Document:

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                                                                     Exhibit 4.7
                      [LETTERHEAD OF SHEPHERD & WEDDERBURN]

                             SP TRANSMISSION LIMITED

                         CONFORMED TRANSMISSION LICENCE

     1.  This conformed electricity transmission licence has been produced by
         Shepherd & Wedderburn from materials supplied by ScottishPower. It is
         intended for use by ScottishPower personnel as a convenient reference
         tool, but is not a substitute for the definitive texts from which it
         has been produced.

     2.  The conformed licence is intended to consolidate (a) the provisions of
         annexe 2 to the licensing scheme made by the Secretary of State on 28
         September 2001 in relation to Scottish Power UK plc and Manweb plc (the
         "scheme"), (b) the standard conditions for transmission licences
         determined by the Secretary of State on 27 September 2001 as brought
         into effect in relation to SP Transmission Limited by the scheme (c)
         all directions and consents of a continuing nature issued under the
         licence and (d) all modifications to the licence made since 1 October
         2001.

     3.  Those standard conditions which, in accordance with Part II of the
         licence, are not in effect have been included in this document for
         completeness, but are shown in italics.

     4.  The underline and strike through contained in this document reflect the
         changes made by the modification to the electricity transmission
         licence issued to SP Transmission Limited on 21 December 2001.

<PAGE>

                                    CONTENTS

<TABLE>
<S>                                                                                     <C>
                                   PRELIMINARY
                                   -----------

PART I: TERMS OF THE LICENCE                                                            1

PART II: THE STANDARD CONDITIONS                                                        3

PART III: AMENDED STANDARD CONDITIONS                                                   5

                        CONSOLIDATED STANDARD CONDITIONS
                        --------------------------------

SECTION A.     INTERPRETATION, APPLICATION AND PAYMENTS                                 8

1.    Definitions and Interpretation                                                    8

2.    Application of Section C of Part II Supplementary Standard
      Conditions for England and Wales                                                 26

3.    Application of Section D of Part II Supplementary Conditions for Scotland        28

4.    Payments by the Licensee to the Authority                                        30

SECTION B      GENERAL                                                                 34

5.    Regulatory Accounts                                                              34

6.    Change of Financial Year                                                         40

7.    Licensee's Grid Code                                                             42

7A .  Compliance with Other Grid Codes                                                 45

8.    Compliance with Distribution Codes                                               46

9.    Change Co-ordination for the Utilities Act 2000                                  47

10.   Disposal of Relevant Assets                                                      49

11.   Provision of Information to the Authority                                        52

12.   Prohibition of Cross-Subsidies                                                   55

SECTION C -    SUPPLEMENTARY STANDARD CONDITIONS
               FOR ENGLAND AND WALES                                                   56

C1.   Interpretation of Section C                                                      56

C2.   Prohibited Activities                                                            62

C3.   Balancing and Settlement Code                                                    63
</TABLE>

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<TABLE>
<S>                                                                                 <C>
C4.   NETA Implementation                                                             71

C5.   Supplementary Grid Code Condition for England and Wales                         74

C6.   Pooling and Settlement Agreement Run-off                                        75

C7.   Charges for Use of System                                                       78

C7A.  Use of System Charging Methodology                                              81

C7B.  Connection Charging Methodology                                                 83

C7C.  Non- discrimination                                                             87

C7D.  Requirement to Offer Terms                                                      88

C7E.  Functions of the Authority                                                      91

C7F.  Connection and Use of System Code                                               94

C7G.  Information about the Licensee's Transmission System                            99

C8.   Security Arrangements                                                          101

SECTION D -    SUPPLEMENTARY CONDITIONS FOR SCOTLAND                                 102

D1.   Interpretation of Section D                                                    102

D2.   Trading Code for Scotland                                                      105

D3.   Restriction on Use of Certain Information                                      111

D3A.  Independence of and Appointment of Managing Director of the
      Transmission Business                                                          114

D3B.  Appointment of Compliance Officer                                              121

D4.   Transmission System Outages                                                    125

D5.   Supplementary Grid Code Condition for Scotland                                 126

D6.   Settlement Agreement for Scotland                                              127

D7.   Security Arrangements                                                          128

D8.   Basis of charges for use of system and connection to system:
      requirements for transparency                                                  129

D8A.  Non-discrimination in the provision of use of system and connection
      to system                                                                      134

D8B.  Requirement to offer terms                                                     135

D8C.  Functions of the Authority                                                     139
</TABLE>

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                        SPECIAL CONDITIONS AND SCHEDULES
                        --------------------------------

<TABLE>
<S>                                                                                         <C>
PART IV: SPECIAL CONDITIONS                                                                 141

A:   Interpretation                                                                         141

B:   Basis of charges for use of the Scottish interconnection                               142

C:   Non-discrimination in the provision of use of the Scottish interconnection             149

D:   Requirement to offer terms                                                             151

E:   Functions of the Authority                                                             155

F:   Submission of certain agreements                                                       156

G:   Requests for Transit                                                                   159

H:   Transmission System Security Standard and Quality of Service (Scotland)                161

I:   Definitions                                                                            164

J:   Restriction of transmission charges                                                    167

Annex A to Special Condition J                                                              170

K:   Restriction of transmission charges: adjustments                                       171

L:   Information to be provided to the Authority in connection with
     the charge restriction conditions                                                      172

M:   Allowances in respect of security costs                                                175

N:   Duration of charge restriction conditions                                              178

Schedule A:  Supplementary Provisions of the Charge Restriction Conditions                  180

O:   Restriction on Activity and Financial Ringfencing                                      183

P:   Availability of Resources                                                              186

Q:   Undertaking from ultimate controller                                                   189

R:   Credit Rating of Licensee                                                              191

S:   Indebtedness                                                                           192

SCHEDULE 1 - AUTHORISED AREA                                                                195

SCHEDULE 2 - REVOCATION                                                                     196
</TABLE>

<PAGE>

                             CONSENTS AND DIRECTIONS
                             -----------------------

<TABLE>
<S>                                                                                  <C>
(01.04.92)   Direction issued under Condition 7 (of Part IV) of the
             Generation, Transmission and Public Electricity Supply Licence
             of Scottish Power UK plc now Standard Condition 10 of this licence     200

(28.07.00)   Direction issued under Conditions 8 and 8A (of Part IV) of
             the Transmission Licence of Scottish Power UK plc now
             Standard Condition D3 and D3A of this licence                          203

(01.10.01)   Consent issued under Special Licence Condition S of this licence       206

(01.10.01)   Consent issued under Special Licence Condition S of this licence
             and Annex thereo                                                       207

(12.11.01)   Direction issued under Special Licence Condition H of this licence     213

(20.11.01)   Consent issued under Special Licence Condition S of this licence       216

(28.01.02)   Direction issued under Standard Condition 10 of this licence           219
</TABLE>

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                                   PRELIMINARY

                          PART I: TERMS OF THE LICENCE

1.   This licence, treated as granted under section 6(1)(b) of the Electricity
     Act 1989 ("the Act"), authorises SP Transmission Limited (a company
     registered in Scotland under number SC189126) ("the licensee") whose
     registered office is situated at 1 Atlantic Quay, Robertson Street, Glasgow
     G2 8SP, to transmit electricity for the purpose of giving a supply to any
     premises or enabling a supply to be so given in the area specified in
     Schedule 1 during the period specified in paragraph 3 below, subject to -

     (a)  the standard conditions of electricity transmission licences referred
          to in -

          (i)  paragraph 1 of Part II below which shall have effect in the
               licence; and

          (ii) paragraph 2 of Part II below which shall have effect in the
               licence only in accordance with the provisions of standard
               conditions 2 and 3 respectively,

          in each case, subject to such amendments (if any) as are set out in
          Part III below (together "the conditions");

     (b)  the special conditions, if any, set out in Part IV below (the "Special
          Conditions");

     (c)  such Schedules hereto, if any, as may be referenced in the conditions,
          the Special Conditions or the terms of the licence.

2.   This licence is subject to transfer, modification or amendment in
     accordance with the provisions of the Act, the Special Conditions or the
     conditions.

3.   This licence, unless revoked in accordance with the terms of Schedule 2,
     shall continue until determined by not less than 25 years' notice in
     writing given by the Authority to the licensee.

4.   The provisions of section 109(1) of the Act (Service of documents) shall
     have effect as if set out herein and as if for the words "this Act" there
     were substituted the words "this licence".

5.   Without prejudice to sections 11 and 23(1) of the Interpretation Act 1978,
     Parts I to IV inclusive of, and the Schedules to, this licence shall be
     interpreted and construed in like manner as an Act of Parliament passed
     after the commencement of the Interpretation Act 1978.

                                       1

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6.   References in this licence to a provision of any enactment where, after the
     date of this licence -

     (a)  the enactment has been replaced or supplemented by another enactment,
          and

     (b)  such enactment incorporates a corresponding provision in relation to
          fundamentally the same subject matter,

     shall be construed, so far as the context permits, as including a reference
     to the corresponding provision of that other enactment. Pursuant to a
     licensing scheme made by the Secretary of State under Part II of Schedule 7
     to the Utilities Act 2000 on 28 September 2001 this licence was made and is
     treated as granted under section 6(1)(b) of the Electricity Act 1989.

                                       2

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                        PART II: THE STANDARD CONDITIONS

1.   Standard conditions in effect in this licence

<TABLE>
<CAPTION>
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Section A                        Section B                        Section D
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<S>                              <C>                               <C>
Standard condition 1             Standard condition 5             Standard condition D1
------------------------------------------------------------------------------------------------
Standard condition 2             Standard condition 6             Standard condition D2
------------------------------------------------------------------------------------------------
Standard condition 3             Standard condition 7             Standard condition D3
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Standard condition 4             Standard condition 7A            Standard condition D3A
------------------------------------------------------------------------------------------------
                                 Standard condition 8             Standard condition D3B
------------------------------------------------------------------------------------------------
                                 Standard condition 9             Standard condition D4
------------------------------------------------------------------------------------------------
                                 Standard condition 10            Standard condition D5
------------------------------------------------------------------------------------------------
                                 Standard condition 11            Standard condition D6
------------------------------------------------------------------------------------------------
                                 Standard condition 12            Standard condition D7
------------------------------------------------------------------------------------------------
                                                                  Standard condition D8
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                                                                  Standard condition D8A
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                                                                  Standard condition D8B
------------------------------------------------------------------------------------------------
                                                                  Standard condition D8C
------------------------------------------------------------------------------------------------
</TABLE>

2.   Standard conditions not in effect in this licence

--------------------------------------
Section C
--------------------------------------
Standard condition C1
--------------------------------------
Standard condition C2
--------------------------------------
Standard condition C3
--------------------------------------
Standard condition C4
--------------------------------------
Standard condition C5
--------------------------------------
Standard condition C6
--------------------------------------
Standard condition C7
--------------------------------------
Standard condition C7A
--------------------------------------

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---------------------------------
Standard condition C7B
---------------------------------
Standard condition C7C
---------------------------------
Standard condition C7D
---------------------------------
Standard condition C7E
---------------------------------
Standard condition C7F
---------------------------------
Standard condition C7G
---------------------------------
Standard condition C8
---------------------------------

Note: A copy of the current standard conditions of electricity generation
licences can be inspected at the principal office of the Authority. The above
lists are correct at the date of this licence but may be changed by subsequent
amendments or modifications to the licence. The authoritative up-to-date version
of this licence is available for public inspection at the principal office of
the Authority.

                                       4

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                      PART III: AMENDED STANDARD CONDITIONS

1.   Standard condition 1 shall be amended by the addition of the following text
     as an additional definition:-

     ""bulk supply point"                   means any point at which electricity
                                            is delivered from a transmission
                                            system to any distribution system."

2.   Standard condition 5 (Regulatory Accounts) shall be amended by the addition
     of the following text at the start of paragraph 6:

     "6.  Unless the Authority otherwise consents (such consent may be given in
     relation to some or all of the obligations in this condition and may be
     given subject to such conditions as the Authority considers appropriate),"

3.   Standard condition 11 (Provision of Information to the Authority) shall be
     amended by the addition of the following text as new paragraphs 6 to 9:

     "6.  The licensee shall procure from each company or other person which the
          licensee knows or reasonably should know is at any time an ultimate
          controller of the licensee a legally enforceable undertaking in favour
          of the licensee in a form specified by the Authority that that
          ultimate controller ("the information covenantor") will give to the
          licensee, and will procure that any person (including, without
          limitation, a corporate body) which is a subsidiary of, or is
          controlled by, the information covenantor (other than the licensee and
          the licensee and its subsidiaries) will give to the licensee, all such
          information as may be necessary to enable the licensee to comply fully
          with the obligation imposed on it by paragraph 1. Such undertaking
          shall be obtained within 7 days of such corporate body or other person
          in question becoming an ultimate controller of the licensee and shall
          remain in force for so long as the licensee remains the holder of this
          licence and the information covenantor remains an ultimate controller
          of the licensee.

     7.   The licensee shall deliver to the Authority evidence (including a copy
          of each such undertaking) that the licensee has complied with the
          obligation to procure undertakings pursuant to paragraph 6, and shall
          comply with any direction from the Authority to enforce any
          undertaking so procured.

                                       5

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     8.   The licensee shall not, save with the consent in writing of the
          Authority, enter (directly or indirectly) into any agreement or
          arrangement with any ultimate controller of the licensee or, where the
          ultimate controller is a corporate body, any of the subsidiaries of
          such a corporate ultimate controller (other than the subsidiaries of
          the licensee) at a time when:

          (a)  an undertaking complying with paragraph 6 is not in place in
               relation to that ultimate controller; or

          (b)  there is an unremedied breach of such undertaking; or

          (c)  the licensee is in breach of the terms of any direction issued by
               the Authority under paragraph 7 of this condition.

