Document:

<PAGE>

                                                                   EXHIBIT 10.52

Michigan Electric Transmission Company, LLC
FERC Electric Rate Schedule No. 2
EXECUTION COPY

                 Amendment and Restatement of the April 1, 2001

                               OPERATING AGREEMENT

                                 BY AND BETWEEN

                     MICHIGAN ELECTRIC TRANSMISSION COMPANY

                                       AND

                            CONSUMERS ENERGY COMPANY

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                 Original Sheet No. 1
FERC Electric Rate Schedule No. 2
EXECUTION COPY

                 Amendment and Restatement of the April 1, 2001
                               OPERATING AGREEMENT
                                 BY AND BETWEEN
                     MICHIGAN ELECTRIC TRANSMISSION COMPANY
                                       AND
                            CONSUMERS ENERGY COMPANY

     This Amendment and Restatement of the April 1, 2001 Operating Agreement
(the "Agreement") is made and entered into as of April 29, 2002 by and between
Michigan Electric Transmission Company ("MICHIGAN TRANSCO"), a Michigan
corporation, having its principal place of business at 540 Avis Drive, Suite H,
Ann Arbor, Michigan 48108, and Consumers Energy Company ("CONSUMERS"), a
Michigan corporation, having its principal place of business at 212 W Michigan
Avenue, Jackson, Michigan 49201. (Michigan Transco and Consumers may be referred
to individually as "PARTY" or collectively as the "PARTIES"). This Agreement
amends, restates and replaces the April 1, 2001 Operating Agreement between the
Parties, effective on the date indicated above.

     WHEREAS, Michigan Transco desires to engage in the transmission of electric
energy in interstate commerce and to exercise operational authority over the
Transmission System for the purpose of providing open access, non-discriminatory
transmission service to Consumers and all other eligible customers;

     WHEREAS, Michigan Transco also desires to provide open access,
non-discriminatory transmission service over certain facilities owned and
operated by Consumers with voltage ratings below 120 kV ("DISTRIBUTION
FACILITIES") that are used to serve certain wholesale customers and credit all
charges collected therefrom to Consumers; and

     NOW THEREFORE, in consideration of the mutual agreements and commitments
contained herein, Michigan Transco and Consumers agree as follows:

                             ARTICLE 1. DEFINITIONS

     1.1 The following terms shall have the meanings set forth below. Any term
used in this Agreement that is not defined herein shall have the meaning
customarily attributed to such term within the electric utility industry.

     "AGREEMENT" means this Operating Agreement By and Between Michigan Transco
and Consumers Energy Company, as it may be amended from time to time.

     "CONTROL AREA" means an electrical system bounded by interconnection
metering and telemetry. Generation within the Control Area is directed to
operate in a manner prescribed by guidelines established by ECAR and NERC and in
accordance with Good Utility Practice to (a) maintain scheduled interchange with
other Control Areas, (b) maintain the operating frequency and (c) provide
sufficient generating capacity to maintain operating reserves.

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                 Original Sheet No. 2
FERC Electric Rate Schedule No. 2
EXECUTION COPY

     "CONTROL AREA OPERATOR" means the person(s) and/or entity(ies) responsible
for exercising operational control over the Transmission System.

     "ECAR" means the East Central Area Reliability council, its successors and
assigns.

     "FERC" means the Federal Energy Regulatory Commission or the successor
thereto.

     "GENERATION RESOURCES" means the facilities used for the production of
electric energy, which are owned and operated by Consumers and located within
Michigan Transco's Control Area available to meet the capacity and energy needs
of Consumers.

     "GOOD UTILITY PRACTICE" means any of the practices, methods, or acts
engaged in or approved by a significant portion of the electric utility industry
with respect to similar facilities during the relevant time period which, in
each case, in the exercise of reasonable judgment in light of the facts known or
that should have been known at the time the decision was made, could have been
expected to accomplish the desired result at a reasonable cost consistent with
good business practices, reliability, safety, law, regulation, environmental
protection, and expedition. Good Utility Practice are not intended to be limited
to the optimum practices, methods, or acts to the exclusion of all others, but
rather to delineate the acceptable practices, methods, or acts generally
accepted in the region.

     "MICHIGAN TRANSCO TRANSMISSION TARIFFS" means either the Open Access
Transmission Tariff or the Joint Open Access Transmission Tariff in which
Michigan Transco provides or will provide open access, non-discriminatory
transmission service, as amended from time to time, or any successor tariff on
file, or to be filed, with the FERC, as such may be amended from time to time.

     "OASIS STANDARDS OF CONDUCT" means the rules and regulations promulgated by
the FERC, 18 C.F.R. Part 37 (1999), as amended from time to time, requiring the
implementation of Standards of Conduct governing the transfer of information and
communications between public utilities' wholesale merchant and transmission
system operation functions, and that of their affiliates.

     "REGULATORY AUTHORITY" means any federal, state, local, or other
governmental, regulatory, or administrative agency having jurisdiction over the
subject matter of this Agreement.

     "TRANSMISSION CUSTOMER" means a transmission customer taking service under
the Michigan Transco Transmission Tariffs, any entity that is a party to a
transaction under the Michigan Transco Transmission Tariffs, including
Consumers, or any entity on whose behalf Michigan Transco is providing
transmission service.

     "TRANSMISSION SYSTEM" means transmission assets owned and operated by
Michigan Transco.

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                 Original Sheet No. 3
FERC Electric Rate Schedule No. 2
EXECUTION COPY

                         ARTICLE 2. TERM AND TERMINATION

     2.1 This Agreement shall become effective when signed by the Parties.
Parties' corresponding obligations as set forth herein shall begin at 12:01 a.m.
(EPT) on April 29, 2002 ("EFFECTIVE DATE"). The expiration date of this
Agreement shall coincide with Article 2, Term, of the Easement Agreement.

     2.2 Any obligations incurred by the Parties under this Agreement to make
payments due, remit costs, or complete construction of designated facilities, as
agreed to prior to the termination hereof, shall survive the termination of this
Agreement.

                                   ARTICLE 3.
                   OBLIGATIONS, RIGHTS AND RESPONSIBILITIES OF
                     MICHIGAN ELECTRIC TRANSMISSION COMPANY

     3.1 Operation of Transmission System. Pursuant to the terms of this
Agreement, Michigan Transco shall be responsible for operating the Transmission
System in order to provide all Transmission Customers with safe, efficient,
reliable, and non-discriminatory transmission service pursuant to terms and
conditions set forth in the Michigan Transco Transmission Tariffs. As more fully
set forth in the Operating Protocols attached hereto as Appendix 1, such
operation shall be in accordance with Good Utility Practice and shall conform to
the applicable reliability requirements of NERC, ECAR or other regional
reliability councils, or any successor organizations, and all applicable
requirements of federal or state laws or Regulatory Authorities. As further
detailed in Appendix 1, Michigan Transco shall assume the following operational
responsibilities from Consumers:

          3.1.1 Administration and Maintenance of Michigan Transco Transmission
Tariffs. Michigan Transco shall be responsible for administering the Michigan
Transco Transmission Tariffs and for providing open access, non-discriminatory
transmission service to all Transmission Customers taking service under such
tariff and for maintaining the Michigan Transco Transmission Tariffs on file
with the FERC.

          3.1.2 Review and Approval of Requests for Transmission Service Under
the Michigan Transco Transmission Tariffs. Michigan Transco shall be responsible
for reviewing and approving, as appropriate, all requests for open access,
non-discriminatory transmission service under the Michigan Transco Transmission
Tariffs.

          3.1.3 Determination of Available Transmission Capacity. Michigan
Transco shall be responsible for calculating available transmission capacity
("ATC") for the Transmission System in accordance with the terms and conditions
set forth in the Michigan Transco Transmission Tariffs.

          3.1.4 Provision of Ancillary Services. Michigan Transco shall be
responsible for offering ancillary services, as required by the rules and
regulations of the FERC, to all Transmission Customers taking service under the
Michigan Transco Transmission Tariffs.

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                 Original Sheet No. 4
FERC Electric Rate Schedule No. 2
EXECUTION COPY

Michigan Transco shall procure ancillary services on a non-preferential and
competitive basis from Consumers and from any third-party suppliers of such
services at FERC-approved rates.

          3.1.5 Administration of Open Access Same-Time Information System.
Michigan Transco shall assume responsibility for operating the open access
same-time information system ("OASIS") for the Transmission System.

          3.1.6 Maintenance and Operation Services. Michigan Transco shall be
responsible for maintenance and operation of the Transmission System and may
employ persons and enter into agreements as necessary to perform these services.
Michigan Transco may contract with Consumers to perform these services. Pursuant
to the terms of a separate services agreement, Consumers agrees to perform
maintenance and operation services for Michigan Transco, in accordance with Good
Utility Practice.

          3.1.7 Coordination of Maintenance Schedules. Michigan Transco shall be
responsible for establishing a maintenance schedule for all Transmission Assets
making up the Transmission System. Michigan Transco shall coordinate with
Consumers, as appropriate, both the scheduling of maintenance on all Generation
Resources connected to the Transmission System and the scheduling of maintenance
on Transmission Assets that could affect the operation of any Generation
Resources.

          3.1.8 Maintenance of Transmission System Security. Michigan Transco
shall be responsible for maintaining the security of the Transmission System and
shall monitor and coordinate voltage levels with neighboring control areas.

          3.1.9 Construction of New Transmission Assets. Michigan Transco shall
be responsible for the construction of new Transmission Assets where necessary
or desirable to provide transmission service over the Transmission System, or in
response to requests for transmission service under the Michigan Transco
Transmission Tariffs. Upon request from Consumers, Michigan Transco shall
construct necessary connection facilities to permit the interconnection of the
Transmission System with new Distribution Facilities constructed by Consumers.
Michigan Transco shall be responsible for acquiring all land, licenses, or
rights-or-way necessary for such construction. At Michigan Transco's expense,
Consumers shall use its eminent domain rights to the extent it legally can and
may, within the exercise of good business practice, to assist Michigan Transco
in the acquisition of land, licenses, or rights of way necessary for the
construction of new Transmission Assets. Michigan Transco may, in its reasonable
business judgment, contract with Consumers for design, construction, and related
real estate services. Pursuant to the terms of separate design, construction,
and real estate services agreements, Consumers agrees to design and construct
all new Transmission Assets for Michigan Transco as well as provide real estate
services.

          3.1.10 Access to Transmission System. During reasonable business hours
and under reasonable conditions, Michigan Transco shall, upon request, allow a
duly-authorized representative(s) of Consumers such access to the Transmission
System as is necessary for Consumers to perform its obligations under this
Agreement or to comply with the requirements

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                 Original Sheet No. 5
FERC Electric Rate Schedule No. 2
EXECUTION COPY

of Regulatory Authorities. Any such access provided pursuant to this Section
3.1.10 shall be subject to the relevant rules and regulations set forth in the
OASIS Standards of Conduct.

          3.1.11 Providing Information to Consumers. Michigan Transco shall
provide such information to Consumers as is necessary for Consumers to perform
the obligations set forth in Article IV of this Agreement or any Grandfathered
Agreement, or to comply with the requirements of any Regulatory Authority. All
such information provided by Michigan Transco shall be submitted in accordance
with the relevant rules and regulations set forth in the OASIS Standards of
Conduct. Information identified as "confidential" shall be treated as
confidential to the extent permitted by law. Any information provided pursuant
to this Section 3.1.11 shall be subject to the relevant rules and regulations
set forth in the OASIS Standards of Conduct.

          3.1.12 Inspection and Auditing of Records. During reasonable business
hours and under reasonable conditions, Michigan Transco shall, upon request,
grant a duly-authorized representative(s) of Consumers and/or Regulatory
Authorities such access to Michigan Transco's books and records as is necessary
to verify compliance by Michigan Transco under this Agreement, and to audit and
verify transactions under this Agreement. Michigan Transco shall also comply
with all applicable reporting requirements of Regulatory Authorities having
jurisdiction over Michigan Transco with respect to the business aspects of its
operations, and shall maintain such accounting records and metering data as is
necessary to perform its obligations under this Agreement. The inspection and
auditing of Michigan Transco's books and records pursuant to this Section 3.1.12
shall be subject to the relevant rules and regulations of the OASIS Standards of
Conduct.

