Document:

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                         INTANGIBLE TRANSITION PROPERTY
                                 SALE AGREEMENT

                                    between

                          PECO ENERGY TRANSITION TRUST

                                     Issuer

                                      and

                              PECO ENERGY COMPANY

                                     Seller

                          Dated as of March 25, 1999,
                            as amended and restated
                               as of May 2, 2000

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                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
                                    ARTICLE I

                                   Definitions

SECTION 1.01.  Definitions.................................................... 3
SECTION 1.02.  Other Definitional Provisions..................................10

                                   ARTICLE II

                  Conveyance of Intangible Transition Property

SECTION 2.01.  Conveyance of Initial Intangible Transition Property...........11
SECTION 2.02.  Conveyance of Subsequent Intangible Transition Property........12
SECTION 2.03.  Conditions to Conveyance of Intangible Transition Property.....13

                                   ARTICLE III

                    Representations and Warranties of Seller

SECTION 3.01.  Organization and Good Standing.................................15
SECTION 3.02.  Due Qualification..............................................15
SECTION 3.03.  Power and Authority............................................16
SECTION 3.04.  Binding Obligation.............................................16
SECTION 3.05.  No Violation...................................................17
SECTION 3.06.  No Proceedings.................................................17
SECTION 3.07.  Approvals......................................................18
SECTION 3.08.  The Intangible Transition Property.............................18

                                   ARTICLE IV

                             Covenants of the Seller

SECTION 4.01.  Corporate Existence............................................24
SECTION 4.02.  No Liens or Conveyances........................................25
SECTION 4.03.  Delivery of Collections........................................25
SECTION 4.04.  Notice of Liens................................................26
SECTION 4.05.  Compliance with Law............................................26
SECTION 4.06.  Covenants Related to Intangible Transition Property............26
SECTION 4.07.  Notice of Indemnification Events...............................28

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SECTION 4.08.  Protection of Title............................................28
SECTION 4.09.  Taxes..........................................................29

                                    ARTICLE V

                                   The Seller

SECTION 5.01.  Liability of Seller; Indemnities and Liquidated Damages........30
SECTION 5.02.  Merger or Consolidation of, or Assumption of the
                 Obligations of, Seller.......................................37
SECTION 5.03.  Limitation on Liability of Seller and Others...................39
SECTION 5.04.  Opinions of Counsel............................................40

                                   ARTICLE VI

                            Miscellaneous Provisions

SECTION 6.01.  Amendment......................................................41
SECTION 6.02.  Notices........................................................42
SECTION 6.03.  Assignment.....................................................43
SECTION 6.04.  Limitations on Rights of Others................................43
SECTION 6.05.  Severability...................................................43
SECTION 6.06.  Separate Counterparts..........................................44
SECTION 6.07.  Headings.......................................................44
SECTION 6.08.  Governing Law..................................................44
SECTION 6.09.  Assignment to Bond Trustee.....................................44
SECTION 6.10.  Nonpetition Covenant...........................................45
SECTION 6.11.  Limitation of Liability of Issuer Trustee......................46
SECTION 6.12.  Perfection.....................................................46

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                       INTANGIBLE TRANSITION PROPERTY SALE AGREEMENT dated as of
                    March 25, 1999, as amended and restated as of May 2, 2000,
                    between PECO ENERGY TRANSITION TRUST, a Delaware business
                    trust (the "Issuer"), and PECO ENERGY COMPANY, a
                    Pennsylvania corporation, and its successors in interest to
                    the extent permitted hereunder, as Seller (the "Seller").

     WHEREAS the Issuer desires to purchase from time to time Intangible
Transition Property created pursuant to the Statute and the Qualified Rate
Orders;

     WHEREAS the Seller is willing to sell Intangible Transition Property to the
Issuer;

     WHEREAS the Issuer, in order to finance the purchase of the Transferred
Intangible Transition Property, will from time to time issue Transition Bonds
under the Indenture;

     WHEREAS, on March 25, 1999, the Issuer, to secure its obligations under all
Transition Bonds and the Indenture, pledged all its right, title and interest in
certain Intangible Transition Property created by the Initial Qualified Rate
Order to the Bond Trustee for the benefit of the Transition Bondholders;

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                                                                               2

     WHEREAS the Issuer, to secure its obligations under additional Transition
Bonds and to further secure its obligations under the Series 1999-A Bonds issued
on March 25, 1999, will pledge all its right, title and interest in certain
Intangible Transition Property created by the Second Qualified Rate Order and by
any additional Qualified Rate Orders issued from time to time to the Bond
Trustee for the benefit of the Transition Bondholders;

     WHEREAS the Issuer and the Seller desire to amend and restate this
Agreement to add provisions for the Second Qualified Rate Order and any
subsequent Qualified Rate Orders; and

     WHEREAS the Issuer has determined that the transactions contemplated by the
Basic Documents are in the best interest of the Issuer and its creditors and
represent a prudent and advisable course of action that does not impair the
rights and interests of the Issuer's creditors.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound hereby, the parties hereto
agree as follows:

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                                                                               3

                                    ARTICLE I

                                   Definitions

     SECTION 1.01. Definitions. (a) Whenever used in this Agreement, each of the
following words and phrases shall have the following meaning:

     "Addition Notice" means, with respect to the transfer of Subsequent
Intangible Transition Property to the Issuer pursuant to Section 2.02, notice,
which shall be given by the Seller to the Issuer and the Rating Agencies not
later than 10 days prior to the related Subsequent Transfer Date, specifying the
Subsequent Transfer Date for such Subsequent Intangible Transition Property.

     "Affected QRO" has the meaning specified in the definition of Affected
Transition Bonds.

     "Affected Transition Bonds" means all of the Transition Bonds; provided
that if the Seller is obligated pursuant to Section 5.01(d)(i) to pay amounts
for deposit into the General Subaccount of the Collection Account for a breach
of a representation or warranty which relates to one or more of the Qualified
Rate Orders (any such Qualified Rate Order, an "Affected QRO"), but not all of
the Qualified Rate Orders, then "Affected Transition Bonds" shall mean only the
Series of Transition Bonds issued in connection with the Affected QRO.

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                                                                               4

     "Agreement" means this Intangible Transition Property Sale Agreement, as
amended and restated, and as the same may be further amended and supplemented
from time to time.

     "Bill of Sale" means a bill of sale substantially in the form of Exhibit A
hereto.

     "Business Day" has the meaning specified in the Master Servicing Agreement.

     "Competitive Transition Charges" has the meaning specified in the Master
Servicing Agreement.

     "Corporate Trust Office" means,(i) with respect to the Bond Trustee, 101
Barclay Street, Floor 12 East, New York, New York 10286, Attention: Asset Backed
Finance Unit, or the principal corporate trust office of any successor Bond
Trustee (the address of which the successor Bond Trustee will notify the
Transition Bondholders and the Issuer), and (ii) with respect to the Issuer
Trustee, c/o First Union Trust Company, National Association, One Rodney Square,
920 King Street, Wilmington, Delaware 19801.

     "Customers" has the meaning specified in the Master Servicing Agreement.

     "De Minimis Loss Amount" has the meaning specified in Section 5.01(d)(iii).

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                                                                               5

     "Duff" has the meaning specified in the Master Servicing Agreement.

     "Fitch IBCA" has the meaning specified in the Master Servicing Agreement.

     "Indemnification Event" has the meaning specified in Section 5.01(c)(i).

     "Indenture" means the Indenture dated as of March 1, 1999, between the
Issuer and The Bank of New York, as the same may be amended and supplemented
from time to time.

     "Initial Intangible Transition Property" means the Intangible Transition
Property, as identified in the related Bill of Sale, sold to the Issuer on the
Initial Transfer Date pursuant to this Agreement in connection with the issuance
of the Series 1999-A Transition Bonds.

     "Initial Loss Calculation Date" has the meaning specified in Section
5.01(c)(ii).

     "Initial Qualified Rate Order" has the meaning specified in the Master
Servicing Agreement.

     "Initial Transfer Date" means March 25, 1999.

     "Intangible Transition Charges" has the meaning specified in the Master
Servicing Agreement.

     "Intangible Transition Property" has the meaning specified in the Master
Servicing Agreement.

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                                                                               6

     "ITC Collections" has the meaning specified in the Master Servicing
Agreement.

     "Lien" has the meaning specified in the Master Servicing Agreement.

     "Liquidated Damages Amount" means an amount equal to the sum of (i) all
amounts due to the Bond Trustee or the Issuer Trustee in respect of expenses or
indemnity payments, (ii) the then outstanding principal amount of the Affected
Transition Bonds as of the Liquidated Damages Redemption Date and unpaid
interest accrued thereon to such date, (iii) amounts due to the Issuer in
respect of any other fees or Operating Expenses of the Issuer or indemnity
payments and (iv) amounts due to any Counterparty in respect of the termination
of a Swap Agreement related to the Affected Transition Bonds.

     "Liquidated Damages Payment Date" means the date that is (i) 90 days after
the date of a breach of a representation or warranty specified in Section
3.08(b),(c),(d)(i), (d)(ii), (d)(iv) or (f) if the Seller (A) has the long term
debt ratings specified by, and enters into the binding agreement described in,
Section 5.01(d)(i)(B)(i) or (B) does not have such long term debt ratings but
makes the deposit required by Section 5.01(d)(i)(B)(ii) or (ii) in all other
cases, two Business Days after the date of such breach.

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                                                                               7

     "Losses" has the meaning specified in the Master Servicing Agreement.

     "Master Servicing Agreement" means the Master Servicing Agreement dated as
of March 25, 1999, as amended and restated as of May 2, 2000, among the Issuer,
the Servicer and any Other Issuers, as the same may be amended and supplemented
from time to time.

     "Monthly Allocation Date" has the meaning specified in the Master Servicing
Agreement.

     "Moody's" has the meaning specified in the Master Servicing Agreement.

     "Mortgage" has the meaning specified in the Master Servicing Agreement.

     "Officers' Certificate" means a certificate signed by (a) the chairman of
the board, the president, the vice chairman of the board, the executive vice
president or any vice president and (b) a treasurer, assistant treasurer,
secretary or assistant secretary, in each case of the Seller or the Servicer, as
appropriate.

     "Opinion of Counsel" means one or more written opinions of counsel who may
be an employee of or counsel to the Seller or the Servicer, which counsel shall
be reasonably acceptable to the Bond Trustee, the Issuer or the Rating Agencies,
as applicable, and which shall be in form reasonably satisfactory to the Bond
Trustee, if applicable.

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                                                                               8

     "Other Issuer" means any Person other than the Issuer that issues Other
Transition Bonds secured by Intangible Transition Property sold by the Seller to
such Person in accordance with Section 4.02 of this Agreement.

     "Other Transition Bonds" means "transition bonds" (as defined in the
Statute) issued by any Other Issuer.

     "PECO Energy" has the meaning specified in the Master Servicing Agreement.

     "PUC" has the meaning specified in the Master Servicing Agreement.

     "PUC Regulations" has the meaning specified in the Master Servicing
Agreement.

     "Qualified Rate Orders" has the meaning specified in the Master Servicing
Agreement.

     "Qualified Transition Expenses" has the meaning specified in the Master
Servicing Agreement.

     "Rate Class" has the meaning specified in the Master Servicing Agreement.

     "Retained Intangible Transition Property" means Intangible Transition
Property other than (i) the Transferred Intangible Transition Property and (ii)
any Intangible Transition Property sold to Other Issuers.

     "Second Qualified Rate Order" has the meaning specified in the Master
Servicing Agreement.

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                                                                               9

     "Serviced Intangible Transition Property" has the meaning specified in the
Master Servicing Agreement.

     "Servicer" means PECO Energy, as the servicer of the Intangible Transition
Property, and each successor to PECO Energy (in the same capacity) pursuant to
Section 5.03 or 6.04 of the Master Servicing Agreement.

     "Servicer Default" means an event specified in Section 6.01 of the Master
Servicing Agreement.

     "Standard & Poor's" has the meaning specified in the Master Servicing
Agreement.

     "Statute" has the meaning specified in the Master Servicing Agreement.

     "Subsequent Intangible Transition Property" means Intangible Transition
Property, as identified in the related Bill of Sale, sold to the Issuer on any
Subsequent Transfer Date in connection with the issuance of a Series of
Transition Bonds.

     "Subsequent Transfer Date" means any date on which Subsequent Intangible
Transition Property is to be transferred to the Issuer pursuant to Section 2.02.

     "Third Party" has the meaning specified in the Master Servicing Agreement.

     "Transferred Intangible Transition Property" means, collectively, the
Initial Intangible Transition Property and any Subsequent Intangible Transition
Property.

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                                                                              10

     "Trust Agreement" means the Second Amended and Restated Trust Agreement
dated as of May 2, 2000, among the Seller, the Issuer Trustee and the other
trustees named therein, as the same may be amended and supplemented from time to
time.

     "UCC" has the meaning specified in the Master Servicing Agreement.

     (b) Except as otherwise specified herein or as the context may otherwise
require, each of the following terms has the meaning set forth in the Indenture
for all purposes of this Agreement, and the definitions of such terms are
equally applicable both to the singular and plural forms of such terms:

                                                                   Signature of
Term                                                               the Indenture
----                                                               -------------
Adjustment Date...................................................... 1.01(a)
Affiliate............................................................ 1.01(a)
Basic Documents...................................................... 1.01(a)
Bond Trustee......................................................... 1.01(a)
Capital Subaccount................................................... 1.01(a)
Collateral........................................................... 1.01(a)
Collection Account................................................... 1.01(a)
Counterparty......................................................... 1.01(a)
General Subaccount................................................... 1.01(a)
Holders or Transition Bondholders ................................... 1.01(a)
Issuer Trustee....................................................... 1.01(a)
Liquidated Damages................................................... 1.01(a)
Liquidated Damages Redemption Date................................... 1.01(a)
Loss Subaccount...................................................... 1.01(a)
Monthly Servicing Fee................................................ 1.01(a)
Operating Expenses................................................... 1.01(a)
Overcollateralization Amount......................................... 1.01(a)
Person............................................................... 1.01(a)
Rating Agency........................................................ 1.01(a)
Rating Agency Condition.............................................. 1.01(a)
Reserve Subaccount................................................... 1.01(a)
Series............................................................... 1.01(a)
Swap Agreement....................................................... 1.01(a)
Transition Bonds..................................................... 1.01(a)

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                                                                              11

     SECTION 1.02. Other Definitional Provisions. (a) The words "hereof",
"herein", "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement; Section, Schedule and Exhibit references contained in this
Agreement are references to Sections, Schedules and Exhibits in or to this
Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".

     (b) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.

                                   ARTICLE II

                  Conveyance of Intangible Transition Property

     SECTION 2.01. Conveyance of Initial Intangible Transition Property. (a) The
Seller and the Issuer hereby confirm that in consideration of the Issuer's
delivery to or upon the order of the Seller of $3,994,560,476, subject to the
conditions specified in Section 2.03, the Seller irrevocably sold, transferred,
assigned, set over and

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                                                                              12

otherwise conveyed to the Issuer, without recourse (subject to the obligations
herein), all right, title and interest of the Seller in and to the Initial
Intangible Transition Property (such sale, transfer, assignment, set over and
conveyance of the Initial Intangible Transition Property included, to the
fullest extent permitted by the Statute, the assignment of all revenues,
collections, claims, rights, payments, money or proceeds of or arising from the
Intangible Transition Charges related to the Initial Intangible Transition
Property, as the same may be adjusted from time to time). Such sale, transfer,
assignment, set over and conveyance was expressly stated to be a sale and,
pursuant to Section 2812(e) of the Statute, was and shall be treated as an
absolute transfer of all of the Seller's right, title and interest (as in a true
sale), and not as a pledge or other financing, of the Initial Intangible
Transition Property. The preceding sentence is the statement referred to in
Section 2812(e) of the Statute. The Seller hereby confirms that after giving
effect to that sale it had and will have no rights in the Initial Intangible
Transition Property to which a security interest of creditors of the Seller
could attach because it has sold all rights in the Initial Intangible Transition
Property to the Issuer pursuant to Section 2812(e) of the Statute.

<PAGE>

                                                                              13

     (b) The Issuer does hereby confirm the purchase of the Initial Intangible
Transition Property from the Seller for the consideration set forth in paragraph
(a) above.

     (c) The Seller and the Issuer each confirm that the purchase price for the
Initial Intangible Transition Property sold pursuant to this Agreement was equal
to its fair market value at the time of sale.

     SECTION 2.02. Conveyance of Subsequent Intangible Transition Property. The
Seller may from time to time offer to sell additional Intangible Transition
Property to the Issuer, subject to the conditions specified in Section 2.03. If
any such offer is accepted by the Issuer, such Subsequent Intangible Transition
Property shall be sold to the Issuer effective on the Subsequent Transfer Date
specified in the related Addition Notice, subject to the satisfaction or waiver
of the conditions specified in Section 2.03.

     SECTION 2.03. Conditions to Conveyance of Intangible Transition Property.
The Seller shall be permitted to sell Intangible Transition Property to the
Issuer only upon the satisfaction or waiver of each of the following conditions:

          (i) on or prior to the Initial Transfer Date or Subsequent Transfer
     Date, as applicable, the Seller shall have delivered to the Issuer a duly
     executed Bill

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                                                                              14

     of Sale identifying the Intangible Transition Property to be conveyed on
     that date;

          (ii) as of the Initial Transfer Date or the Subsequent Transfer Date,
     as applicable, the Seller was not insolvent and will not have been made
     insolvent by such sale and the Seller is not aware of any pending
     insolvency with respect to itself;

          (iii) as of the Initial Transfer Date or the Subsequent Transfer Date,
     as applicable, no breach by the Seller of its representations, warranties
     or covenants in this Agreement shall exist; and no Servicer Default shall
     have occurred and be continuing;

          (iv) as of the Initial Transfer Date or the Subsequent Transfer Date,
     as applicable, (A) the Issuer shall have sufficient funds available to pay
     the purchase price for the Transferred Intangible Transition Property to be
     conveyed on such date and (B) all conditions to the issuance of one or more
     Series of Transition Bonds intended to provide such funds set forth in the
     Indenture shall have been satisfied or waived;

          (v) on or prior to the Initial Transfer Date or Subsequent Transfer
     Date, as applicable, the Seller shall have taken all action required to
     transfer to the Issuer ownership of the Transferred Intangible

<PAGE>

                                                                              15

     Transition Property to be conveyed on such date, free and clear of all
     Liens other than Liens created by the Issuer pursuant to the Indenture; and
     the Issuer or the Servicer, on behalf of the Issuer, shall have taken any
     action required for the Issuer to grant the Bond Trustee a first priority
     perfected security interest in the Collateral and maintain such security
     interest as of such date;

          (vi) in the case of a sale of Subsequent Intangible Transition
     Property only, on or prior to such Subsequent Transfer Date, the Seller
     shall have provided the Issuer and the Rating Agencies with a timely
     Addition Notice;

          (vii) the Seller shall have delivered to the Rating Agencies and the
     Issuer the Opinion of Counsel required by Section 5.04(a); and

          (viii) the Seller shall have delivered to the Bond Trustee and the
     Issuer an Officers' Certificate confirming the satisfaction of each
     condition precedent specified in this Section 2.03.