     9.   In this condition

           "ultimate controller"             means:

                                             (a)  a holding company of the
                                                  licensee which is not itself a
                                                  subsidiary of another company;
                                                  and

                                             (b)  any person who (whether alone
                                                  or with a person or persons
                                                  connected with him) is in a
                                                  position to control, or to
                                                  exercise significant influence
                                                  over, the policy of the
                                                  licensee or any holding
                                                  company of the licensee by
                                                  virtue of:

                                                  (i)  rights under contractual
                                                       arrangements to which he
                                                       is a party or of which he
                                                       is a beneficiary; or

                                                  (ii) rights of ownership
                                                       (including rights
                                                       attached to or deriving

                                       6

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                                                    from securities or rights
                                                    under a trust) which are
                                                    held by him or of which he
                                                    is a beneficiary; but
                                                    excluding any director or
                                                    employee of a corporate body
                                                    in his capacity as such; and

                                        (c)  for the purposes of sub-paragraph
                                             (b), a person is connected with
                                             another person if they are party to
                                             any arrangement regarding the
                                             exercise of any such rights as are
                                             described in that paragraph."

4.   Standard condition 12 (Prohibition of Cross-Subsidies) shall be amended by
     the addition of the following text as a new paragraph 2 of that condition:

     "2.  Nothing which the licensee is obliged to do or not to do pursuant to
          this licence or any other document which grants a licence to the
          licensee under the Act shall be regarded as a cross-subsidy for the
          purposes of this condition."

                                       7

<PAGE>

                        CONSOLIDATED STANDARD CONDITIONS

               SECTION A. INTERPRETATION, APPLICATION AND PAYMENTS

Condition 1. Definitions and Interpretation

1. In the standard conditions unless the context otherwise requires:

the "Act"                       means the Electricity Act 1989.

"affiliate"                     in relation to the licensee means any holding
                                company or subsidiary of the licensee or any
                                subsidiary of a holding company of the licensee,
                                in each case within the meaning of sections 736.
                                736A, and 736B of the Companies Act 1985.

"alternative accounting rules"  for the purposes of standard condition 5
                                (Regulatory Accounts) only, has the meaning
                                given in that condition.

"ancillary services"            means:

                                (a) such services as any authorised electricity
                                operator may be required to have available as
                                ancillary services pursuant to the licensee's
                                Grid Code; and

                                (b) such services as any authorised electricity
                                operator or person making interconnector or
                                Scottish interconnection transfers may have
                                agreed to have

                                       8

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                                available as being ancillary services pursuant
                                to any agreement made with the licensee

                                and which may be offered for purchase by the
                                licensee for the purpose of securing stability
                                of operation on the licensee's transmission
                                system and the distribution system of any
                                authorised electricity operator or any system
                                linked to the licensee's transmission system by
                                an interconnector or Scottish interconnection.

"Application Regulations"       means the Electricity (Applications for Licences
                                and Extensions and Restrictions of Licences)
                                Regulations 2001.

"appropriate time"              for the purposes of standard condition D3A
                                (Independence of and Appointment of a Managing
                                Director of the Transmission Business) only, has
                                the meaning given in that condition.

"auditors"                      means the licensee's auditors for the time being
                                holding office in accordance with the
                                requirements of the Companies Act 1985.

"authorised"                    in relation to any business or activity means
                                authorised by licence granted or treated as
                                granted under section 6 or exemption granted
                                under section 5 of the Act.

"authorised area"               means the area from time to time comprised in
                                Schedule 1 to this licence.

                                       9

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"authorised electricity operator"     means any person (other than the licensee
                                      in its capacity as operator of the
                                      licensee's transmission system) who is
                                      authorised to generate, transmit,
                                      distribute, or supply electricity and for
                                      the purposes of standard conditions C7C to
                                      C7E inclusive shall include any person who
                                      has made application to be so authorised
                                      which application has not been refused and
                                      any person transferring electricity to or
                                      from the licensee's transmission system
                                      across any interconnector or Scottish
                                      interconnection (or who has made an
                                      application for use of an interconnector
                                      or Scottish interconnection which has not
                                      been refused).

the "Authority"                       means the Gas and Electricity Markets
                                      Authority established under section 1 of
                                      the Utilities Act 2000.

"balancing mechanism"                 for the purposes of Section C only, has
                                      the meaning given in standard condition C1
                                      (Interpretation of Section C).

"balancing services"                  for the purposes of Section C only, has
                                      the meaning given in standard condition C1
                                      (Interpretation of Section C).

"balancing services activity"         for the purposes of Section C only, has
                                      the meaning given in standard condition
                                      C1 (Interpretation of Section C).

"bilateral agreement"                 for the purposes of Section C only, has
                                      the meaning given in standard condition C1
                                      (Interpretation of

                                       10

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                                      Section C).

"bilateral connection agreement"      for the purposes of Section C only, has
                                      the meaning given in standard condition C1
                                      (Interpretation of Section C).

"bulk supply point"                   means any point at which electricity is
                                      delivered from a transmission system to
                                      any distribution system.

"BSC Framework Agreement"             for the purposes of Section C only, has
                                      the meaning given in standard condition C1
                                      (Interpretation of Section C).

"competent authority"                 for the purposes of Section D only, has
                                      the meaning given in standard condition D3
                                      (Restriction on Use of Certain
                                      Information).

"confidential information"            for the purposes of Section D only, has
                                      the meaning given in standard condition D3
                                      (Restriction on Use of Certain
                                      Information).

"connection charges"                  means charges made or levied or to be made
                                      or levied for the carrying out (whether
                                      before or after the date on which the
                                      licence came into force) or works and
                                      provision and installation of electrical
                                      plant, electric lines and meters in
                                      constructing or modifying entry and exit
                                      points on the licensee's transmission
                                      system together with charges in respect of
                                      maintenance and repair of such items in so
                                      far as not otherwise recoverable as use of
                                      system charges and in respect of
                                      disconnection and the removal of
                                      electrical plant,

                                       11

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                                      electric lines and ancillary meters
                                      following disconnection, all as more fully
                                      described in paragraphs 4 and 8 of
                                      standard condition C7B (Connection
                                      Charging Methodology) and special
                                      condition B1 (Basis of Charges for Use of
                                      Scottish Interconnection), whether or not
                                      such charges are annualised.

"connection charging methodology"     for the purposes of Section C only, has
                                      the meaning given in standard condition C1
                                      (Interpretation of Section C).

"consolidated transmission business"  for the purposes of standard condition 5
                                      (Regulatory Accounts) only, has the
                                      meaning given in that condition.

"Consumer Council"                    means the Gas and Electricity Consumer
                                      Council established under section 2 of the
                                      Utilities Act 2000.

"construction agreement"              for the purposes of Section C only, has
                                      the meaning given in standard condition C1
                                      (Interpretation of Section C).

"contract"                            for the purposes of paragraph 9 of
                                      standard condition D2 (Trading Code for
                                      Scotland) only, has the meaning given in
                                      that condition.

"core industry documents"             for the purposes of Section C only, has
                                      the meaning given in standard condition C1
                                      (Interpretation of Section C).

                                       12

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"customer"                                means any person supplied or requiring
                                          to be supplied with electricity at any
                                          premises in Great Britain but shall
                                          not include any authorised electricity
                                          operator in his capacity as such.

"CUSC"                                    for the purposes of Section C only,
                                          has the meaning given in standard
                                          condition C1 (Interpretation of
                                          Section C).

"CUSC user"                               for the purposes of Section C only,
                                          has the meaning given in standard
                                          condition C1 (Interpretation of
                                          Section C).

"Director General of Electricity Supply"  for the purposes of standard condition
                                          4 (Payments by the Licensee to the
                                          Authority) only, has the meaning given
                                          in that condition.

"disposal"                                for the purposes of standard condition
                                          10 (Disposal of Relevant Assets) only,
                                          has the meaning given in that
                                          condition.

"Distribution Code"                       means any distribution code required
                                          to be prepared by a licensed
                                          distributor pursuant to standard
                                          condition 9 (Distribution Code) of a
                                          distribution licence and approved by
                                          the Authority and revised from time to
                                          time with the approval of the
                                          Authority.

"distribution licence"                    means a distribution licence granted
                                          or treated as granted under section
                                          6(1)(c) of the Act.

                                       13

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"distribution system"                     means the system consisting (wholly or
                                          mainly) of electric lines owned or
                                          operated by an authorised distributor
                                          and used for the distribution of
                                          electricity from grid supply points or
                                          generation sets or other entry points
                                          (and bulk supply points in Scotland)
                                          to the points of delivery to customers
                                          or authorised electricity operators or
                                          any transmission licensee within Great
                                          Britain in its capacity as operator of
                                          a transmission system, and includes
                                          any remote transmission assets (owned
                                          by a transmission licensee within
                                          England and Wales) operated by such
                                          distributor and any electrical plant,
                                          meters and metering equipment owned or
                                          operated by such distributor in
                                          connection with the distribution of
                                          electricity, but shall not include any
                                          part of a transmission system,

"effective time"                          for the purposes of Section C  only,
                                          has the meaning given in standard
                                          condition C1 (Interpretation of
                                          Section C).

"Electricity Arbitration Association"     for the purposes of standard condition
                                          D3 (Restriction on Use of Certain
                                          Information) only, has the meaning
                                          given in that condition.

"estimated costs"                         for the purposes of standard condition
                                          4 (Payments by the Licensee to the
                                          Authority) only, has the meaning given
                                          in that condition.

"external transmission activities"        for the purposes of Section D only,
                                          has the meaning given in standard
                                          condition D3 (Restriction on Use of

                                       14

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                                      Certain Information).

"external distribution activities"    for the purposes of standard condition D3
                                      (Restriction on Use of Certain
                                      Information) only, has the meaning given
                                      in that condition.

"financial year"                      means subject to standard condition 6
                                      (Change of Financial Year) (where
                                      applicable) a period of 12 months
                                      beginning on 1st April of each year and
                                      ending on 31st March of the following
                                      calendar year.

"founder members"                     for the purposes of standard condition D2
                                      (Trading Code) only, has the meaning given
                                      in that condition.

"Fuel Security Code"                  means the document of that title
                                      designated as such by the Secretary of
                                      State as from time to time amended.

"generation set"                      means any plant or apparatus for the
                                      production of electricity and shall where
                                      appropriate include a generating station
                                      comprising more than one generating set.

"grid supply point"                   means any point at which electricity is
                                      delivered from a transmission system to
                                      any distribution system.

"the handbook"                        for the purposes of standard condition 5
                                      (Regulatory Accounts) only, has the
                                      meaning given in that condition.

                                       15

<PAGE>

"holding company"                  for the purposes of standard condition 5
                                   (Regulatory Accounts) only, has the meaning
                                   given in that condition.

"information"                      includes any documents, accounts, estimates,
                                   returns, records or reports and data in
                                   written, verbal or electronic form and
                                   information in any form or medium whatsoever
                                   (whether or not prepared specifically at the
                                   request of the Authority) of any description
                                   specified by the Authority.

"interconnection"                  has the meaning given in standard condition
                                   D1 (Interpretation of Section D).

"interconnector(s)"                has the meaning given in standard condition
                                   C1 (Interpretation of Section C).

"interconnector(s) business"       has the meaning given in standard condition
                                   C1 (Interpretation of Section C).

"licensed distributor"             means any holder of a distribution licence.

"licensee's Grid Code"             means the grid code required to be drawn up
                                   by the licensee pursuant to standard
                                   condition 7 (Licensee's Grid code), as from
                                   time to time revised with the approval of the
                                   Authority.

                                       16

<PAGE>

"licensee's transmission system"     means the transmission system of the
                                     licensee within the authorised area owned
                                     and operated by the licensee.

"other founder member"               for the purposes of standard condition D2
                                     (Trading Code) only, has the meaning given
                                     in that condition.

"other Grid Codes"                   means the grid codes which the holder(s) of
                                     a transmission licence (other than the
                                     licensee) are required to draw up and have
                                     approved by the Authority pursuant to
                                     standard condition 7 (Licensee's Grid code)
                                     of their transmission licence, as from time
                                     to time revised with the approval of the
                                     Authority.

"participating interest"             has the meaning given by section 260 of the
                                     Companies Act 1985 as amended by section 22
                                     of the Companies Act 1989.

"Pooling and Settlement Agreement"   means the agreement of that title approved
                                     by the Secretary of State as from time to
                                     time amended.

"regulatory accounts"                for the purposes of standard condition 5
                                     (Regulatory Accounts) only, has the meaning
                                     given in that condition.

"related undertaking"                in relation to the licensee means any
                                     undertaking in which the licensee has a
                                     participating interest.

"relevant agreement"                 for the purposes of standard condition C7E
                                     (Functions of the Authority) only, has the
                                     meaning given in that

                                       17

<PAGE>

                                           condition.

"relevant assets"                          for the purposes of standard
                                           condition 10 (Disposal of Relevant
                                           Assets) only has the meaning given in
                                           that condition.

"Relevant Consumers' Committees"           for the purposes of standard
                                           condition 4 (Payments by the Licensee
                                           to the Authority) only, has the
                                           meaning given in that condition.

"relevant proportion"                      for the purposes of standard
                                           condition 4 (Payments by the Licensee
                                           to the Authority) only, has the
                                           meaning given in that condition.

"relevant year"                            for the purposes of standard
                                           condition 4 (Payments by the Licensee
                                           to the Authority) only, has the
                                           meaning given in that condition.