     3.2 Provision of Transmission Service over Distribution Facilities by
Michigan Transco. Michigan Transco shall provide open access, non-discriminatory
transmission service to certain wholesale customers over the Distribution
Facilities, as defined herein, pursuant to the terms of the Michigan Transco
Transmission Tariffs and shall credit all charges associated with the provision
of such services over the Distribution Facilities to Consumers.

     3.3 Metering. Consumers and Michigan Transco shall provide communications,
metering, and other facilities necessary for the metering and control of the
Transmission Assets. Michigan Transco shall be responsible for any expenses it
incurs for the installation, operation, and maintenance of Transmission Assets
or the Transmission System.

     3.4 Obligations as Control Area Operator. As of April 1, 2001, Michigan
Transco shall administer and perform the duties, as defined in this Section 3.4,
of Control Area Operator for the Transmission System and, at a minimum, shall be
obligated to:

          3.4.1 match, at all times, the power supply located within the Control
Area and power purchased from or sold to entities located outside of the Control
Area with the load located within the Control Area;

          3.4.2 maintain scheduled interchange with other Control Areas directly
connected with the Transmission System within the limits of Good Utility
Practice;

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                 Original Sheet No. 6
FERC Electric Rate Schedule No. 2
EXECUTION COPY

          3.4.3 maintain system frequency within reasonable limits in accordance
with Good Utility Practice;

          3.4.4 procure from Consumers, or from other third-party entities, a
sufficient amount of ancillary services, as necessary, to maintain the operating
reserve requirement for the Consumers portion of the Control Area in accordance
with Good Utility Practice;

          3.4.5 provide operational and transaction data as necessary through
the ECAR OASIS or other OASIS facilities performing these functions on behalf of
the Control Area Operator.

     3.5 Grandfathered Transmission Agreements. Where Consumers is obligated to
provide transmission under agreements or tariffs which were executed or
effective prior to July 9, 1996 ("GRANDFATHERED AGREEMENTS"), Michigan Transco
and Consumers will execute a Network Integration Transmission Service ("NITS")
agreement under the Michigan Transco Transmission Tariffs to ensure that
Consumers' obligation to provide transmission service under the Grandfathered
Agreements is satisfied. Consumers will continue to bill customers served
pursuant to the Grandfathered Agreements in accordance with the rates, terms and
conditions set forth therein.

     3.6 Performance of Regulatory Obligations. Michigan Transco shall comply
with transmission operation and planning obligations of Consumers imposed by
federal or state laws or Regulatory Authorities, as of the effective date of
this Agreement, which can no longer be performed solely by Consumers following
transfer of ownership and control of their Transmission Facilities to Michigan
Transco, until such time as such obligations are changed or revised to relieve
Consumers or Michigan Transco in whole or in part of such obligations.

                                   ARTICLE 4.
                    OBLIGATIONS, RIGHTS AND RESPONSIBILITIES
                           OF CONSUMERS ENERGY COMPANY

     4.1 Duty to Cooperate with Michigan Transco. Consumers shall, to the
greatest extent practicable, cooperate with Michigan Transco as Michigan Transco
performs its duties as Control Area Operator, including providing reactive
supply and voltage control from generation sources or other ancillary services
and reducing load, when reasonably requested by Michigan Transco, in accordance
with the terms and conditions of the Michigan Transco Transmission Tariffs and
Good Utility Practice. Consumers shall not operate its Generation Resources or
Distribution Facilities in a manner which unduly interferes with the provision
of transmission service by Michigan Transco.

     4.2 Construction of New Distribution Facilities. Consumers shall, at the
request of Michigan Transco, plan and construct such Distribution Facilities
necessary to provide adequate and reliable transmission service to wholesale
customers served over the Distribution Facilities.

          4.2.1 Consumers shall obtain all required authorizations, permits,
licenses, or other regulatory approvals, including without limitation, siting
and environmental requirements

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                 Original Sheet No. 7
FERC Electric Rate Schedule No. 2
EXECUTION COPY

as may be imposed by state, local, and federal laws and regulations, for all
facilities constructed by Consumers. Construction of new facilities shall be
performed in accordance with Good Utility Practice, industry standards, and any
requirements of Regulatory Authorities.

     4.3 Access to Distribution Facilities. During reasonable business hours and
under reasonable conditions, Consumers shall, upon request, allow a
duly-authorized representative(s) of Michigan Transco access to the Distribution
Facilities as is necessary for Michigan Transco to perform its obligations under
this Agreement, the Michigan Transco Transmission Tariffs, and any service
agreements thereunder, or to comply with the requirements of Regulatory
Authorities. Any such access provided pursuant to this Section 4.3 shall be
subject to the relevant rules and regulations set forth in the OASIS Standards
of Conduct.

     4.4 Providing Information to Michigan Transco. Consumers shall provide such
information to Michigan Transco as is necessary for Michigan Transco to perform
its obligations under this Agreement, the Michigan Transco Transmission Tariffs,
and any transmission service agreements thereunder, or to comply with the
requirements of Regulatory Authorities. Any such information provided pursuant
to this Section 4.4 shall be subject to the relevant rules and regulations
established pursuant to the OASIS Standards of Conduct.

     4.5 Inspection and Auditing of Records. During reasonable business hours
and under reasonable conditions, Consumers shall, upon request, allow a
duly-authorized representative(s) of Michigan Transco such access to books and
records as is necessary for Michigan Transco to perform its obligations under
this Agreement, the Michigan Transco Transmission Tariffs, and any service
agreements thereunder, or to comply with the requirements of Regulatory
Authorities, for purposes of auditing and verifying transactions under this
Agreement. Consumers shall comply with all applicable reporting requirements of
Regulatory Authorities having jurisdiction over Consumers with respect to the
business aspects of its operations and shall maintain such accounting records
and metering data as is necessary to perform its obligations under this
Agreement. Any such inspection and auditing of Consumers' books and records
conducted by Michigan Transco pursuant to this Section 4.5 shall be subject to
the relevant rules and regulations set forth in the OASIS Standards of Conduct.

     4.6 Dispatch and Scheduling Decisions. Notwithstanding any other provision
of this Agreement, Consumers shall be solely responsible for determining and
implementing dispatch and scheduling decisions [other than redispatch under the
Tariffs and that certain "Lake Erie Emergency Redispatch Agreement", as filed
with FERC on July 28, 2000 ("LEER")] with respect to its resources to meet its
supply obligations. Consumers shall also be responsible for dispatching its
resources to self-provide Ancillary Services for its own load. Consumers shall
also be responsible for dispatching its resources to provide Ancillary Services
and other services to (a) to third parties that purchase such services from
Consumers and (b) Michigan Transco which purchases such services from Consumers
for resale to Transmission Customers.

                        ARTICLE 5. ASSIGNMENT OF REVENUES

     Transmission revenues from all Grandfathered Agreements will be billed and
collected by Consumers. Michigan Transco will bill and collect all revenues for
open access transmission

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                 Original Sheet No. 8
FERC Electric Rate Schedule No. 2
EXECUTION COPY

service agreements assigned by Consumers to Michigan Transco. The revenues
billed, collected, and received pursuant to open access transmission service
provided pursuant to the terms and conditions of the Michigan Transco
Transmission Tariffs shall be retained by Michigan Transco. Michigan Transco
shall credit to Consumers those charges billed and collected for the use of the
Distribution Facilities by wholesale customers taking transmission service under
Michigan Transco Transmission Tariffs. Michigan Transco shall also use its best
efforts to collect (to the extent allowed by FERC policy) from wholesale
customers taking transmission service under Michigan Transco Transmission
Tariffs for costs of Distribution Facilities constructed by Consumers pursuant
to Section 4.2 hereof, and shall credit to Consumers any collections therefor.

                                   ARTICLE 6.
                    OBLIGATIONS, RIGHTS AND RESPONSIBILITIES
                         OF THE ADMINISTRATIVE COMMITTEE

     6.1 Creation of Administrative Committee. The Parties hereto shall create
an Administrative Committee which shall consist of two members designated by
each party; provided however, that any third-party transferring ownership and/or
control over its FERC-jurisdictional transmission facilities to Michigan Transco
shall be granted the opportunity to designate two representatives to the
Administrative Committee.

     6.2 Meeting Dates. The Administrative Committee shall hold such meetings at
such times designated by the Committee, but at least once per calendar year.
Meetings of the Administrative Committee may also be held at any time upon the
request of a member of the Administrative Committee. Minutes of the
Administrative Committee meeting shall be prepared and maintained.

     6.3 Decisions. All decisions of the Administrative Committee shall be made
by unanimous vote of the members present or voting by proxy at the meeting at
which the vote is taken.

     6.4 Duties. The Administrative Committee shall have the following duties,
unless such duties are otherwise assigned by a vote of the Administrative
Committee to Michigan Transco or Consumers, in which case the so-assigned party
shall perform such duties. The Administrative Committee shall:

          6.4.1 Consider any matters in connection with the administration of
this agreement as may, from time-to-time, arise.

          6.4.2 Review and recommend additional duties and responsibilities for
Michigan Transco or Consumers consistent with FERC Order Nos. 888, 889 and 2000.

          6.4.3 Establish an Operating Committee and a Planning Committee and
other committees as necessary for the purpose of carrying out the day-to-day
administration of this Agreement including, but not limited to, the coordination
of generation and maintenance schedules, operating reserve monitoring,
transmission/distribution activity coordination, and

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                 Original Sheet No. 9
FERC Electric Rate Schedule No. 2
EXECUTION COPY

transmission/distribution systems planning coordination. The specific duties of
the committees shall be set forth in related agreements between the parties.

          6.4.4 Provide coordination of other matters not specifically provided
herein which the Parties agree are necessary to operate the Transmission System
reliably and economically.

     6.5 Committee Expenses. Each Party shall pay the expenses of its
representative to the Administrative Committee.

                            ARTICLE 7. FORCE MAJEURE

     7.1 Force Majeure. A Party shall not be considered to be in default or
breach of this Agreement, and shall be excused from performance, or liability
for damages to the other Party, to the extent it shall be delayed in or
prevented from performing or carrying out any of the obligations or
responsibilities of this Agreement because of a Force Majeure Event. "FORCE
MAJEURE EVENT" means any occurrence beyond the reasonable control of a Party
which causes such Party to be delayed in or prevented from performing or
carrying out any of its obligations under this Agreement and which by the
exercise of due diligence in accordance with Good Utility Practice, that Party
is unable to prevent, avoid, mitigate, or overcome, including any of the
following: any act of God, labor disturbance, act of the public enemy, war,
insurrection, riot, fire, storm or flood, ice, explosion, breakage or accident
to machinery or equipment, order, regulation or restriction imposed by
governmental military or lawfully established civilian authorities, provided
that a Force Majeure Event shall not include lack of finances or change in
market conditions, and provided further that any failure by Michigan Transco to
obtain services for the Transmission System due to the failure of any supplier
or subcontractor of Michigan Transco to perform any obligation to Michigan
Transco (including Consumers as maintenance supplier) shall not constitute a
Force Majeure Event hereunder unless such subcontractor or supplier is unable to
perform for reasons that would constitute a "Force Majeure Event" hereunder.

     7.2 Procedure. Any Party claiming that a Force Majeure Event has occurred
shall (i) provide prompt written notice of such Force Majeure Event to the other
Party giving a detailed written explanation of the event and an estimate of its
expected duration and probable effect on the performance of that Party's
obligations hereunder; and (ii) use commercially reasonable efforts in
accordance with Good Utility Practice to mitigate the effect of the Force
Majeure Event on the other Party, except that settlement of any labor dispute
shall be in the sole judgment of the affected Party.

                               ARTICLE 8. DEFAULT

     Unless excused by a Force Majeure Event, or the other Party's Event of
Default, each of the following events shall be deemed to be an "EVENT OF
DEFAULT" hereunder: failure of either Party, in a material respect, to comply
with, observe, or perform any covenant, warranty, or obligation under this
Agreement, without limitation, and such failure is not cured or rectified within
thirty (30) days after receipt of written notice of such failure from the other
Party or such

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                Original Sheet No. 10
FERC Electric Rate Schedule No. 2
EXECUTION COPY

longer period as may be reasonably required, provided that the defaulting Party
diligently attempts to cure the Event of Default.

