settlement
--------------------------------------------------------

                                      307
<PAGE>

25.  The Licensee shall submit all available E&W generation sets forming part of
     a generating station in England and Wales which is capable of providing 100
     megawatts or more to the total system, to central despatch by the
     Transmission Company.

26.  The Licensee shall at such times and in such manner as may be provided
     under the England and Wales Grid Code provide the Transmission Company with
     all information in relation to such generating stations as are referred to
     in paragraph 25 reasonably required by it to enable it, in conformity with
     the conditions of the Transmission Company's Transmission Licence;

     (i) to operate the system of central despatch; and

     (ii) to operate the merit order system.

27.  The Licensee shall be party to and (from the date of commissioning of any
     generating station in England and Wales) be a pool member under, and shall
     in either case comply with, the provisions of the Pooling and Settlement
     Agreement insofar as the same shall apply to it in its capacity as a party
     to such agreement and/or as a pool member being a generator of electricity
     (as the case may be).

28.  In this Schedule:

     "available"                      means (a) available in accordance with
                                      the England and Wales Grid Code and (b)
                                      declared as available for the generation
                                      of electricity in accordance with the
                                      provisions of the Pooling and Settlement
                                      Agreement.

     "central despatch"               means the process of scheduling and
                                      issuing direct instructions for despatch

                                      308
<PAGE>

                                      of available E&W generation sets and
                                      interconnector transfers by the
                                      Transmission Company under the conditions
                                      of the Transmission Company's
                                      Transmission Licence.

     "interconectors"                 means the electric lines and electrical
                                      plant and meters owned or operated by the
                                      Transmission Company solely for the
                                      transfer of electricity to or from the
                                      Transmission Company's Transmission
                                      System into or out of England and Wales.

     "interconnector transfer"        means electricity generating capacity of
                                      an amount not exceeding the maximum
                                      capacity specified in any contract for
                                      use of the relevant interconnector as may
                                      at any time be available to generate
                                      electricity for transfer across the
                                      interconnector to the total system.

     "merit order system"             means a system establishing economic
                                      precedence of electricity from available
                                      E&W generation sets or interconnector
                                      transfers to be delivered or transferred
                                      to the total system (subject to other
                                      system needs).

     "total system"                   means the systems for the transmission
                                      and distribution of

                                      309
<PAGE>

                                      electricity of all Authorised Electricity
                                      Operators which are located in England
                                      and/or Wales

     "Transmission Company's          means the licence issued to the
     Transmission Licence"            Transmission Company under Section
                                      6(1)(b) of the Act as from time to time
                                      amended.

29.  The Supplementary Conditions in this Schedule or parts of them shall cease
     to have effect on the date specified in a direction to that effect made
     pursuant to paragraph 4 of Condition 2A in Part II.

                                      310
<PAGE>

SCHEDULE 5
----------

Transmission charge restriction conditions
-----------------------------------------

1.   Definitions
     -----------

1.1  In this Schedule:
     "average charge per regulated unit       means the regulated transmission
     transmitted"                             revenue in the relevant year
                                              divided by the regulated quantity
                                              transmitted in that year.

     "average specified rate"                 means the average of the daily
                                              base rates of Governor and Company
                                              of the Bank of Scotland (or such
                                              other bank as the Director shall
                                              specify from time to time) current
                                              from time to time during the
                                              period in respect of which the
                                              calculation falls to be made.

     "excluded services"                      means those services provided as
                                              part of the Transmission Business
                                              which in accordance with the
                                              principles set out in paragraph 5
                                              fall to be treated as excluded
                                              services.

     "maximum average charge per unit         means the charge calculated in
     transmitted"                             in accordance with the formula in
                                              paragraph 2.1.

     "metered"                                means in relation to any quantity
                                              transmitted, as measured by a
                                              meter installed for such purpose
                                              or (where no such meter is
                                              installed) as otherwise reasonably
                                              calculated.

                                      311
<PAGE>

     "notified value"                        means, in relation to any term,
                                             such value as the Secretary of
                                             State shall ascribe to that term in
                                             a written notice given to the
                                             licensee as soon as practicable
                                             after the date of grant of this
                                             Licence Document.

     "regulated quantity transmitted"        means the aggregate quantity of
                                             units transmitted through the
                                             licensee's transmission system in
                                             that relevant year metered at exit
                                             points on leaving the licensee's
                                             transmission system.

     "regulated transmission revenue"        means the revenue (measured on an
                                             accruals basis) derived from the
                                             provision of transmission services
                                             (including to any Separate
                                             Business, other than the
                                             Transmission Business) in the
                                             relevant year, after deduction of
                                             value added tax (if any) and any
                                             other taxes based directly on the
                                             amounts so derived.

     "relevant entity"                       means any affiliate or related
                                             undertaking of the licensee.

     "regulated unit transmitted"            means any unit within the regulated
                                             quantity transmitted.

     "relevant year"                         means a financial year commencing
                                             on or after 1 April 1990.

     "relevant year t"                       means that relevant year for the
                                             purposes of which any calculation
                                             falls to be made; "relevant year t-
                                             1" means the relevant year
                                             preceding relevant year t or, in
                                             respect of the period prior to 1
                                             April 1990, the period of 12
                                             calendar months commencing on 1
                                             April 1989; and similar expressions
                                             shall be construed accordingly.

                                      312
<PAGE>

     "transmission charge restriction      means this Schedule as from time to
      conditions                           time modified or replaced in
                                           accordance therewith or pursuant to
                                           Section 11, 14 or 15 of the Act.

     "transmission services"               means all services provided as part
                                           of the Transmission Business other
                                           than excluded services.

     "unit"                                means a kilowatt hour.

2.    Initial restriction of transmission charges
      -------------------------------------------

      Basic Formula
      -------------

2.1  Without prejudice to paragraph 6 the licensee shall in setting its charges
     for the provision of transmission services use its best endeavours to
     secure that in any relevant year the average charge per regulated unit
     transmitted shall not exceed the maximum average charge per unit
     transmitted calculated in accordance with the following formula:

               Tt = [1+ RPIt - XT] Pt-1 - KTt
                      -----------
                              100
          where:

        Tt      means the maximum average charge per regulated unit transmitted
                in relevant year t.

        RPIt    means the arithmetic mean of the percentage change (whether of a
                positive or a negative value) in the Retail Price Index between
                that published or determined with respect to each of the months
                from July to December (both inclusive) in relevant year t-1 and
                that published or determined with respect to the same months in
                the relevant year t-2 but in relation to the relevant year
                commencing on 1 April 1994 shall have a value equal to 2.5;

        XT      means 0.

                                      313
<PAGE>

     Pt-1      means that amount per regulated unit transmitted in relevant
               year t-1 which is derived from the following formula:

                                    Pt-1 = Pt-2 [ 1+ RPIt-1 - XT]
                                                     ------------
                                                     100

               but, in relation to the relevant year commencing on 1 April 1994
               Pt-1 shall have a value equal to 0.348p, and in relation to
               the relevant year commencing on 1 April 1995 Pt-2 shall have
               that value.

      KTt      means the correction factor per regulated unit (whether of a
               positive or negative value) to be applied to the average price
               per regulated unit transmitted in relevant year t (other than in
               the first relevant year and subject to paragraph 3.3) which is
               derived from the following formula.

               KTt = Q t-1(Ct-1 - Tt-1)(1 + It )
                          -------------     __
                               Qt              100
   where:

      Qt-1     means the regulated quantity transmitted in relevant year t-1,
               but in relation to the relevant year commencing on 1 April 1995
               and each of the four succeeding relevant years shall have the
               value specified opposite the preceding relevant year in Table 1
               below.

      Ct-1     means the average charge per regulated unit transmitted in
               relevant year   t-1.

     Tt-1      means the maximum average charge per unit transmitted in
               relevant year t-1.

                                      314
<PAGE>

          Qt  means the regulated quantity transmitted in relevant year t, but
               in relation to the relevant year commencing on 1 April 1994 and
               each of the five succeeding relevant years shall have the value
               specified opposite that relevant year in Table 1 below.

     Relevant Year Commencing             Regulated Quantity
          1 April                         Transmitted
                                          (Gigawatt hours)

           1994                           26051
           1995                           26893
           1996                           29040
           1997                           29311
           1998                           30399
           1999                           30399

               It means that interest rate in relevant year t which is equal to,
               where KTt (taking no account of I for this purpose) has a
               positive value and Ct-1 exceeds Tt-l by more than 2 per cent, the
               average specified rate plus 4 or, where KTt (taking no account of
               I for this purpose) has a negative value, or Ct-1 does not exceed
               Tt-1 by more than 2 per cent the average specified rate.

                                      315
<PAGE>

3.   Restriction of transmission charges: adjustments
     ------------------------------------------------

3.1  If,  in respect of any relevant year,  the average charge per regulated
     unit transmitted exceeds the maximum average charge per unit transmitted by
     more than 3 per cent of the latter, the licensee shall furnish an
     explanation to the Director and in the next following relevant year the
     licensee shall not effect any increase in charges for the provision of
     transmission services the revenue from which is regulated under this
     Schedule  unless it  has  demonstrated  to  the  reasonable satisfaction of
     the Director that the average charge per regulated unit transmitted would
     not be likely to exceed the maximum average charge per unit transmitted in
     that next following relevant year.

3.2  If, in respect of any 2 successive relevant years, the sum of the amounts
     by which the average charge per regulated unit transmitted has exceeded the
     maximum average charge per unit transmitted is more than 4 per cent of the
     maximum average charge per unit transmitted for the second of these
     relevant years, then in the next following relevant year the licensee
     shall, if required by the Director, adjust its charges for the provision of
     transmission services the revenue from which is regulated under this
     Schedule such that the average charge per regulated unit transmitted would
     not be likely, in the judgment of the Director, to exceed the maximum
     average charge per unit transmitted in that next following relevant year.

3.3  If, in respect of any 2 successive relevant years,  the average charge per
     regulated unit transmitted is less than 90 per cent of the maximum average
     charge per unit  transmitted,  the  Director,  after consultation with the
     licensee, may direct that in calculating K//Tt// in respect of the next
     following relevant year, there shall be substituted for C\\t-1\\ in the
     formula set out in paragraph 2.1 such figure as the Director may specify
     being not less than C\\t-1\\ and not more than 0.90 (T\\t-1\\).
<PAGE>

4.   Information to be provided to the Director in connection with the
     -----------------------------------------------------------------
     transmission charge restriction conditions
     ------------------------------------------

4.1  Where any change is intended to be made in charges for the provision of
     transmission services the revenue from which is regulated under this
     Schedule , the licensee shall not later than the time of publication of
     such change provide the Director with:

     (i)  a written forecast of the maximum average charge per unit transmitted,
          together with its components, in respect of the relevant year t in
          which such change is to take effect and in respect of the next
          following relevant year t+1;

     (ii) a written estimate of the maximum average charge per unit transmitted,
          together with its components, in respect of the relevant year t-1
          immediately preceding the relevant year in which the change is to take
          effect unless a statement complying with paragraph 4.5 in respect of
          relevant year t-l has been furnished by the licensee to the Director
          before the publication of the proposed change.

4.2  If within 3 months of the commencement of any relevant year t the licensee
     has not made any such change in charges as is referred to in paragraph 4.1,
     the licensee shall provide the Director with a written forecast of the
     maximum average charge per unit transmitted together with its components,
     in respect of relevant year t.

4.3  Any forecast or estimate provided in accordance with paragraph 4.1 or 4.2
     shall  be accompanied by  such information as  regards  the assumptions
     underlying the forecast or estimate as may be necessary to enable the
     Director to be satisfied that the forecast or estimate has been properly
     prepared on a consistent basis.

4.4  Not later than 6 weeks after the commencement of each relevant year t, the
     licensee shall send to the Director a statement as to:

                                      317
<PAGE>

     (a)  whether or not the provisions of paragraph 3 are likely to be
          applicable in consequence of the average charge per regulated unit
          transmitted in the preceding relevant year t-1 or the 2 preceding
          relevant years t-1 and t-2; and

     (b)  its best estimate as to the relevant correction factor K\\Tt\\
          calculated in accordance with the formula set out in paragraph 2 to be
          applied in calculating the maximum average charge per unit transmitted
          in respect of relevant year t.

4.5  Not later than 3 months after the end of each relevant year the licensee
     shall send to the Director a statement, in respect of that relevant year,
     showing the specified items referred to in paragraph 4.7.

4.6  The statement referred to in the preceding paragraph shall be:

     (a)  accompanied by a report from the Auditors that in their opinion such
          statement fairly presents each of the specified items in accordance
          with the requirements of the transmission charge restriction
          conditions and that the amounts shown in respect of each of the
          specified items are in accordance with the accounting records which
          have been maintained in accordance with Condition 3 of Part II; and

     (b)  certified by a director of the licensee on behalf of the licensee that
          to the best of his knowledge, information and belief after having made
          all reasonable enquiries:

          (i)  there is no amount included in its calculations under paragraph 2
               which represents other than bona fide consideration for the
               provision of transmission services the revenue from which is
               regulated under this Schedule;

          (ii) no service has been treated as an excluded service other than a
               service permitted to be so treated in accordance with paragraph
               5;

                                      318
<PAGE>

          (iii) no amount included in the revenues stated in respect of excluded
                services represents other than bona fide consideration for the
                provision of the excluded service to which it relates.

4.7  The specified items to be shown in the statement referred to in paragraph
     4.5 shall be the following:

     (a)  the regulated quantity transmitted;

     (b)  the average charge per regulated unit transmitted;

     (c)  the regulated transmission revenue;

     (d)  the nature of all services provided as part of the Transmission
          Business and treated as excluded services, together with a statement
          of the revenues derived from each service so treated;

     (e)  [deleted]

     (f)  [deleted]

     (g)  the details referred to in paragraph 6.5; and

     (h)  such other items as shall be specified in directions issued by the
          Director for the purposes of this Schedule.

4.8  Where the Director issues directions under paragraph 5.6,  the licensee
     shall, if so required by the Director and within such period as the
     Director shall specify, send to the Director a revised statement in
     substitution for the licensee's statement under paragraph 4.5 in respect of
     the relevant year in question and such revised statement shall give effect
     to such directions.

                                      319
<PAGE>

5.   Excluded services for purposes of Transmission Business
     -------------------------------------------------------

5.1  Subject to paragraph 5.6, there may be treated as excluded services
     provided by the Transmission Business such services in respect of which
     charges are made:

     (a)  which fall within paragraph 5.5A; or

     (b)  which:

          (i)    do not fall within paragraph 5.2; and

          (ii)   may be determined by the licensee as falling under one of the
                 principles set out in paragraphs 5.3 to 5.5.