<PAGE>

                                                                              16

                                  ARTICLE III

                    Representations and Warranties of Seller

     As of the Initial Transfer Date and as of any Subsequent Transfer Date, as
applicable, the Seller makes the following representations and warranties on
which the Issuer has relied and will rely in acquiring Transferred Intangible
Transition Property. The representations and warranties shall survive the sale
of Transferred Intangible Transition Property to the Issuer and the pledge
thereof to the Bond Trustee pursuant to the Indenture.

     SECTION 3.01. Organization and Good Standing. The Seller is a corporation
duly organized and in good standing under the laws of the Commonwealth of
Pennsylvania, with corporate power and authority to own its properties and
conduct its business as currently owned or conducted.

     SECTION 3.02. Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications, licenses or approvals (except where the failure to so qualify
would not be reasonably likely to have a material adverse effect on the Seller's
business, operations, assets, revenues, properties or prospects).

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                                                                              17

     SECTION 3.03. Power and Authority. The Seller has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms; the
Seller has full corporate power and authority to own the Intangible Transition
Property and sell and assign the Initial Intangible Transition Property, in the
case of the Initial Transfer Date, and the Subsequent Intangible Transition
Property, in the case of each Subsequent Transfer Date, as applicable, and the
Seller has duly authorized such sale and assignment to the Issuer by all
necessary corporate action; and the execution, delivery and performance of this
Agreement has been duly authorized by the Seller by all necessary corporate
action.

     SECTION 3.04. Binding Obligation. This Agreement constitutes a legal, valid
and binding obligation of the Seller enforceable against the Seller in
accordance with its terms subject to bankruptcy, receivership, insolvency,
fraudulent transfer, reorganization, moratorium or other laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity (regardless of whether considered in a proceeding in equity
or at law).

     SECTION 3.05. No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions of, nor

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                                                                              18

constitute (with or without notice or lapse of time) a default under, the
articles of incorporation or by-laws of the Seller, or any indenture, agreement
or other instrument to which the Seller is a party or by which it shall be
bound; nor result in the creation or imposition of any Lien upon any of its
properties (other than the lien of the Mortgage on the Seller's interest in the
Monthly Servicing Fee and any other rights under this Agreement in accordance
with the terms of this Agreement) pursuant to the terms of any such indenture,
agreement or other instrument; nor violate any law or any order, rule or
regulation applicable to the Seller of any court or of any Federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Seller or its properties.

     SECTION 3.06. No Proceedings. There are no proceedings or investigations
pending or, to the Seller's best knowledge, threatened, before any court,
Federal or state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties (i)
asserting the invalidity of the Basic Documents or the Transition Bonds, (ii)
seeking to prevent the issuance of the Transition Bonds or the consummation of
any of the transactions contemplated by the Basic Documents or the Transition
Bonds or (iii) except as

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                                                                              19

disclosed by the Seller to the Issuer, seeking any determination or ruling that
could reasonably be expected to materially and adversely affect the performance
by the Seller of its obligations under, or the validity or enforceability of,
the Basic Documents or the Transition Bonds.

     SECTION 3.07. Approvals. Except for UCC continuation filings, no approval,
authorization, consent, order or other action of, or filing with, any court,
Federal or state regulatory body, administrative agency or other governmental
instrumentality is required in connection with the execution and delivery by the
Seller of this Agreement, the performance by the Seller of the transactions
contemplated hereby or the fulfillment by the Seller of the terms hereof, except
those that have been obtained or made.

     SECTION 3.08. The Intangible Transition Property. (a) Information. All
information provided by the Seller to the Issuer with respect to the Transferred
Intangible Transition Property is correct in all material respects.

     (b) Effect of Transfer. The transfers and assignments herein contemplated
constitute sales of the Initial Intangible Transition Property or the Subsequent
Intangible Transition Property, as the case may be, from the Seller to the
Issuer and the beneficial interest in and

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                                                                              20

title to the Transferred Intangible Transition Property would not be part of the
debtor's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy law.

     (c) Transfer Filings. The Seller is the sole owner of the Intangible
Transition Property being sold to the Issuer on the Initial Transfer Date or
Subsequent Transfer Date, as applicable; the Transferred Intangible Transition
Property has been validly transferred and sold to the Issuer free and clear of
all Liens other than Liens created by the Issuer pursuant to the Indenture. All
filings, including filings with the PUC under the Statute, necessary in any
jurisdiction to give the Issuer a valid ownership interest in the Transferred
Intangible Transition Property, free and clear of all Liens of the Seller or
anyone claiming through the Seller, and to give the Bond Trustee a first
priority perfected security interest in the Transferred Intangible Transition
Property have been made, other than any such filings (except for filings with
the PUC under the Statute and UCC filings with the Secretary of State of the
State of Delaware) the absence of which would not have an adverse impact on (i)
the ability of the Servicer to collect Intangible Transition Charges with
respect to the Serviced Intangible Transition Property or

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                                                                              21

(ii) the rights of the Issuer or the Bond Trustee with respect to the
Transferred Intangible Transition Property.

     (d) Irrevocable; Process Valid; No Litigation; Etc. (i) Each Qualified Rate
Order has been issued by the PUC in accordance with the Statute, such order and
the process by which it was issued comply with all applicable laws, rules and
regulations, and each such order is in full force and effect. (ii) As of the
date of issuance of any Series of Transition Bonds, such Transition Bonds are
entitled to the protections provided by the Statute and, accordingly, the
provisions of each Qualified Rate Order relating to Intangible Transition
Property and Intangible Transition Charges are not revocable by the PUC. (iii)
(a) Under the Statute, neither the Commonwealth of Pennsylvania nor the PUC may
limit, alter or in any way impair or reduce the value of Intangible Transition
Property or Intangible Transition Charges approved by the Qualified Rate Orders
or any rights thereunder, except such a limitation or alteration may be made by
the Commonwealth of Pennsylvania or the PUC if adequate compensation is made by
law for the full protection of the Intangible Transition Charges and of
Transition Bondholders; and (b) under the Contract Clauses of the Constitutions
of the Commonwealth of Pennsylvania and the United States, the Commonwealth of
Pennsylvania and the PUC cannot take any action that

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                                                                              22

substantially impairs the rights of the Transition Bondholders unless such
action is a reasonable exercise of the Commonwealth of Pennsylvania's sovereign
powers and appropriate to further a legitimate public purpose, and, under the
Takings Clauses of the Pennsylvania and United States Constitutions, in the
event such action constitutes a permanent appropriation of the property interest
of Transition Bondholders in the Intangible Transition Property and deprives the
Transition Bondholders of their reasonable expectations arising from their
investments in Transition Bonds, unless just compensation, as determined by a
court of competent jurisdiction, is provided to Transition Bondholders. (iv)
There is no order by any court providing for the revocation, alteration,
limitation or other impairment of the Statute, any Qualified Rate Order, the
Intangible Transition Property or the Intangible Transition Charges or any
rights arising under any of them or which seeks to enjoin the performance of any
obligations under the Qualified Rate Orders. (v) No other approval,
authorization, consent, order or other action of, or filing with, any court,
Federal or state regulatory body, administrative agency or other governmental
instrumentality is required in connection with the creation of the Intangible
Transition Property, except those that have been obtained or made. (vi) Except
as disclosed by the Seller to

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                                                                              23

the Issuer there are no proceedings or investigations pending, or to the
Seller's best knowledge, threatened before any court, Federal or state
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Seller or its properties challenging any Qualified
Rate Order or the Statute. (vii) No failure on the Initial Transfer Date or any
Subsequent Transfer Date or any time thereafter to satisfy any condition imposed
by the Statute with respect to the recovery of stranded costs will adversely
affect the creation or sale hereunder of Intangible Transition Property or the
right to collect Intangible Transition Charges.

     (e) Assumptions. The assumptions used in calculating Intangible Transition
Charges are reasonable and made in good faith.

     (f) Creation of Intangible Transition Property. (i) The Intangible
Transition Property other than the Retained Intangible Transition Property
constitutes a current property right, (ii) the Intangible Transition Property
includes, without limitation, (A) the irrevocable right of the Issuer and any
Other Issuers to receive through Intangible Transition Charges an amount
sufficient to recover all of the Seller's Qualified Transition Expenses
described in the Qualified Rate Orders in an amount equal to the aggregate
principal amount of Transition Bonds and Other

<PAGE>

                                                                              24

Transition Bonds plus an amount sufficient to provide for any credit enhancement
(including the Overcollateralization Amount relating to each Series of
Transition Bonds), to fund any reserves, and to pay interest, premium, if any,
servicing fees and other expenses relating to the Transition Bonds and Other
Transition Bonds, and (B) all right, title and interest of the Seller or its
assignee applicable to the Transition Bonds and Other Transition Bonds in the
Qualified Rate Orders and in all revenues, collections, claims, payments, money
or proceeds of or arising from the Intangible Transition Charges applicable to
the Transition Bonds and Other Transition Bonds set forth in the Qualified Rate
Orders to the extent that in accordance with the Statute, the Qualified Rate
Orders and the rates and charges authorized under the Qualified Rate Orders are
declared to be irrevocable and (iii) paragraphs four through nineteen of the
Initial Qualified Rate Order and paragraphs four through eighteen of the Second
Qualified Rate Order (and the comparable paragraphs for any subsequent Qualified
Rate Order), including the right to collect Intangible Transition Charges, have
been declared to be irrevocable by the PUC.

     (g) Solvency. After giving effect to the sale of any Transferred Intangible
Transition Property hereunder, the Seller (i) is solvent and expects to remain
solvent, (ii) is adequately capitalized to conduct its business and

<PAGE>

                                                                              25

affairs considering its size and the nature of its business and intended
purposes, (iii) is not engaged in nor does it expect to engage in a business for
which its remaining property represents an unreasonably small capital, (iv)
believes that it will be able to pay its debts as they come due and that such
belief is reasonable and (v) is able to pay its debts as they mature and does
not intend to incur, or believe that it will incur, indebtedness that it will
not be able to repay at its maturity.

     (h) Swap Payments. Semiannual fixed amounts payable by the Issuer to a
Counterparty in respect of fixed interest under a Swap Agreement are includable
in Intangible Transition Charges.

                                   ARTICLE IV

                             Covenants of the Seller

     SECTION 4.01. Corporate Existence. Subject to Section 5.02, so long as any
of the Transition Bonds are outstanding, the Seller will keep in full force and
effect its corporate existence and remain in good standing, in each case under
the laws of the jurisdiction of its incorporation, and will obtain and preserve
its qualification to do business in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement and the Trust Agreement and each other
instrument or agreement to which

<PAGE>

                                                                              26

the Seller is a party necessary to the proper administration of this Agreement
and the transactions contemplated hereby.

     SECTION 4.02. No Liens or Conveyances. Except for the conveyances
hereunder, the Seller will not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien on, any of
the Intangible Transition Property, whether now existing or hereafter created,
or any interest therein, other than, with respect to Retained Intangible
Transition Property, the Lien of the Mortgage; provided, that the Seller may
sell Retained Intangible Transition Property to Other Issuers if (i) the Rating
Agency Condition is satisfied with respect to all outstanding Transition Bonds
and (ii) each such Other Issuer is, or prior to such sale becomes, a party to
the Master Servicing Agreement as an "Issuer" (as defined in the Master
Servicing Agreement). The Seller shall not at any time assert any Lien against
or with respect to any Serviced Intangible Transition Property, and shall defend
the right, title and interest of the Issuer, the Bond Trustee, as assignee of
the Issuer, and any Other Issuers in, to and under the Intangible Transition
Property, whether now existing or hereafter created, against all claims of third
parties claiming through or under the Seller.

     SECTION 4.03. Delivery of Collections. If the Seller receives collections
in respect of the Intangible

<PAGE>

                                                                              27

Transition Charges, other than Intangible Transition Charges relating to
Retained Intangible Transition Property, or the proceeds thereof, the Seller
agrees to pay the Servicer all payments received by the Seller in respect
thereof as soon as practicable after receipt thereof by the Seller, but in no
event later than two Business Days after such receipt.

     SECTION 4.04. Notice of Liens. The Seller shall notify the Issuer Trustee
and the Bond Trustee promptly after becoming aware of any Lien on any Intangible
Transition Property other than the conveyances hereunder or under the Indenture,
conveyances to Other Issuers (and related pledges) or, in the case of Retained
Intangible Transition Property, the Lien of the Mortgage.

     SECTION 4.05. Compliance with Law. The Seller hereby agrees to comply with
its organizational or governing documents and all laws, treaties, rules,
regulations and determinations of any governmental instrumentality applicable to
the Seller, except to the extent that failure to so comply would not adversely
affect the Issuer's, the Bond Trustee's or any Other Issuer's interests in the
Intangible Transition Property or under any of the Basic Documents or the
Seller's performance of its obligations hereunder or under any of the other
Basic Documents to which it is a party.

<PAGE>

                                                                              28

     SECTION 4.06. Covenants Related to Intangible Transition Property. (a) So
long as any of the Transition Bonds are outstanding, the Seller shall treat the
Transition Bonds as debt of the Seller for Federal income tax purposes.

     (b) So long as any of the Transition Bonds are outstanding, the Seller
shall (i) clearly disclose in its financial statements that it is not the owner
of the Serviced Intangible Transition Property and that the assets of the Issuer
are not available to pay creditors of the Seller or any of its Affiliates and
(ii) clearly disclose the effects of all transactions between the Seller and the
Issuer in accordance with generally accepted accounting principles.

     (c) The Seller agrees that upon the sale by the Seller of the Transferred
Intangible Transition Property to the Issuer pursuant to this Agreement, (i) to
the fullest extent permitted by law, including applicable PUC Regulations, the
Issuer shall have all of the rights originally held by the Seller with respect
to the Transferred Intangible Transition Property (other than the rights of an
electric distribution company set forth in Section 2807 of the Statute),
including the right to collect any amounts payable by any Customer or Third
Party in respect of such Transferred Intangible Transition Property,
notwithstanding any objection or direction to the contrary

<PAGE>

                                                                              29

by the Seller and (ii) any payment by any Customer or Third Party to the Issuer
shall discharge such Customer's or such Third Party's obligations in respect of
such Transferred Intangible Transition Property to the extent of such payment,
notwithstanding any objection or direction to the contrary by the Seller.

     (d) So long as any of the Transition Bonds are outstanding, (i) the Seller
shall not make any statement or reference in respect of the Transferred
Intangible Transition Property that is inconsistent with the ownership thereof
by the Issuer and (ii) the Seller shall not take any action in respect of the
Serviced Intangible Transition Property except solely in its capacity as the
Servicer thereof pursuant to the Master Servicing Agreement or as otherwise
contemplated by the Basic Documents.

     SECTION 4.07. Notice of Indemnification Events. The Seller shall deliver to
the Issuer and the Bond Trustee promptly after having obtained knowledge
thereof, written notice in an Officers' Certificate of any Indemnification Event
or any event which, with the giving of notice or the passage of time, would
become an Indemnification Event.

     SECTION 4.08. Protection of Title. The Seller shall execute and file such
filings, including filings with the PUC pursuant to the Statute, and cause to be
executed

<PAGE>

                                                                              30

and filed such filings, all in such manner and in such places as may be required
by law fully to preserve, maintain, and protect the interests of the Issuer in
the Transferred Intangible Transition Property, including all filings required
under the Statute relating to the transfer of the ownership or security interest
in the Transferred Intangible Transition Property by the Seller to the Issuer.
The Seller shall deliver (or cause to be delivered) to the Issuer file-stamped
copies of, or filing receipts for, any document filed as provided above, as soon
as available following such filing. The Seller agrees to take such legal or
administrative actions, including defending against or instituting and pursuing
legal actions and appearing or testifying at hearings or similar proceedings, as
may be reasonably necessary (i) to protect the Issuer and the Transition
Bondholders from claims, state actions or other actions or proceedings of third
parties which, if successfully pursued, would result in a breach of any
representation or warranty set forth in Article III or (ii) to block or overturn
any attempts to cause a repeal of, modification of or supplement to the Statute
or the Qualified Rate Orders or the rights of holders of Intangible Transition
Property by legislative enactment or constitutional amendment that would be
adverse to the holders of Intangible Transition Property.

<PAGE>

                                                                              31

     SECTION 4.09. Taxes. So long as any of the Transition Bonds are
outstanding, the Seller shall, and shall cause each of its subsidiaries (other
than the Issuer) to, pay all material taxes, including gross receipts taxes,
assessments and governmental charges imposed upon it or any of its properties or
assets or with respect to any of its franchises, business, income or property
before any penalty accrues thereon if the failure to pay any such taxes,
assessments and governmental charges would, after any applicable grace periods,
notices or other similar requirements, result in a lien on the Intangible
Transition Property; provided that no such tax need be paid if the Seller or one
of its subsidiaries is contesting the same in good faith by appropriate
proceedings promptly instituted and diligently conducted and if the Seller or
such subsidiary has established appropriate reserves as shall be required in
conformity with generally accepted accounting principles.

                                    ARTICLE V

                                   The Seller

     SECTION 5.01. Liability of Seller; Indemnities and Liquidated Damages. (a)
The Seller shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Seller under this Agreement.

<PAGE>

                                                                              32

     (b) The Seller shall indemnify the Issuer and the Bond Trustee, for itself
and on behalf of the Transition Bondholders, and each of their respective
trustees, officers, directors and agents for, and defend and hold harmless each
such Person from and against, any and all taxes (other than any taxes imposed on
Transition Bondholders solely as a result of their ownership of Transition
Bonds) that may at any time be imposed on or asserted against any such Person as
a result of the acquisition or holding of the Transferred Intangible Transition
Property by the Issuer or the issuance and sale by the Issuer of the Transition
Bonds, including any sales, gross receipts, general corporation, tangible
personal property, privilege or license taxes.