                               ARTICLE 9. DISPUTES

     Any disagreement between Michigan Transco and Consumers as to their rights
and obligations under this Agreement shall first be addressed by the Parties. If
representatives of the Parties are unable in good faith to satisfactorily
resolve their disagreement, the Parties shall refer the matter to their
respective senior management. If, after using their best efforts to try to
resolve the dispute, senior management cannot resolve the dispute in thirty (30)
days, either Party may exercise any right or remedy available pursuant to this
Agreement.

                   ARTICLE 10. REPRESENTATIONS AND WARRANTIES

     10.1 Michigan Transco. Michigan Transco represents and warrants to
Consumers as follows:

          10.1.1 Organization. Michigan Transco is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Michigan
and Michigan Transco has the requisite corporate power and authority to carry on
its business as now being conducted.

          10.1.2 Authority Relative to this Agreement. Michigan Transco has the
requisite power and authority to execute and deliver this Agreement and, subject
to the procurement of applicable regulatory approvals, to carry out the actions
required of it by this Agreement. The execution and delivery of this Agreement
and the actions it contemplates have been duly and validly authorized by all
required corporate action. The Agreement has been duly and validly executed and
delivered by Michigan Transco and constitutes a valid and binding Agreement of
Michigan Transco.

          10.1.3 Regulatory Approval. Michigan Transco has obtained or will
obtain by the Closing Date any and all approvals of, and given notice to, any
public authority that is required for it to execute and deliver this Agreement.

          10.1.4 Compliance With Law. Michigan Transco represents and warrants
that it is not in violation of any applicable law, statute, order, rule, or
regulation promulgated or judgment entered by any Federal, state, or local
governmental authority, which violation would materially affect Michigan
Transco's performance of its obligations under this Agreement. Michigan Transco
represents and warrants that it will comply in all material respects with all
applicable laws, rules, regulations, codes, and standards of all Federal, state,
and local governmental agencies having jurisdiction over this Agreement, except
to the extent that a failure to so comply would not have a material adverse
effect on Michigan Transco's obligations hereunder.

     10.2 Consumers. Consumers represents and warrants to Michigan Transco as
follows:

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                Original Sheet No. 11
FERC Electric Rate Schedule No. 2
EXECUTION COPY

          10.2.1 Organization. Consumers is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Michigan,
and has the requisite power and authority to carry on its business as is now
being conducted.

          10.2.2 Authority Relative to this Agreement. Consumers has the
requisite power and authority to execute and deliver this Agreement and, subject
to the procurement of applicable regulatory approvals, to carry out the actions
required of it by this Agreement. The execution and delivery of this Agreement
and the actions it contemplates have been duly and validly authorized by all
required corporate action. The Agreement has been duly and validly executed and
delivered by Consumers and constitutes a valid and binding Agreement of
Consumers.

          10.2.3 Regulatory Approval. Consumers has obtained or will obtain by
the Closing Date any and all approvals of, and given notice to, any public
authority that is required for it to execute and deliver this Agreement.

          10.2.4 Compliance With Law. Consumers represents and warrants that it
is not in violation of any applicable law, statute, order, rule, or regulation
promulgated or judgment entered by any Federal, state, or local governmental
authority, which violation would materially affect its performance of its
obligations under this Agreement. Consumers represents and warrants that it will
comply in all material respects with all applicable laws, rules, regulations,
codes, and standards of all Federal, state, and local governmental agencies
having jurisdiction over this Agreement, except to the extent that a failure so
to comply would not have a material adverse effect on its obligations hereunder.

     10.3 Effectiveness. The representations and warranties in Sections 13.1 and
13.2 shall continue in full force and effect for the term of this Agreement.

                                   ARTICLE 11.
                ASSIGNMENT OR OTHER CHANGE IN CORPORATE IDENTITY

     This Agreement and all of the provisions hereof shall be binding upon, and
inure to the benefit of the Parties and their respective successors and
permitted assigns, but assignment of any right, interest, or obligation under
this Agreement may not be made without the other Party's prior written consent,
which consent shall not be unreasonably withheld. Assignments to which there is
not consent may be voided by the non-assigning Party.

                            ARTICLE 12. MISCELLANEOUS

     12.1 Waiver. Except as otherwise provided in this Agreement, any failure of
a Party to comply with any obligation, covenant, agreement, or condition herein
may be waived by the Party entitled to the benefit thereof only by a written
instrument signed by the Party granting such waiver, but such waiver shall not
operate as a waiver of, or estoppel with respect to any subsequent failure of
the first Party to comply with such obligation, covenant, agreement, or
condition.

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                Original Sheet No. 12
FERC Electric Rate Schedule No. 2
EXECUTION COPY

     12.2 Governing Law. This Agreement, and all rights, obligations, and
performances of the Parties hereunder, are subject to all applicable Federal and
state laws, and to all duly-promulgated orders, and other duly-authorized action
of governmental authorities having jurisdiction. When not in conflict with or
preempted by Federal law, this Agreement will be governed by and construed in
accordance with the laws of the State of Michigan, without giving effect to the
conflict of law principles thereof.

     12.3 Severability. If any of the provisions of this Agreement are held to
be unenforceable or invalid by any court or Regulatory Authority of competent
jurisdiction, the Parties shall, to the extent possible, negotiate an equitable
adjustment to the provisions of this Agreement with a view toward effecting the
purpose of this Agreement, and the validity and enforceability of the remaining
provisions hereof shall not be affected thereby.

     12.4 Amendment. If the applicable provisions relating to the implementation
of this Agreement are changed materially from the policies, methods, and
procedures contemplated herein, the Parties shall endeavor in good faith to make
conforming changes to this Agreement with the intent to fulfill the purposes of
this Agreement. Any amendment to this Agreement shall be in writing and signed
by both Parties.

     12.5 Further Assurances. The Parties hereto agree to promptly execute and
deliver, at the expense of the Party requesting such action, any and all other
and further instruments and documents which may be reasonably requested in order
to effectuate the transactions contemplated hereby, and shall carry out their
obligations under this Agreement.

     12.6 Third Party Agreements. This Agreement, including the appendices to
this Agreement, the Michigan Transco Transmission Tariffs, the Service
Agreements thereunder, and other agreements referenced herein, shall not be
construed, interpreted or applied in such a manner as to cause Consumers to be
in breach, anticipatory or otherwise, of any agreement between Consumers and one
or more third parties who are not Parties to this Agreement for the joint
ownership, operation, or maintenance of any electric facilities covered by this
Agreement, or the Michigan Transco Transmission Tariffs. Consumers shall discuss
with Michigan Transco any material conflict between such third-party joint
agreement and this Agreement, or the Michigan Transco Transmission Tariffs,
raised by a third party to such joint agreement, and shall act in good faith to
resolve such conflict in accordance with Good Utility Practice.

     12.7 No Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to confer on any person, other than the Parties, any rights
or remedies under or by reason of this Agreement.

     12.9 Confidentiality. All information regarding a Party (the "DISCLOSING
PARTY") that is furnished directly or indirectly to the other Party (the
"RECIPIENT") pursuant to this Agreement and marked "Confidential" shall be
deemed "CONFIDENTIAL INFORMATION". Notwithstanding the foregoing, Confidential
Information does not include information that (i) is rightfully received by
Recipient from a third party having an obligation of confidence to the
Disclosing Party, (ii) is or becomes in the public domain through no action on
Recipient's part in violation of this Agreement, (iii) is already known by
Recipient as of the date hereof, or (iv) is developed by

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                Original Sheet No. 13
FERC Electric Rate Schedule No. 2
EXECUTION COPY

Recipient independent of any Confidential Information of the Disclosing Party.
Information that is specific as to certain data shall not be deemed to be in the
public domain merely because such information is embraced by more general
disclosure in the public domain.

          12.9.1 Recipient shall keep all Confidential Information strictly
confidential and not disclose any Confidential Information to any third party
for a period of two (2) years from the date the Confidential Information was
received by Recipient, except as otherwise provided herein.

          12.9.2 Recipient may disclose the Confidential Information to its
affiliates and its affiliates' respective directors, officers, employees,
consultants, advisors, and agents who need to know the Confidential Information
for the purpose of assisting Recipient with respect to its obligations under
this Agreement. Recipient shall inform all such parties, in advance, of the
confidential nature of the Confidential Information. Recipient shall cause such
parties to comply with the requirements of this Agreement and shall be
responsible for the actions, uses, and disclosures of all such parties.

          12.9.3 If Recipient becomes legally compelled or required to disclose
any of the Confidential Information (including, without limitation, pursuant to
the policies, methods, and procedures of the FERC, including the OASIS Standards
of Conduct, or other Regulatory Authority), Recipient will provide the
Disclosing Party with prompt written notice thereof so that the Disclosing Party
may seek a protective order or other appropriate remedy. Recipient will furnish
only that portion of the Confidential Information which its counsel considers
legally required, and Recipient will cooperate, at the Disclosing Party's
expense, with the Disclosing Party's counsel to enable the Disclosing Party to
obtain a protective order or other reliable assurance that confidential
treatment will be accorded the Confidential Information. It is further agreed
that, if, in the absence of a protective order, Recipient is nonetheless
required to disclose any Confidential Information, Recipient will furnish only
that portion of the Confidential Information which its counsel considers legally
required.

     12.10 Survival. The indemnification obligations of each Party under Article
7 shall become effective upon the occurrence of the Closing Date, and, for acts
and occurrences prior to expiration, termination, completion, suspension, or
cancellation of this Agreement shall continue in full force and effect
regardless of whether this Agreement expires, terminates, or is suspended,
completed, or canceled. The provisions of Articles 8, 9, and 10 shall survive
termination, expiration, cancellation, suspension, or completion of this
Agreement.

     12.11 Notices. All notices, requests, claims, demands, and other
communications hereunder shall be in writing and shall be deemed effective upon
receipt when delivered either by hand delivery, cable, telecopy (confirmed in
writing), or telex, or by mail (registered or certified, postage prepaid) to the
respective Parties as follows:

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                Original Sheet No. 14
FERC Electric Rate Schedule No. 2
EXECUTION COPY

          If to Michigan Transco to:

          Michigan Electric Transmission Company
          540 Avis Drive, Suite H
          Ann Arbor, Michigan 48108
          Attention: Executive Vice President and Chief Operating Officer

          If to Consumers to:

          Consumers Energy Company
          212 W. Michigan Avenue
          Jackson, MI 49201
          Attention: Mr. William E. Garrity, Vice President

     Each Party may change the name and address of its contact person by giving
the other Party written notice of the change.

     12.12 Entire Agreement. This Agreement constitutes the entire understanding
between the Parties, and supersedes any and all previous understandings, oral or
written, which pertain to the subject matter contained herein.

     12.13 Counterparts. This Agreement may be executed in counterparts, all of
which will be considered one and the same Agreement and each of which will be
deemed an original.

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                Original Sheet No. 15
FERC Electric Rate Schedule No. 2
EXECUTION COPY

     IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the date and year first above written.

                                        MICHIGAN ELECTRIC TRANSMISSION COMPANY

                                        By: /s/ Dennis DaPra
                                            ------------------------------------
                                        Name: Dennis DaPra
                                              ----------------------------------
                                        Title: Vice President
                                               ---------------------------------

                                        CONSUMERS ENERGY COMPANY

                                        By: /s/ John Russell
                                            ------------------------------------
                                        Name: John Russell
                                              ----------------------------------
                                        Title: President
                                               ---------------------------------

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                Original Sheet No. 16
FERC Electric Rate Schedule No. 2
EXECUTION COPY

                                   Appendix 1

                               Operating Protocols

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                Original Sheet No. 17
FERC Electric Rate Schedule No. 2
EXECUTION COPY

                               OPERATING PROTOCOLS

     Pursuant to and in accordance with the Operating Agreement between Michigan
Electric Transmission Company ("MICHIGAN TRANSCO") and Consumers Energy Company
("CONSUMERS") entered into concurrently herewith, the Parties agree to the
following Operating Protocols. The Effective Date of this agreement is the same
as that described in the Operating Agreement ("Agreement"), and all capitalized
terms used herein shall have the same meaning ascribed thereto in the Operating
Agreement, unless otherwise indicated.