5.2  No service provided as part of the Transmission Business shall be treated
     as an excluded service insofar as it relates to the provision of services
     remunerated under use of system charges in accordance with Condition 2 of
     Part VI including (without prejudice to the foregoing):

          (i)    the transport of electricity;

          (ii)   the carrying out of works for the installation of electric
                 lines or electrical plant (not otherwise payable in the form of
                 connection charges) for the purpose of maintaining or upgrading
                 the licensee's transmission system;

          (iii)  the carrying out of works or the provision of maintenance or
                 repair or other services for the purpose of enabling the
                 licensee to comply with Conditions 3 and 4 of Part IV, the
                 Electricity Supply Regulations 1988 or any regulations made
                 under Section 29 of the Act or any other enactment relating to
                 safety or standards applicable in respect of the Transmission
                 Business; and

                                      320
<PAGE>

          (iv)   the provision, installation and maintenance of any meters,
                 switchgear or other electrical plant ancillary to the grant of
                 use of system.

5.3  The whole or an appropriate proportion (as the case may be) of the charges
     of the type described in paragraph 7 of Condition 2 of Part VI and borne by
     any person as connection charges in respect of connections made after the
     grant of this Licence Document may be treated as excluded services.

5.4  There may be treated as an excluded service charges for the relocation of
     electric lines or electrical plant and the carrying out of works associated
     therewith pursuant to a statutory obligation (other than under Section 9(2)
     of the Act) imposed on the licensee.

5.5  There may with the approval of the Director be treated as an excluded
     service any service of a type not above referred to which:

     (a)  consists in the provision of services for the specific benefit of a
          third party requesting the same; and

     (b)  is not made available as a normal part of the Transmission Business
          remunerated by use of system charges.

5.5A Services may be regarded as excluded services where the charges are:

     (a)  to SHE for the provision of capacity for transferring electricity from
          its authorized transmission area to the Scottish interconnection;

     (b)  to SHE for the provision of capacity for transferring electricity
          across any part of the Scottish interconnection apart from any
          Upgrade;

     (c)  made for the provision of capacity for transferring electricity across
          any part of any Upgrade;

                                      321
<PAGE>

     (d)  to British Nuclear Fuels Limited for use of system for electricity
          which British Nuclear Fuels Limited delivers to the Licensee's
          transmission system at Chapelcross in accordance with the specified
          agreement referred to in paragraph 5(a)(iv) of Condition 7 of Part II;
          and

     (e)  made for the provision of capacity for transferring electricity across
          any interconnection between Scotland and Northern Ireland.

5.6  Where the Director is satisfied that in light of the principles set out in
     paragraphs 5.3 to 5.5A inclusive any service treated as being or not being
     an excluded service should not be so treated, the Director shall issue
     directions to that effect, and such service shall cease to be treated as an
     excluded service with effect from the date of issue of such directions or
     such earlier date (being not earlier than the commencement of the relevant
     year to which the statement last furnished to the Director pursuant to
     paragraph 4.5 prior to issue of such directions related, unless such
     statement or the accompanying report or certificate referred to in
     paragraph 4.6 or any earlier such statement, report or certificate was
     incorrect or misleading in any material respect) as may be specified in the
     directions.

5.7  For the purpose of this paragraph "Scottish interconnection", and "Upgrade"
     have the meaning given in Condition 3.13 of Part VI.

6.   Allowances in respect of security costs
     ---------------------------------------

6.1  At any time during a security period, the licensee may give notice in
     writing to the Director suspending, with effect from the date of receipt of
     the notice by the Director, application of such of the transmission charge
     restriction conditions as may be specified in the notice, for the unexpired
     term of the security period.

6.2  At any time during a security period, the Director may (having regard to
     his duties under the Act) by means of directions:

                                      322
<PAGE>

     (a)  suspend or modify for the unexpired term of the security period the
          transmission charge restriction conditions or any part or parts
          thereof; or

     (b)  introduce for the unexpired term of the security period new
          transmission charge restriction conditions

     in either case, so as to make such provision as in the opinion or
     estimation of the Director is requisite or appropriate to enable the
     licensee to recover by means of a uniform percentage increase on all
     charges made in the course of the Transmission Business an amount estimated
     as being equal to the licensee's allowed transmission-related security
     costs during such period, and the licensee shall comply with the terms of
     the directions so issued.

6.3  Subject to paragraphs 6.4 and 6.6, the licensee shall in any relevant year
     be entitled to recover an aggregate amount equal to the licensee's allowed
     transmission-related security costs in that year or (insofar as not
     previously recovered) any previous year, by means of appropriate equitable
     increases in the charges made by the licensee in the course of the
     Transmission Business.

6.4  Paragraph 6.3 shall not apply insofar as such licensee's allowed
     transmission-related security costs:

     (a)  were otherwise recovered by the licensee; or

     (b)  were taken into account by the Director in setting charge restriction
          conditions by means of directions issued under paragraph 6.2.

6.5  The licensee shall following the end of each relevant year provide to the
     Director details in respect of that relevant year of:

     (a)  the aggregate amounts charged under paragraph 6.3 on account of the
          licensee's allowed transmission-related security costs; and

                                      323
<PAGE>

     (b)  the bases and calculations underlying the increases in charges made by
          the licensee in the course of the Transmission Business.

6.6  Where the Director is satisfied that the licensee has recovered amounts in
     excess of the licensee's allowed transmission-related security costs, the
     Director may issue directions requiring the licensee to take such steps as
     may be specified to reimburse customers of the Transmission Business for
     the excess amounts charged to them, and the licensee shall comply with any
     directions so issued.

6.7  No amounts charged by the licensee under this paragraph 6 (whether or not
     subsequently required to be reimbursed) shall be taken into account for the
     purpose of applying the transmission charge restriction provisions of
     paragraph 2.1.

6.8  In this paragraph 6:

     "licensee's allowed transmission      means any cost allowed by the
     related security costs"               Director(uponreceipt of such
                                           information, including a certificate
                                           from the Auditors, as the Director
                                           may request) as being a cost which is
                                           directly attributable to any action
                                           taken or omitted to be taken by the
                                           licensee in its capacity as holder of
                                           the transmission licence for the
                                           purpose of complying with directions
                                           issued by the Secretary of State
                                           under Section 34(4) of the Act.

7.   [no longer used]

                                      324
<PAGE>

Schedule 5A
-----------

Transmission charge restriction conditions
------------------------------------------

1.   Definitions
     -----------

1.1  In this Schedule:

     "average charge per regulated           means the regulated transmission
     unit transmitted"                       revenue in the relevant year
     by                                      divided the regulated quantity
                                             transmitted in that year.

     "average specified rate"                means the average of the daily base
                                             rates of Governor and Company of
                                             the Bank of Scotland (or such other
                                             bank as the Director shall specify
                                             from time to time) current from
                                             time to time during the period in
                                             respect of which the calculation
                                             falls to be made.

     "excluded services"                     means those services provided as
                                             part of the Transmission Business
                                             which in accordance with the
                                             principles set out in paragraph 5
                                             fall to be treated as excluded
                                             services.

     "maximum average charge                 means the maximum average
     per regulated unit transmitted"         charge per regulated unit
                                             transmitted by the Licensee for
                                             relevant year commencing on 1 April
                                             1999 calculated in accordance with
                                             the formula in paragraph 2.1 of
                                             Schedule

                                      325
<PAGE>

                                             5 of the Licensee's licence in
                                             force (or deemed to be in force) as
                                             at 31 March 2000.

     "maximum regulated                      means the maximum regulated
     transmission revenue"                   transmission revenue of the
                                             Licensee calculated in accordance
                                             with the formula contained in
                                             paragraph 2.

     "metered"                               means in relation to any quantity
                                             of units of electricity
                                             transmitted, as measured by a meter
                                             installed for such purposes or
                                             (where no such meter is installed)
                                             as otherwise reasonably calculated.

     "notified value"                        means, in relation to any term,
                                             such value as the Secretary of
                                             State shall ascribe to that term in
                                             a written notice given to the
                                             Licensee as soon as practicable
                                             after the date of grant of this
                                             Licence Document.

     "regulated quantity transmitted"        means the aggregate quantity of
                                             units transmitted through the
                                             Licensee's transmission system in
                                             that relevant year metered at exit
                                             points on leaving the Licensee's
                                             transmission system.

     "regulated transmission revenue"        means the revenue (measured on an
                                             accruals basis) derived from the
                                             provision of transmission services
                                             (including to any Separate Business
                                             other than the Transmission

                                      326
<PAGE>

                                             Business) in the relevant year,
                                             after deduction of value added tax
                                             (if any) and any other taxes based
                                             directly on the amounts so derived.

     "regulated unit transmitted"            means any unit within the regulated
     transmitted.                            quantity

     "relevant entity"                       means any affiliate or related
                                             undertaking of the Licensee.

     "relevant year"                         means a year commencing on 1 April.

     "relevant year t"                       means that relevant year for the
                                             purposes of which any calculation
                                             falls to be made.

     "relevant year t-1"                     means the relevant year preceding
                                             relevant year t and similar
                                             expressions shall be construed
                                             accordingly.

     "transmission charge restriction        means the Conditions in this
                                             Schedule
     conditions"                             (which is part of Schedule 5) as
                                             from time to time modified or
                                             replaced in accordance therewith or
                                             pursuant to Section 11, 14 or 15 of
                                             the Act.

     "transmission services"                 means all services provided as part
                                             of the Transmission Business other
                                             than excluded services.

     "unit"                                  means a kilowatt hour.

                                      327
<PAGE>

2.   Initial restriction of transmission charges
     -------------------------------------------

     Basic Formula
     -------------

     Without prejudice to paragraph 6 the Licensee shall in setting its charges
     for the provision of transmission services use its best endeavours to
     secure that in any relevant year the regulated transmission revenue shall
     not exceed the maximum regulated transmission revenue calculated in
     accordance with the following formula:

          TR\\t\\ = R\\t\\ - KK\\Tt\\

          where:

          TR\\t\\  means the maximum regulated transmission revenue in relevant
                   year t; and

          R\\t\\  in relation to the relevant year commencing 1 April 2000,
                  shall have a value equal to (Pounds)114.36 million and in
                  relation to any subsequent relevant year the value of it shall
                  be derived from the following formula:

                    R\\t\\ = R\\t-1\\ [ 1+ RP\\IT\\-\\X\\T]
                                           ----------------
                                                     /100/
                  where

                   RPI\\t\\   means the percentage change (whether of a positive
                              or a negative value) in the arithmetic average of
                              the Retail Price Index figures published or
                              determined with respect to each of the six months
                              July to December (inclusive) in relevant year t-1
                              and the arithmetic average of the Retail Price
                              Index figures published or determined with respect
                              to the same months in relevant year t-2.

                                      328
<PAGE>

                      X\\T\\  means 0.

          KK\\Tt\\    means the correction factor (whether of a positive or
                      negative value) to be applied to the regulated
                      transmission revenue in relevant year t (subject to
                      paragraph 3.3) which factor is to be derived as follows:

                      (a)  in the relevant year commencing 1 April 2000:
<TABLE>
<S>                        <C>
                      KK\\Tt\\ = Q\\t-1\\ x (C\\t-1\\-T\\t-1\\ ) x (1+ IR/t/)
                                 --------                              -----
                                    100                                 100
</TABLE>

                      where

                      C\\t-1\\  means the average charge per regulated unit
                                transmitted in relevant year commencing 1 April
                                1999.

                      IR\\t\\   means that interest rate which is equal to,
                                where KK\\Tt\\ in relevant year commencing 1
                                April 2000 (taking no account of IR for this
                                purpose) has a positive value and C\\t-1\\
                                exceeds T\\t-l\\ by more than 2 per cent, the
                                average specified rate plus 4 or, where KK\\Tt\\
                                in that relevant year commencing 1 April 2000
                                (taking no account of IR for this purpose) has a
                                negative value and C\\t-1\\ does not exceed T\\
                                t-1\\ by more than 2 per cent, the average
                                specified rate.

                      Q\\t-1\\  has the value 30,399 (which represents the
                                regulated quantity transmitted (expressed in
                                GWh) by the Licensee in relevant year commencing
                                1 April 1999).

                      T\\t-1\\  means the maximum average charge per regulated
                                unit transmitted in relevant year commencing 1
                                April 1999; as determined in accordance with
                                Schedule 5 of the form of Licensee's licence in
                                force as at 31 March 2000; and

                                      329
<PAGE>

               (b)       in subsequent relevant years Kdt is to be derived from
                         the following formula:

               KK\\Tt\\ =(CR\\t-1\\ - TR\\t-1\\ )(1+/It/)
                                                    ----
                                                     100

               where:

               CR\\t-1\\ means the regulated transmission revenue in relevant
                         year t-1.

               TR\\t-1\\ means the maximum regulated transmission revenue in
                         relevant year t-1.

               I\\t\\    means that interest rate in relevant year t which is
                         equal to, where KK\\Tt\\ (taking no account of I for
                         this purpose) has a positive value and CR\\t-1\\
                         exceeds TR\\t-l\\ by more than 2 per cent, the average
                         specified rate plus 4 or, where KK\\Tt\\ (taking no
                         account of I for this purpose) has a negative value and
                         CR\\t-1\\ does not exceed TR\\t-1\\ by more than 2 per
                         cent, the average specified rate.

                                      330
<PAGE>

3.   Restriction of transmission charges: adjustments
     ------------------------------------------------

3.1  If, in respect of any relevant year, the regulated transmission revenue
     exceeds the maximum regulated transmission revenue by more than 3 per cent
     of the latter, the Licensee shall furnish an explanation to the Director
     and in the next following relevant year the Licensee shall not effect any
     increase in charges for the provision of transmission services, the revenue
     from which is regulated under the Conditions in this Schedule, unless it
     has demonstrated to the reasonable satisfaction of the Director that the
     regulated transmission revenue in that next following relevant year would
     not be likely to exceed the maximum regulated transmission revenue in that
     same relevant year.

3.2  If, in respect of any 2 successive relevant years, the sum of the amounts
     by which the regulated transmission revenue has exceeded the maximum
     regulated transmission revenue is more than 4 per cent of the maximum
     regulated transmission revenue for the second of these relevant years, then
     in the next following relevant year the Licensee shall, if required by the
     Director, adjust its charges for the provision of transmission services,
     the revenue from which is regulated under this Schedule, such that the
     regulated transmission revenue would not be likely, in the judgment of the
     Director, to exceed the maximum regulated transmission revenue in that next
     following relevant year.

3.3  If, in respect of any 2 successive relevant years, the regulated
     transmission revenue is less than 90 per cent of the maximum regulated
     transmission revenue, the Director, after consultation with the Licensee,
     may direct that in calculating KKTt in respect of the next following
     relevant year, there shall be substituted for CRt-1 in the formula set out
     in paragraph 2.1 such figure as the Director may specify being not less
     than CRt-1 and not more than 0.90 (TRt-1).