"relinquishment of operational control"    for the purposes of standard
                                           condition 10 (Disposal of Relevant
                                           Assets) only, has the meaning given
                                           in that condition.

"remote transmission assets"               means any electric lines, electrical
                                           plant or meters in England and Wales
                                           owned by the licensee which:

                                           (a) are embedded in a distribution
                                           system of an authorised electricity
                                           operator within the authorised area
                                           of the licensee and are not directly
                                           connected by lines or plant owned by
                                           the licensee to a sub-station owned
                                           by the licensee and

                                       18

<PAGE>

                                    (b) are by agreement between the licensee
                                    and such authorised electricity operator
                                    operated under the direction and control of
                                    such authorised electricity operator.

"Retail Price Index"                means the general index of retail prices
                                    published by the Office for National
                                    Statistics each month in respect of all
                                    items or:

                                    (a) if the index for any month in any year
                                    shall not have been published on or before
                                    the last day of the third month after such
                                    month, such index for such month or months
                                    as the Authority may after consultation with
                                    the licensee and for the purposes of this
                                    condition generally determine to be
                                    appropriate in the circumstances; or

                                    (b) if there is a material change in the
                                    basis of the index, such other index as the
                                    Authority may after consultation with the
                                    licensee and for the purposes of this
                                    condition generally determine to be
                                    appropriate in the circumstances.

"Scottish interconnection"          has the meaning given in standard condition
                                    D1 (Interpretation of Section D).

"Scottish transmission system"      for the purposes of standard condition D2
                                    (Trading Code) only, has the meaning given
                                    in that condition.

                                       19

<PAGE>

"Secretary of State's costs"            for the purposes of standard condition 4
                                        (Payments by the Licensee to the
                                        Authority) has the meaning given in that
                                        condition.

"separate business"                     (i)  in relation to any area of England
                                        and Wales, has the meaning given in
                                        standard condition C1 (Interpretation of
                                        Section C); and

                                        (ii) in relation to any area of
                                        Scotland, has the meaning given in
                                        standard condition D1 (Interpretation of
                                        Section D).

"Settlement Agreement for Scotland"     has the meaning given in standard
                                        condition D6 (Settlement Agreement for
                                        Scotland).

"short term contract"                   for the purposes of standard condition
                                        D2 (Trading Code) only, has the meaning
                                        given in that condition.

"statutory accounts"                    means the accounts to be prepared by the
                                        licensee under the Companies Act 1985.

"subsidiary"                            means a subsidiary within the meanings
                                        of sections 736, 736A, 736B of the
                                        Companies Act 1985.

"total system"                          for the purposes of Section C only, has
                                        the meaning given in standard condition
                                        C1 (Interpretation of Section C).

                                       20

<PAGE>

"Trading Code"                      for the purposes of Section D only, has the
                                    meaning given in standard condition D1
                                    (Interpretation of Section D).

"trading of electricity"            for the purposes of Section D only, has the
                                    meaning given in standard condition D2
                                    (Trading Code).

"trading system"                    for the purposes of Section D only, has the
                                    meaning given in standard condition D2
                                    (Trading Code).

"transmission business"             (i)  in relation to any area of England and
                                    Wales, has the meaning given in standard
                                    condition C1 (Interpretation of Section C);
                                    and

                                    (ii) in relation to any area of Scotland,
                                    has the meaning given in standard condition
                                    D1 (Interpretation of Section D).

"transmission licence"              means a licence granted or treated as
                                    granted under section 6(1)(b) of the Act.

"transmission network services"     means all services provided by the licensee
                                    as part of its transmission business other
                                    than excluded services and in relation to
                                    any area of England and Wales the balancing
                                    services activity.

"transmission system"               means a system consisting (wholly or mainly)
                                    of high voltage electric wires owned or
                                    operated by the licensee in its authorised
                                    area and used for the transmission of

                                       21

<PAGE>

                                        electricity from one generating station
                                        to a sub-station or to another
                                        generating station or between
                                        sub-stations or to or from any
                                        interconnector and Scottish
                                        interconnection in question and in
                                        relation to Scotland including any
                                        interconnector and Scottish
                                        interconnection, and includes any
                                        electrical plant and meters owned or
                                        operated by such transmission company in
                                        connection with the transmission of
                                        electricity but shall not include any
                                        remote transmission assets.

"undertaking"                           bears the meaning ascribed to that
                                        expression by section 259 of the
                                        companies Act 1985.

"use of interconnector"                 means use of any interconnector for the
                                        transfer of electricity.

"use of system"                         means use of the licensee's transmission
                                        system for the transport of electricity
                                        by any authorised electricity operator.

"use of system charges"                 means charges made or levied or to be
                                        made or levied by the licensee for the
                                        provision of transmission network
                                        services and/or in relation to any area
                                        of England and Wales in respect of the
                                        balancing services activity, in each
                                        case as part of the transmission
                                        business, to any authorised electricity
                                        operator, but shall not include
                                        connection charges.

"use of system charging methodology"    for the purposes of Section C only, has
                                        the meaning

                                       22

<PAGE>

                                  given in standard condition C1 (Interpretation
                                  of Section C).

         2.    Any word or expressions used in the Utilities Act 2000 or Part I
               of the Act shall, unless the contrary intention appears, have the
               same meaning when used in the standard conditions.

         3.    Except where the context otherwise requires, any reference to a
               numbered standard condition (with or without a letter) or
               Schedule is a reference to the standard condition (with or
               without a letter) or Schedule bearing that number in this
               licence, and any reference to a numbered paragraph (with or
               without a letter) is a reference to the paragraph bearing that
               number in the standard condition or Schedule in which the
               reference occurs, and reference to a Section is a reference to
               that Section in these standard conditions.

         4.    These standard conditions shall have effect as if, in relation to
               a licence holder who is a natural person, for the words "it",
               "its" and "which" there were substituted the words "he", "him"
               "his", and "whom", and cognate expressions shall be construed
               accordingly.

         5     Except where the context otherwise requires, a reference in a
               standard condition to a paragraph is a reference to a paragraph
               of that standard condition and a reference in a paragraph to a
               sub-paragraph is a reference to a sub-paragraph of that
               paragraph.

         6.    Any reference in these conditions to-

         (a)   a provision thereof;

         (b)   a provision of the standard conditions of electricity generation
               licences;

         (c)   a provision of the standard conditions of electricity
               distribution licences;

         (d)   a provision of the standard conditions of electricity supply
               licences,

                                       23

<PAGE>

              shall, if these standard conditions or the standard conditions in
              question come to be modified, be construed so as far as the
              context permits, as a reference to the corresponding provision of
              these standard conditions or the other standard conditions in
              question as modified.

         7.   In construing the standard conditions, the heading or title of any
              standard  condition or paragraph shall be disregarded.

         8.   Any reference in a standard condition to the purposes of that
              condition generally is a reference to the purposes of that
              condition as incorporated in this licence and as incorporated in
              each other licence under section 6(1)(b) of the Act (whenever
              granted) which incorporates it.

         9.   Where any obligation under, in or pursuant to the licence is
              required to be performed by a specified date or within a specified
              period, and where the licensee has failed so to perform by such
              date or within such period, such obligation shall continue to be
              binding and enforceable after the specified date or after the
              expiry of the specified period (but without prejudice to all
              rights and remedies available against the licensee by reason of
              the licensee's failure to perform by that date or within that
              period).

         10.  Anything required by or under these standard conditions to be done
              in writing may be done by facsimile transmission of the instrument
              in question or by other  electronic means and, in such case -

              (a)   the original instrument or other confirmation in writing
                    shall be delivered or sent by pre-paid first class post as
                    soon as is reasonably practicable, and

              (b)   where the means of transmission had been agreed in advance
                    between

                                       24

<PAGE>

                 the parties concerned, in the absence of and pending such
                 confirmation, there shall be a refutable presumption that what
                 was received duly represented the original instrument.

     11.   The definitions referred to in this condition may include some
           definitions which are not used or not used exclusively in Sections A
           and B (which Sections are incorporated in all transmission licences).
           Where:

           (a)   any definition is not used in Sections A and B, that definition
                 shall, for the purposes of this licence, be treated:

                 (i)   as part of the standard condition or conditions (and the
                       Section) in which it is used;

                 (ii)  as not having effect in the licence until such time as
                       the standard condition in which the definition is used
                       has effect within the licence in pursuance of standard
                       condition 2 (Application of Section C (England and Wales)
                       or standard condition 3 (Application of Section D
                       (Scotland));

           (b)   any definition which is used in Sections A and B and is also
                 used in one or more other Sections:

                 (i)   shall only be modifiable in accordance with the
                       modification  process  applicable to each of the standard
                       conditions in which it is used; and

                 (ii)  if any such standard condition is modified so as to omit
                       that definition, then the reference to that definition in
                       this condition shall automatically cease to have effect.

                                       25

<PAGE>

Condition 2. Application of Section C of Part II Supplementary Standard
Conditions for England and Wales

1.   Where the Secretary of State provides, by a scheme made under Schedule 7 to
     the Utilities Act 2000, for Section C (in whole or in part) to have effect
     within this licence:

     (a)   paragraphs 4 to 8 shall cease to be suspended and shall have effect
           in the licensee's licence; and

     (b)   the licensee shall be obliged to comply with the requirements of
           Section C (in whole or, as the case may be, in part) of this licence,

     from the date the said scheme takes effect.

2.   Until -

     (a)   the Secretary of State provides, by a scheme made under Schedule 7 to
           the Utilities Act 2000, for Section C (in whole or in part) to have
           effect within this licence; or

     (b)   the Authority has issued to the licensee a direction pursuant to
           paragraph 4,

     the standard conditions in Section C (in whole or, as the case may be, in
     part) shall not have effect within this licence; and the licensee shall not
     be obliged to comply with any of the requirements of Section C (in whole
     or, as the case may be, in part) of this licence.

3.   Except where paragraph 1 applies to the licensee, paragraphs 4 to 8 of this
     standard condition shall be suspended and shall have no effect in this
     licence until such time as the Authority issues to the licensee a notice
     ending the suspension and providing for

                                       26

<PAGE>

     those paragraphs to have effect in this licence with effect from the date
     specified in the notice.

4.   The Authority may issue a direction (a "Section C Direction"). Where the
     Authority has issued to the licensee a Section C Direction the standard
     conditions in Section C (in whole or, as the case may be, in part) shall
     have effect within this licence from the date specified in the direction;
     and the licensee shall be obliged to comply with the requirements of
     Section C (in whole or, as the case may be, in part) to the extent and
     subject to the terms specified in such direction.

5.   A Section C Direction may specify that the standard conditions in Section C
     (in whole or in part) are to have effect in this licence;

6.   The Authority may, with the consent of the licensee:

     (a)   vary the terms (as set out in the Section C Direction or elsewhere)
           under which Section C (or parts thereof) has effect in this licence;
           or

     (b)   provide for Section C (or parts thereof) to cease to have effect in
           this licence.

7.   The variation or cessation provided for in paragraph 6 shall take effect
     form the date specified in the variation or cessation notice given to the
     licensee by the Authority.

8.   With effect from the date of cessation referred to in paragraph 7,
     paragraphs 4 to 7 of this condition shall be suspended and shall cease to
     have effect in this licence, but the Authority may at any time thereafter
     give to the licensee a notice ending the suspension and providing for those
     paragraphs again to have effect in this licence with effect from the date
     specified in the notice.

                                       27

<PAGE>

Condition 3. Application of Section D of Part II Supplementary Conditions for
Scotland

1.   Where the Secretary of State provides, by a scheme made under Schedule 7 to
     the Utilities Act 2000, for Section D (in whole or in part) to have effect
     within this licence:

     (a)  paragraphs 4 to 8 shall cease to be suspended and shall have effect in
          the licensee's licence; and

     (b)  the licensee shall be obliged to comply with the requirements of
          Section D (in whole or, as the case may be, in part) of this licence,

     from the date the said scheme takes effect.

2.   Until -

     (a)  the Secretary of State provides, by a scheme made under Schedule 7 to
          the Utilities Act 2000, for Section D (in whole or in part) to have
          effect within this licence; or

     (b)  the Authority has issued to the licensee a direction pursuant to
          paragraph 4,

      the standard conditions in Section D (in whole or, as the case may be, in
      part) shall not have effect within this licence; and the licensee shall
      not be obliged to comply with any of the requirements of Section D (in
      whole or, as the case may be, in part) of this licence.

3.    Except where paragraph 1 applies to the licensee, paragraphs 4 to 8 of
      this standard condition shall be suspended and shall have no effect in
      this licence until such time as the Authority issues to the licensee a
      notice in writing ending the suspension and providing for those
      paragraphs to have effect in this licence with effect from the date
      specified in the notice.

                                       28

<PAGE>

4.   The Authority may issue a direction (a "Section D Direction"). Where the
     Authority has issued to the licensee a Section D Direction the standard
     conditions in Section D (in whole or, as the case may be, in part) shall
     have effect within this licence from the date specified in the direction;
     and the licensee shall be obliged to comply with the requirements of
     Section D (in whole or, as the case may be, in part) to the extent and
     subject to the terms specified in such direction.

5.   A Section D Direction may specify that the conditions in Section D (in
     whole or in part) are to have effect in this licence.

6.   The Authority may, with the consent of the licensee:

     (a)   vary the terms (as set out in the Section D Direction or elsewhere)
           under  which  Section D (or parts thereof) has effect in this
           licence; or

     (b)   provide for Section D (or parts thereof) to cease to have effect in
           this licence.