                                    ARTICLE 1
                         CONTROL OF TRANSMISSION SYSTEM

     1.1 Michigan Control Area Responsibilities. Agreements have been reached
with entities responsible for Control Area Operations as defined by the NERC to
calculate and operate to a single area control error for Michigan Transco's
Transmission System.

     1.2 Michigan Transco Operational Responsibilities. Michigan Transco shall
have operational control over the Transmission Assets that comprise the
Transmission System. Michigan Transco shall function as Control Area Operator.
On April 1, 2001, Consumers transferred operational control to Michigan Transco
in a manner consistent with Good Utility Practice.

          1.2.1 Michigan Transco shall periodically review whether the
Transmission Assets under its operational control constitute all of the
facilities necessary to provide reliable, non-discriminatory transmission
service as contemplated under the Operating Agreement and the Michigan Transco
Transmission Tariffs.

          1.2.2 Michigan Transco shall, in consultation with Consumers, develop,
and revise from time-to-time as appropriate, operating procedures for its
exercise of operational control over the Transmission System (hereinafter
"Operating Procedures"). The Operating Procedures shall be provided to Consumers
and, except to the extent determined necessary for emergency or security
reasons, such procedures shall be made available to the public. Michigan Transco
shall comply with its Operating Procedures in exercising its operational control
over the facilities described above.

          1.2.3 Michigan Transco shall operate the Transmission System in such a
way as to preserve the rights of Consumers' existing open access Transmission
Customers and transmission customers taking service under Grandfathered
Agreements.

          1.2.4 Michigan Transco shall be responsible for coordinating the
operation of the Transmission System with Consumers, NERC, ECAR, and any other
applicable regional reliability councils. Michigan Transco may join such
regional reliability councils as appropriate.

          1.2.5 Michigan Transco shall comply with any transmission operating
obligations imposed by federal or state law or Regulatory Authorities which can
no longer be

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                Original Sheet No. 18
FERC Electric Rate Schedule No. 2
EXECUTION COPY

performed solely by Consumers following transfer of ownership and operational
control of the Transmission System to Michigan Transco, until such obligations
are revised or changed.

     1.3 Operational Responsibilities of Consumers. Consumers shall own and
maintain its Distribution Facilities in accordance with Good Utility Practice,
and shall comply with the reasonable requests of Michigan Transco with respect
to such operation and maintenance issued in compliance with these Operating
Procedures.

                                    ARTICLE 2
                DETERMINATION OF AVAILABLE TRANSMISSION CAPACITY
                           AND TRANSMISSION SCHEDULING

     2.1 Determination of Available Transmission Capacity. Michigan Transco
shall determine the ATC consistent with the terms of the Michigan Transco
Transmission Tariffs.

          2.1.1 Michigan Transco shall review all data received from other
control areas, independent transmission system operators, regional reliability
councils, or other entities that impact ATC calculations.

          2.1.2 Michigan Transco shall share data with other control areas,
independent transmission system operators, regional reliability councils, or
other entities with whom data must be exchanged, as requested, in order to
determine ATC.

          2.1.3 Michigan Transco shall determine the capacity, rating, control
settings, and contingency analysis parameters for all Transmission Assets used
to calculate ATC.

     2.2 Transmission Service Requests. Michigan Transco shall receive and
process all transmission service requests in accordance with the Michigan
Transco Transmission Tariffs.

          2.2.1 Michigan Transco shall be responsible for conducting all System
Impact Studies associated with a request for transmission service. To the extent
that a request for transmission service under the Michigan Transco Transmission
Tariffs will or may have an adverse affect on Consumers' ability to safely and
reliably serve its transmission customers pursuant to the terms of the
Grandfathered Agreements, Michigan Transco shall coordinate its System Impact
Study analysis with Consumers as follows:

               2.2.1.1 Michigan Transco shall provide sufficient information to
representatives of Consumers to allow them to model load consequences of the
requested service on Distribution Facilities.

               2.2.1.2 Michigan Transco shall coordinate with Consumers
representatives when processing requests for open access, non-discriminatory
transmission service over Distribution Facilities pursuant the terms of the
Michigan Transco Transmission Tariffs.

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                Original Sheet No. 19
FERC Electric Rate Schedule No. 2
EXECUTION COPY

               2.2.1.3 Michigan Transco shall consult with Consumers with
respect to the construction of new Transmission Assets, or the expansion of
existing Transmission Assets, which affects or may affect the Distribution
Facilities.

               2.2.1.4 Upon completion of any required System Impact Studies,
Michigan Transco shall be responsible for making the final determination as to
the amount of firm and non-firm transmission capacity that is available under
the Michigan Transco Transmission Tariffs and for resolving requests for
transmission service in accordance with the terms of the Michigan Transco
Transmission Tariffs.

          2.2.2 To the extent that there is not adequate transmission capability
to satisfy a transmission request, Michigan Transco shall relieve or facilitate
the relief of the transmission constraint consistent with Good Utility Practice
and the terms of the Michigan Transco Transmission Tariffs.

          2.2.3 Michigan Transco shall document all requests for transmission
under the Michigan Transco Transmission Tariffs, the disposition of such
requests, and any supporting data required to support the decision with respect
to such requests.

     2.3 Implementation of Transmission Service Transactions. Michigan Transco
shall process and implement all requests for transmission service made under the
Michigan Transco Transmission Tariffs, as follows:

          2.3.1 Michigan Transco shall schedule and curtail transmission service
in accordance with the terms of Michigan Transco Transmission Tariffs.

          2.3.2 Michigan Transco shall, in consultation with Consumers, develop,
and from time-to-time amend, as necessary, scheduling protocols ("Scheduling
Procedures"). The Scheduling Procedures shall not conflict with the terms of the
Michigan Transco Transmission Tariffs or requirements of any applicable
Regulatory Authorities. All scheduling shall be performed in accordance with the
Scheduling Procedures.

          2.3.3 Michigan Transco shall operate its Control Area to maintain load
and supply balance. In so doing, Michigan Transco shall comply with the
scheduling instructions issued pursuant to the Scheduling Procedures.

          2.3.4 In performing its scheduling functions, Michigan Transco shall
ensure that the Transmission System is operated in compliance with applicable
NERC, ECAR or other regional reliability council or successor organizations'
reliability requirements, and all other applicable operating reliability
criteria.

          2.3.5 Michigan Transco shall perform all inadvertent flow accounting
for its control area and shall coordinate the performance of such accounting
with other control areas.

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                Original Sheet No. 20
FERC Electric Rate Schedule No. 2
EXECUTION COPY

                                    ARTICLE 3
             MICHIGAN TRANSCO'S OBLIGATIONS PURSUANT TO THE MICHIGAN
                          TRANSCO TRANSMISSION TARIFFS

     3.1 Michigan Transco shall be solely responsible for administering the
Michigan Transco Transmission Tariffs.

     3.2 Michigan Transco shall negotiate as appropriate to develop reciprocal
service, equitable tariff application, compensation principles, and any related
arrangements.

     3.3 Michigan Transco shall credit to Consumers those charges billed and
collected for the use of the Distribution Facilities by wholesale customers
taking transmission service under Michigan Transco Transmission Tariffs.

                                    ARTICLE 4
                       SECURITY OF THE TRANSMISSION SYSTEM

     4.1 Obligations of Michigan Transco to Maintain the Security of the
Transmission System. Michigan Transco shall be responsible for the security and
reliability of the Transmission System. In addition, Michigan Transco shall be
responsible for operating its control area in a secure and reliable manner. As
Control Area Operator, Michigan Transco, shall exercise security monitoring and
emergency response functions, as described in more detail below.

     4.2 Security Monitoring.

          4.2.1 Michigan Transco shall perform load-flow and stability studies
of the Transmission System to identify and address security problems.

          4.2.2 Michigan Transco shall monitor its control area for system
security. It shall be responsible for identifying and addressing local security
problems.

          4.2.3 Michigan Transco shall exchange necessary security information
with other control areas, independent transmission system operators, ECAR, and
any other applicable regional reliability councils consistent with NERC (or
successor organizations) and regional requirements, and the OASIS Standards of
Conduct.

          4.2.4 Consumers shall continuously provide Michigan Transco with all
data required to assess the security of the Transmission System consistent with
NERC (or successor organizations), ECAR, and any other applicable regional
requirements, and OASIS Standards of Conduct.

     4.3 Emergency Response. Michigan Transco shall work with Consumers, other
security coordinators, NERC, ECAR, and other applicable regional councils to
develop regional security plans and emergency operating procedures.

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                Original Sheet No. 21
FERC Electric Rate Schedule No. 2
EXECUTION COPY

          4.3.1 Michigan Transco shall, in coordination with Consumers, other
security coordinators, NERC, ECAR, or other applicable regional reliability
councils, develop, and from time-to-time update, procedures for responding to
emergencies (hereinafter the "Emergency Procedures"). Such Emergency Procedures
shall include procedures for responding to specified critical contingencies.

          4.3.2 Michigan Transco shall continuously analyze issues that may
require the initiation of emergency response actions. Such analysis may be made
at Michigan Transco's initiative, or at the request of Consumers and/or other
Transmission Customers, NERC, regional reliability councils, security
coordinators, or other system operators. The Emergency Procedures shall be
amended to include any changes or additions resulting from such analysis.

          4.3.3 Michigan Transco shall direct the response to any emergency in
the Transmission System pursuant to the Emergency Procedures. Consumers and
other Transmission Customers shall carry out the required emergency procedures
as directed by Michigan Transco. Michigan Transco will alert Consumers and other
Transmission Customers to the possibility of load shedding and will provide as
much advance notice as possible of the need to shed firm load.

                                    ARTICLE 5
                               ANCILLARY SERVICES

     Pursuant to Section 3.1.4 of the Operating Agreement, Michigan Transco
shall be obligated to offer ancillary services, as required by the applicable
rules and regulations of the FERC, to all Transmission Customers taking service
under the Michigan Transco Transmission Tariffs. Michigan Transco shall procure
such ancillary services on a non-preferential and competitive basis from
Consumers and from any third-party suppliers of such services at FERC-approved
rates.

                                    ARTICLE 6
              TRANSMISSION, DISTRIBUTION AND GENERATION MAINTENANCE

     6.1 Planned Transmission Maintenance. Michigan Transco is responsible for
reviewing, establishing, and updating schedules for all planned maintenance of
the Transmission System. Michigan Transco shall establish its planned
transmission maintenance schedules for a minimum of a rolling one (1) year
period, which shall be updated monthly.

          6.1.1 Michigan Transco shall determine if, and to the extent which,
such planned transmission maintenance affects transmission service, ATC,
ancillary services, the security of the Transmission System, Consumers
distribution service and any other relevant effects. This determination shall
include appropriate analytical detail. As part of its review process, Michigan
Transco shall identify planned transmission maintenance schedules that limit
ATC, and opportunities and associated costs for rescheduling planned maintenance
to enhance ATC. If Michigan Transco reschedules maintenance at Consumers
request,

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                Original Sheet No. 22
FERC Electric Rate Schedule No. 2
EXECUTION COPY

Michigan Transco shall be compensated for additional costs associated with
rescheduling such planned maintenance pursuant to procedures jointly agreed to
by Consumers and Michigan Transco.

          6.1.2 Michigan Transco will coordinate planned outages of the
Transmission System with Consumers. Consumers shall inform Michigan Transco of
all customer-owned equipment outages that could impact loading on the
Transmission System.

          6.1.3 In developing its transmission maintenance schedule, Michigan
Transco will comply with all applicable reliability standards, including, but
not limited to, the current maintenance practices of Consumers, will meet
Consumers' requirements for access to the Transmission System, and will endeavor
to minimize transmission congestion.