     (c)(i) The Seller shall indemnify the Issuer and the Bond Trustee, on
behalf of the Transition Bondholders, each of their respective trustees,
officers, directors, and agents, and any Counterparty, and defend and hold
harmless each such Person from and against, any and all Losses that may be
imposed on, incurred by or asserted against any such Person as a result of (x)
the Seller's wilful misconduct, bad faith or gross negligence in the performance
of its duties or observance of its covenants under this Agreement, (y) the
Seller's reckless disregard of its obligations and duties under this Agreement
or (z) the Seller's breach of

<PAGE>

                                                                              33

any of its representations or warranties contained in this Agreement other than
those contained in Sections 3.08(b), 3.08(c), 3.08(d)(i), (ii) and (iv) and
3.08(f) (any event described in any of the foregoing clauses (x), (y) or (z), an
"Indemnification Event"); provided, however, that the amount of such Losses
(other than those payable pursuant to Section 5.01(e)) for which the Seller
shall be obligated to provide indemnification shall not exceed the Liquidated
Damages Amount. Amounts on deposit in the Reserve Subaccount, the
Overcollateralization Subaccount and the Capital Subaccount shall not be
available to satisfy any Losses for which indemnification is provided in this
Agreement.

     (ii) If an Indemnification Event shall occur, upon receipt of written
notice thereof by the Seller from the Issuer or the Bond Trustee, the Seller
shall notify the Servicer of the occurrence of such event so that the Servicer
may, pursuant to Section 8 of Annex 1 to the Master Servicing Agreement,
calculate (x) on the day which is 90 days after receipt of such notice by the
Seller (the "Initial Loss Calculation Date") the amount of Losses expected to be
incurred as a result of such Indemnification Event from and including the time
of its occurrence through and including the next Monthly Allocation Date after
the Initial Loss Calculation Date and (y) to the extent that

<PAGE>

                                                                              34

Losses may be incurred as a result of such Indemnification Event in an amount
exceeding the amount of Losses calculated pursuant to clause (x) above and
unless the Seller has paid Liquidated Damages with respect to such
Indemnification Event pursuant to Section 5.01(d)(i)(B), not later than each
Monthly Allocation Date succeeding the Initial Loss Calculation Date, the amount
of Losses expected to be incurred as a result of such Indemnification Event from
but excluding such Monthly Allocation Date through and including the next
Monthly Allocation Date. All such calculations shall be subject to the approval
of the Bond Trustee. If such Indemnification Event shall continue unremedied
beyond the Initial Loss Calculation Date, the Seller shall pay to the Bond
Trustee, as assignee of the Issuer, for deposit into the General Subaccount of
the Collection Account, (x) on the Monthly Allocation Date immediately following
the Initial Loss Calculation Date, the amount of Losses calculated pursuant to
clause (x) and clause (y) of the preceding sentence with respect to such Monthly
Allocation Date and (y) on each subsequent Monthly Allocation Date, the amount
of Losses calculated as of such date pursuant to clause (y) of the preceding
sentence. Upon payment pursuant to this Section 5.01(c)(ii), the Seller shall
have no further obligations with respect to such Losses to the extent of such
payments.

<PAGE>

                                                                              35

     (d)(i) In the event of a breach by the Seller of any representation and
warranty specified in (A) Section 3.08(b), 3.08(c), 3.08(d)(i), (ii) or (iv) or
3.08(f) of this Agreement that has a material adverse effect on the Transition
Bondholders or (B) Sections 3.01, 3.03, 3.04, 3.05 and 3.08(d)(iii), (v) or (vi)
of this Agreement for which the full amount of Losses attributable thereto are
reasonably expected to be incurred beyond a 90-day period immediately following
the occurrence of such Indemnification Event, the Seller shall pay to the Bond
Trustee, as assignee of the Issuer, for deposit into the General Subaccount of
the Collection Account the Liquidated Damages Amount. Such amount shall be paid
(x) in the case of clause (A) above, on the Liquidated Damages Payment Date or
(y) in the case of clause (B) above, on the First Monthly Allocation Date
following the expiration of the 90-day period set forth in such clause (B).
Notwithstanding the foregoing, if the Seller is obligated pursuant to this
Section 5.01(d)(i) to pay amounts for deposit into the General Subaccount of the
Collection Account for a breach of a representation and warranty which relates
to one or more of the Qualified Rate Orders, but not all of the Qualified Rate
Orders, then the Liquidated Damages Amount will include the then outstanding
principal amount of only the Affected Transition Bonds as of

<PAGE>

                                                                              36

the Liquidated Damages Redemption Date and unpaid interest accrued thereon.

     (ii) The Seller shall not be obligated to pay the Liquidated Damages Amount
pursuant to Section 5.01(d)(i) (A) if (A) within 90 days after the date of the
occurrence thereof such breach is cured or the Seller takes remedial action such
that there is not and will not be a material adverse effect on the Transition
Bondholders as a result of such breach and (B) either (i) if the Seller had,
immediately prior to the breach, a long term debt rating of at least "A3" by
Moody's and "BBB" by Standard & Poor's and the equivalent of "BBB" by any other
Rating Agency, the Seller enters into a binding agreement with the Issuer to pay
any amounts necessary so that all interest payments due on the Transition Bonds
during such 90-day period will be paid in full, or (ii) if the Seller does not
have such long term debt ratings, the Seller deposits, within two Business Days
after such breach, an amount in escrow with the Bond Trustee sufficient, taking
into account amounts on deposit in the Collection Account which will be
available for such purpose, to pay all interest payments which will become due
on the Transition Bonds during such 90-day period. In the event that within such
90-day period (i) such breach is cured or (ii) the Seller takes the remedial
action specified by Section 5.01(d)(ii)(A), any amounts paid by the Seller to

<PAGE>

                                                                              37

the Bond Trustee, as assignee of the Issuer pursuant to Section 5.01(d)(ii)(B),
which have not been distributed pursuant to the Indenture shall be returned to
the Seller at the end of such 90-day period.

     (iii) With respect to any Losses described in Section 5.01(c)(ii) or
Section 5.01(d)(i)(B) above, the full amount of which is reasonably expected not
to exceed 1/12th of 1% of the annual outstanding balance of the Affected
Transition Bonds per Monthly Allocation Date (the "De Minimis Loss Amount"), the
Seller, on the Monthly Allocation Date immediately following the Initial Loss
Calculation Date, shall pay to the Bond Trustee, as assignee of the Issuer, for
deposit in the Loss Subaccount of the Collection Account, the aggregate expected
amount of such Losses for all Monthly Allocation Dates on which such Losses are
expected to be incurred, following which the Seller's obligation to pay
indemnification or Liquidated Damages, as applicable, as a result of such Losses
shall be waived so long as the actual Losses incurred on any Monthly Allocation
Date do not exceed the De Minimis Loss Amount. If the aggregate amount of such
Losses incurred as of any Monthly Allocation Date exceeds the amounts paid by
the Seller to the Bond Trustee, as assignee of the Issuer, with respect thereto,
the Seller shall pay to the Bond Trustee, as assignee of the Issuer, on the next
Monthly Allocation Date,

<PAGE>

                                                                              38

the amount of such excess for such Monthly Allocation Date and the expected
amount of excess for all subsequent Monthly Allocation Dates.

     (iv) Upon the payment by the Seller of the Liquidated Damages Amount
pursuant to Section 5.01(d)(i), neither the Issuer nor any other Person shall
have any other claims, rights or remedies against the Seller for a breach of the
representations and warranties specified in Section 3.08(b), (c), (d)(i),
(d)(ii), (d)(iv) or (f).

     (e) The Seller shall indemnify the Bond Trustee and the Issuer Trustee and
their respective officers, directors and agents for, and defend and hold
harmless each such Person from and against, any and all Losses that may be
imposed upon, incurred by or asserted against any such Person as a result of the
acceptance or performance of the trusts and duties contained herein and in the
Indenture, except to the extent that any such Loss shall be due to the wilful
misfeasance, bad faith or gross negligence of the Bond Trustee or the Issuer
Trustee, as applicable. Such amounts shall be deposited into the Collection
Account and distributed in accordance with the Indenture.

     (f) The Seller's indemnification obligations under Section 5.01(b),(c), (d)
and (e) for events occurring prior to the removal or resignation of the Bond
Trustee or the termination of this Agreement shall survive the

<PAGE>

                                                                              39

resignation or removal of the Bond Trustee or the termination of this Agreement
and shall include reasonable fees and expenses of investigation and litigation
(including the Bond Trustee's reasonable attorney's fees and expenses).

     (g) The Seller shall indemnify each Counterparty for, and defend and hold
harmless each Counterparty from and against, any and all Losses that may be
imposed upon, incurred by or asserted against such Counterparty as a result of
breach of the Seller's representations or warranties contained in Section
3.08(h) of this Agreement. Such amounts shall be deposited into the Collection
Account and distributed in accordance with the Indenture.

     SECTION 5.02. Merger or Consolidation of, or Assumption of the Obligations
of, Seller. Any Person (a) into which the Seller may be merged or consolidated
and which succeeds to the major part of the electric distribution business of
the Seller, (b) which results from the division of the Seller into two or more
Persons and which succeeds to the major part of the electric distribution
business of the Seller, (c) which may result from any merger or consolidation to
which the Seller shall be a party and which succeeds to the major part of the
electric distribution business of the Seller, (d) which may succeed to the
properties and assets of the Seller substantially as a whole and which succeeds
to the major

<PAGE>

                                                                              40

part of the electric distribution business of the Seller or (e) which may
otherwise succeed to the major part of the electric distribution business of the
Seller, which Person in any of the foregoing cases executes an agreement of
assumption to perform every obligation of the Seller under this Agreement, shall
be the successor to the Seller hereunder without the execution or filing of any
document or any further act by any of the parties to this Agreement; provided,
however, that (i) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Article III shall have been breached
and no Servicer Default, and no event that, after notice or lapse of time, or
both, would become a Servicer Default, shall have occurred and be continuing,
(ii) the Seller shall have delivered to the Issuer and the Bond Trustee an
Officers' Certificate and an Opinion of Counsel each stating that such
consolidation, merger, division or sale or succession and such agreement of
assumption comply with this Section and that all conditions precedent, if any,
provided for in this Agreement relating to such transaction have been complied
with, (iii) the Rating Agencies shall have received prior written notice of such
transaction and (iv) the Seller shall have delivered to the Issuer and the Bond
Trustee an Opinion of Counsel either (A) stating that, in the opinion of such
counsel, all filings, including filings with the PUC

<PAGE>

                                                                              41

pursuant to the Statute, have been executed and filed that are necessary fully
to preserve and protect the interest of the Issuer in the Transferred Intangible
Transition Property and reciting the details of such filings or (B) stating
that, in the opinion of such counsel, no such action shall be necessary to
preserve and protect such interests. Notwithstanding anything herein to the
contrary, the execution of the above described agreement of assumption and
compliance with clauses (i), (ii), (iii) and (iv) above shall be conditions
precedent to the consummation of any transaction referred to in clauses (a),
(b), (c), (d) or (e) above.

     SECTION 5.03. Limitation on Liability of Seller and Others. The Seller and
any director or officer or employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person, respecting any matters arising
hereunder. Subject to Section 5.04, the Seller shall not be under any obligation
to appear in, prosecute or defend any legal action that is not incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.

     SECTION 5.04. Opinions of Counsel. The Seller shall deliver to the Issuer
and the Bond Trustee:

<PAGE>

                                                                              42

(a) promptly after the execution and delivery of this Agreement and of each
amendment hereto or to the Master Servicing Agreement and on each Subsequent
Transfer Date, an Opinion of Counsel either (i) to the effect that, in the
opinion of such counsel, all filings, including filings with the PUC pursuant to
the Statute, that are necessary to fully preserve and protect the interests of
the Issuer in the Intangible Transition Property have been executed and filed,
and reciting the details of such filings or referring to prior Opinions of
Counsel in which such details are given, or (ii) to the effect that, in the
opinion of such counsel, no such action shall be necessary to preserve and
protect such interest; and (b) within 90 days after the beginning of each
calendar year beginning with the first calendar year beginning more than three
months after the Initial Transfer Date, an Opinion of Counsel, dated as of a
date during such 90-day period, either (i) to the effect that, in the opinion of
such counsel, all filings with the PUC pursuant to the Statute, have been
executed and filed that are necessary to preserve fully and protect fully the
interest of the Issuer in the Intangible Transition Property, and reciting the
details of such filings or referring to prior Opinions of Counsel in which such
details are given, or (ii) to the effect that, in the opinion of such counsel,
no such action shall be necessary to preserve and protect such interest.

<PAGE>

                                                                              43

Each Opinion of Counsel referred to in clause (a) or (b) above shall specify any
action necessary (as of the date of such opinion) to be taken in the following
year to preserve and protect such interest.

                                   ARTICLE VI

                            Miscellaneous Provisions

     SECTION 6.01. Amendment. This Agreement may be amended by the Seller and
the Issuer, with the consent of the Bond Trustee and, with respect to any
amendment which would materially adversely affect the rights of any Counterparty
under any Swap Agreement, the consent of each such Counterparty (which consent
shall not be unreasonably withheld). The Issuer shall furnish to each of the
Rating Agencies (i) prior to the execution of any such amendment or consent,
written notification of the substance thereof and (ii) promptly after the
execution of any such amendment or consent, a copy thereof.

     Prior to the execution of any amendment to this Agreement, the Issuer and
the Bond Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement and the Opinion of Counsel referred to in Section 5.04(a). The
Issuer and the Bond Trustee may, but shall not be obligated to, enter into any
such amendment

<PAGE>

                                                                              44

which affects their own rights, duties or immunities under this Agreement or
otherwise.

     SECTION 6.02. Notices. All demands, notices and communications upon or to
the Seller, the Issuer or the Issuer Trustee, the Bond Trustee or the Rating
Agencies under this Agreement shall be in writing, delivered personally, via
facsimile, reputable overnight courier or by certified mail, return-receipt
requested, and shall be deemed to have been duly given upon receipt (a) in the
case of the Seller, to PECO Energy Company, 2301 Market Street, Philadelphia, PA
19101, Attention of Vice President, Finance and Treasurer, (b) in the case of
the Issuer, the Issuer Trustee or any other trustee of the Issuer, at the
Corporate Trust Office, (c) in the case of the Bond Trustee, at the Corporate
Trust Office, (d) in the case of Moody's, to Moody's Investors Service, Inc.,
ABS Monitoring Department, 99 Church Street, New York, New York 10007, (e) in
the case of Standard & Poor's, to Standard & Poor's Corporation, 55 Water Street
(41st Floor), New York, New York 10041, Attention of Asset Backed Surveillance
Department, (f) in the case of Fitch IBCA, to Fitch IBCA, Inc., One State Street
Plaza, New York, New York 10004, Attention of ABS Surveillance, and (h) in the
case of Duff, to Duff & Phelps Credit Rating Company, 55 E. Monroe Street (35th
Floor), Chicago, Illinois 60603; or, as to each of the foregoing, at

<PAGE>

                                                                              45

such other address as shall be designated by written notice to the other
parties.

     SECTION 6.03. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Section 5.02, this Agreement may not be
assigned by the Seller.

     SECTION 6.04. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Seller, the Issuer, the Issuer
Trustee and the Bond Trustee, on behalf of itself and the Transition
Bondholders, and nothing in this Agreement, whether express or implied, shall be
construed to give to any other Person any legal or equitable right, remedy or
claim in the Collateral or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.

     SECTION 6.05. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

     SECTION 6.06. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate

<PAGE>

                                                                              46

counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.

     SECTION 6.07. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.

     SECTION 6.08. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania, without reference
to its conflict of law provisions, and the obligations, rights and remedies of
the parties hereunder shall be determined in accordance with such laws.

     SECTION 6.09. Assignment to Bond Trustee. The Seller hereby acknowledges
and consents to any mortgage, pledge, assignment and grant of a security
interest by the Issuer to the Bond Trustee pursuant to the Indenture for the
benefit of the Transition Bondholders of all right, title and interest of the
Issuer in, to and under the Transferred Intangible Transition Property and the
proceeds thereof and the assignment of any or all of the Issuer's rights
hereunder to the Bond Trustee. In no event shall The Bank of New York have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer, hereunder or in any of the certificates, notices

<PAGE>

                                                                              47

or agreements delivered pursuant hereto, as to all of which recourse shall be
had solely to the assets of the Issuer.

     SECTION 6.10. Nonpetition Covenant. Notwithstanding any prior termination
of this Agreement or the Indenture, but subject to the PUC's rights to order the
sequestration and payment of revenues arising with respect to the Intangible
Transition Property notwithstanding any bankruptcy, reorganization or other
insolvency proceedings with respect to the debtor, pledgor or transferor of the
Intangible Transition Property pursuant to Section 2812(d)(3)(v) of the Statute,
the Seller shall not, prior to the date which is one year and one day after the
termination of the Indenture, petition or otherwise invoke or cause the Issuer
to invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Issuer under any Federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of the
Issuer or any substantial part of the property of the Issuer, or ordering the
winding up or liquidation of the affairs of the Issuer.

     SECTION 6.11. Limitation of Liability of Issuer Trustee. Notwithstanding
anything contained herein to the contrary, this Agreement has been countersigned
by First Union Trust Company, National Association not in its

<PAGE>

                                                                              48

individual capacity but solely in its capacity as Issuer Trustee of the Issuer
and in no event shall First Union Trust Company, National Association in its
individual capacity have any liability for warranties, covenants, agreements or
other obligations of the Issuer hereunder or in any of the certificates, notices
or agreements delivered pursuant hereto, as to all of which recourse shall be
had solely to the assets of the Issuer. For all purposes of this Agreement, in
the performance of its duties or obligations hereunder or in the performance of
any duties or obligations of the Issuer hereunder, the Issuer Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII, VIII and IX of the Trust Agreement.

     SECTION 6.12. Perfection. In accordance with Section 2812(e) of the
Statute, upon the execution and delivery of this Agreement and the related Bill
of Sale, the transfer of the Initial Intangible Transition Property will be
perfected as against all third persons, including any judicial lien creditors,
and upon the execution and delivery of a Bill of Sale and, if applicable, a
supplement to this Agreement, a transfer of Subsequent Intangible Transition

<PAGE>

                                                                              49

Property will be perfected against all third persons, including any judicial
lien creditors.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.