7.   The variation or cessation provided for in paragraph 6 shall take effect
     from the date specified in the variation or cessation notice given to the
     licensee by the Authority.

8.   With effect from the date of cessation referred to in paragraph 7,
     paragraphs 4 to 7 of this condition shall be suspended and shall cease to
     have effect in this licence, but the Authority may at any time thereafter
     give to the licensee a notice ending the suspension and providing for those
     paragraphs again to have effect in this licence with effect from the date
     specified in the notice.

                                       29

<PAGE>

Condition 4. Payments by the Licensee to the Authority

1.   The licensee shall, at the times stated, pay to the Authority such amounts
     as are determined by or under this condition.

2.   In respect of each relevant year at the beginning of which the licensee
     holds this licence, the licensee shall pay to the Authority the aggregate
     of:

     (a)   an amount which is the relevant proportion of the estimated costs of
           the Authority during the year in question;

     (b)   an amount which is the relevant proportion of the estimated costs of
           the Consumer Council during the year in question;

     (c)   an amount which is the relevant proportion of the estimated costs
           incurred in the previous relevant year by the Competition Commission
           in connection with references made to it with respect to the licence
           or any other electricity transmission licence;

     (d)   an amount which is the relevant proportion of the Secretary of
           State's  costs during the year in question;

     (e)   an amount which is the relevant proportion of the difference (being a
           positive or negative amount), if any, between:

           (aa)   any costs estimated by the Authority or, in the case of
                  sub-paragraph 2(d), the Secretary of State in the previous
                  relevant year under sub-paragraphs 2(a), (b), (c), and (d);
                  and

           (bb)   the actual costs of the Authority, the Consumer Council, the
                  Competition Commission (in connection with that reference) and
                  the Secretary of State for the previous relevant year or, in
                  the case of the

                                       30

<PAGE>

                   Competition Commission, for the relevant year prior to the
                   previous relevant year; and

     (f)   in respect of the relevant year ending on 31 March 2002, an amount
           which is the relevant proportion of the actual unrecovered costs of
           the Director General of Electricity Supply and the Relevant
           Consumers' Committees.

3.   The amounts determined in accordance with paragraph 2 shall be paid by the
     licensee to the Authority in two instalments, with:

     (a)   the first instalment being due for payment by 30 June in each year;
           and

     (b)   the second instalment being due for payment by 31 January in each
           year

     provided that, in each case, if the Authority has not given notice of the
     amount of the instalment due at least 30 days before the payment date
     stated above, the licensee shall pay the amount due within 30 days from the
     actual giving of notice by the authority to the licensee (whenever notice
     is given).

4.   Where the licensee fails to pay the amount determined in accordance with
     paragraph 2 within 30 days of the due date set out in paragraph 3, it shall
     pay simple interest on the amount at the rate which is from time to time
     equivalent to the base rate of NatWest Bank plc or, if there is no such
     base rate, such base rate as the Authority may designate for the purposes
     hereof.

5.   In relation to any data or information specified by the Authority in a
     direction given for the purposes of this condition generally, the licensee
     shall submit a certificate to the Authority, approved by a resolution of
     the board of directors of the licensee and signed by a director of the
     licensee pursuant to that resolution. Such certificate shall be submitted
     to the Authority each year on the date specified by the Authority. Each
     certificate shall be in the following form -

                                       31

<PAGE>

      "In the opinion of the directors of [the licensee], all data and
      information provided to the Authority on [date provided to the Authority]
      for the purposes of enabling the Authority to calculate the licence fee
      payable by [the licensee] pursuant to standard condition 4 (Payments by
      the Licensee to the Authority) is accurate."

6.    In this condition:

     "estimated costs"              means costs estimated by the Authority as
                                    likely to be:

                                    (a)   the costs of the Authority and the
                                          Consumer Council; and

                                    (b)   the costs incurred by the Competition
                                          Commission, such estimate having
                                          regard to the views of the Competition
                                          Commission.

     "relevant proportion"          means the proportion of the costs
                                    attributable to the licensee in accordance
                                    with principles determined by the Authority
                                    for the purposes of this condition generally
                                    and notified to the licensee.

     "relevant year"                means a year beginning on 1 April of each
                                    calendar year and ending on 31 March of the
                                    following calendar year.

     "Secretary of State's costs"   means costs estimated by the Secretary of
                                    State as likely to be his costs in relation
                                    to:

                                    (a)   the establishment of the Authority and
                                          the Consumer Council; and

                                    (b)   Schedule 7 to the Utilities Act 2000.

5.    In sub-paragraph 2(f) of this condition:

                                       32

<PAGE>

     "Director General of Electricity Supply"   means the office previously
                                                established under section 1 of
                                                the Act;

     "Relevant Consumers' Committees"           means the committees previously
                                                appointed by the Director
                                                General of Electricity Supply
                                                under section 2 of that Act

                                       33

<PAGE>

PART II: SECTION B GENERAL

Condition 5.  Regulatory Accounts

1.   The following paragraphs of this condition apply for the purpose of
     ensuring that the licensee (and any affiliate or related undertaking)
     maintains accounting and reporting arrangements which enable regulatory
     accounts to be prepared for the consolidated transmission business and
     showing the financial affairs of the consolidated transmission business.

2.   The licensee shall:

     (a)   keep or cause to be kept for the period referred to in section
           222(5)(b) of the Companies Act 1985 and in the manner referred to in
           that section such accounting records in respect of the consolidated
           transmission business so that the revenues, costs, assets,
           liabilities, reserves and provisions of, or reasonably attributable
           to, the consolidated transmission business are separately
           identifiable in the accounting records of the licensee (and any
           affiliate or related undertaking) from those of any other business of
           the licensee;

     (b)   prepare on a consistent basis from such accounting records in respect
           of:

           (i)   each financial year, accounting statements comprising a profit
                 and loss account, a statement of total recognised gains and
                 losses, a balance sheet, and a cash flow statement, together
                 with notes thereto, and showing separately in respect of the
                 consolidated transmission business and in appropriate detail
                 the amounts of any revenue, cost, asset, liability, reserve or
                 provision which has been either:

                 (aa) charged from or to any other business together with a
                      description of the basis of that charge; or

                 (bb) determined by apportionment or allocation between the

                                       34

<PAGE>

                            consolidated transmission business and any other
                            business together with a description of the basis of
                            the apportionment or allocation; and

                (ii)  the first six months of each financial year, an interim
                      profit and loss account; and

                (iii) each financial year, sufficient accounting information in
                      respect of the consolidated transmission business to allow
                      the preparation of consolidated accounting statements of
                      the licensee or, where applicable, the ultimate holding
                      company of the licensee. Such information shall include a
                      profit and loss account, a statement of total recognised
                      gains and losses, a balance sheet, and a cash flow
                      statement together with notes thereto.

         (c)    procure, in respect of the accounting statements prepared in
                accordance with this condition in respect of each financial
                year, a report by the auditors and addressed to the Authority
                stating whether in their opinion those statements have been
                properly prepared in accordance with this condition and give a
                true and fair view of the revenues, costs, assets, liabilities,
                reserves and provisions of, or reasonably attributable to, the
                consolidated transmission business to which the statements
                relate; and

         (d)    deliver to the Authority a copy of the account referred to in
                sub-paragraph (b)(ii), the auditors' report referred to in
                sub-paragraph (c), the accounting statements referred to in
                sub-paragraph (b)(i) and the accounting information referred to
                in sub-paragraph b(iii), as soon as reasonably practicable, and
                in any event not later than three months after the end of the
                period to which it relates in the case of the account referred
                to in sub-paragraph (b)(ii) and six months after the end of the
                financial year to which they relate in the case of the
                accounting statements, auditors' report and accounting
                information referred to in sub-paragraphs (b)(i), (b)(iii) and
                (c).

                                       35

<PAGE>

3.   Unless the Authority so specifies in directions issued for the purposes of
     this condition, or with the Authority's prior written approval, the
     licensee shall not in relation to the accounting statements in respect of a
     financial year change the bases of charge or apportionment or allocation
     referred to in sub-paragraph 2(b)(i) from those applied in respect of the
     previous financial year.

4.   Where, in relation to the accounting statements in respect of a financial
     year, the licensee has changed such bases of charge or apportionment or
     allocation from those adopted for the immediately preceding financial year,
     the licensee shall, if so directed in directions issued by the Authority,
     in addition to preparing accounting statements on those bases which it has
     adopted, prepare such accounting statements on the bases which applied in
     respect of the immediately preceding financial year.

5.   Accounting statements and information in respect of a financial year
     prepared under sub-paragraph 2(b)(i) and (b)(iii) shall, so far as
     reasonably practicable and unless otherwise approved by the Authority
     having regard to the purposes of this condition:

     (a) have the same content and format as the statutory accounts of the
         licensee prepared under section 226 and, where appropriate, section 227
         of the Companies Act 1985 and conform to the best commercial accounting
         practices including all relevant accounting standards issued or adopted
         by the Accounting Standards Board currently in force;

     (b) state the accounting policies adopted; and

     (c) with the exception of the part of such statements and information which
         shows separately the amounts charged, apportioned or allocated and
         describes the bases of charge or apportionment or allocation
         respectively, be published with the statutory accounts of the licensee.

6.   Unless the Authority otherwise consents (such consent may be given in
     relation to some or all of the obligations in this condition and may be
     given subject to such conditions as the Authority considers appropriate),
     unless the accounting statements

                                       36

<PAGE>

        and information prepared under sub-paragraph 2(b)(i) and (b)(iii) are
        prepared on the current cost basis as provided by the alternative
        accounting rules, the licensee shall, unless otherwise agreed by the
        Authority, in addition to preparing those accounting statements under
        that paragraph, prepare accounting statements for the consolidated
        transmission business covering the same period, which shall comprise and
        show separately:

        (a)  a profit and loss account, a statement of total recognised gains
             and losses, a balance sheet, and a cash flow statement, together
             with notes thereto, which shall:

             (i)   include in respect of current costs assets amounts determined
                   on the current cost basis as provided by the alternative
                   accounting rules; and

             (ii)  show or disclose the information and other matters required
                   by the alternative accounting rules to be shown or disclosed
                   in accounts where the amounts included in respect of assets
                   covered by any items shown in those accounts have been
                   determined on any basis mentioned in paragraph 31 of section
                   C of Part II of Schedule 4 to the Companies Act 1985;

        (b)  in respect of the consolidated transmission business the adjusted
             amount of any such provision for depreciation as is referred to in
             paragraph 32(2) of section C of Part II of Schedule 4 to the
             Companies Act 1985 and the item shown in the profit and loss
             account of the consolidated transmission business for the relevant
             period which are affected by the determination of amounts on the
             current cost basis as provided by the alternative accounting rules,
             including the profit (or loss) before taxation; and

        (c)  such other current cost information as is referred to in the
             handbook as the Authority may reasonably require;

        and shall deliver the same, together with an auditors' report prepared
        in relation to the

                                       37

<PAGE>

          current cost basis accounting statements in the form referred to in
          sub-paragraph 2(c), to the Authority within the time limit referred to
          in sub-paragraph 2(d), and shall (with the exception of the part of
          such statements and information which shows separately the amounts
          charged, apportioned or allocated and describes the bases of charge or
          apportionment or allocation respectively) publish the same with the
          statutory accounts of the licensee.

7.   References in this condition to costs or liabilities of, or reasonably
     attributable to, the consolidated transmission business shall be construed
     as excluding taxation and capital liabilities which do not relate
     principally to the consolidated transmission business, and interest
     thereon; and references to any profit and loss account shall be construed
     accordingly.

8.   Without prejudice to paragraph 5 of the terms of this licence, references
     in this condition to sections of the Companies Act 1985 are references to
     those provisions as amended, substituted or inserted by the relevant
     provisions of the Companies Act 1989 and if such provisions of the
     Companies Act 1989 are not in force at the date of grant of this licence
     shall be construed as if such provisions were in force at such date.

9.   For the purposes of paragraph 6:

     "alternative accounting rules"     means the rules set out in section C of
                                        Part II of Schedule 4 to the Companies
                                        Act 1985.

     "current cost assets"              means assets of any description
                                        mentioned in paragraph 31 of section C
                                        of Part II of Schedule 4 to the
                                        Companies Act 1985.

     "the handbook"                     means the handbook issued by the
                                        Accounting Standards Committee of the
                                        Consultative Committee of Accounting

                                       38

<PAGE>

                                             Bodies (CCAB Limited) or any
                                             successor body entitled "Accounting
                                             for the effects of changing prices:
                                             a Handbook" in its current edition
                                             for the time being or in the event
                                             that no such handbook shall be in
                                             issue such guidance or publication
                                             as may be issued in replacement or
                                             substitution therefor.

10.  For the purposes of this condition:

     "consolidated transmission business"    means the consolidation, for
                                             regulatory accounting purposes, of
                                             the businesses referred to in the
                                             definition of "transmission
                                             business" as defined in standard
                                             condition 1 (Definitions and
                                             Interpretations).

     "holding company"                       means a holding company within the
                                             meaning of sections 736, 736A and
                                             736B of the Companies Act 1985.

     "regulatory accounts"                   means the accounts required to be
                                             prepared by the licensee pursuant
                                             to this condition.

                                       39

<PAGE>

         (This page left blank intentionally)

Condition 6. Change of Financial Year

1.   The definition of "financial year" in standard condition 1 (Definitions and
     Interpretation) shall, for the purpose only of the statutory accounts of
     the licensee, cease to apply to the licensee from the date the licensee
     sends a notice to the Authority for that purpose.