     6.2 Unplanned and Emergency Transmission Maintenance. Michigan Transco
shall coordinate unplanned transmission maintenance with Consumers to assure
that reliability of the Transmission System and Consumers distribution system is
maintained. For emergency conditions which are likely to result in significant
disruption of service or damage to Generation Resources, the Transmission System
or Distribution Facilities, or are likely to endanger life, property, or the
environment, Consumers (to the extent responsible for performing said
maintenance) shall notify Michigan Transco of such emergency maintenance. Prior
approval by Michigan Transco for such emergency transmission maintenance is not
required.

     6.3 Generation Maintenance. Consumers shall coordinate the maintenance of
Generation Resources with Michigan Transco to the extent such generation
maintenance affects the capability or reliability of the Transmission System as
follows:

          6.3.1 Consumers shall submit its planned generating unit maintenance
schedules to Michigan Transco annually for a two (2) year period, updated to
include changes.

          6.3.2 Michigan Transco shall analyze planned generating unit
maintenance schedules to determine the effect on Consumers (and other
Transmission Customers), ATC, ancillary services, the security of the
Transmission System, identification of must-run units, and any other relevant
effects. Michigan Transco shall inform Consumers if its generation maintenance
schedule is expected to have an impact on the security of the Transmission
System.

          6.3.3 As part of its review process, Michigan Transco shall identify
Generation Resource maintenance schedules that limit ATC and shall recommend
opportunities for rescheduling planned maintenance to enhance ATC. If Consumers
reschedules maintenance at Michigan Transco's request, Consumers shall be
compensated for additional costs associated with rescheduling such planned
maintenance pursuant to procedures adopted by Michigan Transco, and applied on a
non-discriminatory basis to all similarly situated generation owners located
within Michigan Transco's Control Area.

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002

<PAGE>

Michigan Electric Transmission Company, LLC                Original Sheet No. 23
FERC Electric Rate Schedule No. 2
EXECUTION COPY

          6.3.4 With respect to all Generating Resources connected to the
Transmission System, Michigan Transco will enter into interconnection agreements
and, if necessary, must-run agreements which define coordinated operations and
such other operating requirements as are necessary to ensure the safe and
reliable operation of such Generation Resources with the Transmission System.

     6.4 Unplanned Generation Maintenance. Consumers shall notify Michigan
Transco promptly in the event of an unplanned outage of the Generation
Resources, including partial forced outages. Consumers will coordinate unplanned
generation maintenance with Michigan Transco to ensure that the reliability of
the Transmission System is maintained. For emergency conditions which are likely
to result in significant disruption of service or damage to Generation
Resources, the Transmission System, or Distribution Facilities, or are likely to
endanger life, property, or the environment, Consumers shall notify Michigan
Transco of the emergency generation maintenance. Prior approval for emergency
generation maintenance is not required.

Michigan Electric Transmission          Consumers Energy Company
Company

By:                                     By:
    ---------------------------------       ------------------------------------
Its:                                    Its:
     --------------------------------        -----------------------------------

Issued By: Julie A. Morrow                                Effective: May 1, 2002
           Executive Vice President &
           Chief Operating Officer
Issued On: May 13, 2002<PAGE>

                                                                   EXHIBIT 10.53

Consumers Energy Company                                    Original Sheet No. 1
Rate Schedule No. 116
EXECUTION COPY

                 Amendment and Restatement of the April 1, 2001

                           PURCHASE AND SALE AGREEMENT

                             FOR ANCILLARY SERVICES

                                     Between

                            Consumers Energy Company

                                       And

                     Michigan Electric Transmission Company

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                    Original Sheet No. 2
Rate Schedule No. 116
EXECUTION COPY

                 Amendment and Restatement of the April 1, 2001
                           Purchase and Sale Agreement
                             For Ancillary Services

                                Table of Contents
<TABLE>
<S>                                                                           <C>
ARTICLE 1 - Definitions....................................................    5
   1.1    Ancillary Services...............................................    5
   1.2    Commission.......................................................    5
   1.3    Consumers' Resources.............................................    5
   1.4    ECAR.............................................................    5
   1.5    Firm Service.....................................................    5
   1.6    Good Utility Practice............................................    5
   1.7    NERC.............................................................    5
   1.8    Point of Receipt.................................................    6
   1.9    Reserved Capacity................................................    6
   1.10   Resources........................................................    6
   1.11   System Operator..................................................    6
   1.12   Tariff...........................................................    6
   1.13   Third Party......................................................    6
   1.14   Transmission Service Area........................................    6
   1.15   Transaction......................................................    6

ARTICLE 2 - Effective Date.................................................    6

ARTICLE 3 - Capacity, Energy and Reactive Power Sale By Consumers
   to Michigan Transco.....................................................    7
   3.1    Consumers' Responsibilities......................................    7
   3.2    Michigan Transco's Responsibilities..............................    7
   3.3    Ancillary Services...............................................    8
   3.4    Changes in Responsibilities......................................    9

ARTICLE 4 - Service Conditions.............................................   10
   4.1    Maintenance and Operation........................................   10
   4.2    Service Interruptions to Maintain Reliability....................   10

ARTICLE 5 - Compensation...................................................   10
   5.1    Payments to Consumers............................................   10
   5.2    Payments to Michigan Transco.....................................   11
   5.3    Applicable Tariff Rates..........................................   12

ARTICLE 6 - Forecasted Requirement for Generation Services.................   12

ARTICLE 7 - Priority and Nature of Service.................................   13
   7.1    Nature of Service................................................   13
   7.2    Use of Power.....................................................   13

ARTICLE 8 - Conditions Precedent...........................................   13

ARTICLE 9 - Operating Committee............................................   13
   9.1    Creation of the Operating Committee..............................   13
   9.2    Duties...........................................................   13
   9.3    Committee Expenses...............................................   14

ARTICLE 10 - Exchange of Information.......................................   14
   10.1   Data to be Furnished.............................................   14
   10.2   Records and Accounts.............................................   14
</TABLE>

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                    Original Sheet No. 3
Rate Schedule No. 116
EXECUTION COPY

<TABLE>
<S>                                                                           <C>
ARTICLE 11 - Settlements...................................................   14
   11.1   Accounting Period................................................   14
   11.2   Invoicing........................................................   14
   11.3   Payments.........................................................   14
   11.4   Interest Charges.................................................   15
   11.5   Disputed Invoices................................................   15

ARTICLE 12 - Indemnity.....................................................   15

ARTICLE 13 - Regulatory Authority..........................................   15

ARTICLE 14 - Term..........................................................   16
   14.1   Initial Term.....................................................   16
   14.2   Termination......................................................   16

ARTICLE 15 - Breach and Default............................................   16
   15.1   General..........................................................   16
   15.2   Events of Breach.................................................   16
   15.3   Cure and Default.................................................   17
   15.4   Right to Compel Performance......................................   17

ARTICLE 16 - Successors and Assigns........................................   17

ARTICLE 17 - Dispute Resolution Procedures.................................   18

ARTICLE 18 - Force Majeure.................................................   18

ARTICLE 19 - General.......................................................   19
   19.1   Authority........................................................   19
   19.2   Waivers..........................................................   19
   19.3   Governing Law....................................................   19
   19.4   Headings.........................................................   19
   19.5   Notices..........................................................   19
   19.6   Entirety.........................................................   20
   19.7   Severability.....................................................   20
</TABLE>

   APPENDIX A - Forecast Procedures
   APPENDIX B - Ancillary Services Rates

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                    Original Sheet No. 4
Rate Schedule No. 116
EXECUTION COPY

                 Amendment and Restatement of the April 1, 2001
                           PURCHASE AND SALE AGREEMENT
                             FOR ANCILLARY SERVICES

     This Amendment and Restatement of the April 1, 2001 Purchase and Sale
Agreement for Ancillary Services (herein referred to as "Agreement") is made and
entered into as of April 29, 2002, by and between Consumers Energy Company, a
Michigan corporation with offices at 212 West Michigan Avenue, Jackson, Michigan
(herein referred to as "Consumers") and Michigan Electric Transmission Company,
a Michigan corporation with offices at 540 Avis Drive, Suite H, Ann Arbor,
Michigan (herein referred to as "Michigan Transco"). The purpose of this
Agreement is to establish the terms and conditions under which Michigan Transco
may obtain Ancillary Services from Consumers. Consumers and Michigan Transco are
sometimes individually referred to herein as "Party" and collectively as
"Parties". This Agreement amends, restates and replaces the April 1, 2001
Purchase and Sale Agreement For Ancillary Services between the Parties,
effective on the date indicated above.

                                   WITNESSETH:

     WHEREAS, Consumers is in the business of generating electric capacity and
energy and selling electric capacity and energy and reactive power to wholesale
and retail customers; and

     WHEREAS, Michigan Transco is in the business of providing transmission
services under its Open Access Transmission Tariff on file with the Commission
and is obligated to provide or offer certain Ancillary Services within its
Transmission Service Area; and

     WHEREAS, the Parties have entered into an Operating Agreement, dated as of
April 1, 2001, as amended and restated, (herein referred to as the "Operating
Agreement") that defines the operating responsibilities of Michigan Transco over
its transmission system and the obligations, rights and responsibilities of
Consumers to provide electric capacity and energy as Ancillary Services and to
operate its Generation Resources in a manner that will not unduly interfere with
the provision of transmission services by Michigan Transco; and

     WHEREAS, the Parties have entered into a Network Operating Agreement, dated
as of April 1, 2001, as amended and restated, that governs Transmission
Provider's provision of Network Integration Transmission Service to Consumers as
a Network Customer under the Tariff, and

     WHEREAS, the Parties have entered into a Generator Interconnection
Agreement, dated as of April 1, 2001, as amended and restated, that describes
the general facilities and associated appurtenances that electrically connect
the Generation Resources to the transmission system, establishes the ownership
interests of the Parties in such facilities and establishes the respective
obligations and rights of the Parties with respect to the operating and
maintenance of such facilities; and

     WHEREAS, during the term of this Agreement, Michigan Transco desires to
purchase and Consumers desires to sell capacity and energy and Reactive Power to
at

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                    Original Sheet No. 5
Rate Schedule No. 116
EXECUTION COPY

least partially meet the Tariff obligations of Michigan Transco for provision of
Ancillary Services; and

     WHEREAS, under the Transmission Service Agreement between the Parties,
Consumers has elected to self-supply the optional Ancillary Services under the
Tariff to its native load customers.

     NOW THERFORE, in consideration of the covenants and mutual agreements
contained herein, Consumers and Michigan Transco agree as follows:

                                    ARTICLE 1
                                   Definitions

1.1 Ancillary Services

     Services identified by the Commission, as set forth in Section 3.3 below,
which Michigan Transco must include in its Tariff.

1.2 Commission

     The Federal Energy Regulatory Commission, or any successor regulatory
agency of the federal government of the United States of America.

1.3 Consumers' Resources

     Capacity and associated energy supplied from generation facilities owned
and/or operated by Consumers or from purchased power.

1.4 ECAR

     The East Central Area Reliability council, its successors and assigns.

1.5 Firm Service

     Service that is interrupted only to maintain the reliability of the
generation and transmission systems.

1.6 Good Utility Practice

     Any of the practices, methods and acts engaged in or approved by a
significant portion of the electric utility industry with respect to similar
facilities during the relevant time period which, in each case, in the exercise
of reasonable judgement in light of the facts known or that should have been
known at the time the decision was made, could have been expected to accomplish
the desired result at a reasonable cost consistent with good business practices,
reliability, safety, law, regulation, environmental protection and expedition.
Good Utility Practice is not intended to be limited to the optimal practices,
methods or acts to the exclusion of all others, but rather to delineate the
acceptable practices, methods or acts generally accepted in such industry.

1.7 NERC

     The North American Electric Reliability Council, its successors and
assigns.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                    Original Sheet No. 6
Rate Schedule No. 116
EXECUTION COPY

1.8 Point of Receipt

     The point at which capacity and energy is provided by Consumers to Michigan
Transco.

1.9 Reserved Capacity

     The maximum amount of capacity and energy that Consumers provides to
Michigan Transco during any specified period as Ancillary Services under Part II
of the Tariff. Reserved Capacity shall be expressed in terms to whole megawatts
on a sixty (60) minute interval (commencing on the clock hour) basis.

1.10 Resources

     Consumers' Generation committed or procured by Consumers to provide service
under this Agreement.