                                      331
<PAGE>

4.   Information to be provided to the Director in connection with the
     -----------------------------------------------------------------
     transmission charge restriction conditions
     ------------------------------------------

4.1  Where any change is intended to be made in charges for the provision of
     transmission services the revenue from which is regulated under this
     Schedule, the Licensee shall not later than the time of publication of such
     change provide the Director with:

     (i)  a written forecast of the maximum regulated transmission revenue,
          together with its components, in respect of the relevant year t in
          which such change is to take effect and in respect of the next
          following relevant year t+1; and

     (ii) a written estimate of the maximum regulated transmission revenue,
          together with its components, in respect of the relevant year t-1
          immediately preceding the relevant year in which the change is to take
          effect unless a statement complying with the requirements of paragraph
          4.5 in respect of relevant year t-l has been furnished by the Licensee
          to the Director before the publication of the proposed change.

4.2  If within 3 months of the commencement of any relevant year t the Licensee
     has not made any such change in charges as is referred to in paragraph 4.1,
     the Licensee shall provide the Director with a written forecast of the
     maximum regulated transmission revenue together with its components, in
     respect of relevant year t.

4.3  Any forecast or estimate provided in accordance with paragraph 4.1 or 4.2
     shall be accompanied by such information as regards the assumptions
     underlying the forecast or estimate as may be necessary to enable the
     Director to be satisfied that the forecast or estimate has been properly
     prepared on a consistent basis.

4.4  Not later than 6 weeks after the commencement of each relevant year t, the
     Licensee shall send to the Director a statement as to:

                                      332
<PAGE>

     (a)  whether or not the provisions of paragraph 3 are likely to be
          applicable in consequence of the regulated transmission revenue in the
          preceding relevant year t-1 or the 2 preceding relevant years t-1 and
          t-2; and

     (b)  its best estimate as to the relevant correction factor KKTt calculated
          in accordance with the formula set out in paragraph 2 to be applied in
          calculating the maximum regulated transmission revenue in respect of
          relevant year t.

4.5  Not later than 3 months after the end of each relevant year the Licensee
     shall send to the Director a statement, in respect of that relevant year,
     showing the specified items referred to in paragraph 4.7.

4.6  The statement referred to in the preceding paragraph shall be:

     (a)  accompanied by a report from the Auditors that in their opinion such
          statement fairly presents each of the specified items in accordance
          with the requirements of the transmission charge restriction
          conditions and that the amounts shown in respect of each of the
          specified items are in accordance with the accounting records which
          have been maintained in accordance with Condition 3 of Part II; and

     (b)  certified by a director of the Licensee on behalf of the Licensee that
          to the best of his knowledge, information and belief after having made
          all reasonable inquiries:

          (i)  there is no amount included in its calculations under paragraph 2
               which represents other than bona fide consideration for the
               provision of transmission services the revenue from which is
               regulated under this Schedule;

          (ii) no service has been treated as an excluded service other than a
               service permitted to be so treated in accordance with paragraph
               5;

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<PAGE>

          (iii) no amount included in the revenues stated in respect of excluded
                services represents other than bona fide consideration for the
                provision of the excluded service to which it relates.

4.7  The specified items to be shown in the statement referred to in paragraph
     4.5 shall be the following:

     (a)  the regulated quantity transmitted;

     (b)  [no longer used]

     (c)  the regulated transmission revenue;

     (d)  the nature of all services provided as part of the Transmission
          Business and treated as excluded services, together with a statement
          of the revenues derived from each service so treated;

     (e)  [no longer used]

     (f)  [no longer used]

     (g)  the details referred to in paragraph 6.5; and

     (h)  such other items as shall be specified in directions issued by the
          Director for the purposes of this Schedule.

4.8  Where the Director issues directions under paragraph 5.6, the Licensee
     shall, if so required by the Director and within such period as the
     Director shall specify, send to the Director a revised statement in
     substitution for the Licensee's statement under paragraph 4.5 in respect of
     the relevant year in question and such revised statement shall give effect
     to such directions.

                                      334
<PAGE>

5.   Excluded services for purposes of Transmission Business
     -------------------------------------------------------

5.1  Subject to paragraph 5.6, there may be treated as excluded services
     provided by the Transmission Business such services in respect of which
     charges are made:

     (a)  which fall within paragraph 5.5A; or

     (b)  which:

          (i)   do not fall within paragraph 5.2; and

          (ii)  may be determined by the Licensee as falling under one of the
                principles set out in paragraphs 5.3 to 5.5.

5.2  No service provided as part of the Transmission Business shall be treated
     as an excluded service insofar as it relates to the provision of services
     remunerated under use of system charges in accordance with Condition 2 of
     Part VI including (without prejudice to the foregoing):

          (i)   the transport of electricity;

          (ii)  the carrying out of works for the installation of electric lines
                or electrical plant (not otherwise payable in the form of
                connection charges) for the purpose of maintaining or upgrading
                the Licensee's transmission system;

          (iii) the carrying out of works or the provision of maintenance or
                repair or other services for the purpose of enabling the
                Licensee to comply with Conditions 3 and 4 of Part IV, the
                Electricity Supply Regulations 1988 or any regulations made
                under Section 29 of the Act or any other enactment relating to
                safety or standards applicable in respect of the Transmission
                Business; and

                                      335
<PAGE>

          (iv)  the provision, installation and maintenance of any meters,
                switchgear or other electrical plant ancillary to the grant of
                use of system.

5.3  The whole or an appropriate proportion (as the case may be) of the charges
     of the type described in paragraph 10 of Condition 2 of Part VI and borne
     by any person as connection charges in respect of connections made after
     the grant of this Licence Document may be treated as excluded services.

5.4  There may be treated as an excluded service charges for the relocation of
     electric lines or electrical plant and the carrying out of works associated
     therewith pursuant to a statutory obligation (other than under Section 9(2)
     of the Act) imposed on the Licensee.

5.5  There may with the approval of the Director be treated as an excluded
     service any service of a type not above referred to which:

     (a)  consists in the provision of services for the specific benefit of a
          third party requesting the same; and

     (b)  is not made available as a normal part of the Transmission Business
          remunerated by use of system charges.

5.5A Services may be regarded as excluded services where the charges are:

     (a)  the rental for Transmission Business assets hosting fibre-optic
          telecommunications systems and used by third parties;

     (b)  made for the provision of capacity for transferring electricity across
          any part of any Upgrade;

     (c)  to SHE for the provision of capacity for transferring electricity from
          its authorized transmission area to the Scottish interconnection;

                                      336
<PAGE>

     (d)  to SHE for the provision of capacity for transferring electricity
          across any part of the Scottish interconnection apart from any
          Upgrade;

     (e)  made for the provision of capacity for transferring electricity across
          any interconnection between Scotland and Northern Ireland.

5.6  Where the Director is satisfied that, in light of the principles set out in
     paragraphs 5.3 to 5.5A inclusive, any service treated as being or not being
     an excluded service should not be so treated, the Director shall issue
     directions to that effect, and such service shall cease to be treated as an
     excluded service with effect from the date of issue of such directions or
     such earlier date (being not earlier than the commencement of the relevant
     year to which the statement last furnished to the Director pursuant to
     paragraph 4.5 prior to issue of such directions related, unless such
     statement or the accompanying report or certificate referred to in
     paragraph 4.6 or any earlier such statement, report or certificate was
     incorrect or misleading in any material respect) as may be specified in the
     directions.

5.7  For the purpose of this paragraph "Scottish interconnection", and "Upgrade"
     have the meaning given in Condition 3.13 of Part VI.

                                      337
<PAGE>

6.   Allowances in respect of security costs
     ---------------------------------------

6.1  At any time during a security period, the Licensee may give notice in
     writing to the Director suspending, with effect from the date of receipt of
     the notice by the Director, application of such of the transmission charge
     restriction conditions as may be specified in the notice, for the unexpired
     term of the security period.

6.2  At any time during a security period, the Director may (having regard to
     his duties under the Act) by means of directions:

     (a)  suspend or modify for the unexpired term of the security period the
          transmission charge restriction conditions or any part or parts
          thereof; or

     (b)  introduce for the unexpired term of the security period new
          transmission charge restriction conditions;

     in either case, so as to make such provision as in the opinion or
     estimation of the Director is requisite or appropriate to enable the
     Licensee to recover by means of a uniform percentage increase on all
     charges made in the course of the Transmission Business an amount estimated
     as being equal to the Licensee's allowed transmission-related security
     costs during such period, and the Licensee shall comply with the terms of
     the directions so issued.

6.3  Subject to paragraphs 6.4 and 6.6, the Licensee shall in any relevant year
     be entitled to recover an aggregate amount equal to the Licensee's allowed
     transmission-related security costs in that year or (insofar as not
     previously recovered) any previous year, by means of appropriate equitable
     increases in the charges made by the Licensee in the course of the
     Transmission Business.

6.4  Paragraph 6.3 shall not apply insofar as such Licensee's allowed
     transmission-related security costs:

                                      338
<PAGE>

     (a)  were otherwise recovered by the Licensee; or

     (b)  were taken into account by the Director in setting charge restriction
          conditions by means of directions issued under paragraph 6.2.

6.5  The Licensee shall following the end of each relevant year provide to the
     Director details in respect of that relevant year of:

     (a)  the aggregate amounts charged under paragraph 6.3 on account of the
          Licensee's allowed transmission-related security costs; and

     (b)  the bases and calculations underlying the increases in charges made by
          the Licensee in the course of the Transmission Business.

6.6  Where the Director is satisfied that the Licensee has recovered amounts in
     excess of the Licensee's allowed transmission-related security costs, the
     Director may issue directions requiring the Licensee to take such steps as
     may be specified to reimburse customers of the Transmission Business for
     the excess amounts charged to them, and the Licensee shall comply with any
     directions so issued.

6.7  No amounts charged by the Licensee under this paragraph 6 (whether or not
     subsequently required to be reimbursed) shall be taken into account for the
     purpose of applying the transmission charge restriction provisions of
     paragraph 2.

6.8  In this paragraph 6:

     "Licensee's allowed transmission-   means any cost allowed by the Director
     related security costs"             (upon receipt of such information,
                                         including a certificate from the
                                         Auditors, as the Director may request)
                                         as being a cost which is directly
                                         attributable to any action taken or
                                         omitted to be taken by the

                                      339
<PAGE>

                                         Licensee in its capacity as holder of
                                         the transmission licence for the
                                         purpose of complying with directions
                                         issued by the Secretary of State under
                                         Section 34(4) of the Act.

                                      340
<PAGE>

7.   Duration of transmission charge restriction conditions
     ------------------------------------------------------

7.1  The transmission charge restriction conditions shall apply so long as the
     transmission licence continues in force but shall cease to have effect (in
     whole or in part, as the case may be) if the Licensee delivers to the
     Director a disapplication request made in accordance with paragraph 7.2
     and:

     (a)  the Director agrees in writing to the disapplication request; or

     (b)  their application (in whole or in part) is terminated by notice given
          by the Licensee in accordance with either paragraph 7.4 or paragraph
          7.5.

7.2  A disapplication request shall (a) be in writing addressed to the Director,
     (b) specify the transmission charge restriction conditions (or any part or
     parts thereof) to which the request relates and (c) state the date (being
     not earlier than the date referred to in paragraph 7.3) from which the
     Licensee wishes the Director to agree that the specified transmission
     charge restriction conditions shall cease to have effect.

7.3  Save where the Director agrees otherwise, no disapplication following
     delivery of a disapplication request pursuant to this paragraph 7 shall
     have effect earlier than the date which is the later of:

     (a)  the date occurring 18 months after delivery of the disapplication
          request; and

     (b)  31 March 2005.

7.4  If the Director has not made a reference to the  Competition Commission
     under Section 12 of the Act relating to the modification of the
     transmission charge restriction conditions before the beginning of

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<PAGE>

     the period of 12 months which will end with the disapplication date, the
     Licensee may deliver written notice to the Director terminating the
     application of such of the transmission charge restriction conditions (or
     any part or parts thereof) as are specified in the disapplication request
     with effect from the disapplication date or a later date.

7.5  If the  Competition Commission makes a report on a reference made by the
     Director relating to the modification of the transmission charge
     restriction conditions (or any part or parts thereof) specified in the
     disapplication request and such report does not include a conclusion that
     the cessation of such transmission charge restriction conditions, in whole
     or in part, operates or may be expected to operate against the public
     interest, the Licensee may within 30 days after the publication of the
     report by the Director in accordance with Section 13 of the Act deliver to
     him written notice terminating the application of such transmission charge
     restriction conditions (or any part or parts thereof) with effect from the
     disapplication date or a later date.

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<PAGE>

SCHEDULE 6
----------

Public electricity supply charge restriction conditions
-------------------------------------------------------

1.   Definitions
     -----------

1.1  In this Schedule:

     "attribute"                            means attribute in accordance with
                                            the principles set out in paragraph
                                            8.

     "average charge per regulated unit     means the regulated distribution
     distributed"                           revenue in the relevant year divided
                                            by the regulated quantity
                                            distributed in that year.

     "average specified rate"               means the average of the daily base
                                            rates of the Governor and Company of
                                            the Bank of Scotland (or such other
                                            bank as the Director shall specify
                                            from time to time) current from time
                                            to time during the period in respect
                                            of which the calculation falls to be
                                            made.

     "distribution losses"                  means units unaccounted for on the
                                            Licensee's distribution system,
                                            measured as being the difference
                                            between the units metered on entry
                                            into the system and the units
                                            metered on leaving the system.

     "distribution revenue"                 means the revenue (measured on an
                                            accruals basis) derived from the
                                            provision of distribution services
                                            (including to any Separate Business

                                      343
<PAGE>

                                            (other than the Distribution
                                            Business)) in the relevant year,
                                            after deduction of value added tax
                                            (if any) and any other taxes based
                                            directly on the amounts so derived.

     "distribution services"                means all services provided as part
                                            of the Distribution Business other
                                            than excluded services.

     "EHV premises"                         means premises connected to the
                                            Licensee's distribution system at a
                                            voltage at or higher than 22
                                            kilovolts or at a sub-station with a
                                            primary voltage of 66 kilovolts or
                                            above, to which units are delivered
                                            by the Licensee, or any relevant
                                            entity, and which fall to be treated
                                            as EHV premises in accordance with
                                            paragraph 9.1.

     "EHV units"                            means units distributed by the
                                            Licensee, or any relevant entity,
                                            which are delivered or deemed to be
                                            delivered to EHV premises.