                                      PECO ENERGY TRANSITION TRUST,

                                      by  First Union Trust
                                          Company, National
                                          Association, not in its
                                          individual capacity but
                                          solely as Issuer Trustee
                                          on behalf of the Trust,

                                          by /s/ Edward L. Truitt, Jr.
                                              ----------------------------
                                              Title: Vice President

                                      PECO ENERGY COMPANY, Seller,

                                      by /s/ J. Barry Mitchell
                                         ---------------------------------
                                         Title: Vice President and Treasurer

Acknowledged and Accepted:

THE BANK OF NEW YORK, not
in its individual capacity
but solely as Bond Trustee
on behalf of the Transition
Bondholders,

by /s/ Thomas J. Provenzano
   ------------------------
   Title: Vice President================================================================================

                                MASTER SERVICING
                                    AGREEMENT

                                      among

                          PECO ENERGY TRANSITION TRUST,
                             the other Issuers from
                            time to time party hereto

                                       and

                               PECO ENERGY COMPANY

                                    Servicer

                           Dated as of March 25, 1999,
                             as amended and restated
                                as of May 2, 2000

================================================================================

<PAGE>

                                TABLE OF CONTENTS

                                                                          Page

                                    ARTICLE I

                                   Definitions

SECTION 1.01.  Definitions...................................................2
SECTION 1.02.  Other Definitional Provisions................................14

                                   ARTICLE II

                    Appointment and Authorization of Servicer

SECTION 2.01.  Appointment of Servicer; Acceptance of Appointment...........15
SECTION 2.02.  Authorization................................................15
SECTION 2.03.  Dominion and Control over Serviced Intangible Transition
                 Property...................................................16

                                   ARTICLE III

                                Billing Services

SECTION 3.01.  Duties of Servicer...........................................17
SECTION 3.02.  Collection and Allocation of Intangible Transition
                 Charges....................................................19
SECTION 3.03.  Servicing and Maintenance Standards..........................21
SECTION 3.04.  Servicer's Certificates......................................22
SECTION 3.05.  Annual Statement as to Compliance; Notice of Default.........22
SECTION 3.06.  Annual Independent Certified Public Accountants' Report......23
SECTION 3.07.  Intangible Transition Property Documentation.................25
SECTION 3.08.  Computer Records; Audits of Documentation....................25
SECTION 3.09.  Defending Intangible Transition Property Against Claims......27
SECTION 3.10.  Opinions of Counsel..........................................28

                                       i
<PAGE>

                                   ARTICLE IV

                         Services Related to Intangible
                         Transition Charges Adjustments

SECTION 4.01.  Intangible Transition Charges Adjustments....................29

                                    ARTICLE V

                                  The Servicer

SECTION 5.01.  Representations and Warranties of Servicer...................29
SECTION 5.02.  Indemnities of Servicer; Release of Claims...................34
SECTION 5.03.  Merger or Consolidation of, or Assumption of the
                 Obligations of, Servicer...................................36
SECTION 5.04.  Assignment of Servicer's Obligations.........................38
SECTION 5.05.  Limitation on Liability of Servicer and Others...............39
SECTION 5.06.  PECO Energy Not To Resign as Servicer........................40
SECTION 5.07.  Monthly Servicing Fee........................................40
SECTION 5.08.  Servicer Expenses............................................41
SECTION 5.09.  Appointments.................................................41
SECTION 5.10.  Remittances..................................................42
SECTION 5.11.  Servicer Advances............................................44
SECTION 5.12.  Protection of Title..........................................44

                                   ARTICLE VI

                                Servicer Default

SECTION 6.01.  Servicer Default.............................................45
SECTION 6.02.  Notice of Servicer Default...................................48
SECTION 6.03.  Waiver of Past Defaults......................................49
SECTION 6.04.  Appointment of Successor.....................................49
SECTION 6.05.  Cooperation with Successor...................................51

                                   ARTICLE VII

                            Miscellaneous Provisions

SECTION 7.01.  Amendment....................................................51
SECTION 7.02.  Notices......................................................52
SECTION 7.03.  Assignment...................................................53
SECTION 7.04.  Limitations on Rights of Others..............................53

                                       ii
<PAGE>

SECTION 7.05.  Severability.................................................54
SECTION 7.06.  Separate Counterparts........................................54
SECTION 7.07.  Headings.....................................................54
SECTION 7.08.  Governing Law................................................54
SECTION 7.09.  Assignment to Bond Trustee...................................54
SECTION 7.10.  Nonpetition Covenants........................................55
SECTION 7.11.  Addition of Issuers..........................................56
SECTION 7.12.  Termination by Issuers.......................................56
SECTION 7.13.  Limitation of Liability of Trustee...........................56

EXHIBIT A      Servicing Procedures
EXHIBIT B      Supplement for Addition of Issuer
ANNEX 1        ITC Adjustment Process and Reports - PECO
               Energy Transition Trust

<PAGE>

                    MASTER SERVICING AGREEMENT dated as of March 25, 1999, as
               amended and restated as of May 2, 2000, among PECO ENERGY
               TRANSITION TRUST, a Delaware business trust (the "First Issuer"),
               the other Issuers from time to time party hereto (together with
               the First Issuer, the "Issuers"), and PECO ENERGY COMPANY, a
               Pennsylvania corporation, as the servicer of the Intangible
               Transition Property (together with each successor to PECO ENERGY
               COMPANY (in the same capacity) pursuant to Section 5.03 or 6.02,
               the "Servicer").

     WHEREAS the Servicer has been servicing Intangible Transition Property in
accordance with the terms of this Agreement since the sale of Intangible
Transition Property by PECO Energy Company to the First Issuer on March 25,
1999;

     WHEREAS the First Issuer and the Servicer desire to amend this Agreement to
make provisions for the Second Qualified Rate Order and any subsequent Qualified
Rate Orders;

     WHEREAS the Servicer is willing to service the Intangible Transition
Property purchased from the Seller by each Issuer; and

<PAGE>

     WHEREAS each Issuer, in connection with ownership of Serviced Intangible
Transition Property, desires to engage the Servicer to carry out the functions
described herein.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and intending to be legally bound hereby, the parties hereto
agree as follows:

                                    ARTICLE I
                                   Definitions

     SECTION 1.01. Definitions. Whenever used in this Agreement, each of the
following words and phrases shall have the following meaning:

     "Agreement" means this Master Servicing Agreement, as amended and restated,
and as the same may be further amended and supplemented from time to time.

     "Annual Accountant's Report" has the meaning specified in Section 3.06(a).

     "Basic Documents" has the meaning set forth in the Indentures.

     "Bond Trustees" means, collectively, The Bank of New York, a New York
banking corporation, as bond trustee under the Indenture to which the First
Issuer is a party,

                                       2
<PAGE>

and each other Person serving as a bond trustee or in a similar capacity under
any of the other Indentures, or any successors to any of the foregoing.

     "Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in the City of New York, the City of Philadelphia or
the State of Delaware are required by law or executive order to remain closed.

     "Class" means, with respect to any Series, any one of the classes of
Transition Bonds of that Series.

     "Collateral" means, with respect to an Issuer, all property of such Issuer
pledged by it to secure Transition Bonds issued by such Issuer as provided in
the Indenture to which it is a party.

     "Collection Period" means the period from and including the first day of a
calendar month to and including the last day of the same calendar month.

     "Competitive Transition Charges" means the competitive transition charges
that PECO Energy may impose on Customers as set forth in Appendix A to the Joint
Petition for Approval of Full Settlement of PECO Energy Company's Restructuring
Plan and Related Appeals and approved in the Final Order issued on May 14, 1998
by the PUC with respect to PECO Energy's restructuring plan, as

                                       3
<PAGE>

adjusted in the Second Qualified Rate Order and such other adjustments that may
occur from time to time.

     "Counterparty" means any counterparty to a Swap Agreement entered into by
any Issuer.

     "Customers" means each person that (i) was a customer of PECO Energy
located within PECO Energy's retail electric service territory on January 1,
1997 or that became a customer of electric services within such territory after
January 1, 1997, (ii) is still located within such territory, and (iii) is in a
Rate Class that has been assigned stranded cost responsibility.

     "Duff" means Duff & Phelps Credit Rating Company or its successor.

     "Fitch IBCA" means Fitch IBCA, Inc. or its successor.

     "Formation Documents" means, collectively, the Second Amended and Restated
Trust Agreement of the First Issuer dated as of May 2, 2000, among the Seller
and the trustees named therein, and any other trust agreement, certificate of
incorporation, limited liability company agreement, partnership agreement, or
other document pursuant to which any other Issuer is formed or governed, in each
case, as the same may be amended and supplemented from time to time.

                                       4

<PAGE>

     "Holder" or "Transition Bondholder" means the Person in whose name a
Transition Bond of any Series or Class is registered as provided in the
Indenture therefor.

     "Indentures" means, collectively, the indenture dated as of March 1, 1999,
between the First Issuer and The Bank of New York, and each indenture entered
into by any other Issuer in connection with the issuance of Transition Bonds, in
each case as the same may be amended and supplemented from time to time,
including by any Series Supplement.

     "Initial Intangible Transition Property" has the meaning set forth in the
Sale Agreements.

     "Initial Qualified Rate Order" means the order of the PUC issued on May 14,
1998, adopted in accordance with the Statute, which, among other things, creates
the Initial Intangible Transition Property and authorizes the imposition and
collection of the Intangible Transition Charges in respect of the Initial
Intangible Transition Property by PECO Energy or its assignee.

     "Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or

                                       5

<PAGE>

hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or for any substantial
part of its property, or ordering the winding-up or liquidation of such Person's
affairs, and such decree or order shall remain unstayed and in effect for a
period of 90 consecutive days or (b) the commencement by such Person of a
voluntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or the consent by such Person to
the entry of an order for relief in an involuntary case under any such law, or
the consent by such Person to the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors, or
the failure by such Person generally to pay its debts as such debts become due,
or the taking of action by such Person in furtherance of any of the foregoing.

     "Intangible Transition Charges" means the amounts authorized
by the PUC to be imposed on all Customer bills with respect to the Intangible
Transition Property and collected, through a non-bypassable mechanism, by the
Seller or its successor or by any other entity which provides

                                       6

<PAGE>

electric service to Customers, to recover Qualified Transition Expenses pursuant
to the Qualified Rate Orders.

     "Intangible Transition Charges Adjustment" means each adjustment to
Intangible Transition Charges related to the Serviced Intangible Transition
Property made in accordance with Section 4.01 and the Issuer Annexes or in
connection with the redemption by any Issuer of Transition Bonds.

     "Intangible Transition Property" means the irrevocable right of the Seller
or its successor or assignee to collect Intangible Transition Charges from
Customers to recover the Qualified Transition Expenses described in the
Qualified Rate Orders, including all right, title and interest of the Seller or
its successor or assignee in such order and in all revenues, collections,
claims, payments, money or proceeds of or arising from Intangible Transition
Charges pursuant to such orders, and all proceeds of any of the foregoing.

     "Intangible Transition Property Documentation" has the meaning assigned to
that term in Section 3.07.

     "Issuer Annex" means, with respect to the First Issuer, Annex 1 hereto, and
with respect to any other Issuer, an Annex hereto describing the statements and
certificates to be provided by the Servicer and the procedures regarding
Intangible Transition Charges

                                       7

<PAGE>

Adjustments to be followed by the Servicer with respect to such Issuer.

     "Issuers" means, collectively, the First Issuer and each other Person from
time to time named as an Issuer in this Agreement, in each case each until a
successor replaces it and, thereafter, such successor.

     "ITC Collections" means amounts collected in respect of Intangible
Transition Charges or the Intangible Transition Property.

     "Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind.

     "Losses" means collectively, any and all liabilities, obligations, losses,
damages, payments, costs or expenses of any kind whatsoever.

     "Monthly Allocation Date" means the first day of each calendar month or, if
any such day is not a Business Day, the immediately succeeding Business Day.

     "Monthly Servicing Fee" means, with respect to any Series of Transition
Bonds, the fee payable to the Servicer on each Monthly Allocation Date for
services rendered, determined pursuant to Section 5.07.

     "Moody's" means Moody's Investors Service Inc., or its successor.

     "Mortgage" means the First and Refunding Mortgage, dated May 1, 1923
between the Counties Gas and Electric

                                       8
<PAGE>

Company (to which PECO Energy is successor) and Fidelity Trust Company (to which
First Union National Bank is successor), as trustee, as supplemented and amended
from time to time by supplemental indentures.

     "Officers' Certificate" means a certificate signed by (a) the
chairman of the board, the president, the vice chairman of the board, the
executive vice president or any vice president and (b) a treasurer, assistant
treasurer, secretary or assistant secretary, in each case of the Servicer.

     "Operating Expenses" means, with respect to any Issuer, all fees, costs,
expenses and indemnity payments owed by such Issuer, including all amounts owed
by such Issuer to a Bond Trustee or any other trustee of such Issuer, the
Monthly Servicing Fee payable in respect of Transition Bonds issued by such
Issuer, legal fees and expenses of the Servicer allocated to such Issuer
pursuant to Section 3.09 and legal and accounting fees, costs and expenses of
such Issuer and any trustee of such Issuer.

     "Opinion of Counsel" means one or more written opinions of counsel who may
be an employee of or counsel to the Seller or the Servicer, which counsel shall
be reasonably acceptable to the Bond Trustees, the Issuers or the Rating
Agencies, as applicable, and shall be in form reasonably satisfactory to the
Bond Trustee, if applicable.

                                       9
<PAGE>

     "PECO Energy" means PECO Energy Company, a Pennsylvania corporation.

     "Percentage" means, with respect to any Issuer and any Collection Period,
the percentage equivalent of a fraction, the numerator of which is the aggregate
Intangible Transition Charges (as adjusted from time to time) scheduled to be
collected in such Collection Period applicable to all Series of Transition Bonds
issued by such Issuer and the denominator of which is the aggregate Intangible
Transition Charges (as adjusted from time to time) scheduled to be collected in
such Collection Period applicable to all Series of Transition Bonds issued by
all the Issuers.

     "Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), business trust, unincorporated organization or government or any
agency or political subdivision thereof.

     "PUC" means the Pennsylvania Public Utility Commission or any successor.

     "PUC Regulations" means any regulations promulgated or adopted by the PUC.

     "Qualified Rate Orders" means, collectively, the Initial Qualified Rate
Order, the Second Qualified Rate Order and from and after its date of issuance
any subsequent order of the PUC, adopted in accordance with the Statute,

                                       10

<PAGE>

which creates Intangible Transition Property and authorizes the imposition and
collection of Intangible Transition Charges by PECO Energy or its assignee, and
any order supplemental to any of the foregoing.

     "Qualified Transition Expenses" has the meaning assigned to that term in
the Qualified Rate Orders.

     "Rate Class" means each of the rate classes into which Customers are
divided as of the date hereof, as such rate classes may be reconfigured from
time to time.

     "Rating Agency" means any rating agency rating the Transition Bonds of any
Class or Series at the time of issuance thereof at the request of the Issuer of
such Class or Series. If no such organization or successor is any longer in
existence, "Rating Agency" shall be a nationally recognized statistical rating
organization or other comparable Person designated by an Issuer, notice of which
designation shall be given to the Bond Trustee under the Indenture to which such
Issuer is a party, any trustee of such Issuer and the Servicer.

     "Rating Agency Condition" means, with respect to any action, the
notification in writing by each Rating Agency to the Seller, the Servicer, the
Bond Trustees and the applicable Issuer that such action will not result in a
reduction or withdrawal of the then current rating by such

                                       11

<PAGE>

Rating Agency of any outstanding Series or Class of Transition Bonds issued by
such Issuer.

     "Released Parties" has the meaning specified in Section 5.02(e).

     "Remittance Date" means each date on which ITC Collections allocated to any
Issuer are to be remitted by the Servicer to the Bond Trustee for such Issuer
pursuant to Section 5.10.

     "Sale Agreements" means, collectively, the Intangible Transition Property
Sale Agreement dated as of March 25, 1999, as amended and restated as of May 2,
2000, and as the same may be further amended and supplemented from time to time,
between the Seller and the First Issuer, and any other agreements between the
Seller and any other Issuer relating to the sale of Intangible Transition
Property to such Issuer.

     "Second Qualified Rate Order" means the order of the PUC issued on March
16, 2000, adopted in accordance with the Statute, which, among other things,
creates Intangible Transition Property to be transferred to the First Issuer on
the date hereof and authorizes the imposition and collection of Intangible
Transition Charges by PECO Energy or its assignee.

     "Seller" means PECO Energy and its successors in interest to the extent
permitted hereunder.

                                       12

<PAGE>

     "Series" means any series of Transition Bonds issued by any of the Issuers.

     "Series Supplement" means an indenture supplemental to an Indenture that
authorizes a particular Series of Transition Bonds.

     "Serviced Intangible Transition Property" means, collectively, all
Intangible Transition Property sold, conveyed, assigned or otherwise transferred
to any Issuer by the Seller or, with respect to an Issuer, all Intangible
Transition Property sold, conveyed, assigned or otherwise transferred to such
Issuer by the Seller.

     "Servicer Default" means an event specified in Section 6.01.

     "Servicing Fee Rate" means, with respect to any Series of Transition Bonds,
the per annum rate specified in the Series Supplement pursuant to which such
Transition Bonds are issued.

     "Standard & Poor's means Standard & Poor's Rating Group, or its successor.

     "Statute" means the Pennsylvania Electricity Generation Customer Choice and
Competition Act, Chapter 28 of Title 66 of the Pennsylvania Consolidated
Statutes, 66 Pa. C.S., ss.2801, et seq., as in effect from time to time.

                                       13

<PAGE>

     "Swap Agreement" means any interest rate swap agreement or agreement with
respect to any hedge or similar transaction entered into by any Issuer.

     "Termination Notice" has the meaning specified in Section 6.01(d).

     "Third Party" means any third party, including any electric generation
supplier, providing billing or metering services, licensed by the PUC pursuant
to relevant provisions of the Statute and any PUC order.

     "Transfer Date" means each date on which the Seller sells, conveys, or
otherwise transfers any Intangible Transition Property to any Issuer.

     "Transition Bonds" means "transition bonds" (as defined in the Statute)
issued by any Issuer.

     "UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.

     SECTION 1.02. Other Definitional Provisions. (a) The words "hereof",
"herein", "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement; Section, Annex, Schedule and Exhibit references contained in
this Agreement are references to Sections, Annexes, Schedules and Exhibits in

                                       14

<PAGE>

or to this Agreement unless otherwise specified; and the term "including" shall
mean "including without limitation".