1.11 System Operator

     A generic term used to describe the individuals responsible for the
integrity or the operational control of Michigan Transco's transmission system,
and any successor thereto.

1.12 Tariff

     Either (a) the Open Access Transmission Tariff (OATT) of Michigan Transco
filed with the Commission on November 13, 2000, or (b) the Joint Open Access
Transmission Tariff (JOATT) filed by Michigan Transco and ITC with the
Commission on February 22, 2001 as they may subsequently be modified or
supplemented and accepted for filing by the Commission, or any superseding
tariff.

1.13 Third Party

     Parties other than Consumers or Michigan Transco.

1.14 Transmission Service Area

     The geographic region in which Michigan Transco operates transmission
facilities and provides transmission service as of the effective date of this
Agreement.

1.15 Transaction

     A particular purchase by Michigan Transco or sale by Consumers of capacity
and/or energy and/or reactive power to be performed under this Agreement, as
evidenced by the agreement of the Parties.

                                    ARTICLE 2
                                 Effective Date

     This Agreement shall become effective on May 1, 2002, or the date the
Michigan Transco begins operation under its filed Tariff, whichever date occurs
later, or such other date as is required by regulatory authority having
jurisdiction over this Agreement.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                    Original Sheet No. 7
Rate Schedule No. 116
EXECUTION COPY

                                    ARTICLE 3
                    Capacity, Energy and Reactive Power Sale
                        By Consumers to Michigan Transco

3.1 Consumers' Responsibilities

     (a)  During the term of this Agreement, Consumers shall provide capacity,
          energy and reactive power needed by Michigan Transco for Ancillary
          Services in amounts set forth in this Article 3. Capacity, energy and
          reactive power shall be supplied from one or more Resources as Firm
          Service. The quantities to be supplied shall be as specified in the
          pertinent forecasts or actual use for each type of service, as
          outlined in Article 6 and Appendix A hereof. Notwithstanding Ancillary
          Service obligations that Michigan Transco may enter into associated
          with Transmission Service Agreements that have a term that is longer
          than the term of this Agreement, Consumers shall not be obligated to
          provide Michigan Transco with Ancillary Services after this Agreement
          is terminated.

     (b)  Michigan Transco and Consumers agree that dispatch and scheduling
          decisions with respect to Consumers' Resources shall be as set forth
          in Section 4.6 of the Operating Agreement between the Parties.

     (c)  Subject to Consumers' obligation to supply capacity, energy and
          reactive power under this Agreement, Consumers may, under an
          applicable tariff, sell capacity and/or energy and reactive power to
          any other entity that is eligible to make purchases under such
          tariffs. Consumers is not obligated to curtail any previously
          committed sales from Consumers' Generation to provide service
          hereunder beyond the obligations set forth in Section 3.3.

     (d)  The energy delivered hereunder shall be of the character commonly
          known as three-phase, 60 Hertz (60 Hz) energy at a voltage, or
          voltages, mutually agreed upon by the Parties.

     (e)  Consumers shall continue the present practice of providing overlap
          regulation services for Michigan Transco's Transmission Service Area.

     (f)  Consumers shall cooperate with Michigan Transco in establishing
          billing practices and information transfer protocols to process and
          bill transactions under this Agreement.

3.2 Michigan Transco's Responsibilities

     (a)  Michigan Transco shall purchase from Consumers capacity, energy and
          reactive power in order to provide pertinent Ancillary Services in
          addition to transmission services pursuant to its Tariff. Nothing in
          this Agreement shall be construed to preclude Michigan Transco from
          procuring capacity, energy and/or reactive power from Third Party
          suppliers when available.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                    Original Sheet No. 8
Rate Schedule No. 116
EXECUTION COPY

     (b)  Michigan Transco will use services provided hereunder solely in order
          to meet its obligations under its Tariff, local, regional and national
          reliability requirements and its operating practice requirements.

     (c)  Michigan Transco shall provide Consumers with timely notification of
          forecasted requirements for Ancillary Services pursuant to Article 6
          hereof so that Consumers can plan its supply of such services.

     (d)  Michigan Transco will provide Consumers with necessary real-time and
          historic information for Consumers to forecast and identify its
          obligations under this Agreement.

     (e)  At Consumers' request, Michigan Transco will provide to Consumers the
          information Consumers may need to reassess the rates stated in Article
          5 hereof.

3.3 Ancillary Services

     The following Ancillary Services may be purchased by Michigan Transco at
quantities specified in the forecasts for same as outlined in Article 6 and
Appendix A hereof.

     (a)  Reactive Supply and Voltage Control from Generation Sources Service

          Michigan Transco will control transmission voltages on the Michigan
          Transco transmission facilities. Michigan Transco shall establish
          voltage schedules or reactive power schedules for each Resource,
          within its established capabilities, to maintain voltage levels in the
          Michigan Transco Transmission Service Area within stability limits
          that are generally accepted in the region and consistently adhered to
          by Michigan Transco. Michigan Transco shall provide to Consumers a
          daily forecast of reactive power requirements, and updates as needed
          the day ahead and throughout the day being forecasted, as an
          operational guide as outlined in Article 6 and Appendix A hereof.
          Within the limitations specified below, Consumers shall provide
          reactive power daily from operating Resources in a manner that will
          produce or absorb reactive power in amounts and over periods of time
          as needed by Michigan Transco. Under Michigan Transco's direction,
          Consumers may (i) vary the reactive power from its generating units in
          operation at the time or (ii) remove units from operation or place
          units in operation at its earliest convenience in a manner consistent
          with Good Utility Practice to allow for the delivery, absorption or
          redistribution among local units of reactive power; however, the
          removal of units from operation or the placing of units in operation
          shall be classified as a request for redispatch pursuant to Section 2
          of the Network Operating Agreement between the Parties and compensated
          pursuant to said Network Operating Agreement. Consumers will not be
          obligated to provide reactive power when, in its sole judgement, to do
          so would damage or otherwise adversely affect the reliability of its
          Generation Resources.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                    Original Sheet No. 9
Rate Schedule No. 116
EXECUTION COPY

     (b)  Regulation and Frequency Response Service

          Michigan Transco shall provide to Consumers, on a daily basis, a
          forecast (updated throughout the day, as necessary) of Regulation and
          Frequency Response Service which it is purchasing from Consumers, as
          outlined in Article 6 and Appendix A hereof.

     (c)  Energy Imbalance Service, Delivery Scheduling and Balancing Service
          and Generator Supply Imbalance Service

          Because Consumers will provide overlap regulation services to the
          Michigan Transco area, Michigan Transco will automatically be supplied
          with energy needed to maintain the balance between (i) real-time
          generation made available to Michigan Transco and (ii) the actual load
          in the Michigan Transco Transmission Service Area. In addition,
          Consumers will provide energy up to the daily operating reserve
          capacity defined in Sections 3.3(b), 3.3(d) and 3.3(e) to support
          Michigan Transco's obligations, including but not limited to
          contributions to frequency control and area control error. Michigan
          Transco shall provide to Consumers, on a daily basis, a forecast
          (updated throughout the day, as necessary) of energy Michigan Transco
          will purchase to maintain these obligations, as outlined in Article 6
          and Appendix A hereof. Consumers shall attempt at all times to provide
          this service from Consumers' Resources in a manner consistent with
          Good Utility Practice.

     (d)  Operating Reserve - Spinning Reserve Service

          Michigan Transco shall provide to Consumers, on a daily basis, a
          forecast (updated throughout the day, as necessary) of Spinning
          Reserve Service capacity which it is purchasing from Consumers, as
          outlined in Article 6 and Appendix A hereof.

     (e)  Operating Reserve - Supplemental Reserve Service

          Michigan Transco shall provide to Consumers, on a daily basis, a
          forecast (updated throughout the day, as necessary), of Supplemental
          Reserve Service capacity which it is purchasing from Consumers, as
          outlined in Article 6 and Appendix A hereof.

3.4 Changes in Responsibilities

     (a)  Mandated Changes

          In the event that a regulatory body having jurisdiction over the
          operations of Michigan Transco, or legislative action, either federal
          or state, or a regional or national reliability organization, alters,
          revises or otherwise restructures the electric utility industry such
          that Michigan Transco is no longer required to provide transmission
          and/or Ancillary Services, in whole or in part, then in such event,
          either Party may call for amendment to or termination of this
          Agreement as of the effective date of the relevant regulatory
          decision.

     (b)  Notice of Changes

          Michigan Transco agrees to provide Consumers reasonable notice of all
          forecasts and forecast revisions outlined in Article 6 and Appendix A
          hereof.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 10
Rate Schedule No. 116
EXECUTION COPY

                                    ARTICLE 4
                               Service Conditions

4.1 Maintenance and Operation

     The Parties shall maintain and operate their respective facilities in
accordance with Good Utility Practice in such a manner to minimize the
likelihood of disturbance. The Parties shall not be responsible to each other
for any damage or loss of revenue caused by any interruption that is not caused
by procedures within the responsible Party's control. Neither Party shall make
changes to equipment configurations which materially modify arrangements or
connections of equipment or computer systems related to the generation or
transmission systems, as the same existed prior to the effective date of this
Agreement, without giving advance notice to the other Party.

4.2 Service Interruptions to Maintain Reliability

     Any service being provided under this Agreement may be interrupted or
reduced: (a) by operation of automatic equipment installed for power system
protection, (b) after adequate notice to and consultation between the Parties
for installation, maintenance, inspection, repair or replacement of equipment,
or (c) when such interruption or reduction is necessary to preserve the
integrity of, to prevent or limit any instability on, or to avoid a burden on
the systems of the Parties. However, Consumers and Michigan Transco shall
exercise reasonable care to maintain the continuity and quality of all service
provided under this Agreement and to minimize the length and effects of any
interruption or disruption of service.

                                    ARTICLE 5
                                  Compensation

5.1 Payments to Consumers

     Michigan Transco agrees to pay for services provided hereunder as follows:

     (a)  Reactive Supply and Voltage Control from Generation Sources Service

          Michigan Transco agrees to pay Consumers for provision of this
          Ancillary Service as rendered under this Agreement at the rates
          specified in Appendix B hereto. Michigan Transco will pay Consumers a
          proportional amount of revenues received from its transmission
          customers each month. The proportion will be determined in accordance
          with Consumers' and Third Parties' supply of this service to Michigan
          Transco.

     (b)  Regulation and Frequency Response Service

          Michigan Transco agrees to pay Consumers for provision of this
          Ancillary Service as rendered under this Agreement at the rates
          specified in Appendix B hereto.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 11
Rate Schedule No. 116
EXECUTION COPY

     (c)  Energy Imbalance Service

          In the event that Michigan Transco determines that (i) the actual
          deliveries of electricity to a Third Party load located in its
          Transmission Service Area in any hour were less than the amounts
          scheduled for that hour and (ii) Consumers' Generation supplied said
          deficient energy, Michigan Transco agrees to pay Consumers for
          provision of this Energy Imbalance Service as rendered under this
          Agreement at the rates specified in Appendix B hereto.

     (d)  Delivery Scheduling and Balancing Service

          In the event that Michigan Transco determines that (i) the actual
          deliveries of electricity on behalf of a Third Party transmission
          customer in any hour were less than the amounts scheduled for that
          hour and (ii) Consumers' Generation supplied said deficient energy,
          Michigan Transco agrees to pay Consumers for provision of this
          Delivery Scheduling and Balancing Service as rendered under this
          Agreement at the rates specified in Appendix B hereof.

     (e)  Generator Supply Imbalances

          In the event that Michigan Transco determines that (i) the actual
          deliveries of electricity to it from a Third Party generator located
          in Michigan Transco's Transmission Service Area on behalf of a
          transmission customer in any hour were less than the amounts scheduled
          for that hour and (ii) Consumers' Generation supplied said deficient
          energy, Michigan Transco agrees to pay Consumers for provision of this
          Generator Supply Imbalance Service as rendered under this Agreement at
          the rates specified in Appendix B hereof.

     (f)  Operating Reserve - Spinning Reserve Service

          Michigan Transco agrees to pay Consumers for provision of this
          Ancillary Service as rendered under this Agreement at the rates
          specified in Appendix B hereof.