2.   Such notice:

     (a)  shall specify the date from which, for the purpose set out at
          paragraph 1, the current and subsequent financial years of the
          licensee shall run; and

     (b)  shall continue in effect until revoked by the licensee issuing a
          further notice.

3.   While the notice continues in effect the licensee shall procure the
     preparation of and shall deliver to the Authority audited group accounts
     for its group of companies for each financial year.

4.   Audited group accounts produced in accordance with paragraph 3:

     (a)  shall comprise consolidated group accounts in respect of the group of
          companies;

     (b)  shall, save insofar as is necessary to reflect a different financial
          year, have the same form and content as the statutory accounts of the
          licensee;

     (c)  shall be accompanied by a report by the auditors and addressed to the
          Authority stating whether in their opinion the audited group accounts
          have been properly prepared in accordance with this condition and give
          a true and

                                       40

<PAGE>

          fair view of the state of affairs of the group of companies and of its
          profits or losses, total recognised gains or losses and cash flows
          during the financial year;

     (d)  may, with the prior written consent of the Authority, omit or provide
          in a different form, specified in the consent, such information as may
          be specified in the consent; and

     (e)  shall clearly disclose any differences between the accounting policies
          underlying the preparation of the statutory accounts of the licensee
          and the accounting policies underlying the preparation of the audited
          group accounts.

5.   The licensee may, for the purpose only of its statutory accounts, change
     its financial year from that previously notified by sending to the
     Authority a new notice pursuant to paragraph 1. Where the licensee sends
     the Authority a new notice the previous notice shall be revoked, as
     provided by sub-paragraph 2(b). The licensee's financial year-end will
     change with effect from the date specified in the new notice. The new
     notice shall specify the licensee's new financial year-end.

6.   No provisions of this condition shall apply to the financial year of the
     licensee as defined in standard condition 1 (Definitions and
     Interpretation) for the purpose of accounts produced in compliance with
     standard condition 5 (Regulatory Accounts). No provisions of this condition
     shall affect the licensee's obligations in respect of payment of licence
     fees under standard condition 4 (Payments by the Licensee to the
     Authority).

                                       41

<PAGE>

Condition 7. Licensee's Grid Code

1.   The licensee shall in consultation with authorised electricity operators
     liable to be materially affected thereby prepare and at all times have in
     force and shall implement and comply (subject to paragraph 10) with the
     Grid Code to be known as the licensee's Grid Code:

     (a)  covering all material technical aspects relating to connections to and
          the operation and use of the licensee's transmission system or (in so
          far as relevant to the operation and use of the licensee's
          transmission system) the operation of electric lines and electrical
          plant connected to the licensee's transmission system or any
          distribution system of any authorised distributor and (without
          prejudice to the foregoing) making express provision as to the matters
          referred to in paragraph 5 below; and

     (b)  which is designed so as:

          (i)   to permit the development, maintenance and operation of an
                efficient, co-ordinated and economical system for the
                transmission of electricity;

          (ii)  to facilitate competition in the generation and supply of
                electricity (and without limiting the foregoing, to facilitate
                the licensee's transmission system being made available to
                persons authorised to supply or generate electricity on terms
                which neither prevent nor restrict competition in the supply or
                generation of electricity) ; and

          (iii) subject to sub-paragraphs (i) and (ii), to promote the security
                and efficiency of the electricity generation, transmission and
                distribution systems in England and Wales or Scotland each taken
                as a whole.

2.   The licensee's Grid Code in force at the date this condition comes into
     force shall be sent to the Authority for its approval. Thereafter the
     licensee shall (in consultation with authorised electricity operators
     liable to be materially affected thereby) periodically review (including
     upon the request of the Authority) the licensee's Grid Code and its
     implementation. Following any such review, the licensee shall send to the
     Authority:

                                       42

<PAGE>

     (a)  a report on the outcome of such review; and

     (b)  any proposed revisions to the licensee's Grid Code from time to time
          as the licensee (having regard to the outcome of such review)
          reasonably thinks fit for the achievement of the objectives referred
          to in paragraph (b) of paragraph 1; and

     (c)  any written representations or objections from authorised electricity
          operators liable to be materially affected thereby (including any
          proposals by such operators for revisions to the licensee's Grid Code
          not accepted by the licensee in the course of the review) arising
          during the consultation process and subsequently maintained.

3.   Revisions to the licensee's Grid Code proposed by the licensee and sent to
     the Authority pursuant to paragraph 2 shall require to be approved by the
     Authority.

4.   Having regard to any written representations or objections referred to in
     sub-paragraph (c) of paragraph 2, and following such further consultation
     (if any) as the Authority may consider appropriate, the Authority may issue
     directions requiring the licensee to revise the licensee's Grid Code in
     such manner as may be specified in the directions, and the licensee shall
     forthwith comply with any such directions.

5.   The licensee's Grid Code shall include codes relating to the technical
     operation of the licensee's transmission system, including:

     (a)  connection conditions specifying the technical, design and operational
          criteria to be complied with by the licensee and by any person
          connected or seeking connection with the licensee's transmission
          system or by any person authorised to generate who is connected with
          or seeks connection with the licensee's transmission system or any
          transmission system or distribution system of any third party which is
          located in Great Britain.

     (b)  an operating code specifying the conditions under which the licensee
          shall operate the licensee's transmission system and under which
          persons shall operate their plant and/or distribution systems in
          relation to the licensee's

                                       43

<PAGE>

          transmission system, in so far as necessary to protect the security
          and quality of supply and safe operation of the licensee's
          transmission system under both normal and abnormal operating
          conditions; and

     (c)  a planning code specifying the technical and design criteria and
          procedures to be applied by the licensee in the planning and
          development of the licensee's transmission system and to be taken into
          account by persons connected or seeking connection with the licensee's
          transmission system in the planning and development of their own plant
          and systems.

6.   The licensee shall give or send a copy of the licensee's Grid Code (as from
     time to time revised) to the Authority.

7.   The licensee shall (subject to paragraph 8) give or send a copy of the
     licensee's Grid Code (as from time to time revised) to any person
     requesting the same.

8.   The licensee may make a charge for any copy of the licensee's Grid Code (as
     from time to time revised) given or sent pursuant to paragraph 7 of an
     amount which will not exceed any amount specified for the time being for
     the purposes of this condition in directions issued by the Authority.

9.   In preparing, implementing and complying with the licensee's Grid Code
     (including in respect of the scheduling of maintenance of the licensee's
     transmission system), the licensee shall not unduly discriminate against or
     unduly prefer any person or class or classes of person in favour of or as
     against any person or class or classes of persons.

10.  The Authority may (following consultation with the licensee) issue
     directions relieving the licensee of its obligations to implement or comply
     with the licensee's Grid Code in respect of such parts of the licensee's
     transmission system and/or to such extent as may be specified in the
     directions.

                                       44

<PAGE>

Condition 7A. Compliance with Other Grid Codes

1.   The licensee shall comply with the provisions of any other Grid Codes in so
     far as applicable to the licensee or licensee's transmission business.

2.   The Authority may, following consultation with the transmission company
     responsible for any other Grid Code and any other authorised electricity
     operators directly affected thereby, issue directions relieving the
     licensee of its obligation under paragraph 1 in respect of such parts of
     such other Grid Code and to such extent and subject to such conditions as
     may be specified in those directions.

                                       45

<PAGE>

Condition 8. Compliance with Distribution Codes

1.   The licensee shall comply with the provisions of every Distribution Code in
     so far as applicable to it.

2.   The Authority may, following consultation with the licensed distributor
     responsible for the relevant Distribution Code and any other authorised
     electricity operators directly affected thereby, issue directions relieving
     the licensee of its obligation under paragraph 1 in respect of such parts
     of such Distribution Code and to such extent and subject to such conditions
     as may be specified in those directions.

                                       46

<PAGE>

Condition 9. Change Co-ordination for the Utilities Act 2000

1.   The licensee shall take all reasonable measures to secure and implement,
     and shall not take any steps to prevent or unduly delay, such changes to
     the industry framework documents as are necessary or expedient to give full
     and timely effect to the provisions of the Utilities Act 2000.

2.   In complying with paragraph 1, the licensee shall act in the case of each
     industry framework document consistently with the change procedures
     currently applicable to that document, except where to do so would be
     inconsistent with any provision of the Utilities Act 2000, in which event
     that provision shall take precedence.

3.   For the purposes of this condition, "industry framework document" means,
     subject to paragraph 4, any of the following documents to which the
     licensee is a party, or in relation to which it holds rights in respect of
     amendment or termination, together with any documents which are
     supplemental or ancillary thereto:

     (a) the Pooling and Settlement Agreement;

     (b) the Balancing and Settlement Code;

     (c) the Master Connection and Use of System Agreement or the Connection and
         Use of System Code;

     (d) the Settlement Agreement for Scotland;

     (e) the Master Registration Agreement;

     (f) the Data Transfer Services Agreement;

     (g) the Radio Teleswitch Agreement;

     (h) any Grid Code;

     (i) any Distribution Code;

     (j) the Trading Code;

     (k) the Fuel Security Code;

     (l) any agreement for use of an interconnector or Scottish interconnection;
         and

     (m) any agreement for the provision of distribution use of system, meter
         provision services, meter maintenance services, data retrieval
         services, data processing services, data aggregation services, or
         prepayment meter services.

                                       47

<PAGE>

4.   Where the Authority considers that the list of industry framework documents
     set out in paragraph 3 should be modified for the purposes of this
     condition, the licensee shall discuss any proposed modification (including
     addition) to the list in good faith and use all reasonable endeavours to
     agree such modification with the Authority.

5.   This condition shall cease to have effect on 30 June 2002 or such earlier
     date as the Authority may specify in a direction given, for the purposes of
     this condition generally.

                                       48

<PAGE>

Condition 10. Disposal of Relevant Assets

1.   The licensee shall not dispose of or relinquish operational control over
     any relevant asset otherwise than in accordance with the following
     paragraphs of this condition.

2.   Save as provided in paragraph 3, the licensee shall give to the Authority
     not less than two months' prior written notice of its intention to dispose
     of or relinquish operational control over any relevant asset, together with
     such further information as the Authority may request relating to such
     asset or the circumstances of such intended disposal or relinquishment of
     control or to the intentions in regard thereto of the person proposing to
     acquire such asset or operational control over such asset.

3.   Notwithstanding paragraphs 1 and 2, the licensee may dispose of or
     relinquish operational control over any relevant asset:

     (a)  where:

          (i)  the Authority has issued directions /1/ /2/ for the purposes of
               this condition containing a general consent (whether or not
               subject to conditions) to:

               (aa) transactions of a specified description; and/or

               (bb) the disposal of or relinquishment of operational control
                    over relevant assets of a specified description; and

          (ii) the disposal or relinquishment of operational control in question
               is effected pursuant to a transaction specified in the
               Authority's directions or the relevant assets in question are of
               a description to which such directions apply and the disposal or
               relinquishment of operational control is in accordance with any
               conditions to which the consent is subject; or

     (b)  where the disposal or relinquishment of operational control in
          question is required by or under any enactment or subordinate
          legislation.

________________
/1/  Direction issued under Condition 7 (of Part IV) of the Generation,
     Transmission and Public Electricity Supply Licence of Scottish Power UK plc
     now Standard Condition 10 of this licence (01.04.92)

/2 / Direction issued under Standard Condition 10 of this licence (28.01.02)

                                       49

<PAGE>

4.   Notwithstanding paragraph 1, the licensee may dispose of or relinquish
     operational control over any relevant asset specified in any notice given
     under paragraph 2 in circumstances where:

     (a)  the Authority confirms in writing that it consents to such disposal or
          relinquishment (which consent may be made subject to the acceptance by
          the licensee or any third party in favour of whom the relevant asset
          is proposed to be disposed or operational control is proposed to be
          relinquished to, of such conditions as the Authority may specify); or

     (b)  the Authority does not inform the licensee in writing of any objection
          to such disposal or relinquishment of control within the notice period
          referred to in paragraph 2.

5.   In this condition:

     "disposal"              (a)  in relation to disposal of a relevant asset
                                  situated in England and Wales includes any
                                  sale, gift, exchange, assignment, lease,
                                  licence, loan, mortgage, charge, or grant of
                                  any other encumbrance or the permitting of any
                                  encumbrance to subsist or any other
                                  disposition;

                                       50

<PAGE>

                                              (b)  in relation to disposal of a
                                                   relevant asset situated in
                                                   Scotland includes the grant
                                                   of any disposition,
                                                   conveyance, contract of
                                                   excambion, any lease,
                                                   assignation, licence, the
                                                   grant of any right of
                                                   possession, loan, standard
                                                   security, floating charge to
                                                   a third party, or the grant
                                                   of any servitude right,
                                                   wayleave or any other
                                                   transaction or event which is
                                                   capable under any enactment
                                                   or rule of law of affecting
                                                   the title to a registered
                                                   interest in land and
                                                   "dispose" and cognate
                                                   expressions shall be
                                                   construed accordingly;

    "relevant asset"                          means:

                                              any asset for the time being
                                              forming part of the licensee's
                                              transmission system or of any
                                              interconnector, any control centre
                                              for use in conjunction therewith
                                              and any legal or beneficial
                                              interest in (or right, title or
                                              interest in) land upon which any
                                              of the foregoing is situate (which
                                              for the purposes of property
                                              located in Scotland means any
                                              estate, interest, servitude or
                                              other heritable or leasehold right
                                              in or over land including any
                                              leasehold interests or other
                                              rights to occupy or use and any
                                              contractual or personal rights in
                                              favour of the licensee relating to
                                              the occupation, use or acquisition
                                              of such property).