     "England and Wales PES"                means a public electricity supplier
                                            for an authorised area wholly in
                                            England and Wales.

     "excluded services"                    means those services which in
                                            accordance with the principles set
                                            out in paragraphs 9.2 and 9.3 fall
                                            to be treated as excluded services.

     "HV units"                             means units (other than EHV units)
                                            distributed by the Licensee which
                                            are delivered to premises connected
                                            to the Licensee's distribution
                                            system at a voltage at or higher

                                      344
<PAGE>

                                            than 1000 volts.

     "LV units"                             means units distributed by the
                                            Licensee which are delivered to
                                            premises connected to the Licensee's
                                            distribution system at a voltage
                                            less than 1000 volts.

     "LV1 units"                            means LV units which are distributed
                                            by the Licensee outside night-time
                                            or weekend periods to domestic
                                            premises or small non-domestic
                                            premises where the appropriate use
                                            of system charges apply different
                                            rates in night-time or weekend
                                            periods as opposed to other times of
                                            day or week, for the avoidance of
                                            doubt including the use of system
                                            charges under the tariffs specified
                                            in paragraph 9.5.2.

     "LV2 units"                            means LV units which are distributed
                                            by the Licensee to domestic premises
                                            or small non-domestic premises:

                                            (a) during night-time or weekend
                                            periods, where the appropriate use
                                            of system charges apply different
                                            rates in night-time or weekend
                                            periods as opposed to other times of
                                            the day; or

                                            (b) where the appropriate use of
                                            system charges are incorporated into
                                            tariffs which restrict availability
                                            of supply to specified off-peak
                                            periods,

                                            for the avoidance of doubt including
                                            the use of

                                      345
<PAGE>

                                            system charges under the tariffs
                                            specified in paragraph 9.5.3.

     "LV3 units"                            means LV units other than LV1 and
                                            LV2 units for the avoidance of doubt
                                            including the tariffs specified in
                                            paragraph 9.5.4.

     "maximum average charge per unit       means the charge calculated in
     distributed"                           accordance with the formula in
                                            paragraph 4.1.

     "metered"                              means, in relation to any quantity
                                            supplied or distributed as measured
                                            by a meter installed for such
                                            purpose or (where no such meter is
                                            installed or it is not reasonably
                                            practicable to measure the quantity
                                            by such meter) as otherwise
                                            reasonably calculated.

     "public electricity supply charge      means the Conditions contained in
     restriction conditions"                this Schedule 6 (including the
                                            Conditions in Schedule 6A), as from
                                            time to time modified or replaced in
                                            accordance therewith or pursuant to
                                            Sections 11, 14, or 15 of the Act.

     "quantity supplied"                    means the aggregate quantity of
                                            units supplied by the Licensee in
                                            the relevant year metered at the
                                            points of supply in the authorised
                                            supply area of the Licensee.

     "regulated distribution revenue"       means distribution revenue except
                                            such part thereof as derives from
                                            the distribution of EHV units or
                                            excluded services.

     "regulated distribution unit           means as the case may be HV units or
                                            LV1

                                      346
<PAGE>

     category"                              units or LV2 units or LV3 units.

     "regulated quantity distributed"       means the aggregate quantity of
                                            units distributed (both for the
                                            Licensee and on behalf of third
                                            parties under use of system) through
                                            the Licensee's distribution system
                                            in the relevant year metered at exit
                                            points on leaving the Licensee's
                                            distribution system, but excluding
                                            for this purpose:

                                            (a)  units distributed for the
                                            purpose of supply to premises
                                            outside the Licensee's authorised
                                            supply area; and

                                            (b)  EHV units.

     "relevant entity"                      means any affiliate or related
                                            undertaking of the Licensee.

     "relevant year"                        means a financial year commencing on
                                            or after 1 April 1990.

     "relevant year t"                      means that relevant year for the
                                            purposes of which any calculation
                                            falls to be made;

     "relevant year t-1"                    means the relevant year preceding
                                            relevant year t or, in respect of
                                            the period prior to 1/st/ April
                                            1990, the period of 12 calendar
                                            months commencing on 1 April 1989;
                                            and similar expressions shall be
                                            construed accordingly.

     "supply"                               excludes supply outside the
                                            Licensee's authorised supply area,
                                            standby, top-up and

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<PAGE>

                                            any other sales of electricity to
                                            persons other than customers;
                                            "supplied" and similar expressions
                                            shall be construed accordingly.

     "transmission services"                means all services provided as part
                                            of the Transmission Business other
                                            than excluded services (as defined
                                            in paragraph 1.1 of Schedule 5.

     "unit"                                 means a kilowatt hour.

1.2  In this Schedule, any reference to the first relevant year shall be a
     reference to the relevant year commencing on 1 April 1990, and any
     reference to the second relevant year and so on shall be construed
     accordingly.

2.   [Deleted]

3.   [Deleted]

4.   Restriction of distribution charges
     -----------------------------------

     Basic Formula
     -------------

4.1  Without prejudice to paragraph 7, the Licensee shall in setting its charges
     for the provision of distribution services use its best endeavours to
     ensure that in any relevant year the average charge per regulated unit
     distributed shall not exceed the maximum average charge per unit
     distributed calculated in accordance with the following formula:

               M\\dt\\ = P\\dt\\ + PN\\dt\\ - PM\\dt\\ - K\\dt\\

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<PAGE>

4.2  For the purposes of paragraph 4.1, M\dt\ means the maximum average charge
     per unit distributed in relevant year t.

     Formula for P\dt\ as used in paragraph 4.1
     ------------------------------------------

4.3  For the purposes of paragraph 4.1, P\dt\is derived from the following
     formula:

          P\dt\ = (PUM.GR\t\.PID\t\) + (PL.(AL\t\-L\t\).PIL\t\)
                  ---------------------------------------------
                                    D\t\

                                    where:

     PUM            means an amount equal to (Pounds)261.9 million.

     GR\t\          in the eleventh relevant year has the value of 1 and in each
                    subsequent relevant year is derived from the following
                    formula:

                         GR\t\ = 0.5 (EP\oi\.D\it\   C\dt\)
                                     ------------ + ------   GR\t-1\
                                     (EP\oi\.D\it-1\ C\dt-1\)

                    where:

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<PAGE>

     E        means the summation across all regulated distribution unit
              categories i as described in the definition of the term P\oi\.

     P\oi\    means in respect of each regulated distribution unit category i
              set out below in column 1, the value equal to that amount set
              opposite that category in column 2.

            -------------------------------------------------------------
                       Column 1                       Column 2
            -------------------------------------------------------------
               regulated distribution                 Value (p)
                                                      ---------
                 unit category i
            -------------------------------------------------------------
                        HV                              0.482
                        LV1                             2.790
                        LV2                             0.281
                        LV3                             1.704
            -------------------------------------------------------------

     D\it\    means that number of units in each regulated distribution unit
              category i distributed in relevant year t.

     D\it-1\  means that number of units in each regulated distribution unit
              category i distributed in relevant year t-1.

     C\dt\    means a notional figure representing the number of customers in
              the authorised area (for the purpose of this term C\dt\ only) for
              each relevant year, given in the table below.

              relevant year beginning:

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<PAGE>

                 1st April 1999        1,838,900
                 1st April 2000        1,857,300
                 1st April 2001        1,875,900
                 1st April 2002        1,894,700
                 1st April 2003        1,913,600
                 1st April 2004        1,932,700

                 provided that for any relevant year t beginning on or after 1st
                 April 2005, C\dt\ shall equal 1,932,700.

     C\dt\-1     means the number equal to C\dt\ in relevant year t-1.

     PID\t\      in the eleventh relevant year has the value of 1 and in each
                 subsequent relevant year is derived from the following formula:

                 PID\t\ = (1 + RPI\t\ - Xd\t\)
                               --------------- PID\t-1\
                                     100

     RPI\t\      means the percentage change (whether of a positive or a
                 negative value) in the arithmetic average of the Retail Price
                 Index numbers published or determined with respect to each of
                 the six months July to December (inclusive) in relevant year t-
                 1 and the arithmetic average of the Retail Price Index numbers
                 published or determined with respect to the same months in
                 relevant year t-2.

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<PAGE>

     Xd\t\       means 3.

     PL          means an amount equal to 2.9p.

     AL\t\       means in respect of relevant year t, allowed distribution
                 losses calculated as provided in paragraph 4.6.5.

     L\t\        means in respect of relevant year t, adjusted distribution
                 losses calculated as provided in paragraphs 4.6.2 to 4.6.4.

     PIL\t\      is derived from the following formula:

                  PIL\t\ = (1+RPI\t\)
                              ------  PIL\t-1\
                                100
                 where, for the eleventh relevant year, PIL\t-1\ equals 1.

     D\t\        means the regulated quantity distributed in relevant year t.

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<PAGE>

     Formula for PN\dt\ as used in paragraph 4.1
     -------------------------------------------

4.4  For the purposes of paragraph 4.1, in the eleventh and subsequent relevant
     years the term PN\dt\ shall be calculated in accordance with the following
     formula:

                    PN\dt\ = (PS+PR)PIR\t\
                             -------------
                                 D\t\

     where:

     PS             means an amount equal to (Pounds)3.25 million for each of
                    the eleventh to the fifteenth relevant years, and thereafter
                    shall be 0.

     PR             means, in the eleventh and all subsequent relevant years, an
                    amount equal to (Pounds)2.01 million.

     PIR\t\         in the eleventh relevant year has the value of 1 and in each
                    subsequent relevant year is derived from the following
                    formula:

                    PIR\t\ =(1+RPI\t\)
                               ------PIR\t-1\
                                100

                    where for the ninth relevant year PIR\t-1\ equals 1.

4.4A For the purposes of paragraph 4.1, PM\dt\ is derived from the following
     formula:

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<PAGE>

                         PM\dt\=RM\dt\
                                ------
                                 D\t\

     where:

     RM\dt\      means an amount equal to the Licensee's relevant reduction in
                 costs in the relevant year t resulting from the fact that the
                 Licensee has ceased to provide meter provision services and
                 meter operation services (as defined in paragraph 1 of
                 Condition 8C of Part V) in respect of customers in respect of
                 whom it provided meter provision services and meter operation
                 services at 31 March 2000. The Licensee's relevant reduction in
                 costs shall be calculated in real terms, and shall be the
                 amount, if any, by which the Licensee's cash operating costs
                 (excluding costs of a non-recurring nature) of providing such
                 services in the relevant year t fall short of the cash
                 operating costs (excluding costs of a non-recurring nature) of
                 providing such services in the tenth relevant year, to the
                 extent that such shortfall is attributable to the fact that the
                 Licensee has ceased, since 31 March 2000, to provide (whether
                 directly or through an agent acting on its behalf) meter
                 provision services and meter operation services in respect of
                 such customers. The Licensee's relevant reduction in costs
                 shall exclude the amount of any reduction in costs in providing
                 any services which constitute excluded services.

     Formula for K\dt\ as used in Paragraph 4.1
     ------------------------------------------

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<PAGE>

4.5  For the purposes of paragraph 4.1, K\dt\ means the correction factor per
     unit (whether of a positive or a negative value) derived, subject to
     paragraph 5.3 from the following formula, provided that the value of K\dt\
     for the eleventh relevant year shall be the value of K\dt\ arising for that
     year from the application of the formula for Kdt applicable under paragraph
     4 of this Schedule (in the form of that paragraph in force on 31 March
     2000) but adjusted by adding the amount of TA\dt\ for the tenth relevant
     year calculated by the application of the formula for TA\dt\ applicable
     under paragraph 4 of this Schedule to the form of licence in force as at 31
     March 2000:

                    K\dt\ = R\dt-1\ - (D\t-1\.M\dt-1\)    I\dt\
                            -------------------------(1 x -----)
                                           D\t\            100

     where:

     R\dt-1\      means the distribution revenue in relevant year t-1.

     D\t-1\       means the regulated quantity distributed in relevant year t-1.

     M\dt-1\      means maximum average charge per unit distributed in relevant
                  year t-1.

     I\dt\        means that interest rate in relevant year t which is equal to,
                  where K\dt\ (taking no account of I\d\for this purpose) has a
                  positive value, the average specified rate plus 4, or where
                  K\dt\ (taking no

                                      355
<PAGE>

                  account of I\d\ for this purpose) has a negative value, the
                  average specified rate.

4.5A In paragraph 4 any term defined for the purposes of paragraph 4.1 shall
     have the same meaning in all the sub paragraphs and provisions of paragraph
     4.

                                      356
<PAGE>

4.6   Calculation of factor in respect of distribution losses
      -------------------------------------------------------

4.6.1 The terms AL\t\ and L\t\ which are used in paragraph 4.3 of this Schedule
      shall each be determined using the consistent methodological basis set out
      in paragraphs 4.6.2 to 4.6.6 below.

      Consistent methodological basis for determination of AL\t\ and L\t\
      -------------------------------------------------------------------

4.6.2 Adjusted distribution losses L\t\ in respect of relevant year t shall mean
      the difference between adjusted bulk supply point purchases (calculated as
      provided in paragraph 4.6.3) and adjusted units distributed (calculated as
      provided in paragraph 4.6.5).

4.6.3 Adjusted bulk supply point purchases shall be obtained by adjusting the
      units metered on entry to the Licensee's distribution system by:

      (a) excluding that number of units which is equal to the sum of:

          (i)   EHV units; and

          (ii)  units distributed by the Licensee for the purpose of supply to
                premises outside the Licensee's authorised area; and

          (iii) an amount in respect of distribution losses between the bulk
                supply point and the exit point attributable to the units
                referred to in (i) and (ii) above, as determined in accordance
                with the schedule of adjustment factors referred to in Part VI,
                Condition 2, paragraph 7(b); and

      (b) including an amount (in units) to represent the effect of units
          entering the Licensee's distribution system otherwise than at bulk
          supply points, being the difference between the number

                                      357
<PAGE>

             of units so entering and the number of units that would have been
             required to have entered at bulk supply points in their absence
             (such latter number of units calculated consistently with the
             principles underlying the schedule of adjustment factors referred
             to at Part VI, Condition 2, paragraph 7(b)).

4.6.4   [deleted].

4.6.5   Adjusted units distributed shall be obtained by:

        (a)  calculating all units distributed by the Licensee metered during
             relevant year t at exit points on leaving the Licensee's
             distribution system; and

        (b)  deducting therefrom EHV units delivered or deemed to be delivered
             during relevant year t and units distributed during relevant year t
             for the purpose of supply to premises outside the Licensee's
             authorised area; and

        (c)  adding thereto an amount equal to the units consumed during
             relevant year t on the Licensee's premises in the authorised area
             (insofar as not otherwise taken into account in determining units
             distributed under sub-paragraph (a) above).