     (g)  Operating Reserve - Supplemental Reserve Service

          Michigan Transco agrees to pay Consumers for provision of this
          Ancillary Service as rendered under this Agreement at the rates
          specified in Appendix B hereof.

5.2 Payments to Michigan Transco

     Consumers agrees to pay Michigan Transco for imbalance-related energy it
receives hereunder as follows:

     (a)  Energy Imbalance Service

          Pursuant to Schedule 4 of Michigan Transco's Tariff, no payments are
          currently applicable.

     (b)  Delivery Scheduling and Balancing Service

          In the event that Michigan Transco determines that the actual
          deliveries of electricity to it on behalf of Third Party transmission
          customers in any hour

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]
<PAGE>

Consumers Energy Company                                   Original Sheet No. 12
Rate Schedule No. 116
EXECUTION COPY

          exceeded the amounts scheduled to be delivered to said customers in
          that hour, Consumers shall pay Michigan Transco a price equal to 90%
          of Consumers' cost of energy for the difference between the Third
          Party transmission customers' scheduled deliveries and actual
          deliveries in that hour.

     (c)  Generator Supply Imbalances

          In the event that Michigan Transco determines that the actual
          deliveries of electricity to it on behalf of Third Party transmission
          customers from Third Party generators located in Michigan Transco's
          Transmission Service Area in any hour exceeded the amounts scheduled
          for that hour, Consumers shall pay Michigan Transco a price equal to
          90% of Consumers' cost of energy for the difference between the Third
          Party transmission customers' scheduled deliveries and actual
          deliveries in that hour.

5.3 Applicable Tariff Rates

     Consumers and Michigan Transco recognize that the rates, terms and
conditions contained in the currently effective Michigan Transco Tariff and
Appendix B hereto were filed, and are under review by the Commission, in Docket
No OA96-77-000. If an unappealable Commission Order relating to that Docket
changes rates, terms and/or conditions for a period during which services had
been provided and invoices rendered under this Agreement at the originally filed
rates, terms and conditions, then adjustments will be made to those invoices
accordingly and this Agreement will be revised to reflect the new rates.

                                    ARTICLE 6
                 Forecasted Requirement for Generation Services

     Michigan Transco shall provide timely updates of forecasts, and commitments
as they become known, of the total amount of capacity and energy needed for each
Ancillary Service, as described in Section 3.3 hereof, to be purchased by
Michigan Transco for its use in the Michigan Transco Transmission Service Area.
Forecast procedures are set forth in Appendix A.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 13
Rate Schedule No. 116
EXECUTION COPY

                                    ARTICLE 7
                         Priority and Nature of Service

7.1 Nature of Service

     Consumers agrees to provide capacity, energy and reactive power subject
only to interruption for reasons of maintaining the reliability of the
generation and transmission systems. 7.2 Use of Power

     Capacity, energy and reactive power provided by Consumers hereunder shall
serve the specific defined purposes set forth herein. Such purposes shall not be
modified without the express written consent of Consumers.

                                    ARTICLE 8
                              Conditions Precedent

     The Parties' rights and obligations under this Agreement are contingent
upon acceptance for filing by the Commission of this Agreement and the Tariff
without modification or in a modified form that is acceptable to the Parties.

                                    ARTICLE 9
                               Operating Committee

9.1 Creation of the Operating Committee

     Pursuant to Section 6.4.3 of the Operating Agreement, an Operating
     Committee shall be established to carry out and coordinate the provisions
     of this Agreement. Said Operating Committee shall consist of one
     representative from each Party, as designated in writing from time to time.
     Either Party may change its designated representative by notifying the
     other Party in writing.

9.2 Duties

     With respect to this Agreement, the Operating Committee shall have the
     following duties:

     (a)  Consideration of any matters in connection with the administration of
          this Agreement as may, from time to time, arise.

     (b)  Develop operating procedures and practices needed in the conduct of
          business under this Agreement.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 14
Rate Schedule No. 116
EXECUTION COPY

     (c)  Oversee the invoices rendered for services provided pursuant to this
          Agreement.

     (d)  Provide coordination of other matters not specifically provided for
          herein which the Parties agree are necessary. 9.3 Committee Expenses

     Each Party shall be responsible for the expenses of its representative
serving on the Operating Committee.

                                   ARTICLE 10
                             Exchange of Information

10.1 Data to be Furnished

     The Parties shall furnish such data to each other as may reasonably be
required to provide service hereunder.

10.2 Records and Accounts

     All records and accounts pertaining to services hereunder shall be
available to either Party for audit and review at all reasonable times.

                                   ARTICLE 11
                                  Settlements

11.1 Accounting Period

     The accounting period for transactions hereunder shall be a calendar month,
unless otherwise specified by the Operating Committee.

11.2 Invoicing

     Within a reasonable time after the first day of each month, invoices for
amounts payable for services performed by either Party during the previous month
shall be prepared and delivered. Each invoice shall be paid by the Party
obligated to pay so that the other Party will receive the funds by the 20th day
following the date of the invoice, or the first business day thereafter if the
payment date falls on other than a business day. 11.3 Payments

     (a)  All payments to Consumers shall be made payable to Consumers Energy
          Company, and shall be sent to Consumers Energy Company, Attention:

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 15
Rate Schedule No. 116
EXECUTION COPY

          Treasurer, 212 West Michigan Avenue, Jackson, MI 49201, or by wire
          transfer to a bank designated by Consumers.

     (b)  All payments to Michigan Transco shall be payable to Michigan Electric
          Transmission Company, and shall be sent to Michigan Electric
          Transmission Company, Attention: Executive Vice President and Chief
          Operating Officer, 540 Avis Drive, Suite H, Ann Arbor MI 48108, or by
          wire transfer to a bank designated by Michigan Transco.

     Each Party may change the name and address of its contact person by giving
     the other Party written notice of the change.

11.4 Interest Charges

     Any payment not made on or before the due date shall bear interest, from
the date due until the date upon which payment is made, at an annual percentage
rate of interest equal to the lesser of a) the prime rate published by the Wall
Street Journal (which represents the base rate on corporate loans posted by at
least 75% of the nation's banks) on the date due, plus 2%, or b) the highest
rate permitted by law.

11.5 Disputed Invoices

          In the event a portion of any invoice is in dispute, the undisputed
amount shall be paid when due, and the disputed portion of the invoice shall be
paid promptly after the Parties have determined the correct amount. Said correct
amount shall include interest charges calculated from the date the disputed
amount was originally due until the date upon which payment is made.

                                   ARTICLE 12
                                   Indemnity

     Each Party shall at all times assume all liability for, and shall indemnify
and save the other Party harmless from any and all damages, losses, claims,
demands, suits, recoveries, costs, legal fees, expenses for injury to or death
of any person or persons whomsoever, or for any loss, destruction of or damage
to any property of third persons, firms, corporations or other entities that
occurs on its own system and that arises out of or results from, either directly
or indirectly, its own facilities or facilities controlled by it, unless caused
by the sole negligence, or intentional wrongdoing, of the other Party.

                                   ARTICLE 13
                              Regulatory Authority

13.1 This Agreement is made subject to any governmental authority or authorities
having jurisdiction in the premises. Nothing contained in this Agreement shall
be construed as affecting in any way the right of the party furnishing service
hereunder to unilaterally make application to the Commission for a change in
rates, charges, classification, conditions or

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 16
Rate Schedule No. 116
EXECUTION COPY

service, or any rule, regulation or contract relating thereto, under Section 205
of the Federal Power Act and pursuant to the Commission's Rules and Regulations
promulgated thereunder or under comparable statutes and regulations of a
successor agency or department.

                                   ARTICLE 14
                                      Term

14.1 Initial Term

     This Agreement shall become effective on the effective date set forth in
Article 2 and shall continue in effect for one calendar year (the Initial Term),
subject to the provisions of Section 3.4 above, unless terminated pursuant to
Section 14.2 below. Upon completion of the Initial Term, this Agreement shall
automatically renew each year for successive one-year periods, unless terminated
pursuant to Section 14.2 below.

14.2 Termination

     Either Party may terminate this Agreement as to itself at any time after
the conclusion of the Initial Term upon giving the other Party six (6) month's
prior written notice. However, any termination under this Section 14.2 will not
prevent the continued application of settlement and other provisions of this
Agreement where necessary to resolve outstanding matters related to services
already provided under the Agreement. This Agreement is subject to termination
or modification to the extent that performance hereunder may conflict with any
applicable provision of law or with any rule, regulation or order of any
regulatory agency having jurisdiction, whether adopted before or after the
making of this Agreement.

                                   ARTICLE 15
                               Breach and Default

15.1 General

     A breach of this Agreement ("Breach") shall occur upon the failure by a
Party to perform or observe any material term or condition of this Agreement.
Default of this Agreement ("Default") shall occur upon the failure of a Party in
Breach of this Agreement to cure such Breach in accordance with the provisions
of Section 15.3 of this Agreement.

15.2 Events of Breach

     A Breach of this Agreement shall include:

     (a)  The failure to pay any amount when due;

     (b)  The failure to comply with any material term or condition of this
          Agreement, including but not limited to any material Breach of a
          representation, warranty or covenant made in this Agreement;

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 17
Rate Schedule No. 116
EXECUTION COPY

     (c)  If a Party: (a) becomes insolvent; (b) files a voluntary petition in
          bankruptcy under any provision of any federal or state bankruptcy law
          or shall consent to the filing of any bankruptcy or reorganization
          petition against it under any similar law; (c) makes a general
          assignment for the benefit of its creditors or (d) consents to the
          appointment of a receiver, trustee or liquidator;

     (d)  Assignment of this Agreement in a manner inconsistent with the terms
          of this Agreement;

     (e)  Failure of either Party to provide such access rights, or a Party's
          attempt to revoke or terminate such access rights, as provided under
          this Agreement; or

     (f)  Failure of either Party to provide information or data to the other
          Party as required under this Agreement, provided the Party entitled to
          the information or data under this Agreement requires such information
          or data to satisfy its obligations under this Agreement.

15.3 Cure and Default

     Upon the occurrence of an event of Breach, the Party not in Breach
(hereinafter the "Non-Breaching Party"), when it becomes aware of the Breach,
shall give written notice of the Breach to the Breaching Party and to any other
person a Party to this Agreement identifies in writing to the other Party in
advance. Such notice shall set forth, in reasonable detail, the nature of the
Breach, and where known and applicable, the steps necessary to cure such Breach.
Upon receiving written notice of the Breach hereunder, the Breaching Party shall
have thirty (30) days to cure such Breach. If the Breach is such that it cannot
be cured within thirty (30) days, the Breaching Party will commence in good
faith all steps as are reasonable and appropriate to cure the Breach within such
thirty (30) day time period and thereafter diligently pursue such action to
completion. In the event the Breaching Party fails to cure the Breach, or to
commence reasonable and appropriate steps to cure the Breach, within thirty (30)
days of becoming aware of the Breach; the Breaching Party will be in Default of
the Agreement.

15.4 Right to Compel Performance

     Notwithstanding the foregoing, upon the occurrence of an event of Default,
the non-Defaulting Party shall be entitled to: (a) commence an action to require
the Defaulting Party to remedy such Default and specifically perform its duties
and obligations hereunder in accordance with the terms and conditions hereof and
(b) exercise such other rights and remedies as it may have in equity or at law
including commencing of an action to terminate this Agreement per Section 15.2
of this Agreement.

                                   ARTICLE 16
                             Successors and Assigns

          16.1 This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of the Parties hereto. This Agreement shall not be
transferred or otherwise alienated by either Party without the other Party's
prior written consent, which consent shall not unreasonably be withheld,
provided that any assignee shall expressly

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 18
Rate Schedule No. 116
EXECUTION COPY

assume assignor's obligations hereunder and, unless expressly agreed to by the
other Party, no assignment shall relieve the assignor of its obligations
hereunder in the event its assignee fails to perform. Any attempted assignment,
transfer or other alienation without such consent shall be void and not merely
voidable.