    "relinquishment of operational control"   includes, without limitation,
                                              entering into any agreement or
                                              arrangement whereby operational
                                              control of a relevant asset or
                                              relevant assets is not or ceases
                                              to be under the sole management of
                                              the licensee.

                                       51

<PAGE>

Condition 11. Provision of Information to the Authority

1.   Subject to paragraph 4, the licensee shall furnish to the Authority, in
     such manner and at such times as the Authority may reasonably require, such
     information and shall procure and furnish to it such reports, as the
     Authority may reasonably require or as may be necessary for the purpose of
     performing:

     (a)  the functions conferred on the Authority by or under the Act; and

     (b)  any functions transferred to or conferred on it by or under the
          Utilities Act 2000.

2.   The licensee shall not be required by the Authority to furnish it under
     this condition with information for the purpose of the exercise of its
     functions under section 47 of the Act.

3.   The licensee shall, if so requested by the Authority, give reasoned
     comments on the accuracy and text of any information or advice (so far as
     relating to its activities as holder of an electricity transmission
     licence) which the Authority proposes to publish pursuant to section 48 of
     the Act.

4.   This condition shall not require the licensee to produce any documents or
     give any information which it could not be compelled to produce or give in
     evidence in civil proceedings before a court.

5.   The power of the Authority to call for information under paragraph 1 is in
     addition to the power of the Authority to call for information under or
     pursuant to any other condition. There shall be a presumption that the
     provision of information in accordance with any other condition is
     sufficient for the purposes of that condition, but that presumption shall
     be rebutted, if the Authority states in writing that in its opinion such
     further information is, or is likely to be, necessary to enable it to
     exercise functions under the condition in question.

6.   The licensee shall procure from each company or other person which the
     licensee knows or reasonably should know is at any time an ultimate
     controller of the

                                       52

<PAGE>

     licensee a legally enforceable undertaking in favour of the licensee in a
     form specified by the Authority that that ultimate controller ("the
     information convenantor") will give to the licensee, and will procure that
     any person (including, without limitation, a corporate body) which is a
     subsidiary of, or is controlled by, the information covenantor (other than
     the licensee and the licensee and its subsidiaries) will give to the
     licensee, all such information as may be necessary to enable the licensee
     to comply fully with the obligation imposed on it by paragraph 1. Such
     undertaking shall be obtained within 7 days of such corporate body or other
     person in question becoming an ultimate controller of the licensee and
     shall remain in force for so long as the licensee remains the holder of
     this licence and the information covenantor remains an ultimate controller
     of the licensee.

7.   The licensee shall deliver to the Authority evidence (including a copy of
     each such undertaking) that the licensee has complied with the obligation
     to procure undertakings pursuant to paragraph 6, and shall comply with any
     direction from the Authority to enforce any undertaking so procured.

8.   The licensee shall not, save with the consent in writing of the Authority,
     enter (directly or indirectly) into any agreement or arrangement with any
     ultimate controller of the licensee or, where the ultimate controller is a
     corporate body, any of the subsidiaries of such a corporate ultimate
     controller (other than the subsidiaries of the licensee) at a time when:

     (a)  an undertaking complying with paragraph 6 is not in place in relation
          to that ultimate controller; or

     (b)  there is an unremedied breach of such undertaking; or

     (c)  the licensee is in breach of the terms of any direction issued by the
          Authority under paragraph 7 of this condition.

9.   In this condition

     "ultimate controller"               means:

                                       53

<PAGE>

                                      (a)  a holding company of the licensee
                                           which is not itself a subsidiary of
                                           another company; and

                                      (b)  any person who (whether alone or
                                           with a person or persons connected
                                           with him) is in a position to
                                           control, or to exercise significant
                                           influence over, the policy of the
                                           licensee or any holding company of
                                           the licensee by virtue of:

                                           (i)  rights under contractual
                                                arrangements to which he is a
                                                party or of which he is a
                                                beneficiary; or

                                           (ii) rights of ownership (including
                                                rights attached to or deriving
                                                from securities or rights under
                                                a trust) which are held by him
                                                or of which he is a beneficiary;
                                                but excluding any director or
                                                employee of a corporate body in
                                                his capacity as such; and

                                      (c)  for the purposes of sub-paragraph
                                           (b), a person is connected with
                                           another person if they are party to
                                           any arrangement regarding the
                                           exercise of any such rights as are
                                           described in that paragraph.

                                       54

<PAGE>

Condition 12. Prohibition of Cross-Subsidies

1.   The licensee shall procure that the transmission business shall not give
     any cross-subsidy to, or receive any cross-subsidy from, any other business
     of the licensee or of an affiliate or related undertaking of the licensee.

2.   Nothing which the licensee is obliged to do or not to do pursuant to this
     licence or any other document which grants a licence to the licensee under
     the Act shall be regarded as a cross-subsidy for the purposes of this
     condition.

                                       55

<PAGE>

SECTION C - SUPPLEMENTARY STANDARD CONDITIONS FOR  ENGLAND AND WALES

Condition C1. Interpretation of Section C

1.       In the standard conditions in this Section unless the context otherwise
         requires:

         "balancing mechanism"             means the mechanism for the making
                                           and acceptance of offers and bids
                                           pursuant to the arrangements
                                           contained in the BSC and referred to
                                           in paragraph 2(a) of standard
                                           condition C3 (Balancing and
                                           Settlement Code).

         "balancing services"              means:
                                           (a)    ancillary services;

                                           (b)    offers and bids made in the
                                                  balancing mechanism; and

                                           (c)    other services available to
                                                  the licensee which serve to
                                                  assist the licensee in
                                                  operating the licensee's
                                                  transmission system in
                                                  accordance with the Act or the
                                                  standard conditions and/or in
                                                  doing so efficiently and
                                                  economically.

         "balancing services activity"     means the activity, as part of the
                                           transmission business, of procuring
                                           and using balancing services for the
                                           purpose of balancing the licensee's
                                           transmission system.

         "bilateral agreement"             means a bilateral connection
                                           agreement and/or a bilateral embedded
                                           generation agreement.

                                       56

<PAGE>

         "bilateral connection agreement"         means an agreement between the
                                                  licensee and a CUSC user
                                                  supplemental to the CUSC
                                                  relating to a direct
                                                  connection to the licensee's
                                                  transmission system
                                                  identifying the relevant
                                                  connection site and setting
                                                  out other site specific
                                                  details in relation to that
                                                  connection to the licensee's
                                                  transmission system, including
                                                  provisions relating to payment
                                                  of connection charges.

         "bilateral embedded generation           means an agreement entered
         agreement"                               into between the licensee and
                                                  a CUSC user supplemental to
                                                  the CUSC, relating to a
                                                  generating station (or other
                                                  connections provided for in
                                                  the CUSC) connected to a
                                                  distribution system in England
                                                  and Wales and the use of the
                                                  licensee's transmission system
                                                  in relation to that generating
                                                  station (or other connections
                                                  provided for in the CUSC)
                                                  identifying the relevant site
                                                  of connection to the
                                                  distribution system and
                                                  setting out other site
                                                  specific details in relation
                                                  to that use of the licensee's
                                                  transmission system.

         "BSC"                                    means the balancing and
                                                  settlement code provided for
                                                  in paragraph 1 of standard
                                                  condition C3 (Balancing and
                                                  Settlement Code), as from time
                                                  to time modified in accordance
                                                  with that condition.

                                       57

<PAGE>

         "BSC Framework Agreement"                means the agreement of that
                                                  title, in the form approved by
                                                  the Secretary of State, by
                                                  which the BSC is made
                                                  contractually binding between
                                                  the parties to that agreement,
                                                  as from time to time amended
                                                  with the consent of the
                                                  Secretary of State.

         "connection charging methodology"        means the principles on which,
                                                  and the methods by which, for
                                                  the purposes of achieving the
                                                  objectives referred to in
                                                  paragraph 11 of standard
                                                  condition C7B (Connection
                                                  Charging Methodology),
                                                  connection charges are
                                                  determined.

         "construction agreement"                 means an agreement between the
                                                  licensee and a CUSC user in
                                                  respect of construction works
                                                  required on the licensee's
                                                  transmission system and the
                                                  associated construction works
                                                  of the CUSC user in relation
                                                  to a connection to the
                                                  licensee's transmission system
                                                  or in relation to a generating
                                                  station connected to a
                                                  distribution system in England
                                                  and Wales, whether for the
                                                  initial connection or a
                                                  modification of the
                                                  connection.

                                       58

<PAGE>

         "core industry documents"                means those documents which

                                                  (a)   in the Secretary of
                                                        State's opinion are
                                                        central industry
                                                        documents associated
                                                        with the activities of
                                                        the licensee and
                                                        authorised electricity
                                                        operators, the subject
                                                        matter of which relates
                                                        to or is connected with
                                                        the BSC or the
                                                        balancing and
                                                        settlement arrangements
                                                        and

                                                  (b)   have been so designated
                                                        by the Secretary of
                                                        State.

         "CUSC"                                   means the Connection and Use
                                                  of System Code provided for in
                                                  paragraph 2 of standard
                                                  condition C7F (Connection and
                                                  Use of System Code), as from
                                                  time to time modified in
                                                  accordance with that
                                                  condition.

         "CUSC Framework Agreement"               means the agreement of that
                                                  title, in the form approved by
                                                  the Secretary of State, by
                                                  which the CUSC is made
                                                  contractually binding between
                                                  the parties to that agreement,
                                                  as amended from time to time
                                                  with the approval of the
                                                  Secretary of State.

         "CUSC party"                             means any person who is a
                                                  party to the CUSC Framework
                                                  Agreement.

         "CUSC user"                              means a CUSC party other than
                                                  the licensee.

         "effective time"                         means the start of the first
                                                  period for trading under the
                                                  BSC as determined by the
                                                  Secretary of State.

                                       59

<PAGE>

         "information"                            includes any documents,
                                                  accounts, estimates (whether
                                                  relating to the past or the
                                                  future), returns, records or
                                                  reports and data in written,
                                                  verbal or electronic form and
                                                  information in any form or
                                                  medium whatsoever (whether or
                                                  not prepared specifically at
                                                  the request of the Authority).

         "interconnector(s)"                      means the electric lines and
                                                  electrical plant and meters
                                                  owned or operated by the
                                                  licensee solely for the
                                                  transfer of electricity to or
                                                  from the transmission system
                                                  of the licensee into or out of
                                                  England and Wales.

         "interconnector (s) business"            means the business of the
                                                  licensee or any affiliate or
                                                  related undertaking in the
                                                  operation of any
                                                  interconnector.

         "separate business"                      means each of:

                                                  (a) the transmission business
                                                      of the licensee: and

                                                  (b) the interconnector(s)
                                                      business of the licensee,

                                                  taken separately from one
                                                  another and from any other
                                                  business of the licensee, but
                                                  so that where all or any part
                                                  of such business is carried on
                                                  by an affiliate or related
                                                  undertaking of the licensee
                                                  such part of the business as
                                                  is carried on by that
                                                  affiliate or related
                                                  undertaking shall be
                                                  consolidated with any other
                                                  part of such business of the
                                                  licensee (and of any other
                                                  affiliate or related
                                                  undertaking) so as to form a
                                                  single separate business.

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         "total system"                           means the licensee's
                                                  transmission system and the
                                                  transmission or distribution
                                                  systems of all authorised
                                                  electricity operators which
                                                  are located in England and/or
                                                  Wales.

         "transmission business"                  means the authorised business
                                                  of the licensee or any
                                                  affiliate or related
                                                  undertaking in the planning,
                                                  development, construction and
                                                  maintenance of the licensee's
                                                  transmission system (whether
                                                  or not pursuant to directions
                                                  of the Secretary of State made
                                                  under section 34 or 35 of the
                                                  Act) and the operation of such
                                                  system for the transmission of
                                                  electricity, including the
                                                  balancing services activity,
                                                  and any business in providing
                                                  connections to the licensee's
                                                  transmission system, but shall
                                                  not include

                                                  (i)   any other separate
                                                        business

                                                  (ii)  any business of the
                                                        licensee or any
                                                        affiliate or related
                                                        undertaking in the
                                                        provision of settlement
                                                        services in connection
                                                        with the BSC or the
                                                        Pooling and Settlement
                                                        Agreement or

                                                  (iii) any other business (not
                                                        being a separate
                                                        business) of the
                                                        licensee or any
                                                        affiliate or related
                                                        undertaking in the
                                                        provision of services to
                                                        or on behalf of any one
                                                        or more persons.

         "use of system charging                  means the principles on which,
         methodology"                             and the methods by which, for
                                                  the purposes of achieving the
                                                  objectives referred to in
                                                  paragraph 5 of standard
                                                  condition C7A (Use of System
                                                  Charging Methodology), use of
                                                  system charges are determined.

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Condition C2. Prohibited Activities

1.       The purpose of this condition is to prevent abuse by the licensee of
         its position as owner and operator of the licensee's transmission
         system.

2.       The licensee shall not and shall procure that any affiliate or related
         undertaking of the licensee shall not, on its own account (or that of
         the licensee or of any affiliate or related undertaking of the licensee
         as the case may be), purchase or otherwise acquire electricity for the
         purpose of sale or other disposition to third parties except with the
         consent of the Authority.

3.       In paragraph 2, the reference to the purchase or other acquisition of
         electricity shall include entering into or acquiring the benefit of a
         contract conferring rights or obligations (including rights or
         obligations by way of option) in relation to or by reference to the
         sale, purchase or delivery of electricity at any time or the price at
         which electricity is sold or purchased at any time.