4.6.6   The allowed distribution losses AL\t\ in relevant year t shall be
        derived as follows

         (a) by ascertaining the adjusted units distributed in accordance with
             paragraph 4.6.5;

         (b) multiplying the resulting adjusted units figure by the aggregate of
             adjusted distribution losses (calculated as

                                      358
<PAGE>

             provided in paragraph 4.6.2) over the 10 preceding relevant years;
             and

         (c) dividing the product by the aggregate of adjusted units distributed
             over the same preceding relevant years.

     Information to be provided to the Director
     ------------------------------------------

     4.6.7  [deleted].

     4.6.8  The Licensee shall, following the end of the sixth relevant year and
            each succeeding relevant year, furnish to the Director, as being one
            of the specified items to be included in the statement referred to
            at paragraph 6.7, a statement showing the bulk supply point
            purchases, adjusted units distributed and adjusted distribution
            losses for that relevant year, accompanied by the underlying
            calculations of the adjusted distribution losses and (where
            appropriate) an explanation of any changes in the basis of
            calculation of estimation thereof.

     4.6.9  Where the Director is satisfied that any statement or underlying
            calculation provided has not been drawn up in conformity with
            paragraph 4.6.2 to 4.6.6 above, the Director may issue directions,
            and the statement or underlying calculation shall be adjusted with
            effect from the date of issue of the directions or (subject to
            paragraph 6.10) such other date as may be specified in the
            directions.

5.   Restriction of distribution charges: adjustments
     ------------------------------------------------

5.1  If, in respect of any relevant year, the average charge per regulated unit
     distributed exceeds the maximum average charge per unit distributed by more
     than 3 per cent, the Licensee shall furnish an explanation to the Director
     and in the next following relevant year the Licensee shall not effect

                                      359
<PAGE>

     any increase in charges for the provision of distribution services unless
     it has demonstrated to the reasonable satisfaction of the Director that the
     average charge per regulated unit distributed would not be likely to exceed
     the maximum charge per unit distributed in that next following relevant
     year.

5.2  If, in respect of any 2 successive relevant years, the sum of the amounts
     by which the average charge per regulated unit distributed has exceeded the
     maximum average charge per unit distributed is more than 4 per cent, then
     in the next following relevant year the Licensee shall, if required by the
     Director, adjust its charges such that the average charge per unit
     distributed would not be likely, in the judgement of the Director, to
     exceed the maximum average charge per unit distributed in that next
     following relevant year.

5.3  If, in respect of 2 successive relevant years, the average charge per
     regulated unit distributed is less than 90 per cent of the maximum average
     charge per unit distributed, the Director, after consultation with the
     Licensee, may direct that in calculating K\dt\ for the purposes of
     paragraphs 4.1 and 4.5 in respect of the next following relevant year,
     there shall be substituted for R\dt-1\ in the formula at that paragraph 4.5
     such figure as the Director may specify being not less than R\dt-1\ and not
     more than 0.90 (D\t-1\.M\dt-1\).

[5.4.1, 5.4.2, 5.4.3 and 5.5 deleted]

6.   Information to be provided to the Director in connection with the public
     ------------------------------------------------------------------------
     electricity supply charge restriction conditions
     ------------------------------------------------

6.1  Where any change is intended to be made in charges for the provision of
     distribution services regulated under paragraph 4 the Licensee shall not
     later than the time referred to in paragraph 6.2 provide the Director with:

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<PAGE>

     (a)  a written forecast of the maximum average charge per unit distributed,
          together with its components, in respect of the relevant year t in
          which such change is to take effect and in respect of the next
          following relevant year t+1; and

     (b)  a written estimate of the maximum average charge per unit distributed,
          together with its components, in respect of the relevant year t-1
          immediately preceding the relevant year in which the change is to take
          effect, unless a statement which complies with the requirements of
          paragraph 6.7 in respect of relevant year t-1 has been furnished by
          the Licensee to the Director before the publication of the proposed
          change.

6.2  The relevant time referred to in paragraph 6.1 shall be the date of
     publication of such change.

6.3  If within 3 months of the commencement of any relevant year t the Licensee
     has not provided the aforementioned forecasts pursuant to paragraph 6.1 for
     the purpose of such changes in charges as are referred to in paragraph 6.1,
     the Licensee shall provide the Director with a written forecast of the
     maximum average charge per unit distributed together with its components in
     respect of the relevant year t.

6.4  [deleted]

6.5  The Director may issue directions providing that any forecast or estimate
     provided in accordance with paragraphs 6.1 or 6.3 shall be accompanied by
     such information as regards the assumptions underlying the forecast or
     estimate as may be necessary to enable the Director to be satisfied that
     the forecast or estimate has been properly prepared on a consistent basis
     and the Licensee shall comply with such directions.

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<PAGE>

6.6  Not later than six weeks after the commencement of each relevant year t,
     the Licensee shall send to the Director a statement as to:

     (a)  whether or not the provisions of paragraph 5 are likely to be
          applicable in consequence of the average charge per regulated unit
          distributed in the preceding relevant year t-1 or the two preceding
          relevant years t-1 and t-2; and

     (b)  its best estimate as to the relevant correction factor K\dt\
          calculated in accordance with the formula set out in paragraph 4.5 to
          be applied in calculating the maximum average charge per unit
          distributed in respect of the relevant year t.

6.6A [deleted]

6.7  Not later than 3 months after the end of each relevant year the Licensee
     shall send to the Director a statement, in respect of that relevant year,
     showing the specified items referred to in paragraph 6.9.

6.8  The statement referred to in the preceding paragraph shall be:

     (a)  accompanied by a report from the Auditors that in their opinion:-

          (i)  such statement fairly presents each of the specified items
               referred to in paragraph 6.9 in accordance with the requirements
               of the public electricity supply charge restriction conditions;
               and

          (ii) the amounts shown in respect of each of those specified items are
               in accordance with the Licensee's accounting records which have
               been maintained in respect of each of the relevant Separate
               Businesses in accordance with Condition 3 of Part II; and

                                      362
<PAGE>

     (b)  certified by a director of the Licensee on behalf of the Licensee that
          to the best of his knowledge, information and belief having made all
          reasonable enquiries:

          (i)   [deleted];

          (ii)  there is no amount included in its calculations under paragraph
                4 which represents other than:

                (aa) bona fide consideration for the provision of distribution
                     services in the course of the Distribution Business; or

                (bb) an amount permitted under the public electricity supply
                     charge restriction conditions to be so included;

          (iii) there is no amount included in its calculations of allowed
                security costs under paragraph 7 which represents other than an
                amount permitted under the public electricity supply charge
                restriction conditions to be so included;

          (iv)  no service has been treated as an excluded service which was not
                properly so treated and no amount included in the revenues in
                respect thereof represents other than bona fide consideration
                for the provision of the excluded service to which it relates;
                and

          (v)   all amounts which should properly be taken into account for the
                purposes of the public electricity supply charge restriction
                conditions have been taken into account.

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<PAGE>

6.9  The specified items to be contained in the statement referred to in
     paragraph 6.7 shall be the following:

     (a)  the regulated quantity distributed;

     (b)  the quantity distributed in each regulated distribution unit category;

     (c)  the average charge per regulated unit distributed;

     (d)  the value of the term TA\dt\ in respect of the tenth relevant year
          only together with the value of each of the component parts as
          described in paragraph 4.4 in the form of Licence in force on 31 March
          2000;

     (e)  the information referred to at paragraph 7.8;

     (f)  the statements and information referred to at paragraphs 9.1.2, 9.4.1
          and 9.5.1;

     (g)  such other items as shall be specified in directions issued by the
          Director for the purposes of this Schedule;

     (h)  the statement and information referred to at paragraph 4.6.8; and

     (i)  the statement and information referred to at paragraph 8.5.

     [Proviso deleted/no longer used].

6.10 Where the Director exercises his power to issue directions under paragraph
     7.9 or paragraphs 8.6, 9.1.3, 9.4.2 or 9.5.5 then such directions shall not
     have effect from a date earlier than the commencement of the relevant year
     to which the statement last

                                      364
<PAGE>

     furnished to the Director pursuant to paragraph 6.7 prior to the issue of
     the directions related, unless such statement (or the accompanying report
     or certificate under paragraph 6.8) or any statement, report or certificate
     in respect of an earlier relevant year was incorrect or was misleading in
     any material respect.

6.11 Where the Director issues such directions as are referred to in the
     preceding paragraph the Licensee shall, within such period as the Director
     may specify, send to the Director a revised statement in substitution for
     the Licensee's statement under paragraph 6.7 in respect of the relevant
     year, which revised statement shall confirm and give effect to the contents
     of the statement under paragraph 6.7.

7.   Allowances in respect of security costs
     ---------------------------------------

7.1  The Licensee may at any time after the commencement of a security period
     give notice in writing to the Director suspending, with effect from the
     date of receipt of the notice by the Director, application of such of the
     public electricity supply charge restriction conditions as may be specified
     in the notice for the unexpired term of the security period.

7.2  At any time during a security period, the Director may (having regard to
     his duties under the Act) by means of directions:

     (a)  suspend or modify for the unexpired term of the security period the
          public electricity supply charge restriction conditions or any part or
          parts thereof; or

     (b)  introduce for the unexpired term of the security period new public
          electricity supply charge restriction conditions

     in either case, so as to make such provision as in the opinion or
     estimation of the Director is requisite or appropriate:

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<PAGE>

     (i)   to enable the Licensee to recover by means of increased charges an
           amount estimated as being equal to the Licensee's allowed security
           costs during such period;

     (ii)  to ensure that such part of the amount referred to in sub-paragraph
           (i) above as is estimated as being equal to the Licensee's allowed
           security costs incurred as costs in the Distribution Business are
           recovered by means of appropriate equitable increases in the charges
           made in the Distribution Business;

     (iii) to ensure that such part of the amount referred to in sub-paragraph
           (i) above as is estimated as being equal to the Licensee's allowed
           security costs incurred as costs in the Supply Business, Second- Tier
           Supply Business and Wholesaling Business respectively are recovered
           by appropriate equitable increases in the charges made in those
           Businesses;

     and the Licensee shall comply with the terms of any directions so issued.

7.3  At any time following a security period, the Director may (following such
     consultation with the Licensee and others as the Director may consider
     appropriate) issue directions suspending or modifying the public
     electricity supply charge restriction conditions or any part or parts
     thereof or replacing such directions as may have been made during the
     security period and introducing such new public electricity supply charge
     restriction conditions as in the opinion of the Director are appropriate in
     all  the  circumstances  (including,  at  the  Director's  discretion,  an
     appropriate adjustment having regard to any  profit gained or foregone by
     the Licensee during the security period), and the Licensee shall comply
     with any directions so issued.

                                      366
<PAGE>

7.4  At any time within 3 months after the issue of directions by the Director
     under paragraph 7.3, the Licensee may serve on the Director a
     disapplication request in respect of such of the public electricity supply
     charge restriction conditions or any part or parts thereof as are specified
     in the request.

7.5  If within  3 months  of  the  receipt  by  the  Director  of  the
     disapplication request referred to in paragraph 7.4, the Director has
     either not agreed in writing to such disapplication request or has not made
     a reference to the Competition Commission under Section 12 of the Act
     relating to the modification of the public electricity supply charge
     restriction conditions, the Licensee may deliver one month's written notice
     to the Director terminating the application of such of the public
     electricity supply charge restriction conditions (or any part or parts
     thereof) as are specified in the disapplication request.

7.6  Subject to paragraphs 7.7 and 7.9, the Licensee shall in any relevant year
     be entitled to recover an aggregate amount equal to the Licensee's allowed
     security costs in that year or (insofar as not previously recovered) any
     previous year by means of appropriate equitable increases in the charges
     made in each of the Distribution, Supply, Second-Tier Supply and
     Wholesaling Businesses.

7.7  Paragraph 7.6 shall not apply insofar as the Licensee's allowed security
costs:

     (a) were otherwise recovered by the Licensee;  or

     (b) were taken into account by the Director in setting public electricity
         supply charge restriction conditions by means of directions issued
         under paragraph 7.3.

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<PAGE>

7.8  The Licensee shall following the end of each relevant year provide to the
     Director, as being one of the specified items to be contained in the
     statement referred to in paragraph 6.7, details in respect of that relevant
     year of:

     (a)  the amount of the Licensee's allowed security costs (on an accruals
          basis);

     (b)  the aggregate amounts charged (on an accruals basis) under paragraph
          7.6 on account of the Licensee's allowed security costs; and

     (c)  the bases and calculations underlying the increases in charges made in
          the Distribution, Supply, Second-Tier Supply and Wholesaling
          Businesses under paragraph 7.6.
<PAGE>

7.9  Where the Director is satisfied that the Licensee has recovered amounts in
     excess of the Licensee's allowed security costs, the Director may issue
     directions requiring the Licensee to take such steps as may be specified to
     reimburse customers of or purchasers from the Distribution, Supply, Second-
     Tier Supply and Wholesaling Businesses (as the case may be) for the excess
     amounts charged to them, and the Licensee shall comply with any directions
     so issued provided that if the excess amounts relate to the Licensee's
     allowed security costs paid to any authorised electricity operator, the
     Licensee shall not be obliged to make any such reimbursement unless and
     until it has recovered such costs from the relevant authorised electricity
     operator.

7.10 No amounts charged by the Licensee under this paragraph 7 (whether or not
     subsequently required to be reimbursed) shall be taken into account for the
     purpose of applying the public electricity supply charge restriction
     provisions contained in the provisions of paragraph 4 of this Schedule 6
     and 6A.

7.11 In this paragraph 7:

     "Licensee's allowed security costs"  means any cost (whenever arising)
                                          incurred by the Licensee and approved
                                          by the Director as being directly
                                          attributable to actions taken or
                                          omitted to be taken by the Licensee or
                                          by any authorised electricity operator
                                          (as the case may be) in consequence
                                          of:

                                          (i) complying with directions issued
                                          by the Secretary of

                                      369
<PAGE>

                         State under Section 34(3) or 34(4) of the Act; or

                         (ii) implementing recommendations of any committee
                         constituted to advise the Secretary of State as to
                         matters related to his power to issue directions under
                         Section 34 of the Act which are made to and accepted by
                         the Secretary of State in contemplation of
                         circumstances likely to lead to the issue of directions
                         by the Secretary of State under Section 34(3) or 34(4)
                         of the Act;

                         but for the avoidance of doubt excluding any cost which
                         forms part of the Licensee's allowed transmission-
                         related security costs (as defined in paragraph 6.8 of
                         Schedule 5A (Schedule 5 of the form of licence in force
                         as from 1 April 2000)).