          16.2 Notwithstanding the above, the Michigan Transco shall be
permitted to assign or otherwise transfer this Agreement, or its rights, duties
and obligations hereunder, in whole or in part, by operation of law or
otherwise, without the prior written consent of Consumers, to (a) any Regional
Transmission Organization or Independent Transmission Company or (b) any
successor to or transferee of the direct or indirect ownership or operation of
all or part of the transmission system to which the Facility is to be connected.
Upon the assumption by any such permitted assignee of the assigning Michigan
Transco's rights, duties and obligations hereunder, the assigning Michigan
Transco shall be released and discharged therefrom to the extent provided in the
assignment agreement.

                                   ARTICLE 17
                          Dispute Resolution Procedures

     The Dispute Resolution Procedures set forth in Michigan Transco's Tariff
shall apply to all disputes arising under this Agreement. Under said Dispute
Resolution Procedures, the Transmission Provider shall be Michigan Transco, the
Transmission Customer shall be Consumers and the Tariff shall mean this
Agreement.

                                   ARTICLE 18
                                  Force Majeure

18.1 An event of Force Majeure means any act of God, labor disturbance, act of
the public enemy, war, insurrection, riot, fire, storm or flood, explosion,
breakage or accident to machinery or equipment, any curtailment, order,
regulation or restriction imposed by governmental military or lawfully
established civilian authorities, or any other cause beyond a Party's reasonable
control. A Force Majeure event does not include an act of negligence or
intentional wrongdoing by a Party.

18.2 If either Party is rendered unable, wholly or in part, by Force Majeure, to
carry out its obligations under this Agreement, then, during the continuance of
such inability, the obligation of such Party shall be suspended except that the
obligation to provide protection while operating in parallel shall not be
suspended. The Party relying on Force Majeure shall give written notice of Force
Majeure to the other Party as soon as practicable after such event occurs. Upon
the conclusion of Force Majeure, the Party heretofore relying on Force Majeure
shall, with all reasonable dispatch, take all necessary steps to resume the
obligation previously suspended.

18.3 Any Party's obligation to make payments already owing shall not be
suspended by Force Majeure.

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 19
Rate Schedule No. 116
EXECUTION COPY

                                   ARTICLE 19
                                     General

19.1 Authority

     Each Party hereto represents to the other that this Agreement, the
transactions contemplated herein and the execution and delivery of the Agreement
have been duly authorized by all necessary corporate actions, including without
limitation, required action on the part of the officers and agents of the
representing Party and this Agreement, when executed and delivered, shall be
valid and binding on it.

19.2 Waivers

     Any waiver at any time of any rights as to any default hereunder or any
other matter arising hereunder shall not be deemed a waiver as to any subsequent
default or matter.

19.3 Governing Law

This Agreement shall be governed by and interpreted in accordance with the laws
of the State of Michigan, exclusive of its conflict of laws principles.

19.4 Headings

     The headings contained in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this Agreement.

19.5 Notices

     Unless otherwise specifically provided for in this Agreement, any written
notice or other communication shall be deemed to be given and received on the
date when such notice or communication is given by facsimile or e-mail, and
confirmed as received by the other Party, or the date received if given by
registered or certified mail, postage prepaid, addressed to:

For Consumers:

Consumers Energy Company
1945 West Parnall Road
Jackson, Michigan  49201-8658
Attention: Director of Transaction Strategies

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>
Consumers Energy Company                                   Original Sheet No. 20
Rate Schedule No. 116
EXECUTION COPY

For Michigan Transco:

Michigan Electric Transmission Company
540 Avis Drive, Suite H
Ann Arbor, MI 48108
Attention: Executive Vice President and Chief Operating Officer

Each Party may change the name and address of its contact person by giving the
other Party written notice of the change.

19.6 Entirety

     This Agreement, the appendices hereto and Tariff of Michigan Transco
constitute the entire agreement between the Parties hereto. The execution of
this Agreement supersedes all previous agreements, discussions, communications
and correspondence between the Parties with respect to said subject matter.

19.7 Severability

     Except as otherwise stated herein, any provision, Article or Section
declared or rendered unlawful by a court of law or regulatory agency with
jurisdiction over this Agreement, or deemed unlawful because of statutory change
will not otherwise affect the lawful obligations that arise under this
Agreement.

     IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
by their respective duly authorized officers.

                                        CONSUMERS ENERGY COMPANY

                                        By /s/ John Russell
                                           -------------------------------------
                                        Title: President
                                               ---------------------------------
                                        Date:  May 1, 2002
                                              ----------------------------------

                                        MICHIGAN ELECTRIC TRANSMISSION COMPANY

                                        By: /s/ Dennis DaPra
                                            ------------------------------------
                                        Title: Vice President
                                               ---------------------------------
                                        Date:  May 1, 2002
                                              ----------------------------------

Issued by: William E. Garrity                          Effective on: May 1, 2002
           Vice President, Fuels and
           Power Transactions
Issued on: [INSERT DATE]

<PAGE>

Consumers Energy Company                                   Original Sheet No. 21
Rate Schedule No. 116
EXECUTION COPY

                                   APPENDIX A

                               Forecast Procedures

1.   Michigan Transco will determine the amount of Ancillary Services that
     Consumers will need to supply to Michigan Transco for Third Party
     Regulation and Frequency Response Service, Spinning Reserve Service and
     Supplemental Reserve Service. Michigan Transco's forecasts of the need for
     such services shall be made available by 0800 of the preceding business
     day. Reactive Supply and Voltage Control from Generation Sources Service
     will be supplied by Consumer as described in paragraph 2(a) below.
     Consumers' provision of Energy Imbalance Service, Delivery Scheduling and
     Balancing Service and Generator Supply Imbalance Service will be determined
     by Consumers and Michigan Transco as described in paragraph 2(b) below.

2.   The amount of each Ancillary Service, described in Section 3.3 of this
     Agreement, that Consumers must provide to Michigan Transco will be
     determined as follows:

     (a)  Reactive Supply and Voltage Control from Generation Sources Service

          All Consumers' generation sources will be operated to support Michigan
          Transco's transmission system facilities voltage profile by regulating
          their respective reactive power output within established limits.

          (i)  Michigan Transco will be responsible for monitoring overall
               transmission system conditions and Consumers will take corrective
               action that is requested by Michigan Transco's System Operator.

          (ii) The applicable automatic voltage regulation mechanisms for
               pertinent Consumers' generation sources must be in service when
               those generation sources are on line, except when Consumers takes
               certain corrective action, as requested by the Michigan Transco
               System Operator. In the event any voltage regulation mechanism on
               a generation source of Consumers is out of service or operating
               improperly, Consumers will notify the Michigan Transco System
               Operator immediately.

          (iii) Consumers will maintain is speed governor settings as close as
               practical to a five percent (5%) speed regulation.

     (b)  Energy Imbalance Services

          Michigan Transco will send to Consumers one total value for the hourly
          day ahead energy imbalance forecast, the delivery scheduling and
          balancing forecast and the generator supply imbalance forecast. This
          day ahead forecasted imbalance schedule will supply Consumers with the
          projected needs of this service for use in their daily planning
          process. On the same day, Michigan Transco will provide Consumers with
          updates to the previous day's hourly imbalance forecast as well as
          real-time information relating to such service.

<PAGE>

Consumers Energy Company                                   Original Sheet No. 22
Rate Schedule No. 116
EXECUTION COPY

                                   APPENDIX B

                             Ancillary Service Rates

     As of the effective date of this Agreement, Consumers shall use the
following rates when providing Ancillary Services to Michigan Transco:

Reactive Supply and Voltage Control from Generation Sources Service

For supply to Third Party transmission customers under Part II of the Tariff.

     $0.21 per kW per month of Reserved Capacity.
     $0.049 per kW per week of Reserved Capacity.
     $0.0099 per kW per day of Reserved Capacity.
     $0.00062 per kW per hour of Reserved Capacity.

     The total demand charge in any week, pursuant to a request for hourly or
daily delivery, shall not exceed the rate specified above times the highest
amount in kilowatts of Reserved Capacity in any hour during such week. Also, the
total demand charge in any day, pursuant to a request for hourly delivery, shall
not exceed the rate specified above times the highest amount in kilowatts of
Reserved Capacity in any hour during such day.

For supply to Third Party Network Customers under Part III of the Tariff.

     On a monthly basis, up to the Network Customer's Load Ratio Share times
$14,789,000 divided by 12.

Regulation and Frequency Response Service

For supply to Third Party transmission customers under Part II of the Tariff.

      $0.17 per kW per month of Reserved Capacity.
      $0.040 per kW per week of Reserved Capacity.
      $0.0080 per kW per day of Reserved Capacity.
      $0.00050 per kW per hour of Reserved Capacity.

     The total demand charge in any week, pursuant to a request for hourly or
daily delivery, shall not exceed the rate specified above times the highest
amount in kilowatts of Reserved Capacity in any hour during such week. Also, the
total demand charge in any day, pursuant to a request for hourly delivery, shall
not exceed the rate specified above times the highest amount in kilowatts of
Reserved Capacity in any hour during such day.

For supply to Third Party Network Customers under Part III of the Tariff.

     On a monthly basis, up to the Network Customer's Load Ratio Share times
$11,913,000 divided by 12.

<PAGE>

Consumers Energy Company                                   Original Sheet No. 23
Rate Schedule No. 116
EXECUTION COPY

Energy Imbalance Service

Energy Imbalances less than or equal to the deviation band

     Any energy imbalances not paid back in-kind by the end of a monthly period
shall be paid for in a cash settlement. Cash settlements will be charged as set
forth below:

     On-Peak Imbalance    The greater of:

                          a) The actual replacement cost plus $0.01 per kWh, or

                          b) $0.10 per kWh

     Off-Peak Imbalance   The greater of:

                          a) The actual replacement cost plus $0.01 per kWh, or

                          b) $0.05 per kWh

Energy imbalances that are greater than the deviation band

     Demand Charge   $50 per kW, applied to the highest "Unauthorized Use"
                     demand incurred during the month.

     Energy Charge   $0.05 per kWh or the cost of replacement energy plus $0.01
                     per kWh, whichever is greater.

Delivery Scheduling and Balancing Service

     A price equal to 110% of Consumers' replacement cost of energy for the
difference between the transmission customer's scheduled deliveries and its
actual deliveries in the appropriate hour.

Generator Supply Imbalances

     A price equal to 110% of the greater of (a) Consumers' replacement cost of
energy or (b) the highest price at which Consumers sold energy during the
appropriate hour.

Operating Reserve - Spinning Reserve Service

For supply to Third Party transmission customers under Part II of the Tariff.

     $0.17 per kW per month of Reserved Capacity.
     $0.040 per kW per week of Reserved Capacity.
     $0.0080 per kW per day of Reserved Capacity.
     $0.00050 per kW per hour of Reserved Capacity.

<PAGE>

Consumers Energy Company                                   Original Sheet No. 24
Rate Schedule No. 116
EXECUTION COPY

     The total demand charge in any week, pursuant to a requested for hourly or
daily delivery, shall not exceed the rate specified above times the highest
amount in kilowatts of Reserved Capacity in any hour during such week. Also, the
total demand charge in any day, pursuant to a requested for hourly delivery,
shall not exceed the rate specified above times the highest amount in kilowatts
of Reserved Capacity in any hour during such day.

For supply to Third Party Network Customers under Part III of the Tariff.

     On a monthly basis, up to the Network Customer's Load Ratio Share times
$11,913,000 divided by 12.

Operating Reserve - Supplemental Reserve Service

For supply to Third Party transmission customers under Part II of the Tariff.

     $0.35 per kW per month of Reserved Capacity.
     $0.080 per kW per week of Reserved Capacity.
     $0.016 per kW per day of Reserved Capacity.
     $0.0010 per kW per hour of Reserved Capacity.

     The total demand charge in any week, pursuant to a requested for hourly or
daily delivery, shall not exceed the rate specified above times the highest
amount in kilowatts of Reserved Capacity in any hour during such week. Also, the
total demand charge in any day, pursuant to a requested for hourly delivery,
shall not exceed the rate specified above times the highest amount in kilowatts
of Reserved Capacity in any hour during such day.

For supply to Third Party Network Customers under Part III of the Tariff.

     On a monthly basis, up to the Network Customer's Load Ratio Share times
$23,826,000 divided by 12.

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