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Condition C3. Balancing and Settlement Code

1.       The licensee shall at all times have in force a BSC, being a document

         (a)   setting out the terms of the balancing and settlement
               arrangements described in paragraph 2;

         (b)   designed so that the balancing and settlement arrangements
               facilitate achievement of the objectives set out in paragraph 3;
               and

         (c)   including the modification procedures required by paragraph 4 and
               the matters required by paragraphs 6 and (where applicable) 10.

         and the licensee shall be taken to comply with this paragraph by
         adopting as the BSC in force with effect from the date this condition
         comes into effect the document designated by the Secretary of State for
         the purpose of this condition and by modifying such document from time
         to time in accordance with the provisions of paragraphs 4 and 5.

2.       The balancing and settlement arrangements are

         (a)   arrangements pursuant to which BSC Parties may make, and the
               licensee may accept, offers or bids to increase or decrease the
               quantities of electricity to be delivered to or taken off the
               total system at any time or during any period so as to assist the
               licensee in operating and balancing the licensee's transmission
               system; and for the settlement of financial obligations (between
               BSC Parties, or between BSC Parties and the licensee) arising
               from the acceptance of such offers or bids; and

         (b)   arrangements:

               (i)  for the determination and allocation to BSC Parties of the
                    quantities of electricity  delivered to and taken off the
                    total system, and

               (ii) which set, and provide for the determination and financial
                    settlement of, obligations between BSC Parties, or (in
                    relation to the operation

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<PAGE>

                    of the licensee's transmission system) between BSC Parties
                    and the licensee, arising by reference to the quantities
                    referred to in sub-paragraph (i), including the imbalances
                    (after taking account of the arrangements referred to in
                    sub-paragraph (a)) between such quantities and the
                    quantities of electricity contracted for sale and purchase
                    between BSC Parties.

3.       The objectives referred to in paragraph 1(b) are:

         (a)  the efficient discharge by the licensee of the obligations imposed
              upon it by this licence;

         (b)  the efficient, economic and co-ordinated operation by the licensee
              of the licensee's transmission system;

         (c)  promoting effective competition in the generation and supply of
              electricity, and (so far as consistent therewith) promoting such
              competition in the sale and purchase of electricity;

         (d)  without prejudice to paragraph 10, promoting efficiency in the
              implementation and administration of the balancing and settlement
              arrangements described in paragraph 2.

4.       The BSC shall include procedures for its own modification (including
         procedures for the modification of the modification procedures
         themselves), which procedures shall provide (without prejudice to any
         procedures for modification of the BSC set out in the programme
         implementation scheme provided for in standard condition C4 (NETA
         Implementation) or in the BSC by reference to the programme
         implementation scheme):

         (a)  for proposals for modification of the BSC to be made by the
              licensee, BSC Parties and such other persons or bodies as the BSC
              may provide;

         (b)  where such a proposal is made,

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<PAGE>

              (i)   for bringing the proposal to the attention of BSC Parties
                    and such other persons as may have an appropriate interest
                    in it;

              (ii)  for proper consideration of any representations on the
                    proposal;

              (iii) for properly evaluating whether the proposed modification
                    would better facilitate achieving the applicable BSC
                    objective(s), provided that so far as any such evaluation
                    requires information which is not generally available
                    concerning the licensee or the licensee's transmission
                    system, such evaluation shall be made on the basis of the
                    licensee's proper assessment (which the licensee shall make
                    available for these purposes) of the effect of the proposed
                    modification on the matters referred to in paragraphs 3(a)
                    and (b);

              (iv)  for development of any alternative modification which may,
                    as compared with the proposed modification, better
                    facilitate achieving the applicable BSC objective(s);

              (v)   for the preparation of a report

                    -    setting out the proposed modification and any
                         alternative,

                    -    evaluating the proposed modification and any
                         alternative,

                    -    assessing the extent to which the proposed modification
                         or any alternative would better facilitate achieving
                         the applicable BSC objective(s),

                    -    assessing the impact of the modification on the core
                         industry documents and the changes expected to be
                         required to such documents as a consequence of such
                         modification,

                    -    setting out a timetable for implementation of the
                         modification and any alternative, including the date
                         with effect from which such modification (if made) is
                         to take effect; and

              (vi)  for the submission of the report to the Authority as soon
                    after the proposal is made as is appropriate (taking into
                    account the complexity, importance and urgency of the
                    modification) for the proper execution and completion of the
                    steps in sub-paragraphs (i) to (v);

         (c)  for the timetable (referred to in sub-paragraph (b)(v)) for
              implementation of any modification to be such as will enable the
              modification to take effect as soon as practicable after the
              Authority has directed such modification to be

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<PAGE>

              made, account being taken of the complexity, importance and
              urgency of the modification, and for that timetable to be extended
              with the consent of or as directed by the Authority;

         (d)  for empowering the licensee to secure, if so directed by the
              Authority in circumstances specified in the BSC,

              (i)   that the modification procedures are complied with in
                    respect of any particular modification in accordance with
                    the terms of the direction;

              (ii)  that, where a modification has been made but not implemented
                    in accordance with its terms, all reasonable steps are taken
                    to implement it in accordance with the terms of the
                    direction and

              (iii) that the licensee can recover its reasonable costs and
                    expenses properly incurred in complying with the direction.

5.       (a)  If a report has been submitted to the Authority pursuant to the
              procedures described in paragraph 4(b)(vi), and the Authority is
              of the opinion that a modification set out in such report would,
              as compared with the then existing provisions of the BSC and any
              other modifications set out in such report, better facilitate
              achieving the applicable BSC objective(s), the Authority may
              direct the licensee to make that modification.

         (b)  The licensee shall have power (by executing an appropriate
              instrument) to modify the BSC in accordance with any direction of
              the Authority pursuant to sub-paragraph (a), or paragraph 7 of
              standard condition C4 (NETA Implementation), and shall modify it
              in accordance with every such direction; but it shall not have
              power to modify the BSC in any other circumstance.

         (c)  Only the licensee shall have power to modify the BSC.

6.       The BSC shall provide for:

         (a)  a copy of the BSC to be provided to any person requesting the same
              upon payment of an amount not exceeding the reasonable costs of
              making and providing such copy;

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<PAGE>

         (b)  the licensee to refer to the Authority for determination, whether
              of its own motion or as provided in the BSC, such matters arising
              under the BSC as may be specified in the BSC;

         (c)  information about the operation of the BSC and the balancing and
              settlement arrangements

              (i)   to be provided to the Authority and/or

              (ii)  to be published,

         and for the licensee to be empowered to secure compliance with these
         requirements if so directed by the Authority.

7.       The BSC may include:

         (a)  arrangements to facilitate or secure compliance with the programme
              implementation scheme designated pursuant to standard condition C4
              (NETA Implementation) or matters envisaged thereunder, and

         (b)  arrangements for final settlement and reconciliation of
              liabilities arising under or in connection with the Pooling and
              Settlement Agreement in respect of settlement periods prior to the
              effective time.

8.       The provisions of paragraphs 6, 7, 10 and 12 shall not limit the
         matters which may be provided for in the BSC.

9.       The Authority may direct the licensee to procure the provision to him
         of, or the publication of, such information about the operation of the
         BSC and/or the balancing and settlement arrangements as is referred to
         in paragraph 6(c) and specified in the direction.

10.      (a)  The BSC shall provide for arrangements pursuant to which, if
              sub-paragraph (b) has effect

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              (i)   modifications proposed in respect of one code shall (in so
                    far as applicable thereto) be proposed in respect of the
                    other code,

              (ii)  the modifications procedures under each code may so far as
                    practicable be co-ordinated, and

              (iii) all reasonable steps are taken to secure that rights in
                    respect of computer systems used in support of the
                    implementation of the BSC are made available to support the
                    implementation of the other code on terms approved by the
                    Authority.

         (b)  This sub-paragraph shall have effect if any licence
              authorising the transmission of electricity in an area in
              Scotland includes a condition pursuant to which there are or
              are to be arrangements equivalent to the BSC applying in
              Scotland or part of it.

         (c)  In this paragraph, "code" means the BSC and any equivalent
              arrangements applying in Scotland or part of it and approved
              by the Authority for the purpose of this condition.

11.      The licensee shall comply with:

         (a)  the BSC; and

         (b)  any direction to the licensee made pursuant to this condition.

12.      (a)  The licensee shall be a party to the BSC Framework Agreement.

         (b)  The BSC and/or the BSC Framework Agreement shall contain
              provisions:

              (i)   for admitting as an additional party to the BSC
                    Framework Agreement any person who accepts the terms
                    and fulfils the conditions (each as specified in the
                    BSC) on which accession to the BSC Framework
                    Agreement is offered;

              (ii)  for the licensee to refer to the Authority for
                    determination, whether of its own motion or as
                    provided in the BSC any dispute which shall arise as
                    to whether a person seeking to be admitted as a party
                    to the

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<PAGE>

                    BSC Framework Agreement has fulfilled any accession
                    conditions; and if the Authority determines that the person
                    seeking admission has fulfilled all relevant accession
                    conditions, for admitting such person as a party to the BSC
                    Framework Agreement.

              (iii) for persons to be admitted as additional parties to the BSC
                    Framework Agreement by either

                    -    a representative (who need not be a BSC Party)
                         appointed thereunder to act on behalf of all parties to
                         it, or

                    -    if there is no such representative or if the
                         representative fails to act, the licensee acting on
                         behalf of all parties to it.

         (c)  If, following a determination of the Authority as referred to in
              sub-paragraph (b)(ii), the representative referred to in
              sub-paragraph b(iii) fails to act on behalf of all parties to
              admit such person, the licensee shall act on behalf of all parties
              to admit such person if directed to do so by the Authority.

13.      The licensee shall take all reasonable measures to secure and implement
         (consistently with the procedures applicable under or in relation to
         the core industry documents to which it is party (or in relation to
         which it holds rights in respect of amendment)), and shall not take any
         steps to prevent or unduly delay, changes to those documents, such
         changes being changes which are appropriate in order to give full and
         timely effect to and/or in consequence of any modification which has
         been made to the BSC.

14.      For the avoidance of doubt, paragraph 13 is without prejudice to any
         rights of approval, veto or direction in respect of proposed changes to
         the documents referred to in paragraph 13 which the Authority may have.

15.      In this condition in the expression "sale and purchase of electricity",
         sale excludes sale by way of assumption of an imbalance under the BSC
         and sale by way of supply to premises, and purchase shall be construed
         accordingly; and

        "applicable BSC objective(s)"    means:

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                                          (a)  in relation to a proposed
                                               modification of the modification
                                               procedures, the requirements of
                                               paragraph 4 (to the extent they
                                               do not conflict with the
                                               objectives set out in paragraph
                                               3); and

                                          (b)  in relation to any other proposed
                                               modification, the objectives set
                                               out in paragraph 3.

         "BSC Party"                      means any authorised electricity
                                          operator which is party, and (unless
                                          the context otherwise requires) any
                                          other person which is party, to the
                                          BSC Framework Agreement, other than
                                          the licensee and any person which is
                                          such a party for the purposes only of
                                          administering and/or facilitating the
                                          implementation of the BSC.

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Condition C4. NETA Implementation

1.       The licensee shall comply with the programme implementation scheme
         established in accordance with paragraph 2, as modified from time to
         time in accordance with paragraph 4.

2.       The programme implementation scheme shall be a scheme designated by the
         Secretary of State setting out the steps, including without limitation
         steps as to the matters referred to in paragraph 3, to be taken (or
         procured) by the licensee (and/or by authorised electricity operators)
         which are, in the Secretary of State's opinion, appropriate in order to
         give full and timely effect to:

         (a)      any modifications made to this licence and to the licences of
                  authorised electricity operators by the Secretary of State
                  pursuant to the power vested in him under section 15A of the
                  Act;

         (b)      any conditions imposed by any exemption from the requirement
                  to hold any such licence; and

         (c)      the matters envisaged by such modifications and conditions.

3.       The programme implementation scheme may include provisions, inter alia,

         (a)      to secure or facilitate the amendment of any of the core
                  industry documents;

         (b)      to secure that any systems, contracts, persons or other
                  resources employed in the implementation of the Pooling and
                  Settlement Agreement may be employed in the implementation of
                  the BSC;

         (c)      for the giving of indemnities against liabilities to which
                  parties to the Pooling and Settlement Agreement may be
                  exposed;

         (d)      for securing the co-ordinated and effective commencement of
                  implementation of and of operations under the BSC,
                  including the testing,

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<PAGE>

                  trialling and start-up of the systems, processes and
                  procedures employed in such implementation and employed by
                  authorised electricity operators and others in connection with
                  such operations;

         (e)      for co-ordinating the administration and implementation of the
                  BSC and the administration of the Pooling and Settlement
                  Agreement; and for dealing with run-off as defined in
                  paragraph 7 of standard condition C6 (Pooling and Settlement
                  Agreement Run-Off);

         (f)      for the licensee to refer to the Authority for determination,
                  whether of its own motion or as provided in the programme
                  implementation scheme, disputes, as to matters covered by the
                  scheme, between persons who are required (by conditions of
                  their licences or exemptions) or who have agreed to comply
                  with the scheme or any part of it; and

         (g)      for the Authority, in the circumstances set out in the scheme,
                  to require that consideration be given to the making of a
                  proposal to modify the BSC and, if so, to require the making
                  of such proposal in the manner set out in the scheme, such
                  power to be exercisable at any time within the period of 12
                  months after the effective time.