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<PAGE>

8.   General principles of attribution
     ---------------------------------

8.1  Where for the purposes of this Schedule a share of costs borne by the
     Licensee requires to be attributed to any part of the market, the Licensee
     shall make that attribution on a basis which ensures that no more than a
     fair proportion of those costs, reflecting the costs incurred by the
     Licensee in supplying that part of the market, are so attributed.

8.2  The following paragraphs are without prejudice to paragraph 8.1.

8.3  Fossil Fuel Levy and payments in lieu thereof
     ---------------------------------------------

     The fossil fuel levy requiring to be attributed to the Designated Customers
     shall be attributed on the basis of the amount of the levy incorporated in
     the prices actually charged or to be charged by the Licensee on supplies to
     such customers in the relevant year in respect of which the attribution
     falls to be made.

8.4  Distribution losses
     -------------------

     Where an amount (in units) in respect of distribution losses requires to be
     calculated and attributed in respect of EHV units and units distributed by
     the Licensee for the purpose of supply to premises outside the Licensee's
     authorised area, such calculation and attribution shall be made
     consistently with the principles underlying the schedule of adjustment
     factors referred to in paragraph 7(b) in Condition 2 of Part VI.

                                      371
<PAGE>

8.5  Information to be provided by Licensee
     --------------------------------------

     The Licensee shall following the end of  each relevant year furnish to the
     Director, as being one of the specified items to be included in the
     statement referred to at paragraph 6.7, a statement confirming that the
     calculation of amounts in lieu of the fossil fuel levy and the attribution
     of the fossil fuel levy, amounts in lieu thereof and of distribution losses
     was made in accordance with the provisions of this paragraph accompanied
     (where appropriate) by

     (i)  a statement of the total amounts attributed to Designated Customers
          and other customers of the Licensee;  and

     (ii) an explanation of any changes in the principles of attribution or
          their application (as the case may be) since the issue by the Licensee
          of the last such statement.

8.6  Where the Director is satisfied that the basis of calculation or
     attribution (as the case may be) used by the Licensee is not in conformity
     with paragraph 8.1, the Director may issue directions specifying an
     alternative basis of calculation or attribution, and the basis of
     calculation or attribution by the Licensee (as the case may be) shall be
     adjusted accordingly with effect from the date of issue of the directions
     or (subject to paragraph 6.10) such other date as may be specified in those
     directions.

                                      372
<PAGE>

9.   Matters supplemental to restriction of distribution charges
     -----------------------------------------------------------

9.1  EHV premises:
     ------------

     9.1.1     EHV premises shall comprise:

          (a)  in relation to premises connected to the Licensee's distribution
               system as at the date the Licensee's Public Electricity Supply
               Licence came into force, those premises specified in the list of
               EHV premises notified in writing to the Director by the Licensee
               within 28 days after the Licensee's Public Electricity Supply
               Licence came into force; and

          (b)  in relation to premises connected to the Licensee's distribution
        system which are either first connected or (having been previously
        connected) have had their connections materially altered following the
        date the Licensee's Public Electricity Supply Licence came into force,
        those premises connected to the Licensee's distribution system at a
        voltage at or higher than 22 KV or at a sub-station with a primary
        voltage of 66 KV or above.

     9.1.2  The Licensee shall following the end of each relevant year furnish
            to the Director, as being one of the specified items to be included
            in the statement referred to at paragraph 6.7, a statement listing
            any changes in the premises falling to be treated as EHV premises.

     9.1.3  Where the Director is satisfied that any premises treated by the
            Licensee as being or not being EHV premises should not in conformity
            with paragraph 9.1.1(b) be so treated, the Director may issue
            directions to that effect, and such premises shall cease to be so
            treated from the date of issue of the directions or (subject

                                      373
<PAGE>

               to paragraph 6.10) such other date as may be specified in those
               directions.

9.2  Excluded services for purposes of the Distribution Business
     -----------------------------------------------------------

     9.2.1     There may be treated as excluded services provided by the
               Distribution Business such services in respect of which charges
               are made which:

               (a)   do not fall within paragraph 9.2.2;  and

               (b)   may (subject to paragraph 9.4.2) be determined by the
                     Licensee as falling under one of the principles set out in
                     paragraphs 9.2.3 to 9.2.6.

     9.2.2     No service provided as part of the Distribution Business shall be
               treated as an excluded service insofar as it consists of the
               provision of services remunerated under use of system charges in
               accordance with Condition 2 of Part VI including (without
               prejudice to the foregoing):

               (i)   (subject to paragraph 9.2.3) the transport of electricity;

               (ii)  the carrying out of works for the installation of electric
                     lines or electrical plant (not otherwise payable in the
                     form of connection charges);

               (iii) the carrying out of works or the provision of maintenance
                     or repair or other services for the purpose of enabling the
                     Licensee to comply with Conditions 7, 8 and 21 of Part V,
                     the Electricity Supply Regulations 1988 or any regulations
                     made under Section 29 of the Act or any other enactment

                                      374
<PAGE>

                     relating to safety or standards applicable in respect of
                     the Distribution Business; and

               (iv)  (subject to paragraph 9.2.5) the provision, installation
          and maintenance of any meters, switchgear or other electrical plant
          (not being part of connection charges).

     9.2.3     The Licensee may treat as being an excluded service for the
               purpose of the Distribution Business the transport of:

               (a)  units of electricity not consumed in the Licensee's
                    authorised supply area; or

     (c)  EHV units, provided that the Licensee's charges for the distribution
          of such units do not exceed the charging rates underlying the
          information as to EHV revenue and EHV units distributed, as given by
          the Licensee to the Director and used by him for the purposes of
          setting the term PUM in paragraph 4 of this Schedule, subject only to
          such adjustments as may be appropriate in the reasonable opinion of
          the Director to reflect material variations between the actual charges
          made by the Licensee and the charging rates underlying the information
          as to EHV revenue provided to the Director by the Licensee.

     9.2.4     Charges of the type described in paragraph 7 of Condition 2 of
               Part VI and borne in accordance with the principles set out in
               paragraph 8 of that Condition by any person as connection
               charges, and charges in respect of the statements referred to in
               paragraph 10 of that Condition, may each be treated as excluded
               services for the purposes of the Distribution Business.

     9.2.5     A service provided as part of the Distribution Business may be
               treated as an excluded service insofar as it consists in the
               provision of services (including metering, electric lines or
               electrical

                                      375
<PAGE>

               plant) for the specific benefit of any third party requesting the
               same and not made available as a normal part of the Distribution
               Business remunerated by use of system charges including (without
               prejudice to the foregoing):

                   (i)   special metering (including "time of day" metering) to
                         facilitate energy saving programmes for the benefit of
                         customers requesting the same;

                   (ii)  charges for moving mains, services or meters forming
                         part of the Licensee's distribution system to
                         accommodate extension, re-design or re-development of
                         any premises on which the same are located or to which
                         they are connected;

                   (iii) the provision of electric lines and electrical plant
                         (a) insofar as the same are required for the specific
                         purpose of enabling the provision of top-up or standby
                         supplies or sales of electricity or (b) to provide a
                         higher degree of security than is required for the
                         purposes of complying with Condition 7 of Part V;

                   (iv)  the amount by which charges for the provision of
                         prepayment meters to customers exceed charges for the
                         provision of standard meters for such customers in
                         respect of which the amount receivable per customer
                         shall not exceed that used by the Director in
                         formulating PUM under the provisions of paragraph 4 of
                         this Schedule, (which amount used by the Director shall
                         be deemed to be zero in respect of the Licensee);

                   (v)   special metering or telemetry or data processing
                         equipment for the purposes of enabling any person which
                         is a party to the Settlement Agreement for Scotland to
                         comply with its obligations in respect of metering

                                     376
<PAGE>

                         thereunder or for the performance by the Licensee of
                         any service in relation thereto.

     9.2.6     There may be treated as an excluded service for the purposes of
               the Distribution Business, charges for the relocation of electric
               lines or electrical plant and the carrying out of works
               associated therewith pursuant to a statutory obligation (other
               than under Section 9(1) or Section 16 of the Act) imposed on the
               Licensee.

                                      377
<PAGE>

9.3  Excluded Services for purposes of Supply and Second-Tier Supply Businesses
     --------------------------------------------------------------------------

     9.3.1     Subject to paragraph 9.4.2, a service provided as part of the
               Supply Business or Second-Tier Supply Business may be treated as
               an excluded service insofar as it consists of the provision of
               services for the specific benefit of customers requesting the
               same and not made available as a normal part of such Business.

9.4  Information to be provided to the Director about excluded services
     ------------------------------------------------------------------

     9.4.1     The Licensee shall following the end of each relevant year
               furnish to the Director, as being one of the specified items to
               be included in the statement referred to at paragraph 6.7,
               details specifying separately the nature of all services provided
               as part of the Distribution Business or Supply Business or
               Second-Tier Supply Business and treated as excluded services by
               the Licensee during the course of such year and stating the
               revenues derived in respect of each such service so treated.

     9.4.2     Where the Director is satisfied that in the light of the
               principles set out in the foregoing paragraphs any service
               treated by the Licensee as being or not being an excluded service
               should not be so treated, the Director shall issue directions to
               that effect, and the service or services specified in the
               directions shall cease to be treated as excluded services from
               the date of issue of the directions or (subject to paragraph
               6.10) such other date as may be specified in the directions.

                                      378
<PAGE>

9.5  Regulated distribution unit categories
     --------------------------------------

     9.5.1     The Licensee shall following the end of each relevant year
               furnish to the Director, as being one of the specified items to
               be included in the statement referred to at paragraph 6.7,
               details specifying separately those use of system charges in
               respect of which the Licensee has, during the course of such
               year, treated the units distributed by the Licensee as falling
               within the definition of each of LV1 units and LV2 units and LV3
               units respectively, (as defined in the following paragraphs).

     9.5.2     The definition of LV1 units includes units distributed under the
               following tariffs:

                    1.   Domestic Economy Day Units
                    2.   Farm Economy Day Units
                    3.   General Economy Day Units
                    4.   General Evening and Weekend Day Units
                    5.   Annual Maximum Demand (LV) Day Units
                    6.   Maximum Demand Tariff (LV) Day Units

     9.5.3     The definition of LV2 units includes units distributed under the
               following tariffs:

                    1.   Domestic Economy Night Units
                    2.   Farm Economy Night Units
                    3.   General Economy Night Units
                    4.   General Evening and Weekend (Evening and Weekend Units)
                    5.   Annual Maximum Demand (LV) Night Units
                    6.   Maximum Demand Tariff (LV)  Night Units
                    7.   Restricted Hours and Crop Drying Units

                                      379
<PAGE>

     9.5.4     The definition of LV3 units includes units distributed under the
               following tariffs:

                    1.   Domestic Standard
                    2.   Farm Standard
                    3.   General Standard
                    4.   Catering
                    5.   Public Lighting
                    6.   LV Monthly and Quarterly Maximum Demand

     9.5.5     Notwithstanding the provisions of paragraphs 9.5.2 to 9.5.4,
               where the Director is satisfied that a tariff or tariffs in
               respect of which the Licensee has treated the units distributed
               as falling or not falling within one of the categories in
               paragraphs 9.5.2 to 9.5.4 should not be so treated, the Director
               shall issue directions to that effect and the tariff or tariffs
               specified in the directions shall cease to be so treated from the
               date of issue of the directions or (subject to paragraph 6.10)
               such other date as may be specified in the directions and shall
               with effect from such date be treated in such manner as may be
               specified in the directions.

                                      380
<PAGE>

10.  Duration of charge restriction conditions
     -----------------------------------------

10.1 The public electricity supply charge restriction conditions shall apply so
     long as the public electricity supply licence continues in force but shall
     cease to have effect (in whole or in part, as the case may be) if the
     Licensee delivers to the Director a disapplication request made in
     accordance with paragraph 10.2 and:

     (a)  the Director agrees in writing to the disapplication request; or

     (b)  their application (in whole or in part) is terminated by notice given
          by the Licensee in accordance with either paragraph 10.4 or paragraph
          10.5.

10.2 A disapplication request pursuant to this paragraph 10 shall

     (a)  be in writing addressed to the Director,

     (b)  specify the public electricity supply charge restriction conditions
          (or any part or parts thereof) to which the request relates, and

     (c)  state the date from which the Licensee wishes the Director to agree
          that the specified public electricity supply charge restriction
          conditions shall cease to have effect.

10.3 Save where the Director otherwise agrees, no disapplication following
     delivery of a disapplication request pursuant to this paragraph 10 shall
     have effect earlier than the date which is the later of:

     (a)  the date occurring 18 months after delivery of the disapplication
          request; and either

     (b)  in the case of distribution charges regulated under paragraph 4, 31
          March 2005; or

                                      381
<PAGE>

     (c)  in the case of supplies regulated under Schedule 6A and paragraph 1 of
          Schedule 6, 31 March 2002.

10.4 If the Director has not made a reference to the Competition Commission
     under Section 12 of the Act relating to the modification of the public
     electricity supply charge restriction conditions before the beginning of
     the period of 12 months which will end with the disapplication date, the
     Licensee may deliver written notice to the Director terminating the
     application of such of the public electricity supply charge restriction
     conditions (or any part or parts thereof) as are specified in the
     disapplication request with effect from the disapplication date or a later
     date.

10.5 If the Competition Commission makes a report on a reference made by the
     Director relating to the modification of the public electricity supply
     charge restriction conditions (or any part or parts thereof) specified in
     the disapplication request and such report does not include a conclusion
     that the cessation of such public electricity supply charge restriction
     conditions, in whole or in part, operates or may be expected to operate
     against the public interest, the Licensee may within 30 days after the
     publication of the report by the Director in accordance with Section 13 of
     the Act deliver to him written notice terminating the application of such
     public electricity supply charge restriction conditions (or any part or
     parts thereof) with effect from the disapplication date or a later date.

10.6 A disapplication request or notice served under this Condition may be
     served in respect of a specified geographic area.

                                      382
<PAGE>

SCHEDULE 6
----------

The following Conditions shall be added to Schedule 6 with effect from 1 April
------------------------------------------------------------------------------
2000.
-----

Schedule 6A  Restraints on supply charges
-----------------------------------------

     Availability of Restricted Tariffs
     ----------------------------------

1    The Licensee shall make available and continue to make available to all
     Domestic Customers the Standard Domestic Tariff and the Domestic Economy 7
     Tariff.

2    The Licensee shall not, without the consent in writing of the Director,
     change the terms (other than price, which shall be regulated in accordance
     with this Schedule) of any Restricted Tariff, and the terms to which this
     prohibition applies include, for example, the hours between which
     particular prices apply and the level of consumption at which prices
     change.