     (b) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.

                                   ARTICLE II

                    Appointment and Authorization of Servicer

     SECTION 2.01. Appointment of Servicer; Acceptance of Appointment. The First
Issuer hereby confirms the appointment of the Servicer. Subject to Section 5.04
and Article VI, each Issuer hereby appoints the Servicer, and the Servicer
hereby accepts such appointment, to perform the Servicer's obligations pursuant
to this Agreement on behalf of and for the benefit of each Issuer in accordance
with the terms of this Agreement. This appointment and the Servicer's acceptance
thereof may not be revoked except in accordance with the express terms of this
Agreement.

     SECTION 2.02. Authorization. With respect to all or any portion of the
Serviced Intangible Transition Property, the Servicer shall be, and hereby is,
authorized and empowered by each Issuer to (a) execute and deliver, on behalf of
itself or such Issuer, as the case may be, any and all instruments, documents or
notices, and (b) on behalf of itself or such Issuer, as the case may be, make
any filing

                                       15

<PAGE>

and participate in proceedings of any kind with any governmental authorities,
including with the PUC. Each Issuer shall furnish the Servicer with such
documents as have been prepared by the Servicer for execution by such Issuer,
and with such other documents as may be in such Issuer's possession, as
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder. Upon the written request of the Servicer, each
Issuer shall furnish the Servicer with any powers of attorney or other documents
necessary or appropriate to enable the Servicer to carry out its duties
hereunder.

     SECTION 2.03. Dominion and Control over Serviced Intangible Transition
Property. Notwithstanding any other provision herein, the Servicer and each
Issuer agree that such Issuer shall have dominion and control over its
respective Serviced Intangible Transition Property, and the Servicer, in
accordance with the terms hereof, is acting solely as the servicing agent of
such Issuer with respect to the Serviced Intangible Transition Property owned by
such Issuer. The Servicer hereby agrees that it shall not take any action that
is not authorized by this Agreement, that is not consistent with its customary
procedures and practices, or that shall impair the rights of any Issuer in its
respective Serviced Intangible Transition Property, in each

                                       16

<PAGE>

case unless such action is required by law or court or regulatory order.

                                   ARTICLE III

                                Billing Services

     SECTION 3.01. Duties of Servicer. The Servicer, as agent for each Issuer
(to the extent provided herein), shall have the following duties:

          (a) Duties of Servicer Generally. The Servicer will manage, service,
     administer and make collections in respect of the Serviced Intangible
     Transition Property. The Servicer's duties will include (i) calculating and
     billing the Intangible Transition Charges and collecting (from Customers
     and Third Parties, as applicable) and posting all ITC Collections; (ii)
     responding to inquiries by Customers, Third Parties, the PUC, or any
     Federal, local or other state governmental authorities with respect to the
     Serviced Intangible Transition Property and Intangible Transition Charges;
     (iii) accounting for ITC Collections, investigating delinquencies,
     processing and depositing collections and making periodic remittances,
     furnishing periodic reports to the Issuers, the Bond Trustees and the
     Rating Agencies; (iv) selling, as the agent for each Issuer, as its
     interest may appear, defaulted or written off accounts

                                       17

<PAGE>

     in accordance with the Servicer's usual and customary practices; and
     (v) taking action in connection with Intangible Transition Charge
     Adjustments as set forth herein. Anything to the contrary notwithstanding,
     the duties of the Servicer set forth in this Agreement shall be qualified
     in their entirety by any PUC Regulations as in effect at the time such
     duties are to be performed. Without limiting the generality of this Section
     3.01(a), in furtherance of the foregoing, the Servicer hereby agrees that
     it shall also have, and shall comply with, the duties and responsibilities
     relating to data acquisition, usage and bill calculation, billing, customer
     service functions, collections, payment processing and remittance set forth
     in Exhibit A hereto.

          (b) Notification of Laws and Regulations. The Servicer shall
     immediately notify the Issuers, the Bond Trustees and the Rating Agencies
     in writing of any laws or PUC Regulations hereafter promulgated that have a
     material adverse effect on the Servicer's ability to perform its duties
     under this Agreement.

          (c) Other Information. Upon the reasonable request of any Issuer, any
     Bond Trustee or any Rating Agency, the Servicer shall provide to such
     Issuer, such Bond Trustee or such Rating Agency, as the case may be,

                                       18

<PAGE>

     any public financial information in respect of the Servicer, or any
     material information regarding the Intangible Transition Property to the
     extent it is reasonably available to the Servicer, as may be reasonably
     necessary and permitted by law for such Issuer, such Bond Trustee or such
     Rating Agency to monitor the performance by the Servicer hereunder. In
     addition, so long as any of the Transition Bonds of any Series are
     outstanding, the Servicer shall provide each Issuer and each Bond Trustee,
     within a reasonable time after written request therefor, any information
     available to the Servicer or reasonably obtainable by it that is necessary
     to calculate the Intangible Transition Charges applicable to each Rate
     Class.

     SECTION 3.02. Collection and Allocation of Intangible Transition Charges.
(a) The Servicer shall use all reasonable efforts consistent with its customary
servicing procedures to collect all amounts owed in respect of Intangible
Transition Charges as and when the same shall become due and shall follow such
collection procedures as it follows with respect to collection activities that
the Servicer conducts for itself or others. The Servicer shall not change the
amount of or reschedule the due date of any scheduled payment of Intangible
Transition Charges, except as contemplated in this Agreement or as required by
law or

                                       19
<PAGE>

court or PUC order; provided, however, that the Servicer may take any of the
foregoing actions to the extent that such action would be in accordance with
customary billing and collection practices of the Servicer with respect to
billing and collection activities that it conducts for itself.

     (b) Any amounts received by the Servicer from a Customer that represent a
partial payment toward an outstanding balance will be applied first to state tax
charges, then Intangible Transition Charges, then to Competitive Transition
Charges, then to transmission and distribution charges and finally to electric
generation charges. Notwithstanding the foregoing, when PECO Energy is providing
billing for its transmission and distribution charges which is separate from
billing for generation, any amounts received from Customers remitting partial
payments will be applied in the following priority: (i) to the outstanding
balance before direct access to electric generation from electric generation
suppliers or the installment amount for a payment agreement on such balance;
(ii) to the balance due for state tax charges; (iii) to the balance due or the
instalment amount for a payment agreement for Intangible Transition Charges;
(iv) to the balance due or the instalment amount for a payment agreement for
Competitive Transition Charges; (v) to the balance due or the instalment amount
for a payment agreement for fixed and

                                      20
<PAGE>

variable utility distribution service charges; (vi) to the current state tax
charges; (vii) to the current Intangible Transition Charges; and (viii) to the
current Competitive Transition Charges; (ix) to the current fixed and variable
utility distribution service charges; (x) to the balance due for prior charges
for energy and capacity (if PECO Energy is the provider of last resort); (xi) to
the current charges for energy and capacity charges (if PECO Energy is the
provider of last resort); and (xii) to the non-basic service charges.

     (c) Any ITC Collections received by the Servicer during any Collection
Period shall be allocated between the Issuers based on their respective
Percentages with respect to the Collection Period during which such ITC
Collections were expected to be collected.

     SECTION 3.03. Servicing and Maintenance Standards. The Servicer shall, on
behalf of each Issuer, (a) manage, service, administer and make collections in
respect of the Serviced Intangible Transition Property with reasonable care and
in material compliance with applicable law, including all applicable PUC
Regulations and guidelines, using the same degree of care and diligence that the
Servicer exercises with respect to billing and collection activities that the
Servicer conducts for itself and others; (b) follow standards, policies and
procedures in

                                       21

<PAGE>

performing its duties as Servicer that are customary in the Servicer's industry;
(c) use all reasonable efforts, consistent with its customary servicing
procedures, to enforce and maintain rights in respect of the Intangible
Transition Property; and (d) calculate Intangible Transition Charges in
compliance with the Statute, the Qualified Rate Orders and any applicable
tariffs, except where the failure to comply with any of the foregoing would not
adversely affect any Issuer's or any Bond Trustee's interest in the Serviced
Intangible Transition Property. The Servicer shall follow such customary and
usual practices and procedures as it shall deem necessary or advisable in its
servicing of all or any portion of the Serviced Intangible Transition Property,
which, in the Servicer's judgment, may include the taking of legal action
pursuant to Section 3.09 hereof or otherwise.

     SECTION 3.04. Servicer's Certificates. (a) The Servicer will provide to
each Issuer, the Bond Trustee under the Indenture to which such Issuer is a
party, and each of the Rating Agencies the statements and certificates specified
in the Issuer Annex for such Issuer.

     SECTION 3.05. Annual Statement as to Compliance; Notice of Default. (a) The
Servicer shall deliver to each Issuer, each Bond Trustee and each Rating Agency,
on or before March 31 of each year beginning March 31, 1999, an

                                       22

<PAGE>

Officers' Certificate, stating that (i) a review of the activities of the
Servicer during the preceding calendar year (or relevant portion thereof) and of
its performance under this Agreement has been made under such officers'
supervision and (ii) to the best of such officers' knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such period or, if there has been a default in the fulfillment of any
such obligation, describing each such default.

     (b) The Servicer shall deliver to each Issuer, each Bond Trustee and each
Rating Agency, promptly after having obtained knowledge thereof, but in no event
later than five Business Days thereafter, written notice in an Officers'
Certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Default under Section 6.01.

     SECTION 3.06. Annual Independent Certified Public Accountants' Report. (a)
The Servicer shall cause a firm of independent certified public accountants
(which may also provide other services to the Servicer or the Seller) to
prepare, and the Servicer shall deliver to each Issuer, each Bond Trustee and
each Rating Agency, on or before March 31 of each year, beginning March 31, 2000
to and including the March 31 succeeding the retirement of all Transition Bonds,
a report addressed to the Servicer (the "Annual Accountant's

                                       23

<PAGE>

Report"), which may be included as part of the Servicer's customary auditing
activities, to the effect that such firm has performed certain procedures in
connection with the Servicer's compliance with its obligations under this
Agreement during the preceding calendar year ended December 31 (or, in the case
of the first Annual Accountant's Report, the period of time from the first
Transfer Date until December 31, 1999), identifying the results of such
procedures and including any exceptions noted. In the event such accounting firm
requires any Bond Trustee or any Issuer to agree or consent to the procedures
performed by such firm, such Issuer shall direct the applicable Bond Trustee in
writing to so agree; it being understood and agreed that such Bond Trustee will
deliver such letter of agreement or consent in conclusive reliance upon the
direction of such Issuer, and neither such Bond Trustee nor such Issuer will
make any independent inquiry or investigation as to, and shall have no
obligation or liability in respect of, the sufficiency, validity or correctness
of such procedures.

     (b) The Annual Accountant's Report shall also indicate that the accounting
firm providing such report is independent of the Servicer within the meaning of
the Code of Professional Ethics of the American Institute of Certified Public
Accountants.

                                       24
<PAGE>

     SECTION 3.07. Intangible Transition Property Documentation. To assure
uniform quality in servicing the Serviced Intangible Transition Property and to
reduce administrative costs, the Servicer shall keep on file, in accordance with
its customary procedures, all documents relating to the Intangible Transition
Property, including copies of the Qualified Rate Orders and all documents filed
with the PUC in connection with any Intangible Transition Charges Adjustment
(collectively, the "Intangible Transition Property Documentation").

     SECTION 3.08. Computer Records; Audits of Documentation. (a) Safekeeping.
The Servicer shall maintain accurate and complete accounts, records and computer
systems pertaining to the Intangible Transition Property and the Intangible
Transition Property Documentation in accordance with its standard accounting
procedures and in sufficient detail to permit reconciliation between payments or
recoveries on (or with respect to) Intangible Transition Charges and the ITC
Collections from time to time remitted to each Bond Trustee pursuant to Section
5.10 and to enable each Issuer to comply with this Agreement and the Indenture
to which it is a party. The Servicer shall conduct, or cause to be conducted,
periodic audits of the Intangible Transition Property Documentation held by it
under this Agreement and of the related accounts,

                                       25

<PAGE>

records and computer systems, in such a manner as shall enable each Issuer and
each Bond Trustee, as pledgee of the applicable Issuer, to verify the accuracy
of the Servicer's record keeping. The Servicer shall promptly report to each
Issuer and each Bond Trustee any failure on the Servicer's part to hold the
Intangible Transition Property Documentation and maintain its accounts, records
and computer systems as herein provided and promptly take appropriate action to
remedy any such failure. Nothing herein shall be deemed to require an initial
review or any periodic review by any Issuer or any Bond Trustee of the
Intangible Transition Property Documentation.

     (b) Maintenance of and Access to Records. The Servicer shall maintain the
Intangible Transition Property Documentation at 2301 Market Street,
Philadelphia, Pennsylvania or at such other office as shall be specified to each
Issuer and each Bond Trustee by written notice not later than 30 days prior to
any change in location. The Servicer shall permit each Issuer and each Bond
Trustee or their respective duly authorized representatives, attorneys, agents
or auditors at any time during normal business hours to inspect, audit and make
copies of and abstracts from the Servicer's records regarding the Intangible
Transition Property and Intangible Transition Charges and the Intangible
Transition Property Documentation. The failure

                                       26

<PAGE>

of the Servicer to provide access to such information as a result of an
obligation or applicable law (including PUC Regulations) prohibiting disclosure
of information regarding customers shall not constitute a breach of this Section
3.08(b).

     SECTION 3.09. Defending Intangible Transition Property Against Claims. The
Servicer shall institute any action or proceeding necessary to compel
performance by the PUC or the Commonwealth of Pennsylvania of any of their
obligations or duties under the Statute or the Qualified Rate Orders with
respect to the Intangible Transition Property. The costs of any such action
reasonably allocated by the Servicer to the Serviced Intangible Transition
Property, based on the ratio the Serviced Intangible Transition Property bears
to the total Intangible Transition Property, shall be payable from ITC
Collections as an Operating Expense in accordance with the Indentures and shall
be allocated among the Issuers based on the ratio the outstanding principal
amount of Transition Bonds issued by each such Issuer bears to the aggregate
outstanding principal amount of Transition Bonds issued by all the Issuers at
the time such costs are incurred. The Servicer's obligations pursuant to this
Section 3.09 shall survive and continue notwithstanding the fact that the
payment of Operating Expenses pursuant to the Indentures may be delayed

                                       27
<PAGE>

(it being understood that the Servicer may be required to advance its own funds
to satisfy its obligations hereunder).

     SECTION 3.10. Opinions of Counsel. The Servicer shall deliver to each
Issuer and each Bond Trustee:

          (a) promptly after the execution and delivery of this Agreement and of
     each amendment hereto, promptly after the execution of each Sale Agreement
     and of each amendment thereto and on each Transfer Date, an Opinion of
     Counsel either (i) to the effect that, in the opinion of such counsel, all
     filings, including filings with the PUC pursuant to the Statute, that are
     necessary to fully preserve and protect the interests of each Bond Trustee
     in the Serviced Intangible Transition Property have been executed and
     filed, and reciting the details of such filings or referring to prior
     Opinions of Counsel in which such details are given, or (ii) to the effect
     that, in the opinion of such counsel, no such action shall be necessary to
     preserve and protect such interest; and

          (b) within 90 days after the beginning of each calendar year beginning
     with the first calendar year beginning more than three months after the
     first Transfer Date, an Opinion of Counsel, dated as of a date during such
     90-day period, either (i) to the effect that, in the opinion of such
     counsel, all

                                       28
<PAGE>

         filings with the PUC pursuant to the Statute, have been executed and
         filed that are necessary to preserve fully and protect fully the
         interest of each Bond Trustee in the Serviced Intangible Transition
         Property, and reciting the details of such filings or referring to
         prior Opinions of Counsel in which such details are given, or (ii) to
         the effect that, in the opinion of such counsel, no such action shall
         be necessary to preserve and protect such interest.

     Each Opinion of Counsel referred to in clause (a) or (b) above shall
specify any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.

                                   ARTICLE IV

                         Services Related to Intangible
                         Transition Charges Adjustments

     SECTION 4.01. Intangible Transition Charges Adjustments. The Servicer shall
perform the calculations and take the actions relating to revising the
Intangible Transition Charges, in each case set forth in each Issuer Annex to
this Agreement.

                                    ARTICLE V

                                  The Servicer

     SECTION 5.01. Representations and Warranties of Servicer. The Servicer
makes the following representations

                                       29

<PAGE>

and warranties as of each Transfer Date, on which the Issuers have relied and
will rely in acquiring Serviced Intangible Transition Property. The
representations and warranties shall survive the sale of any of the Serviced
Intangible Transition Property to any Issuer and the pledge thereof to any Bond
Trustee pursuant to any Indenture.

          (a) Organization and Good Standing. The Servicer is a corporation duly
     organized and in good standing under the laws of the state of its
     incorporation, with the corporate power and authority to own its properties
     and to conduct its business as such properties are currently owned and such
     business is presently conducted, and has the power, authority and legal
     right to service the Serviced Intangible Transition Property.

          (b) Due Qualification. The Servicer is duly qualified to do business
     as a foreign corporation in good standing, and has obtained all necessary
     licenses and approvals in, all jurisdictions in which the ownership or
     lease of property or the conduct of its business (including the servicing
     of the Serviced Intangible Transition Property as required by this
     Agreement) requires such qualifications, licenses or approvals (except
     where the failure to so qualify would not be reasonably likely to have a
     material adverse effect on the Servicer's business, operations, assets,

                                       30
<PAGE>

     revenues, properties or prospects or adversely affect the servicing of
     the Serviced Intangible Transition Property).

          (c) Power and Authority. The Servicer has the corporate power and
     authority to execute and deliver this Agreement and to carry out its terms;
     and the execution, delivery and performance of this Agreement have been
     duly authorized by the Servicer by all necessary corporate action.

          (d) Binding Obligation. This Agreement constitutes a legal, valid and
     binding obligation of the Servicer enforceable against the Servicer in
     accordance with its terms subject to bankruptcy, receivership, insolvency,
     fraudulent transfer, reorganization, moratorium or other laws affecting
     creditors' rights generally from time to time in effect and to general
     principles of equity (regardless of whether considered in a proceeding in
     equity or at law).