     Restraints on Prices for Restricted Tariffs
     -------------------------------------------

3    Without prejudice to paragraph 7 of Schedule 6, and subject to paragraph 16
     of this Schedule, the Licensee shall, in addition to complying with
     paragraphs 10, 11 , 12 and (where appropriate) 13, of this Schedule, ensure
     that at any point in time in the eleventh relevant year the prices set by
     the Licensee for the Standard Domestic Tariff and the Domestic Economy 7
     Tariff shall not exceed limits imposed by paragraph 6 and paragraph 8
     respectively.

                                      383
<PAGE>

4    Without prejudice to paragraph 7 of Schedule 6, and subject to paragraph 16
     of this Schedule, the Licensee shall, in addition to complying with
     paragraphs 12, 15 and (where appropriate) 13, ensure that at any point in
     time in the twelfth relevant year the prices set by the Licensee for the
     Standard Domestic Tariff and the Domestic Economy 7 Tariff shall not exceed
     limits imposed by paragraph 7 and paragraph 9 respectively.

5    Without prejudice to paragraph 7 of Schedule 6, and subject to paragraph 16
     of this Schedule, the Licensee shall, in addition to complying with
     paragraphs 12, 15 and (where appropriate) 13, ensure that at any point in
     time in the thirteenth and subsequent relevant years, the prices set by the
     Licensee for the Standard Domestic Tariff and the Domestic Economy 7 Tariff
     shall not exceed the limits imposed by paragraphs 7, 9 and 15 respectively;

     where in paragraphs 7, 9, and 15:

     references to the 'twelfth relevant year' are replaced by reference to the
     relevant subsequent relevant year; and

     references to 't+1' are to be construed as references to the relevant
     subsequent relevant year; and

     references to 't' are to be construed as references to the year preceding
     the relevant subsequent relevant year.

Restraint on Standard Domestic Tariff
-------------------------------------

6    The Standard Domestic Tariff shall be set so that at any point in time in
     the eleventh relevant year the weighted average unit price of that

                                      384
<PAGE>

     tariff represented by the term WP\\SDt\\ does not exceed the lower of the
     two formulae given under (a) and (b) :

     (a)        ( (B\\SDt\\+D\\SDt\\+T\\SDt\\ ) x 1.015 ) x (1+(F\\t\\/100))

     (b)        WP\\SDt-1\\ x ((1+(F\\t\\/100))/(1+(F\\d\\/100))) x
                (1+(RPI\\t\\/100))

     where:

     WP\\SDt\\  is set equal to

                (W\\SD\\ x P\\SDt\\ ) + ( (1-W\\SD\\) x PPP\\SDt\\ )

     W\\SD\\    means the weighting factor given against the Licensee's name in
                Column 2 of Annex D to this Schedule.

     P\\SDt\\   means the average unit price for the Licensee's Standard
                Domestic Tariff calculated as follows, using the Licensee's
                published rates for that tariff, and without taking account of
                any Prompt Payment Discount available under that tariff:

                (Annual Standing Charge + (B1\\SD\\ x Primary Unit rate) +
                ((3300-B1\\SD\\) x Secondary Unit rate)) / 3300

     B1\\SD\\   has the value given against the Licensee's name in Column 2 of
                Annex E to this Schedule.

     PPP\\SDt\\ means the average unit price for the Licensee's Standard
                Domestic Tariff calculated as follows, using the Licensee's
                published rates for that tariff, and after taking account of any
                Prompt Payment Discount available under that tariff:

                                      385
<PAGE>

                (Annual Standing Charge + (B1\\SD\\ x Primary unit rate) +
                ((3300-B1\\SD\\) x Secondary unit rate)) / 3300

     B\\SDt\\   means the base allowance, subject to paragraph 16 of this
                Schedule, (in respect of generation, supply and transmission
                services use of system) given against the Licensee's name in
                Column 2 of Annex B to this Schedule.

     D\\SDt\\   means a sum representing the distribution use of system charges
                incurred by the Licensee in the eleventh relevant year in
                supplying a customer on a Standard Domestic Tariff, represented
                by the formula :

                ( D\\1SDt\\ + (3300 . D\\2SDt\\ ) + D\\3SDt\\ ) / 3300
     where:

     D\\1SDt\\  is the distribution use of system annual standing charge for
                supplying that customer;

     D\\2SDt\\  is the distribution use of system charge in respect of each unit
                consumed by that customer; and

     D\\3SDt\\  is the aggregate of all other relevant distribution charges for
                supplying that customer.

     T\\SDt\\   means a sum representing the transmission use of system charges
                incurred by the Licensee in the eleventh relevant year in
                supplying a customer on a Standard Domestic Tariff, represented
                by the formula :

                                      386
<PAGE>

                  ( T\\1SDt\\ + (3300 x T\\2SDt\\ ) ) / 3300

     where:

     T\\1SDt\\    is the transmission use of system charge annual standing
                  charge attributable to or for supplying that customer;

     T\\2SDt\\    is the transmission use of system charge in respect of each
                  unit consumed by that customer.

     WP\\SDt-1\\  is set equal to

                  (W\\SD\\ x P\\SDt-1\\ ) + ((1-W\\SD\\) x PPP\\SDt-1\\)

     where:

     P\\SDt-1\\   means the average unit price for the Licensee's Standard
                  Domestic Tariff calculated as follows, using the Licensee's
                  published rates for that tariff as at the end of the tenth
                  relevant year and without taking account of any Prompt Payment
                  Discount available under that tariff:

                  (Annual Standing Charge + (B1\\SD\\ x Primary Unit rate) +
                  ((3300-B1\\SD\\) x Secondary Unit rate)) / 3300

     PPP\\SDt-1\\ means the average unit price for the Licensee's Standard
                  Domestic Tariff calculated as follows, using the Licensee's
                  published rates for that tariff as at the end of the tenth
                  relevant year, and after taking account of any Prompt Payment
                  Discount available under that tariff:

                                      387
<PAGE>

                 (Annual Standing Charge + (B1\\SD\\ x Primary unit rate) +
                 ((3300-B1\\SD\\) x Secondary unit rate)) / 3300

7    The Standard Domestic Tariff shall be set so that at any point in time in
     the twelfth relevant year the weighted average unit price of that tariff
     represented by the term WP\\SDt+1\\ does not exceed :

     ((B\\SDt+1\\+D\\SDt+1\\+T\\SDt+1\\ ) x 1.015) x (1+(F\\t+1\\/100))

     where:

     WP\\SDt+1\\ is set equal to

                 (W\\SD\\ x P\\SDt+1\\ ) + ((1-W\\SD\\) x PPP\\SDt+1\\)

     W\\SD\\     means the weighting factor given against the Licensee's name in
                 Column 2 of Annex D to this Schedule.

     P\\SDt+1\\  means the average unit price for the Licensee's Standard
                 Domestic Tariff in the twelfth relevant year calculated as
                 follows, using the Licensee's published rates for that tariff
                 and without taking account of any Prompt Payment Discount
                 available under that tariff:

                 (Annual Standing Charge + (B1\\SD\\ x Primary Unit rate) +
                 ((3300-B1\\SD\\) x Secondary Unit rate)) / 3300

     B1\\SD\\    has the value given against the Licensee's name in Column 2 of
                 Annex E to this Schedule.

                                      388
<PAGE>

     PPP\\SDt+1\\ means the average unit price for the Licensee's Standard
                  Domestic Tariff in the twelfth relevant year calculated as
                  follows, using the Licensee's published rates for that tariff
                  and after taking account of any Prompt Payment Discount
                  available under that tariff:

                  (Annual Standing Charge + (B1\\SD\\ x Primary unit rate) +
                  ((3300-B1\\SD\\) x Secondary unit rate)) / 3300

     B\\SDt+1\\   is set equal to

                  B\\SDt\\ x (1+(RPI\\t+1\\/100))

     D\\SDt+1\\   means a sum representing the distribution use of system
                  charges incurred by the Licensee in the twelfth relevant year
                  in supplying a customer on a Standard Domestic Tariff,
                  represented by the formula :

                  (D\\1SDt+1\\ + (3300 x D\\2SDt+1\\ ) + D\\3SDt+1\\ ) / 3300

     where:

     D\\1SDt+1\\  is the distribution use of system charge annual standing
                  charge for supplying that customer;

     D\\2SDt+1\\  is the distribution use of system charge in respect of each
                  unit consumed by that customer; and

                                      389
<PAGE>

     D\\3SDt+1\\    is the aggregate of all other relevant distribution charges
                    for supplying that customer.

     T\\SDt+1\\     means a sum representing the transmission use of system
                    charges incurred by the Licensee in the twelfth relevant
                    year in supplying a customer on a Standard Domestic Tariff,
                    represented by the formula :

                    (T\\1SDt+1\\ + (3300 x T\\2SDt+1\\))/3300

     where:

     T\\1SDt+1\\    is the transmission use of system charge annual standing
                    charge attributable to or for supplying that customer; and

     T\\2SDt+1\\    is the transmission use of system charge in respect of each
                    unit consumed by that customer.

     For the purposes of this paragraph 7, any cross references to it and this
     Condition generally the terms B\\SDt\\, D\\SDt\\, and T\\SDt\\ shall have
     the meanings given respectively, in paragraph 6 above.

     Restraint on Domestic Economy 7 tariff
     --------------------------------------

8    The Domestic Economy 7 Tariff shall be set so that at any point in time in
     the eleventh relevant year the weighted average unit price of that tariff
     represented by the term WP\\E7t\\ does not exceed the lower of the two
     formulae given under (a) and (b) :

     (a) ((B\\E7t\\+D\\E7t\\+T\\E7t\\) x 1.015) x (1+(F\\t\\/100))

     (b) WP\\E7t-1\\ x ((1+(F\\t\\/100))/(1+F\\d\\/100)) x (1+(RPI\\t\\/100))

                                      390
<PAGE>

     where:

     WP\\E7t\\    is set equal to

                  (W\\E7\\ x P\\E7t\\) + ((1-W\\E7\\) x PPP\\E7t\\)

     and:

     W\\E7\\      means the weighting factor given against the Licensee's name
                  in Column 3 of Annex D to this Schedule;

     P\\E7t\\     means the average unit price for the Licensee's Domestic
                  Economy 7 Tariff calculated as follows, using the Licensee's
                  published rates for that tariff and without taking account of
                  any Prompt Payment Discount available under that tariff :

                  (Annual Standing Charge + (B1\\E7\\. Day Primary Unit Rate) +
                  ((3000 -B1\\E7\\) x Day Secondary Unit Rate) + (3600 x Night
                  Unit Rate))/6600

     B1\\E7\\     has the value given against the Licensee's name in Column 3 of
                  Annex E to this Schedule.

     PPP\\E7t\\   means the average unit price for the Licensee's Domestic
                  Economy 7 Tariff calculated as follows, using the Licensee's
                  published rates for that tariff and after taking account of
                  any Prompt Payment Discount available under that tariff:

                                      391
<PAGE>

                  ((Annual Standing Charge + (B1\\E7\\ x Day Primary Unit Rate)
                  + ((3000 -B1\\E7\\) x Day Secondary Unit Rate) + (3600 x Night
                  Unit Rate)))/6600

     B\\E7t\\     means the base allowance, subject to paragraph 16 of this
                  Schedule, (in respect of generation, supply and transmission
                  services use of system) given against the Licensee's name in
                  Column 3 of Annex B to this Schedule.

     D\\E7t\\     means a sum representing the distribution use of system
                  charges incurred by the Licensee in the eleventh relevant year
                  in supplying a customer on a Domestic Economy 7 Tariff,
                  represented by the formula :

                  (D\\1E7t\\ + (3000 x D\\2E7t\\) + (3600 x D\\3E7t\\) +
                  D\\4E7t\\) / 6600

     where:

     D\\1E7t\\    is the distribution use of system charge annual standing
                  charge for supplying that customer;

     D\\2E7t\\    is the distribution use of system charge in respect of each
                  day unit consumed by that customer;

     D\\3E7t\\    is the distribution use of system charge in respect of each
                  night unit consumed by that customer; and

     D\\4E7t\\    is the aggregate of all other relevant distribution charges
                  for supplying that customer.

                                      392
<PAGE>

     T\\E7t\\     means a sum representing the transmission use of system
                  charges incurred by the Licensee in the eleventh relevant year
                  in supplying a customer on a Domestic Economy 7 Tariff,
                  represented by the formula :

                  (T\\1E7t\\ + (3000 x T\\2E7t\\) + (3600 x T\\3E7t\\))/6600

     where:

     T\\1E7t\\    is the transmission use of system charge annual standing
                  charge;

     T\\2E7t\\    is the transmission use of system charge in respect of each
                  day unit consumed by that customer; and

     T\\3E7t\\    is the transmission use of system charge in respect of each
                  night unit consumed by that customer.

     WP\\E7t-1\\  is set equal to

                  (W\\E7\\ x P\\E7t-1\\) + ((1-W\\E7\\) x PPP\\E7t-1\\)

     P\\E7t-1\\   means the average unit price for the Licensee's Domestic
                  Economy 7 Tariff calculated as follows, using the Licensee's
                  published rates for that tariff as at the end of the tenth
                  relevant year, and without taking account of any Prompt
                  Payment Discount available under that tariff:

                  (Annual Standing Charge + (B1\\E7\\ x Day Primary Unit Rate) +
                  ((3000 - B1\\E7\\) x Day Secondary Unit Rate) + (3600 x Night
                  Unit Rate))/6600

                                      393
<PAGE>

     B1\\E7\\      has the value given against the Licensee's name in column 3
                   of Annex E.

     PPP\\E7t-1\\  means the average unit price for the Licensee's Domestic
                   Economy 7 Tariff calculated as follows, using the Licensee's
                   published rates for that tariff at the end of the tenth
                   relevant year and after taking account of any Prompt Payment
                   Discount available under that tariff:

                   (Annual Standing Charge + (B1\\E7\\ x Day Primary Unit Rate)
                   + ((3000 - B1\\E7\\) x Day Secondary Unit Rate) + (3600 x
                   Night Unit Rate)) / 6600

9    The Domestic Economy 7 Tariff shall be set so that at any point in time in
     the twelfth relevant year the weighted average unit price of that tariff
     represented by the term WP\\E7t+1\\ does not exceed:

        ((B\\E7t+1\\+D\\E7t+1\\+T\\E7t+1\\) x 1.015 ) x (1+(F\\t+1\\/100))

     where:

     WP\\E7t+1\\   is set equal to

                   (W\\E7\\ x P\\E7t+1\\) + ((1-W\\E7\\) x PPP\\E7t+1\\)

     W\\E7\\       means the weighting factor given against the Licensee's name
                   in Column 3 of Annex D to this Schedule;

     P\\E7t+1\\    means the average unit price for the Licensee's Domestic
                   Economy 7 Tariff in the twelfth relevant year calculated as
                   follows, using the Licensee's published rates for that
                   tariff,

                                      394
<PAGE>

                   and without taking account of any Prompt Payment Discount
                   available under that tariff:

                   (Annual Standing Charge + (B1\\E7\\ x Day Primary Unit Rate)
                   + ((3000 -B1\\E7\\) x Day Secondary Unit Rate) + (3600 x
                   Night Unit Rate)) / 6600

     B1\\E7\\      has the value given against the Licensee's name in Column 3
                   of Annex E to this Schedule.

     PPP\\E7t+1\\  means the average unit price for the Licensee's Domestic
                   Economy 7 Tariff in the twelfth relevant year calculated as
                   follows, using the Licensee's published rates for that tariff
                   and after taking account of any Prompt Payment Discount
                   available under that tariff:

                   (Annual Standing Charge + (B1\\E7\\ x Day Primary Unit Rate)
                   + ((3000 -B1\\E7\\) x Day Secondary Unit Rate) + (3600 x
                   Night Unit Rate)) / 6600

     B\\E7t+1\\    is set equal to

                   B\\E7t\\ x (1+(RPI\\t+1\\/100))

     D\\E7t+1\\    means a sum representing the distribution use of system
                   charges incurred by the Licensee in the twelfth relevant year
                   in supplying a customer on a Domestic Economy 7 Tariff,
                   represented by the formula:

                   (D\\1E7t+1\\ + (3000 x D\\2E7t+1\\) + (3600 x D\\3E7t+1\\) +
                   D\\4E7t+1\\) / 6600

                                      395
<PAGE>

     where:

     D\\1E7t+1\\   is the distribution use of system charge annual standing
                   charge for supplying that customer

     D\\2E7t+1\\   is the distribution use of system charge in respect of each
                   day unit consumed by that customer

     D\\3E7t+1\\   is the distribution use of system charge in respect of each
                   night unit consumed by that customer

     D\\4E7t+1\\   is the aggregate of all other relevant distribution charges
                   for supplying that customer

     T\\E7t+1\\    means a sum representing the transmission use of system
                   charges incurred by the Licensee in the twelfth relevant year
                   in supplying a customer on a Domestic Economy 7 Tariff,
                   represented by the formula:

                   (T\\1E7t+1\\ + (3000 x T\\2E7t+1\\) + (3600 x T\\3E7t+1\\))
                   / 6600

     where:

     T\\1E7t+1\\   is the transmission use of system charge annual standing
                   charge attributable to or for supplying that customer;

     T\\2E7t+1\\   is the transmission use of system charge in respect of each
                   day unit consumed by that customer; and

     T\\3E7t+1\\   is the transmission use of system charge in respect of each
                   night unit consumed by that customer.

                                      396
<PAGE>

     For the purposes of this paragraph 9, any cross references to it and this
     condition generally the terms B\\E7t\\ , D\\E7t\\ , and T\\E7t\\ shall have
     the meanings given respectively, in paragraph 8 above.

     Supplementary Restrictions
     --------------------------

10   Without prejudice to paragraph 7 of Schedule 6, at the beginning of the
     eleventh relevant year the Licensee shall set its prices on the Restricted
     Tariffs so that, except with the prior written consent of the Director, in
     addition to complying with paragraph 6 of this Schedule or, as the case may
     be, paragraph 8, the limits in paragraph 11 shall apply.

11   The standing charge and unit rates for the Standard Domestic Tariff and
     Domestic Economy 7 Tariff shall not at any point in time in the eleventh
     relevant year exceed in each case the charges made at the end of the tenth
     relevant year, multiplied by the formula:

     (1+(RPI\\t\\/100)) x [(1+(F\\t\\/100))/(1+(F\\d\\/100))]

12   Without prejudice to paragraph 7 of Schedule 6, throughout the eleventh and
     subsequent relevant years, the Licensee shall set its prices on all tariffs
     available to Domestic Customers (other than the Restricted Tariffs) so that
     the standing charge, unit rate or rates and any other component parts of
     the tariffs shall not, except with the prior written consent of the
     Director, in the relevant year t exceed

     C\\pt\\ x (1+(RPI\\t\\/100)) x [(1 + (F\\t\\/100))/(1+(F\\d\\/100))]

                                      397
<PAGE>

        where:

        C\\pt\\ means each of the standing charge, unit rate or rates, and other
        component parts of the tariff, approved by the Director, prevailing on
        31 March of the previous relevant year.  Hence for the purposes of the
        eleventh relevant year, C\\pt\\ means each of the standing charge, unit
        rate or rates, and other component parts of the tariff prevailing at the
        end of the tenth relevant year.

Prepayment Meter Tariffs

13      In the eleventh and subsequent relevant years, the total charge in any
        domestic prepayment meter tariff, including any charges made for the
        provision of the prepayment meter, shall not exceed the total charge
        made in the equivalent domestic tariff by more than the amount given
        against the Licensee's name in column 2 of Annex F.

14      The Director may by direction specify both which tariffs are to be
        deemed prepayment meter tariffs and which tariffs are their equivalent
        domestic tariffs.

Standing charges and unit rates

15 (a)  Without prejudice to paragraph 7 of Schedule 6, throughout the twelfth
        relevant year and every subsequent relevant year, the Licensee shall set
        its prices for the Standard Domestic Tariff and the Domestic Economy 7
        Tariff so that, except with the prior written consent of the Director,
        the standing charge, unit rate or rates and any other component part of
        those tariffs shall not exceed the formula given in sub-paragraph (b),

                                      398
<PAGE>

        Provided that if in the application of the formulae in paragraphs 7 and
        9 in relevant year t:

        the value of D\\SDt+1\\ in relation to the Standard Domestic Tariff
        exceeds

        D\\SDt\\ x (1 + (RPI\\t\\ / 100))

        or the value of T\\SDt+1\\ in relation to the Standard Domestic Tariff
        exceeds

        T\\SDt\\ x (1+ (RPI\\t\\ / 100))

        or the value of D\\E7t+1\\ in relation to the Domestic Economy 7 Tariff
        exceeds

        D\\E7t\\ x (1 + (RPI\\t\\ / 100))

        or the value of T\\E7t+1\\ in relation to the Domestic Economy 7 Tariff
        exceeds

        T\\E7t\\ x (1+ (RPI\\t\\ / 100))

        then the Licensee may increase that Restricted Tariff up to the level
        allowed by the paragraphs 7 or 9 and 5 as appropriate.

(b)     The formula referred to in paragraph (a) is:

        RTC\\pt\\ . (1+(RPI\\t\\/100)) x [(1+ (F\\t\\/100))/(1+(F\\d\\/100))]

        where:

                                      399
<PAGE>

        RTC\\pt\\  means each of the standing charge, unit rate or rates, and
                   other component parts of the relevant Restricted Tariff,
                   prevailing at the end of relevant year t-1.

        Generation, Supply Business, and Transmission Services Use of System
        --------------------------------------------------------------------
        Costs
        -----

16      If the costs to the Licensee of procuring or providing generation,
        supply or transmission services use of system increase substantially in
        the aggregate due to factors outside the Licensee's control and for
        which the Licensee would not reasonably have been expected to have
        provided, so that the amount allowed for under the terms B\\SD\\ and
        B\\E7\\ in the formulae given in paragraphs 6 to 9 no longer remunerate
        the Licensee appropriately, the Director may direct that, in the
        eleventh or any subsequent relevant year (including any year to which
        paragraph 5 applies), the limits imposed by paragraphs 6 to 9 shall be
        raised to the extent specified in the direction.

        Fossil fuel levy
        ----------------

17      If at any time after the Licensee has set its prices for a relevant year
        the value of F\\t\\ is changed by an amount which is less than half a
        percentage point, after taking account of all other changes in the value
        of F\\t\\ since its prices were set, the Licensee shall not be required,
        solely on that account, to change the prices it has set.

        Reporting requirements
        ----------------------

18      Every three months, in each of the eleventh and subsequent relevant
        years, the Licensee shall submit to the Director statements detailing
        the costs of purchasing electricity for its Supply Business.  Such

                                      400
<PAGE>

               statements shall be in a form approved by the Director, and shall
               as a minimum include total and average costs under electricity
               purchase contracts for the Supply Business, and that part to be
               attributed to the domestic sector, for the relevant year to date
               and forecast for the relevant year as a whole.

               Timing
               ------

19(a)          This paragraph applies where:

      (i)      a reduction has been or is to be made in charges for distribution
               use of system or transmission network use of system;
      (ii)     the effect of the reduction is or would be, if the Licensee did
               not reduce its Restricted Tariffs, to cause the prices set by the
               Licensee to exceed the limits on prices imposed by this Schedule;
               and
      (iii)    the Licensee reasonably expects further changes to be made to the
               charges for distribution use of system or transmission network
               use of system which will further alter the limits on prices
               imposed by this Schedule.

(b)            Where this paragraph applies, the Licensee may give notice to the
               Director:

      (i)      specifying the reduction in charges for distribution use of
               system or transmission network use of system which have been or
               are to be made;
      (ii)     describing the effect of the reduction on the limits on prices
               imposed by this Schedule; and
      (iii)    giving particulars of the further changes which it expects to be
               made in charges for distribution use of system or transmission
               network use of system, including particulars of the grounds for
               that expectation.

                                      401
<PAGE>

(c)         If the Licensee gives such notice to the Director, and the grounds
            for the explanation given in the notice are reasonable, the Licensee
            shall be deemed not to be in breach (to the extent only that such
            breach is attributable to the reduction in charges specified in the
            notice) of any limit on prices imposed by this Schedule during the
            period beginning with the date on which the Director receives the
            notice and ending with the date specified in a direction given
            pursuant to sub-paragraph (d) or, if no such direction is given, 28
            days after the reduction in prices referred to in sub-paragraph
            (b)(I) takes effect.

(d)         The Director may give a direction

      (i)   specifying the end of the period during which the Licensee is deemed
            not to be in breach of the limits on prices imposed by this Schedule
            on account of the change in charges specified in the notice (which
            period may be shorter or longer than 28 days from when the change in
            charges takes effect) and / or

     (ii)   requiring the Licensee to make such reductions in its Restricted
            Tariffs during such period as is specified in the direction as will
            secure that the Licensee makes no significant gain as a result of
            its being deemed not to be in breach of any limit on prices imposed
            by this Schedule.

            Interpretation
            --------------

20          In this Schedule:

            (a) all prices and revenue shall exclude value added tax (if any);

            (b) where published prices do not include an allowance for the
            fossil fuel levy, for the purposes of this Schedule such prices
            shall be adjusted to include the relevant fossil fuel levy;

                                      402
<PAGE>

          (c) any reference to the first relevant year means the relevant year
          commencing 1 April 1990 and any reference to the second relevant year
          and so on shall be construed accordingly;

          (d) in addition to the definitions given within this Schedule the
          following term(s) shall have the following meaning:

          "Standard Domestic Tariff" means that tariff offered by the Licensee
          during the tenth relevant year specified against the Licensee's name
          in Column 2 of Annex A to this Schedule;

          "Domestic Economy 7 Tariff" means that tariff offered by the Licensee
          during the tenth relevant year specified against the Licensee's name
          in Column 3 of Annex A to this Schedule;

          "Restricted Tariffs" means the Standard Domestic Tariff and the
          Domestic Economy 7 Tariff taken together;

          "Prompt Payment Discount" means any discount or reduction, given in
          respect of the relevant year (quantified on the assumption of 3300 kWh
          annual consumption for a Standard Domestic Tariff, and on the basis of
          6600 kWh annual consumption for a Domestic Economy 7 Tariff), for the
          prompt or timely payment of bills by cash or cheque, compared with the
          charge which would be made where payment is not made promptly or on
          time.

          "RPI\\t\\" means the percentage change (whether of positive or a
          negative value) in the arithmetic average of the Retail Price Index
          figures published or determined with respect to each of the six months
          July to December (inclusive) in relevant year t-1 and the

                                      403
<PAGE>

          arithmetic average of the Retail Price Index figures published or
          determined with respect to the same months in relevant year t-2.

          F\\t\\  means the rate of the fossil fuel levy prevailing from time to
          time

          F\\d\\ means the fossil fuel levy prevailing at 31 March in the
          previous relevant year. Hence for the purposes of the eleventh
          relevant year, F\\d\\ means 0.

          (e) Unless otherwise specified in the Schedule or the context
          otherwise requires the words or expressions used in Schedule 6A shall
          have the same meaning as given in paragraph 1 of Schedule 6.

                                      404
<PAGE>

ANNEX A

The Restricted Tariffs

--------------------------------------------------------------------------------
Column 1                 Column 2                        Column 3
--------------------------------------------------------------------------------
Scottish Power plc       Domestic Tariff                 White Meter Tariff No.1

--------------------------------------------------------------------------------
Scottish and             Domestic Standard Tariff        Domestic Economy Tariff

Southern Energy plc
--------------------------------------------------------------------------------

                                      405
<PAGE>

ANNEX B

Base Allowances

Pence per kWh (2000/01 prices)

--------------------------------------------------------------------------------
Column 1                                  Column 2                     Column 3
--------------------------------------------------------------------------------
                                           B\\SD\\                      B\\E7\\
--------------------------------------------------------------------------------
Scottish Power plc                          4.967                        3.814
--------------------------------------------------------------------------------
Scottish and Southern                       5.056                        3.893

Energy plc
--------------------------------------------------------------------------------

                                      406
<PAGE>

ANNEX C

[ Not used ]

                                      407
<PAGE>

ANNEX D

Prompt payment discount weightings

--------------------------------------------------------------------------------
Column 1                         Column 2                           Column 3
--------------------------------------------------------------------------------
                                 W\\SD\\                            W\\E7\\
--------------------------------------------------------------------------------
Scottish

Power plc                         0.618                              0.622

--------------------------------------------------------------------------------
Scottish and                      0.530                              0.530

Southern Energy plc
--------------------------------------------------------------------------------

                                      408
<PAGE>

ANNEX E

Band blocks

--------------------------------------------------------------------------------
Column 1                          Column 2                          Column 3
--------------------------------------------------------------------------------
                                  B1\\SD\\                          B1\\E7\\
--------------------------------------------------------------------------------
Scottish Power plc                  3300                              3000
--------------------------------------------------------------------------------
Scottish and                        3300                              3000

Southern Energy plc
--------------------------------------------------------------------------------

                                      409
<PAGE>

ANNEX F

Prepayment meter surcharge

-------------------------------------------
      Column 1             Column 2
-------------------------------------------
                           (Pounds)

Scottish Power plc           15.00
-------------------------------------------
Scottish and                  0.00

Southern Energy plc
-------------------------------------------

                                      410

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