          (e) No Violation. The consummation of the transactions contemplated by
     this Agreement and the fulfillment of the terms hereof shall not conflict
     with, result in any breach of any of the terms and provisions of, nor
     constitute (with or without notice or lapse of time) a default under, the
     articles of incorporation or by-laws of the Servicer, or any

                                       31

<PAGE>

     indenture, agreement or other instrument to which the Servicer is a
     party or by which it shall be bound; nor result in the creation or
     imposition of any Lien (other than the lien of the Mortgage on the
     Servicer's interest in this Agreement) upon any of its properties pursuant
     to the terms of any such indenture, agreement or other instrument; nor
     violate any law or any order, rule or regulation applicable to the Servicer
     of any court or of any Federal or state regulatory body, administrative
     agency or other governmental instrumentality having jurisdiction over the
     Servicer or its properties.

          (f) Approvals. Except for filings with the PUC for revised Intangible
     Transition Charges pursuant to Section 4.01 and the Issuer Annexes and UCC
     continuation filings, no approval, authorization, consent, order or other
     action of, or filing with, any court, Federal or state regulatory body,
     administrative agency or other governmental instrumentality is required in
     connection with the execution and delivery by the Servicer of this
     Agreement, the performance by the Servicer of the transactions contemplated
     hereby or the fulfillment by the Servicer of the terms hereof, except those
     that have been obtained or made.

                                       32
<PAGE>

          (g) No Proceedings. There are no proceedings or investigations pending
     or, to the Servicer's best knowledge, threatened before any court, Federal
     or state regulatory body, administrative agency or other governmental
     instrumentality having jurisdiction over the Servicer or its properties:
     (i) except as disclosed by the Servicer to the Issuers, seeking any
     determination or ruling that might materially and adversely affect the
     performance by the Servicer of its obligations under, or the validity or
     enforceability against the Servicer of this Agreement or (ii) relating to
     the Servicer and which might adversely affect the Federal or state income
     tax attributes of the Transition Bonds.

          (h) Reports and Certificates. Each report and certificate delivered in
     connection with any filing made to the PUC by the Servicer on behalf of any
     Issuer with respect to Intangible Transition Charges or Intangible
     Transition Charges Adjustments will constitute a representation and
     warranty by the Servicer that each such report or certificate, as the case
     may be, is true and correct in all material respects; provided, however,
     that to the extent any such report or certificate is based in part upon or
     contains assumptions, forecasts or other predictions of future events, the
     representation and warranty of the

                                       33

<PAGE>

         Servicer with respect thereto will be limited to the representation and
         warranty that such assumptions, forecasts or other predictions of
         future events are reasonable based upon historical performance.

     SECTION 5.02. Indemnities of Servicer; Release of Claims. (a) The Servicer
shall be liable in accordance herewith only to the extent of the obligations
specifically undertaken by the Servicer under this Agreement.

     (b) The Servicer shall indemnify each Issuer and each Bond Trustee, for
itself and on behalf of the Transition Bondholders for which it acts as Bond
Trustee, and each of their respective trustees, officers, directors and agents
for, and defend and hold harmless each such Person from and against, any and all
Losses that may be imposed upon, incurred by or asserted against any such Person
as a result of (i) the Servicer's wilful misfeasance, bad faith or gross
negligence in the performance of its duties or observance of its covenants under
this Agreement or the Servicer's reckless disregard of its obligations and
duties under this Agreement or (ii) the Servicer's breach of any of its
representations or warranties in this Agreement.

     (c) If any action, claim, demand or proceeding (including any governmental
investigation) shall be brought or asserted against a party (the "indemnified
party") entitled to any indemnification provided for under this

                                       34
<PAGE>

Section 5.02, such indemnified party shall promptly notify the Servicer in
writing; provided, however, that failure to give such notification shall not
affect the indemnification provided hereunder except to the extent the Servicer
shall have been actually prejudiced as a result of such failure.

     (d) The Servicer shall indemnify the Bond Trustees and their respective
officers, directors and agents for, and defend and hold harmless each such
Person from and against, any and all Losses that may be imposed upon, incurred
by or asserted against any such Person as a result of the acceptance or
performance of the trusts and duties contained herein and in the Indenture,
except to the extent that any such Loss shall be due to the wilful misfeasance,
bad faith or gross negligence of the applicable Bond Trustee. Such amounts with
respect to the Bond Trustee of the First Issuer shall be deposited and
distributed in accordance with the Indenture to which such Bond Trustee is a
party.

     (e) The Servicer's indemnification obligations under Section 5.02(b) and
(d) for events occurring prior to the removal or resignation of any Bond Trustee
or the termination of this Agreement with respect to any Issuer shall survive
the resignation or removal of such Bond Trustee or the termination of this
Agreement with respect to such Issuer and shall include reasonable costs, fees
and

                                       35

<PAGE>

expenses of investigation and litigation (including any Issuer's and any Bond
Trustee's reasonable attorneys' fees and expenses).

     (f) Except to the extent expressly provided for in this Agreement, the Sale
Agreements or the Formation Documents (including the Servicer's claims with
respect to the Monthly Servicing Fees and the Seller's claim for payment of the
purchase price of Intangible Transition Property), the Servicer hereby releases
and discharges each Issuer (including its respective trustees, officers,
directors and agents, if any), and each Bond Trustee (including its respective
officers, directors and agents) (collectively, the "Released Parties") from any
and all actions, claims and demands whatsoever, which the Servicer, in its
capacity as Servicer or Seller, shall or may have against any such Person
relating to the Serviced Intangible Transition Property or the Servicer's
activities with respect thereto other than any actions, claims and demands
arising out of the wilful misconduct, bad faith or gross negligence of the
Released Parties.

     SECTION 5.03. Merger or Consolidation of, or Assumption of the Obligations
of, Servicer. Any Person (a) into which the Servicer may be merged or
consolidated and which succeeds to the major part of the electric distribution
business of the Servicer, (b) which results

                                       36

<PAGE>

from the division of the Servicer into two or more Persons and which succeeds to
the major part of the electric distribution business of the Servicer, (c) which
may result from any merger or consolidation to which the Servicer shall be a
party and which succeeds to the major part of the electric distribution business
of the Servicer, (d) which may succeed to the properties and assets of the
Servicer substantially as a whole and which succeeds to the major part of the
electric distribution business of the Servicer or (e) which may otherwise
succeed to the major part of the electric distribution business of the Servicer,
which Person in any of the foregoing cases executes an agreement of assumption
to perform every obligation of the Servicer hereunder, shall be the successor to
the Servicer under this Agreement without further act on the part of any of the
parties to this Agreement; provided, however, that (i) immediately after giving
effect to such transaction, no representation and warranty made pursuant to
Section 5.01 shall have been breached and no Servicer Default, and no event
which, after notice or lapse of time, or both, would become a Servicer Default,
shall have occurred and be continuing, (ii) the Servicer shall have delivered to
each Issuer and each Bond Trustee an Officers' Certificate and an Opinion of
Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply

                                       37
<PAGE>

with this Section 5.03 and that all conditions precedent provided for in this
Agreement relating to such transaction have been complied with, (iii) the Rating
Agencies shall have received prior written notice of such transaction, (iv) the
Servicer shall have delivered to each Issuer, each Bond Trustee and each Rating
Agency an Opinion of Counsel either (A) stating that, in the opinion of such
counsel, all filings, including filings with the PUC pursuant to the Statute,
have been executed and filed that are necessary to preserve fully and protect
fully the interests of each Issuer in the Serviced Intangible Transition
Property and reciting the details of such filings or (B) stating that, in the
opinion of such counsel, no such action shall be necessary to preserve and
protect such interests. Notwithstanding anything herein to the contrary, the
execution of the above referenced agreement of assumption and compliance with
clauses (i), (ii), (iii) and (iv) above shall be conditions precedent to the
consummation of the transactions referred to in clause (a), (b), (c), (d) or (e)
above.

     SECTION 5.04. Assignment of Servicer's Obligations. In each Qualified Rate
Order the PUC authorizes PECO Energy to contract with an alternative party to
perform PECO Energy's obligations contemplated in such Qualified Rate Order, and
under each such Qualified Rate

                                       38

<PAGE>

Order the Servicer may assign its obligations hereunder to any electric
distribution company (as such term is defined in the Statute) which succeeds to
the major part of PECO Energy's electric distribution business. Prior to any
such assignment, the Servicer shall provide written notice thereof to each of
the Rating Agencies.

     SECTION 5.05. Limitation on Liability of Servicer and Others. The Servicer
shall not be liable to any Issuer, except as provided under this Agreement, for
any action taken or for refraining from the taking of any action pursuant to
this Agreement or for errors in judgment; provided, however, that this provision
shall not protect the Servicer against any liability that would otherwise be
imposed by reason of wilful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of obligations and
duties under this Agreement. The Servicer and any director or officer or
employee or agent of the Servicer may rely in good faith on the advice of
counsel reasonably acceptable to the Bond Trustees or on any document of any
kind, prima facie properly executed and submitted by any Person, respecting any
matters arising under this Agreement.

     Except as provided in this Agreement, the Servicer shall not be under any
obligation to appear in, prosecute or defend any legal action that is not
incidental to its duties

                                       39

<PAGE>

to service the Serviced Intangible Transition Property in accordance with this
Agreement or related to its obligation to pay indemnification, and that in its
reasonable opinion may cause it to incur any expense or liability.

     SECTION 5.06. PECO Energy Not To Resign as Servicer. Subject to the
provisions of Sections 5.03 and 5.04, PECO Energy shall not resign from the
obligations and duties hereby imposed on it as Servicer under this Agreement
except upon a determination that the performance of its duties under this
Agreement shall no longer be permissible under applicable law. Notice of any
such determination permitting the resignation of PECO Energy shall be
communicated to each Issuer, each Bond Trustee and each Rating Agency at the
earliest practicable time (and, if such communication is not in writing, shall
be confirmed in writing at the earliest practicable time), and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to each Issuer and each Bond Trustee concurrently with or promptly
after such notice. No such resignation shall become effective until a successor
Servicer shall have assumed the servicing obligations and duties hereunder of
PECO Energy in accordance with Section 6.04.

     SECTION 5.07. Monthly Servicing Fee. Each Issuer, severally and not
jointly, agrees to pay the

                                       40

<PAGE>

Servicer, solely to the extent amounts are available therefor in accordance with
the Indenture to which such Issuer is a party, the Monthly Servicing Fees with
respect to all Series of Transition Bonds issued by such Issuer. The Monthly
Servicing Fee with respect to a Series for a Monthly Allocation Date shall equal
the product of (a) 1/12, (b) the Servicing Fee Rate for such Series and (c) the
outstanding principal amount of the Transition Bonds of such Series as of such
Monthly Allocation Date. The Servicer will be entitled to retain as additional
compensation net investment income on ITC Collections related to Serviced
Intangible Transition Property received by the Servicer prior to each Remittance
Date and the late fees, if any, paid by Customers to the Servicer. The foregoing
fees constitute a fair and reasonable price for the obligations to be performed
by the Servicer.

     SECTION 5.08. Servicer Expenses. Except as otherwise expressly provided
herein, the Servicer shall be required to pay all expenses incurred by it in
connection with its activities hereunder, including fees and disbursements of
independent accountants and counsel, taxes imposed on the Servicer and expenses
incurred in connection with reports to Transition Bondholders.

     SECTION 5.09. Appointments. The Servicer may at any time appoint a
subservicer to perform all or any portion

                                       41
<PAGE>

of its obligations as Servicer hereunder; provided, however, that the Rating
Agency Condition shall have been satisfied in connection therewith with respect
to all Rating Agencies other than Moody's (and the Servicer shall have furnished
Moody's with written notice of such appointment prior to its effectiveness);
provided further that the Servicer shall remain obligated and be liable to each
Issuer for the servicing and administering of the Serviced Intangible Transition
Property in accordance with the provisions hereof without diminution of such
obligation and liability by virtue of the appointment of such subservicer and to
the same extent and under the same terms and conditions as if the Servicer alone
were servicing and administering the Serviced Intangible Transition Property.
The fees and expenses of the subservicer shall be as agreed between the Servicer
and its subservicer from time to time, and no Issuer (or trustee thereof, if
any), Bond Trustee or Transition Bondholder shall have any responsibility
therefor.

     SECTION 5.10. Remittances. (a) Subject to Section 5.07, the Servicer shall
remit all ITC Collections (from whatever source) allocated to each Issuer
pursuant to Section 3.02 and all proceeds of other Collateral of such Issuer, if
any, received by the Servicer to the Bond Trustee under the Indenture to which
such Issuer is a party, for

                                       42
<PAGE>

deposit pursuant to such Indenture, not later than the second Business Day after
receipt thereof.

     (b) Notwithstanding the foregoing clause (a), (i) as long as PECO Energy or
any successor to PECO Energy's electric distribution business remains the
Servicer, (ii) no Servicer Default has occurred and is continuing and (iii) (A)
PECO Energy or such successor maintains a short- term rating of "A-1" or better
by Standard & Poor's, "P-1" or better by Moody's and, if rated by Fitch IBCA,
"F-2" by Fitch IBCA (and for five Business Days following a reduction in any
such rating) or (B) the Rating Agency Condition shall have been satisfied (and
any conditions or limitations imposed by the Rating Agencies in connection
therewith are complied with), the Servicer need not make the daily remittances
required by such clause (a), but in lieu thereof, shall remit all ITC
Collections (from whatever source) allocated to each Issuer pursuant to Section
3.02 and all proceeds of other Collateral of such Issuer, if any, received by
the Servicer during each Collection Period and any such amounts received in
prior Collection Periods but not so remitted to the Bond Trustee under the
Indenture to which such Issuer is a party, for deposit pursuant to such
Indenture, not later than the final day of such Collection Period or, if any
such day is not a Business Day, the next succeeding Business Day.

                                       43

<PAGE>

     SECTION 5.11. Servicer Advances. The Servicer shall make advances of
interest or principal on the Transition Bonds of any Series in the manner and to
the extent, if any, specified in any Annex to this Agreement entered into in
connection with the issuance of such Transition Bonds.

     SECTION 5.12. Protection of Title. The Servicer shall execute and file such
filings, including filings with the PUC pursuant to the Statute, and cause to be
executed and filed such filings, all in such manner and in such places as may be
required by law fully to preserve, maintain, and protect the interests of each
Issuer in its respective Serviced Intangible Transition Property, including all
filings required under the Statute relating to the transfer of the ownership or
security interest in the Serviced Intangible Transition Property by the Seller
to such Issuer or any security interest granted by such Issuer in its Serviced
Intangible Transition Property. The Servicer shall deliver (or cause to be
delivered) to the applicable Issuers file-stamped copies of, or filing receipts
for, any document filed as provided above, as soon as available following such
filing.

                                       44

<PAGE>

                                   ARTICLE VI

                                Servicer Default

     SECTION 6.01. Servicer Default. If any one of the following events (a
"Servicer Default") shall occur and be continuing:

          (a) any failure by the Servicer to remit to any Bond Trustee on behalf
     of an Issuer any required remittance that shall continue unremedied for a
     period of three Business Days after written notice of such failure is
     received by the Servicer from such Issuer or Bond Trustee; or

          (b) any failure by the Servicer or, so long as the Seller and the
     Servicer are the same Person, the Seller, as applicable, duly to observe or
     perform in any material respect any other covenant or agreement of the
     Servicer or the Seller, as the case may be, set forth in this Agreement or
     any other Basic Document to which it is a party, which failure shall (i)
     materially and adversely affect the Intangible Transition Property and (ii)
     continue unremedied for a period of 30 days after written notice of such
     failure shall have been given to the Servicer or the Seller, as the case
     may be, by any Issuer or any Bond Trustee or after discovery of such
     failure by an officer of the Servicer or the Seller, as the case may be; or

                                       45

<PAGE>

          (c) any representation or warranty made by the Servicer in this
     Agreement shall prove to have been incorrect when made, which has a
     material adverse effect on any of the Issuers or the Transition Bondholders
     and which material adverse effect continues unremedied for a period of 60
     days after the date on which written notice thereof shall have been given
     to the Servicer by any Issuer or any Bond Trustee; or

          (d) an Insolvency Event occurs with respect to the Servicer;

then, and in each and every case, so long as the Servicer Default shall not have
been remedied, Bond Trustees, as assignees of the applicable Issuers, with
respect to Holders of a majority of the outstanding principal amount of the
Transition Bonds, by notice then given in writing to the Servicer (a
"Termination Notice") may terminate all the rights and obligations (other than
the indemnification obligations set forth in Section 5.02 hereof and the
obligation under Section 6.02 to continue performing its functions as Servicer
until a successor Servicer is appointed) of the Servicer under this Agreement
with respect to all the Issuers. In addition, upon a Servicer Default described
in Section 6.01(a), each of the following shall be entitled to apply to the PUC
for sequestration and payment of revenues arising with respect to the Serviced
Intangible

                                       46

<PAGE>

Transition Property: (i) each Issuer or its assignees or (ii) pledgees or
transferees, including transferees under the Statute, of the Serviced Intangible
Transition Property. On or after the receipt by the Servicer of a Termination
Notice, all authority and power of the Servicer under this Agreement with
respect to the Issuers, whether with respect to the Serviced Intangible
Transition Property, the related Intangible Transition Charges or otherwise,
shall, upon appointment of a successor Servicer pursuant to Section 6.02,
without further action, pass to and be vested in such successor Servicer and,
without limitation, each Bond Trustee is hereby authorized and empowered to
execute and deliver, on behalf of the predecessor Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such Termination Notice, whether to complete the transfer of the
Intangible Transition Property Documentation and related documents, or
otherwise. The predecessor Servicer shall cooperate with the successor Servicer,
the Bond Trustees and the Issuers in effecting the termination of the
responsibilities and rights of the predecessor Servicer under this Agreement,
including the transfer to the successor Servicer for administration by it of all
cash amounts that shall at the time be held by the predecessor

                                       47

<PAGE>

Servicer for remittance, or shall thereafter be received by it with respect to
the Serviced Intangible Transition Property or the related Intangible Transition
Charges. As soon as practicable after receipt by the Servicer of such
Termination Notice, the Servicer shall deliver the Intangible Transition
Property Documentation to the successor Servicer. All reasonable costs and
expenses (including attorneys fees and expenses) incurred in connection with
transferring the Intangible Transition Property Documentation to the successor
Servicer and amending this Agreement to reflect such succession as Servicer
pursuant to this Section shall be paid by the predecessor Servicer upon
presentation of reasonable documentation of such costs and expenses. Termination
of PECO Energy as Servicer shall not terminate PECO Energy's rights or
obligations as Seller under any of the Sale Agreements.

     SECTION 6.02. Notice of Servicer Default. The Servicer shall deliver to
each Issuer, each Bond Trustee and each Rating Agency promptly after having
obtained knowledge thereof, but in no event later than five Business Days
thereafter, written notice in an Officers' Certificate of any event or
circumstance (such as a breach of any representation or warranty made by the
Servicer in this

                                       48

<PAGE>

Agreement) which, with the giving of notice or the passage of time, would become
a Servicer Default under Section 6.01.

     SECTION 6.03. Waiver of Past Defaults. All the Bond Trustees acting
together may waive in writing any default by the Servicer in the performance of
its obligations hereunder and its consequences, except a default in making any
required remittances to any Bond Trustee of ITC Collections from Serviced
Intangible Transition Property in accordance with Section 5.10 of this
Agreement. Upon any such waiver of a past default, such default shall cease to
exist, and any Servicer Default arising therefrom shall be deemed to have been
remedied for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other default or impair any right consequent thereto.

     SECTION 6.04. Appointment of Successor. (a) Upon the Servicer's receipt of
a Termination Notice, pursuant to Section 6.01 or the Servicer's resignation in
accordance with the terms of this Agreement, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement and shall be
entitled to receive the requisite portion of the Monthly Servicing Fees, until a
successor Servicer shall have assumed in writing the obligations of the Servicer
hereunder as described below. In the event of the Servicer's termination
hereunder, Bond Trustees, as assignees of the applicable Issuers, with

                                       49

<PAGE>

respect to Holders of a majority of the outstanding principal amount of the
Transition Bonds, shall appoint a successor Servicer, and the successor Servicer
shall accept its appointment by a written assumption in form acceptable to the
Issuers and the Bond Trustees. If, within 30 days after the delivery of the
Termination Notice, a new Servicer shall not have been appointed and accepted
such appointment, any Bond Trustee may petition the PUC or a court of competent
jurisdiction to appoint a successor Servicer under this Agreement. A Person
shall qualify as a successor Servicer only if (i) such Person is permitted under
PUC Regulations to perform the duties of the Servicer pursuant to the Statute,
the Qualified Rate Orders and this Agreement, (ii) the Rating Agency Condition
shall have been satisfied with respect to all Rating Agencies other than Moody's
(and Moody's shall have been furnished with written notice of such appointment
prior to its effectiveness) and (iii) such Person enters into a servicing
agreement with the Issuers having substantially the same provisions as this
Agreement.

     (b) Upon appointment, the successor Servicer shall be the successor in all
respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties and liabilities arising thereafter relating thereto
placed on the predecessor Servicer and shall be entitled to

                                       50

<PAGE>

the Monthly Servicing Fees and all the rights granted to the predecessor
Servicer by the terms and provisions of this Agreement.

     (c) The successor Servicer may not resign unless it is prohibited from
serving as such by law.

     SECTION 6.05. Cooperation with Successor. The Servicer covenants and agrees
with each Issuer that it will, on an ongoing basis, cooperate with the successor
Servicer and provide whatever information is, and take whatever actions are,
reasonably necessary to assist the successor Servicer in performing its
obligations hereunder.

                                   ARTICLE VII

                            Miscellaneous Provisions

     SECTION 7.01. Amendment. This Agreement may be amended by the Seller, the
Servicer and the Issuers, with the consent of all the Bond Trustees and, with
respect to any amendment which would materially adversely affect the rights of
any Counterparty under any Swap Agreement, the consent of each such Counterparty
(which consent shall not be unreasonably withheld). The Issuers shall furnish to
each of the Rating Agencies (i) prior to the execution of any such amendment or
consent, written notification of the substance thereof and (ii) promptly after
the execution of any such amendment or consent, a copy thereof.

                                       51

<PAGE>

     Prior to the execution of any amendment to this Agreement, the Issuers and
the Bond Trustees shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement and the Opinion of Counsel referred to in Section 3.10. The
Issuers and the Bond Trustees may, but shall not be obligated to, enter into any
such amendment which affects their own rights, duties or immunities under this
Agreement or otherwise.

     SECTION 7.02. Notices. All demands, notices and communications upon or to
the Servicer, the Issuers, the Bond Trustees or the Rating Agencies under this
Agreement shall be in writing, delivered personally, via facsimile, reputable
overnight courier or by first class mail, postage prepaid, and shall be deemed
to have been duly given upon receipt (a) in the case of the Servicer, to PECO
Energy Company, 2301 Market Street, Philadelphia, PA 19101, Attention of Vice
President, Finance and Treasurer, (b) in the case of any Issuer or any Bond
Trustee, at the address provided for notices or communications to such Person in
the Indenture to which such Person is a party, (c) in the case of Moody's, to
Moody's Investors Service, Inc., ABS Monitoring Department, 99 Church Street,
New York, New York 10007, (d) in the case of Standard & Poor's, to Standard &
Poor's Corporation, 55 Water Street (41st Floor), New York,

                                       52

<PAGE>

New York 10041, Attention of Asset Backed Surveillance Department, (e) in the
case of Fitch IBCA, to Fitch IBCA, Inc., One State Street Plaza, New York, New
York 10004, Attention of ABS Surveillance, and (f) in the case of Duff, to Duff
& Phelps Credit Rating Company, 55 E. Monroe Street (35th Floor), Chicago,
Illinois 60603; or, as to each of the foregoing, at such other address as shall
be designated by written notice to the other parties.

     SECTION 7.03. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 5.03 and 5.04 and as provided
in the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Servicer.

     SECTION 7.04. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Servicer, the Issuers (including
their respective trustees, if any) and the Bond Trustees, on behalf of
themselves and the Transition Bondholders, and nothing in this Agreement,
whether express or implied, shall be construed to give to any other Person any
legal or equitable right, remedy or claim in any Collateral or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.

                                       53

<PAGE>

     SECTION 7.05. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

     SECTION 7.06. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.

     SECTION 7.07. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.

     SECTION 7.08. Governing Law. This Agreement shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania, without reference
to its conflict of law provisions, and the obligations, rights and remedies of
the parties hereunder shall be determined in accordance with such laws.

     SECTION 7.09. Assignment to Bond Trustee. The Servicer hereby acknowledges
and consents to any mortgage,

                                       54

<PAGE>

pledge, assignment and grant of a security interest by any Issuer to any Bond
Trustee pursuant to any Indenture for the benefit of any Transition Bondholders
of all right, title and interest of such Issuer in, to and under the Serviced
Intangible Transition Property owned by such Issuer and the proceeds thereof and
the assignment of any or all of such Issuer's rights hereunder to such Bond
Trustee. In no event shall any Bond Trustee have any liability for the
representations, warranties, covenants, agreements or other obligations of any
Issuer, hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the applicable Issuer.

     SECTION 7.10. Nonpetition Covenants. Notwithstanding any prior termination
of this Agreement or the Indenture, but subject to the PUC's rights to order the
sequestration and payment of revenues arising with respect to the Serviced
Intangible Transition Property notwithstanding any bankruptcy, reorganization or
other insolvency proceedings with respect to the debtor, pledgor or transferor
of the Serviced Intangible Transition Property pursuant to Section 2812(d)(3)(v)
of the Statute, the Servicer shall not, prior to the date which is one year and
one day after the termination of the applicable Indenture, petition or otherwise
invoke or cause any Issuer to invoke

                                       55
<PAGE>

the process of any court or government authority for the purpose of commencing
or sustaining a case against any Issuer under any Federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of any Issuer or any
substantial part of the property of any Issuer, or ordering the winding up or
liquidation of the affairs of any Issuer.

     SECTION 7.11. Addition of Issuers. Upon execution and delivery by the
Servicer and a Person which owns Intangible Transition Property sold to such
Person by the Seller of an instrument in the form of Exhibit B hereto, such
Person shall become an Issuer hereunder with the same force and effect as if
originally named as an Issuer herein. The execution and delivery of any such
instrument shall not require the consent of any Issuer hereunder. The rights and
obligations of each Issuer hereunder shall remain in full force and effect
notwithstanding the addition of any new Issuer as a party to this Agreement.

     SECTION 7.12. Termination by Issuers. This Agreement shall terminate with
respect to any Issuer when all Transition Bonds issued by such Issuer have been
retired, redeemed or defeased in full.

     SECTION 7.13. Limitation of Liability of Trustee. Notwithstanding anything
contained herein to the contrary,

                                       56

<PAGE>

this Agreement has been countersigned by First Union Trust Company, National
Association, not in its individual capacity but solely in its capacity as
trustee of the First Issuer and in no event shall First Union Trust Company,
National Association, in its individual capacity have any liability for
warranties, covenants, agreements or other obligations of the First Issuer
hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto, as to all of which recourse shall be had solely to the assets
of the First Issuer. For all purposes of this Agreement, in the performance of
its duties or obligations hereunder or in the performance of any duties or
obligations of the First Issuer hereunder, First Union Trust Company,
National Association, shall be subject to, and entitled to

                                       57

<PAGE>

the benefits of, the applicable terms and provisions of the Formation Documents
relating to the First Issuer.

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.

                                        PECO ENERGY TRANSITION TRUST,

                                        by  First Union Trust Company, National
                                            Association, not in its individual
                                            capacity but solely as Issuer
                                            Trustee on behalf of PECO Energy
                                            Transition Trust,

                                        by /s/ Edward L. Truitt, Jr.
                                           -------------------------------------
                                           Title: Vice President

                                        PECO ENERGY COMPANY, Servicer,

                                        by /s/ J. Barry Mitchell
                                           -------------------------------------
                                           Title: Vice President and Treasurer

Acknowledged, Accepted and
Consented to:

THE BANK OF NEW YORK, not in its
individual capacity but solely as Bond
Trustee on behalf of the Holders of
Transition Bonds issued by the First
Issuer,

    by /s/ Thomas J. Provenzano
       ------------------------------
       Title: Vice President

<PAGE>
                                    EXHIBIT A
                                       to
                           MASTER SERVICING AGREEMENT

     The Servicer agrees to comply with the following servicing procedures:

                             SECTION 1. Definitions.

     (a) Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Master Servicing Agreement dated as of March 25, 1999,
as amended and restated as of May 2, 2000, between the First Issuer, the other
Issuers from time to time party thereto and PECO Energy Company, as Servicer
(the "Servicing Agreement").

     (b) Whenever used in this Exhibit A, the following words and phrases shall
have the following meanings:

     "Adjustment Request" has, with respect to the First Issuer, the meaning
given to such term in the Issuer Annex relating to the First Issuer, or with
respect to any other Issuer, the meaning given to such term in the Issuer Annex
relating thereto.

     "Applicable MDMA" means with respect to each Customer, the meter data
management agent or Third Party providing meter reading services for that
Customer's account.

     "Applicable Third Party" means, with respect to each Customer, the Third
Party, if any, providing billing or metering services to that Customer.

     "Billed Intangible Transition Charges" means the amounts billed to
Customers pursuant to the Intangible Transition Charges, whether billed directly
to such Customers by the Servicer or indirectly through a Third Party pursuant
to Consolidated Third Party Billing.

     "Bills" means each of the regular monthly bills, the summary bills, the
opening bills and the Closing bills issued to Customers or Third Parties by PECO
Energy Company.

     "Closing Bill" means the final bill issued to a Customer at the time
service is terminated.

     "Consolidated Third Party Billing" means the billing option available to
Customers served by an Third

<PAGE>

                                                                               2

Party pursuant to which such Third Party will be responsible for billing and
collecting all charges to Customers electing such billing option, including the
Intangible Transition Charges, and will become obligated to the Servicer for
such Billed Intangible Transition Charges, all in accordance with applicable PUC
Regulations and orders.

     "Full Consolidated Third Party Billing" means the billing option available
to Customers served by a Third Party, if such option is approved by the utility
with respect to such Third Party, pursuant to which such Third Party performs
the same tasks it would perform under Consolidated Third Party Billing,
including billing Customers the itemized charges supplied by the Servicer to
such Third Party.

     "Intangible Transition Charge Effective Date" means the date on which the
initial Intangible Transition Charges go into effect pursuant to the Qualified
Rate Orders.

     "Intangible Transition Charge Termination Date" means the date on which the
Intangible Transition Charges will cease to be billed pursuant to the terms of
the Qualified Rate Orders.

     "Level Pay Plan" means a level payment plan offered by the Seller, which,
if elected by a Customer, provides for level monthly Bill charges to such
Customer by estimating the amount that the Customer would pay during a year
(based on the Customer's actual usage during the prior year), then charging the
Customer 1/11th of that amount for each of eleven months, with quarterly
adjustments if necessary. In the twelfth month, the payments made by such
Customer during the preceding eleven months are reconciled with the amount owed
by such Customer for actual usage during the level pay period, and the Customer
is given a credit or billed for the difference as appropriate, based on such
reconciliation.

     "Net Write-Off Percent" means the number (expressed as a percent) equal to:
(i) the amount by which Write-Offs attributable to a particular Billing Period
exceed Write-Off recoveries attributable to such Billing Period, divided by (ii)
the total billed revenue attributable to the current Billing Period.

     "Servicer Policies and Practices" means, with respect to the Servicer's
duties under this Exhibit A, with policies and practices of the Servicer
applicable to such

<PAGE>

                                                                               3

duties that the Servicer follows with respect to comparable assets that it
services for itself.

     "Variables" means the following variables for each Rate Class used in
calculating Adjustment Requests:

                    (i) the 30-day outstanding billed revenue;

                    (ii) the 60-day outstanding billed revenue;

                    (iii) the 90-day outstanding billed revenue (which may be
               solved for in accordance with applicable Servicer Policies and
               Practices);

                    (iv) the 120-day outstanding billed revenue (which may be
               solved for in accordance with applicable Servicer Policies and
               Practices);

                    (v) the 150-day outstanding billed revenue (which may be
               solved for in accordance with applicable Servicer Policies and
               Practices);

                    (vi) the estimated Net Write-Off percentage; and

                    (vii) the projected billed revenue to which Intangible
               Transaction Charges apply.

     "Write-Offs" means write-offs of Billed Intangible Transition Charges that
remain unpaid by Customers or Third Parties as of 180 days after the issuance of
the Closing Bills containing such charges.

     SECTION 2. Data Acquisition.

     (a) Installation and Maintenance of Meters. Except to the extent that a
Third Party is responsible for such services pursuant to a Third Party Service
Agreement, the Servicer shall use its best efforts to cause to be installed,
replaced and maintained meters in such places and in such condition as will
enable the Servicer to obtain usage measurements for each Customer every 27 to
33 days or as provided in the applicable tariff.

     (b) Meter Reading. At least once each calendar month, the Servicer shall
obtain usage measurements from the Applicable MDMA for each Customer; provided,
however, that the Servicer may determine any Customer's usage on the basis of
estimates in accordance with applicable PUC Regulations.

     (c) Cost of Metering. No Issuer shall be obligated to pay any costs
associated with the metering

<PAGE>

                                                                               4

duties set forth in this Section 2, including, but not limited to, the costs of
installing, replacing and maintaining meters, nor shall any Issuer be entitled
to any credit against the Monthly Servicing Fee for any cost savings realized by
the Servicer or any Third Party as a result of new metering and/or billing
technologies.

     SECTION 3. Usage and Bill Calculation.

     The Servicer shall obtain a calculation of each Customer's usage (which may
be based on data obtained from such Customer's meter read or on usage estimates
determined in accordance with applicable PUC Regulations) at least once each
calendar month and shall determine therefrom each Customer's individual
Intangible Transition Charge to be included on such Customer's Bill pursuant to
PUC Regulations.

     SECTION 4. Billing.

     The Servicer shall implement the Intangible Transition Charges as of the
Intangible Transition Charge Effective Date and shall thereafter bill each
Customer or the Applicable Third Party for the respective Customer's outstanding
current and past due Intangible Transition Charges accruing through the
Intangible Transition Charge Termination Date, all in accordance with the
following:

     (a) Frequency of Bills; Billing Practices. In accordance with the
Servicer's then-existing Servicer Policies and Practices for its own charges, as
such Servicer Policies and Practices may be modified from time to time, the
Servicer shall generate and issue a Bill to each Customer, or, in the case of a
Customer who has elected Consolidated Third Party Billing, to an Applicable
Third Party, for such Customer's respective Intangible Transition Charge as a
general practice once every 27 to 33 days or such other time period as allowed
by the PUC, at the same time, with the same frequency and on the same Bill as
that containing the Servicer's own charges to such Customer or Third Party, as
the case may be. In the event that the Servicer makes any material modification
to these practices, it shall notify each Issuer, each Bond Trustee and the
Rating Agencies as soon as practicable, and in no event later than 60 Business
Days after such modification goes into effect; provided, however, that (i) the
Servicer may not make any modification that will materially adversely affect the
Transition Bondholders and (ii) the Rating Agencies shall receive prior notice
of any modification that would change the frequency with which Bills are issued
or would change any tariff charged.

<PAGE>

                                                                               5

     (b) Format.

     (i) Each Bill to a Customer shall contain the charge corresponding to the
respective Competitive Transition Charge owed by such Customer for the Billing
Period. Unless the Servicer's billing system cannot do so, for billing cycles
beginning January 1, 1999, the amount of the Competitive Transition Charge to be
remitted to the Issuers in respect of a Customer's Intangible Transition Charge
shall appear as a footnote to the Competitive Transition Charge line-item on
each Bill.

     (ii) In the case of each Customer that has elected Consolidated Third Party
Billing, the Servicer shall deliver to the Applicable Third Party itemized
charges for such Customer including the amount of such Customer's Competitive
Transition Charge to be remitted by the Servicer to the Issuers in respect of
such Customer's Intangible Transition Charge.

     (iii) The Servicer shall conform to such requirements in respect of the
format, structure and text of Bills delivered to Customers and Third Parties as
applicable PUC Regulations shall from time to time prescribe. To the extent that
Bill format, structure and text are not prescribed by the Statute, other
applicable law or PUC Regulations, the Servicer shall, subject to clauses (i)
and (ii) above, determine the format, structure and text of all Bills in
accordance with its reasonable business judgment, its Servicer Policies and
Practices with respect to its own charges and prevailing industry standards.

     (c) Delivery. The Servicer shall deliver all Bills to Customers (i) by
United States mail in such class or classes as are consistent with the Servicer
Policies and Practices followed by the Servicer with respect to its own charges
or (ii) by any other means, whether electronic or otherwise, that the Servicer
may from time to time use to present its own charges to its customers. In the
case of Customers that have elected Consolidated Third Party Billing, the
Servicer shall deliver all Bills to the Applicable Third Parties by such means
as are prescribed by applicable PUC Regulations, or if not prescribed by
applicable PUC Regulations, by such means as are mutually agreed upon by the
Servicer and the Applicable Third Party and are consistent with PUC Regulations.
The Servicer or a Third Party, as applicable, shall pay from its own funds all
costs of issuance and delivery of all Bills, including but not limited to
printing and postage costs as the same may increase or decrease from time to
time.

<PAGE>

                                                                               6

     SECTION 5. Customer Service Functions.

     The Servicer shall handle all Customer inquiries and other Customer service
matters according to the same procedures it uses to service Customers with
respect to its own charges.

     SECTION 6. Collections; Payment Processing; Remittance.

     (a) Collection Efforts, Policies, Procedures.

     (i) The Servicer shall use reasonable efforts to collect all Billed
Intangible Transition Charges from Customers and Third Parties as and when the
same become due and shall follow such collection procedures as it follows with
respect to comparable assets that it services for itself or others, including
with respect to the following:

          (A) The Servicer shall prepare and deliver overdue notices to
     Customers and Third Parties in accordance with applicable PUC Regulations
     and Servicer Policies and Practices.

          (B) The Servicer shall apply late payment charges to outstanding
     Customer and Third Party balances in accordance with applicable PUC
     Regulations. All late payment charges and interest collected shall be
     payable to and retained by the Servicer as a component of its compensation
     under the Servicing Agreement, and no Issuer shall have any right to share
     in the same.

          (C) The Servicer shall deliver verbal and written final call notices
     in accordance with applicable PUC Regulations and Servicer Policies and
     Practices.

          (D) The Servicer shall adhere and carry out disconnection policies in
     accordance with the Statute, other applicable law and PUC Regulations and
     Servicer Policies and Practices.

          (E) The Servicer may employ the assistance of collections agents in
     accordance with applicable PUC Regulations and Servicer Policies and
     Practices.

          (F) The Servicer shall apply Customer and Third Party deposits to the
     payment of delinquent accounts in accordance with applicable PUC
     Regulations and Servicer Policies and Practices and according to the
     priorities set forth in Section 6(b)(ii), (iii) and (iv) of this Exhibit A.

<PAGE>

                                                                               7

          (g) The Servicer shall promptly take all necessary action in
     accordance with applicable PUC Regulation to terminate billing of
     Competitive Transition Charges by Third Parties whose payments are 45 or
     more days delinquent and to collect the Billed Intangible Transition
     Charges directly from the applicable Customers.

     (ii) The Servicer shall not waive any late payment charge or any other fee
or charge relating to delinquent payments, if any, or waive, vary or modify any
terms of payment of any amounts payable by a Customer, in each case unless such
waiver or action: (A) would be in accordance with the Servicer's customary
practices or those of any successor Servicer with respect to comparable assets
that it services for itself and for others; (B) would not materially adversely
affect the rights of the Transition Bondholders; and (C) would comply with
applicable law; provided, however, that notwithstanding anything in the
Servicing Agreement or this Exhibit A to the contrary, the Servicer is
authorized to write off any Billed Intangible Transition Charges, in accordance
with its Servicer Policies and Practices, that remain outstanding for 180 days.

     (iii) The Servicer shall accept payment from Customers in respect of Billed
Intangible Transition Charges in such forms and methods and at such times and
places as it accepts for payment of its own charges. The Servicer shall accept
payment from Third Parties in respect of Billed Intangible Transition Charges in
such forms and methods and at such times and places as the Servicer and each
Third Party shall mutually agree in accordance with applicable PUC Regulations.

     (b) Payment Processing; Allocation; Priority of Payments.

     (i) The Servicer shall post all payments received to Customer accounts as
promptly as practicable, and, in any event, substantially all payments shall be
posted no later than two Servicer Business Days after receipt.

     (ii) Subject to clause (iii) below, the Servicer shall apply payments
received to each Customer's or Third Party's account in proportion to the
charges contained on the outstanding Bill to such Customer or Third Party.

     (iii) Any amounts collected by the Servicer that represent partial payments
of the total Bill to a Customer or Third Party shall be allocated in accordance
with the

<PAGE>

                                                                               8

priorities set forth in Section 3.02(b) of the Servicing Agreement.

     (iv) The Servicer shall hold all over-payments for the benefit of the
Issuer and the Seller and shall apply such funds to future Bill charges in
accordance with clauses (ii) and (iii) above as such charges become due.

     (v) For Customers on a Level Pay Plan, the Servicer shall treat ITC
Collections received from such Customers as if such Customers had been billed
for their respective Intangible Transition Charges in the absence of the Level
Pay Plan. Partial payment of a Level Pay Plan payment shall be allocated
according to clause (iii) above, and overpayment of a Level Pay Plan payment
shall be allocated according to clause (iv) above.

     (c) Accounts; Records.

     (i) The Servicer shall maintain accounts and records as to the Serviced
Intangible Transition Property accurately and in accordance with its standard
accounting procedures and in sufficient detail to permit reconciliation between
payments or recoveries with respect to the Serviced Intangible Transition
Property and the amounts from time to time remitted to the Collection Account in
respect of the Serviced Intangible Transition Property.

     (ii) The Servicer shall maintain accounts and records as to Third Parties
performing Consolidated Third Party Billing or Full Consolidated Third Party
Billing for Customers accurately and in accordance with its standard accounting
procedures and in sufficient detail to permit reconciliation between payments or
recoveries with respect to the Serviced Intangible Transition Property and
amounts owed by such Customers in respect of Intangible Transition Charges.

     (d) Investment of ITC Collections Received.

     Prior to remittance on the applicable Remittance Date, the Servicer may
invest ITC Collections received at its own risk and for its own benefit, and
such investments and funds shall not be required to be segregated from the other
investments and funds of the Servicer.

     (e) Calculation of Collections; Determination of Aggregate Remittance
Amount.

     (i) On or before each Remittance Date, the Servicer shall calculate the
total ITC Collections received

<PAGE>

                                                                               9

by the Servicer from or on behalf of Customers during prior Collection Periods
in respect of all previously Billed Intangible Transition Charges. With respect
to accounts for which the City of Philadelphia Board of Education is billed and
accounts of Customers that are municipalities billed in Rate Class TL, ITC
Collection will be estimated based upon the amounts billed using the assumption
that all billed amounts are paid when due. These estimates shall be reconciled
to actual ITC Collections received from these accounts twice yearly on May 15
and November 15 of each year, with any under-remittance or over-remittance
corrected on the immediately following Remittance Date.

     (ii) In accordance with Section 4.01 of the Servicing Agreement and each
Issuer Annex, the Servicer shall update the Variables and shall prepare
Adjustment Requests to reflect the updated Variables when required to do so
pursuant to each Issuer Annex.

     (f) Remittances.

     (i) The Servicer shall make remittances to the Issuers in accordance with
Section 5.10 of the Servicing Agreement.

     (ii) In the event of any change of account or change of institution
affecting the remittances, the affected Issuers shall provide written notice
thereof to the Servicer by the earlier of: (A) five Business Days from the
effective date of such change, or (B) five Business Days prior to the next
applicable Remittance Date.

<PAGE>

                                                                       EXHIBIT B
                                               Supplement for Addition of Issuer

               SUPPLEMENT NO. __ dated as of [ ], to the Master Servicing
          Agreement dated as of March 25, 1999, as amended and restated as of
          May 2, 2000, between [ ], a [state of formation] [type of entity] (the
          "New Issuer") and PECO ENERGY COMPANY, a Pennsylvania corporation as
          Servicer (the "Servicer").

     A. Reference is made to the Master Servicing Agreement dated as of March
25, 1999, as amended and restated as of May 2, 2000 (as further amended,
supplemented or otherwise modified from time to time, the "Servicing
Agreement"), among PECO ENERGY TRANSITION TRUST, a Delaware business trust (the
"First Issuer"), the other Issuers from time to time party thereto (together
with the First Issuer, the "Issuers") and the Servicer.

     B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Servicing Agreement.

     C. The Issuers have entered into the Servicing Agreement in order to
provide for servicing of the Serviced Intangible Transition Property. Section
7.11 of Servicing Agreement provides that additional Persons may become Issuers
under the Servicing Agreement by execution and delivery of an instrument in the
form of this Supplement.

<PAGE>

The New Issuer is executing this Supplement in accordance with the requirements
of the Servicing Agreement to become an Issuer under the Servicing Agreement in
order to provide for the servicing of the Serviced Intangible Transition
Property owned by the New Issuer.

     Accordingly, the Servicer and the New Issuer agree as follows:

     SECTION 1. In accordance with Section 7.11 of the Servicing Agreement, the
New Issuer by its signature below becomes an Issuer under the Servicing
Agreement with the same force and effect as if originally named therein as an
Issuer and the New Issuer hereby agrees to all the terms and provisions of the
Servicing Agreement applicable to it as an Issuer thereunder. Each reference to
an "Issuer" in the Servicing Agreement shall be deemed to include the New
Issuer. The Servicing Agreement is hereby incorporated herein by reference.

     SECTION 2. The New Issuer represents and warrants to the Servicer that this
Supplement has been duly authorized, executed and delivered by it and
constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.

     SECTION 3. This Supplement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such

                                       2

<PAGE>

counterparts shall together constitute but one and the same agreement. This
Supplement shall become effective when the Servicer shall have received
counterparts of this Supplement that, when taken together, bear the signatures
of the New Issuer and the Servicer.

     SECTION 4. Except as expressly supplemented hereby, the Servicing Agreement
shall remain in full force and effect.

     SECTION 5. THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

     SECTION 6. Any provision of this Supplement that is prohibited or
unenforceable in any jurisdiction shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.

                                       3

<PAGE>

     SECTION 7. All communications and notices here under shall be in writing
and given as provided in Section 7.02 of the Servicing Agreement.

     IN WITNESS WHEREOF, the New Issuer and the Servicer have duly executed this
Supplement to the Servicing Agreement as of the day and year first above
written.

                                        [Name Of New Issuer],

                                        by
                                           -----------------------------------
                                           Title:

                                        PECO ENERGY COMPANY, Servicer,

                                        by
                                           -----------------------------------
                                           Title:

                                       4
<PAGE>

                                     ANNEX 1
                                       to
                           MASTER SERVICING AGREEMENT

The Servicer agrees to comply with the following with respect to PECO Energy
Transition Trust (the "First Issuer"):

     SECTION 1. Definitions. (a) Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Master Servicing Agreement
dated as of March 25, 1999, as amended and restated as of May 2, 2000 (the
"Servicing Agreement"), among the First Issuer, the other Issuers from time to
time party thereto and PECO ENERGY COMPANY, as Servicer.

     (b) Whenever used in this Annex 1, the following words and phrases shall
have the following meanings:

     "Adjustment Date" has the meaning specified in the Indenture.

     "Adjustment Request" means an application filed by the Servicer with the
PUC for revised Intangible Transition Charges pursuant to Section 6(b) of this
Annex.

     "Available Reserve Amount" means, as of any date, the amount on deposit in
the Reserve Subaccount less the product of (a) the Prepayment Amount and (b) the
difference, expressed as a percentage, between 100% and the Expected
Amortization Percentage for the immediately following Regulatory Year.

<PAGE>

     "Bond Trustee" has the meaning specified in the Indenture.

     "Calculation Date" means, with respect to any Series of Transition Bonds,
such date or dates specified as such in the Series Supplement therefor.

     "Calculated Overcollateralization Level" has the meaning set forth in the
Indenture.

     "Class" has the meaning specified in the Indenture.

     "Expected Amortization Percentage" means, with respect to any Regulatory
Year, the percentage equivalent of a fraction, the numerator of which is the
aggregate amount of Transition Bonds of all Series to be amortized during such
Regulatory Year as set forth in Expected Amortization Schedules therefor and the
denominator of which is the Projected Transition Bond Balance on the first day
of such Regulatory Year.

     "Expected Amortization Schedule" has the meaning set forth in the
Indenture.

     "Expected Final Payment Date" has the meaning set forth in the Indenture.

     "Holder" or "Transition Bondholder" has the meaning set forth in the
Indenture.

     "Indenture" means the Indenture dated as of March 1, 1999, between the
First Issuer and The Bank of

                                       2

<PAGE>

New York, as amended and supplemented from time to time, including any Series
Supplement.

     "Overcollateralization Subaccount" has the meaning set forth in the
Indenture.

     "Payment Date" has the meaning specified in the Indenture.

     "Prepayment Amount" means, as of any date, the sum of all amounts currently
on deposit in the Reserve Subaccount arising from prepayment by customers
allocable to Intangible Transition Charges.

     "Projected Transition Bond Balance" has the meaning specified in the
Indenture.

     "Regulatory Period" means with respect to any Series (i) the period from
the Series Issuance Date therefor through and including the first Adjustment
Date (the "Initial Regulatory Period") and (ii) following the Initial Regulatory
Period until December 31, 2010, each period from and including each Adjustment
Date through but excluding the following Adjustment Date.

     "Reserve Subaccount" has the meaning set forth in the Indenture.

     "Sale Agreement" has the meaning set forth in the Indenture.

     "Schedule Revision Date" has the meaning set forth in the Indenture.

                                       3

<PAGE>

     "Series" has the meaning specified in the Indenture.

     "Series Issuance Date" has the meaning specified in the Indenture.

     "Series Supplement" has the meaning specified in the Indenture.

     "Transferred ITP" has the meaning specified in the Sale Agreement.

     "Transition Bonds" has the meaning specified in the Indenture.

     "Transition Bond Balance" has the meaning specified in the Indenture.

     SECTION 2. Calculation Date Statements. For each Calculation Date, the
Servicer will provide to the First Issuer and the Bond Trustee a statement
indicating (i) the Transition Bond Balance and the Projected Transition Bond
Balance for each Series as of the immediately preceding Payment Date, (ii) the
amount on deposit in the Overcollateralization Subaccount and the Calculated
Overcollateralization Level as of the immediately preceding Payment Date, (iii)
the Projected Transition Bond Balance for each Payment Date prior to the next
Adjustment Date and the Servicer's projection of the Transition Bond Balance as
of each Payment Date prior to the next Adjustment Date, (iv) the Calculated
Overcollateralization Level for each

                                       4

<PAGE>

Payment Date prior to the next Adjustment Date and the Servicer's projection of
the amount on deposit in the Overcollateralization Subaccount for each Payment
Date prior to the next Adjustment Date and (v) the projected ITC Collections
from the Payment Date immediately preceding the next Adjustment Date through
such Adjustment Date.

     SECTION 3. Remittance Date Statements. On or before each Remittance Date,
the Servicer will prepare and furnish to the First Issuer and the Bond Trustee a
statement setting forth the aggregate amount remitted or to be remitted by the
Servicer to the Bond Trustee for deposit on such Remittance Date pursuant to
ss.5.10 of the Servicing Agreement and the Indenture.

     SECTION 4. Monthly Allocation Date Statements. At least three Business Days
before each Monthly Allocation Date, the Servicer will prepare and furnish to
the First Issuer, the Bond Trustee, each Counterparty and the Rating Agencies a
statement setting forth the transfers and payments to be made on such Monthly
Allocation Date pursuant to Section 8.02(d) of the Indenture and the amounts
thereof.

     SECTION 5. Payment Date Statements. At least three Business Days before
each Payment Date for each Series of Transition Bonds, the Servicer will
calculate the interest due on any floating rate Transition Bonds of such Series
and will prepare and furnish to the First Issuer and

                                       5

<PAGE>

the Bond Trustee a statement setting forth the amounts to be paid to Holders of
Transition Bonds of such Series pursuant to Section 8.02(e) of the Indenture.

     SECTION 6. Intangible Transition Charges Adjustments. (a) Prior to each
Calculation Date, the Servicer shall calculate (i) the Transition Bond Balance
as of the Payment Date immediately preceding such Calculation Date (a written
copy of which shall be delivered by the Servicer to the Bond Trustee within five
days following such Calculation Date) and (ii) the revised Intangible Transition
Charges with respect to the Transferred Intangible Transition Property for the
then-current Regulatory Period and any subsequent Regulatory Periods until a
Payment Date occurs, such that the Servicer projects that ITC Collections
therefrom allocable to the First Issuer will be sufficient so that (x) the
outstanding principal balance of each outstanding Series will equal the amount
provided for in the Expected Amortization Schedule therefor and the amount on
deposit in the Overcollateralization Subaccount will equal the Calculated
Overcollateralization Level, by the next Adjustment Date or the immediately
succeeding Payment Date after such Adjustment Date as specified in the Series
Supplement therefor or, if earlier with respect to any Series or Class of
Transition Bonds, by the Expected Final

                                       6

<PAGE>

Payment Date therefor, taking into account the Available Reserve Amount.

     (b) On each Calculation Date, the Servicer shall (i) file an Adjustment
Request with the PUC for such revised Intangible Transition Charges with respect
to the Transferred Intangible Transition Property to remain in effect until the
earlier of (A) the effective date of the next Intangible Transition Charges
Adjustment with respect to the Transition Bonds, (B) the Expected Final Payment
Date for any Series or Class of Transition Bonds and (C) December 31, 2010, (ii)
take all reasonable actions and make all reasonable efforts in order to
effectuate such revision to such Intangible Transition Charges and (iii)
promptly send to the Bond Trustee copies of all material notices and documents
relating to such revision.

     SECTION 7. Servicer Advances. The Servicer shall not make any advances of
interest or principal on the Transition Bonds of any Series.

     SECTION 8. Loss Calculations. Upon notice from the Seller, the Servicer
shall perform the calculations specified in Sections 5.01(c)(ii)(x) and
5.01(c)(ii)(y) of the Sale Agreement in the manner specified in such Sections
and notify the Issuer and the Bond Trustee thereof.

     SECTION 9. Schedule Revision Date Schedules. Prior to each Schedule
Revision Date, the Servicer shall

                                       7
<PAGE>

deliver to the First Issuer a replacement Schedule 1 to the Indenture and
replacement Schedules A and B to each Series Supplement to which such Schedule
Revision Date applies, adjusted to reflect the event giving rise to such
Schedule Revision Date and setting forth the Expected Amortization Schedule for
each Payment Date and the Monthly Allocated Interest Balance and Monthly
Allocated Principal Balance for each Monthly Allocation Date applicable thereto;
provided, however, that no such replacement Schedules A and B shall be required
with respect to a Series if the event giving rise to such Schedule Revision Date
is a redemption of the Transition Bonds of such Series in whole.

                                       8

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