4.       (a)      The Secretary of State may at any time direct in accordance
                  with the provisions of the programme implementation scheme,
                  that the programme implementation scheme, other than
                  provisions pursuant to paragraphs 3(g) and 7(a), be modified
                  in the manner set out in such direction, in order to give (or
                  continue to give) full and timely effect to the matters
                  described in paragraph 2.

         (b)      The Secretary of State shall serve a copy of any such
                  direction on the licensee, and thereupon the licensee shall
                  comply with the scheme as modified by the direction.

5.       If there is any conflict between the requirements contained in the
         programme implementation scheme pursuant to paragraph 3(a) and/or
         imposed on the licensee by paragraphs 1 and 4, and those imposed on the
         licensee by any other condition, the

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<PAGE>

         provisions of this condition shall prevail.

6.       Without prejudice to paragraph 1, the licensee shall use all reasonable
         endeavours to do such things as may be requisite and necessary in order
         to give full and timely effect to the modifications made to this
         licence by the Secretary of State pursuant to the power vested in him
         under section 15A of the Act (and to give full and timely effect to the
         matters envisaged by such modifications).

7.       (a)      The Authority may, in the circumstances specified in the
                  programme  implementation scheme, direct the licensee to
                  modify the BSC in the manner indicated in the direction.

         (b)      The Authority shall not make any such direction after the
                  effective time.

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Condition C5. Supplementary Grid Code Condition for England and Wales

1.       In addition to the list of items referred to in paragraph 5 of standard
         condition 7 (Licensee's Grid Code) which are to be included in the
         licensee's Grid Code, the licensee shall also include in that Grid Code
         procedures relating to the outage of generation sets and a balancing
         code specifying, among other matters, information to be submitted by
         authorised electricity operators to the licensee for the purposes of,
         and the making of offers and bids in, the balancing mechanism, and the
         issuing by the licensee of instructions by reference to such offers and
         bids.

2.       In this condition and standard condition 7 (Licensee's Grid Code) in
         relation to any area of England and Wales, authorised electricity
         operator includes any person transferring electricity to or from
         England and Wales across an interconnector.

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Condition C6. Pooling and Settlement Agreement Run-off

1.       The licensee shall continue to be a party to the Pooling and Settlement
         Agreement in its capacity as grid operator and ancillary services
         provider and will comply with that agreement for the purposes of
         run-off until the provisions of the BSC relating to run-off become
         effective.

2.       The licensee  shall  maintain for a minimum  period of six years such
         records in respect of the period  before the effective time of:

         (a)      generation sets and interconnector transfers available or
                  declared as available;

         (b)      offer prices (including  separate elements thereof) of
                  generation sets and interconnector transfers declared as
                  available;

         (c)      generation sets and interconnector transfers scheduled for
                  despatch or despatched;

         (d)      ancillary services called for by the licensee and provided;

         (e)      kilowatt hours of electricity  taken from the total system by
                  any purchaser of electricity under the Pooling and Settlement
                  Agreement; and

         (f)      imports and exports of electricity across any interconnector

         as shall be reasonably necessary to give effect to the settlement
         system operated under the Pooling and Settlement Agreement.

3.       The licensee shall give or send to any person requesting the same, but
         in each case only in respect of any 28 day period before the effective
         time:

         (a)      the bid prices (showing separately prices for start up,
                  no-load heat and incremental heat rates) of each generation
                  set and interconnector transfer

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<PAGE>

                  offered in each period for which prices are bid over the
                  preceding 28 days for despatch by any authorised electricity
                  operator;

         (b)      declared (and, where different, actual) availability of
                  generation sets (on a set-by-set basis) or interconnector
                  transfers offered for despatch over the preceding 28 days by
                  any authorised electricity operator; and

         (c)      the Pool Selling Price and the Pool Purchase Price as derived
                  in respect of any period over the preceding 28 days pursuant
                  to the terms of the Pooling and Settlement Agreement.

4.       The licensee may make a charge for the information given or sent
         pursuant to paragraph 3 to any person not otherwise entitled to the
         same under the terms of the Pooling and Settlement Agreement of an
         amount which shall not exceed the maximum amount specified in
         directions issued by the Authority for the purposes of this condition.

5.       The licensee shall provide to the Authority such information as the
         Authority shall request concerning the merit order system or any aspect
         of its operation.

6.       The obligations of the licensee under this condition in relation to the
         period before the effective time shall continue notwithstanding any
         termination of the Pooling and Settlement Agreement on or after the
         effective time.

7.       In this condition:

         "available"                               in relation to any generation
                                                   set or interconnector
                                                   transfer means a generation
                                                   set or interconnector
                                                   transfer which is both

                                                   (a)   available in accordance
                                                         with the licensee's
                                                         Grid Code; and

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                                                   (b) declared as available for
                                                       the generation of
                                                       electricity in accordance
                                                       with the provisions of
                                                       the Pooling and
                                                       Settlement Agreement, and

         "interconnector transfer"                 means electricity generating
                                                   capacity of an amount not
                                                   exceeding the maximum
                                                   capacity specified in any
                                                   contract for use of the
                                                   relevant interconnector as
                                                   may at any time be available
                                                   to generate electricity for
                                                   transfer across the
                                                   interconnector to the total
                                                   system.

         "merit order system"                      means a system applying in
                                                   the period before the
                                                   effective time and
                                                   establishing economic
                                                   precedence of electricity
                                                   from available generation
                                                   sets or interconnector
                                                   transfers to be delivered or
                                                   transferred to the total
                                                   system (subject to other
                                                   system needs).

         "run-off"                                 means the determination and
                                                   settlement (including by way
                                                   of reconciliation) of amounts
                                                   due arising under or in
                                                   connection with the Pooling
                                                   and Settlement Agreement in
                                                   relation to settlement
                                                   periods up to and including
                                                   the settlement period
                                                   immediately prior to the
                                                   effective time (including the
                                                   resolution of disputes in
                                                   respect thereof).

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Condition C7.  Charges for Use of System

1.       The licensee shall:

         (a)    by the date this condition comes into effect determine a use of
                system charging methodology approved by the Authority; and

         (b)    conform to the use of system charging methodology as modified in
                accordance with standard condition C7A (Use of System Charging
                Methodology).

2.       The licensee shall by the date this condition comes into effect:

         (a)    prepare a statement approved by the Authority of the use of
                system charging methodology, and

         (b)    prepare, other than in respect of a charge which the Authority
                has consented need not so appear, a statement, in a form
                approved by the Authority, of use of system charges determined
                in accordance with the use of system charging methodology and in
                such form and in such detail as shall be necessary to enable any
                person to make (other than in relation to charges to be made or
                levied in respect of the balancing services activity) a
                reasonable estimate of the charges to which he would become
                liable for the provision of such services,

         and, without prejudice to paragraph 5 of this condition or paragraph 3
         of standard condition C7A (Use of System Charging Methodology), if any
         change is made in the use of system charges to be so made other than in
         relation to charges to be made in respect of the balancing services
         activity, or the use of system charging methodology, the licensee
         shall, before the changes take effect, furnish the Authority with a
         revision of the statement of use of system charges (or if the Authority
         so accepts, with amendments to the previous such statement) and/or (as
         the case may be) with a revision of the statement of the use of system
         charging methodology, which reflect the changes.

3.       Approvals by the Authority pursuant to paragraphs 1(a) and 2(a) may be
         granted subject to such conditions relating to further action to be
         undertaken by the licensee in relation to the use of system charging
         methodology better meeting the relevant objectives including, but not
         limited to, matters identified in any initial consultation

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<PAGE>

         by the Authority, as the Authority deems appropriate. Such conditions
         may include (but are not limited to) elements relating to the time by
         which action under the conditions must be completed.

4.       Nothing in this condition shall affect the ability of the licensee to
         charge according to the statement issued pursuant to paragraph 2(b).

5.       The licensee:

         (a)    shall give, except where the Authority consents to a shorter
                period, 150 days notice to the Authority of any proposals to
                change use of system charges other than in relation to charges
                to be made in respect of the balancing services activity,
                together with a reasonable assessment of the effect of the
                proposals (if implemented) on, those charges, and

         (b)    where it has decided to implement any proposals to change use of
                system charges other than in relation to charges to be made in
                respect of the balancing services activity, shall give the
                Authority notice of its decision and the date on which the
                proposals will be implemented which shall not, without the
                consent of the Authority, be less than a month after the date on
                which the notice required by this sub-paragraph was given.

6.       Unless otherwise determined by the Authority, the licensee shall only
         enter arrangements for use of system which secure that use of system
         charges will conform with the statement last furnished under paragraph
         2(b) either:

         (a)    before it enters into the arrangements; or

         (b)    before the charges in question from time to time fall to be
                made,

         and, for the purposes of this paragraph, the reference to the statement
         last furnished under paragraph 2(b) shall be construed, where that
         statement is subject to amendments so furnished before the relevant
         time, as a reference to that statement as so amended.

7.       References in paragraphs 1, 2, 5 and 6 to charges do not include
         references to:

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         (a)    connection charges; or

         (b)    to the extent, if any, to which the Authority has accepted they
                would, as respects certain matters, be so determined, charges
                determined by reference to the provisions of the CUSC.

8.       The licensee may periodically revise the information set out in and,
         with the approval of the Authority, alter the form of the statements
         prepared in accordance with paragraph 2 and shall, at least once in
         every year that this licence is in force, make such revisions as may be
         necessary to such statements in order that the information set out in
         the statements shall continue to be accurate in all material respects.

9.       The licensee shall send a copy of any such statement, revision,
         amendment or notice given under paragraphs 2 or 5 to any person who
         asks for any such statement, revision, amendment or notice.

10.      The licensee may make a charge for any statement, revision, or
         amendment of a statement, furnished, or notice sent pursuant to
         paragraph 9 of an amount reflecting the licensee's reasonable costs of
         providing such statement, revision, amendment or notice which costs
         shall not exceed the maximum amount specified in directions issued by
         the Authority for the purposes of this condition.

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Condition C7A. Use of System Charging Methodology

1.       The licensee shall, for the purpose of ensuring that the use of system
         charging methodology achieves the relevant objectives, keep the use of
         system charging methodology at all times under review

2.       The licensee shall, subject to paragraph 3, make such modifications of
         the use of system charging methodology as may be requisite for the
         purpose of better achieving the relevant objectives.

3.       Except with the consent of the Authority, before making a modification
         to the use of system charging methodology, the licensee shall:

         (a)    consult the CUSC users on the proposed modification and allow
                them a period of not less than 28 days within which to make
                written representations;

         (b)    send a copy of the terms of the proposed modification to any
                person who asks for them;

         (c)    furnish the Authority with a report setting out;

                (i)    the terms originally proposed for the modification;

                (ii)   the representations (if any) made to the licensee;

                (iii)  any change in the terms of the modification intended in
                       consequence of such representations;

                (iv)   how the intended modification better achieves the
                       relevant objectives; and

                (v)    a timetable for implementation of the modification and
                       the date with effect from which the modification (if
                       made) is to take effect, such date being not earlier than
                       the date on which the period referred to in paragraph 4
                       expires; and

         (d)    where the Authority has given a direction that sub-paragraphs
                (a), (b) and/or (c) should not apply, comply with such other
                requirements (if any) that the

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                Authority may specify in the direction.

4.       Where the licensee has complied with the requirements of paragraph 3,
         it shall, unless the Authority has within 28 days of the report being
         furnished to him given a direction that the modification may not be
         made, make the modification to the use of system charging methodology.

5.       In paragraphs 1, 2 and 3 "the relevant objectives" shall mean the
         following objectives:

         (a)    that compliance with the use of system charging methodology
                facilitates effective competition in the generation and supply
                of electricity and (so far as is consistent therewith)
                facilitates competition in the sale, distribution and purchase
                of electricity;

         (b)    that compliance with the use of system charging methodology
                results in charges which reflect, as far as is reasonably
                practicable, the costs incurred by the licensee in its
                transmission business; and

         (c)    that, so far as is consistent with sub-paragraphs (a) and (b),
                the use of system charging methodology, as far as is reasonably
                practicable, properly takes account of the developments in the
                licensee's transmission business.

6.       The licensee shall send a copy of any report furnished under paragraph
         3 to any person who asks for any such report.

7.       The licensee may make a charge for any report sent pursuant to
         paragraph 6 of an amount reflecting the licensee's reasonable costs of
         providing such report which costs shall not exceed the maximum amount
         specified in directions issued by the Authority for the purposes of
         this condition.

8.       Nothing in this condition shall impact on the application of special
         conditions AA5Ato AA5E.

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Condition C7B. Connection Charging Methodology

1.       The licensee shall:

         (a)    by the date this condition comes into effect determine a
                connection charging methodology approved by the Authority; and

         (b)    conform to the connection charging methodology as modified in
                accordance with paragraph 10.

2.       The licensee shall, for the purpose of ensuring that the connection
         charging methodology achieves the relevant objectives, keep the
         connection charging methodology at all times under review.

3.       The licensee shall, subject to paragraph 9, make such modifications to
         the connection charging methodology as may be requisite for the purpose
         of better achieving the relevant objectives.

4.       The licensee shall by the date this condition comes into effect prepare
         a statement approved by the Authority of the connection charging
         methodology in relation to charges, including charges:

         (a)    for the carrying out of works and the provision and installation
                of electrical lines or electrical plant or meters for the
                purposes of connection (at entry or exit points) to the
                licensee's transmission system;

         (b)    in respect of extension or reinforcement of the licensee's
                transmission system rendered (at the licensee's discretion)
                necessary or appropriate by virtue of providing connection to
                or use of system to any person seeking connection;

         (c)    in circumstances where the electrical lines or electrical plant
                to be installed are (at the licensee's discretion) of greater
                size than that required for use of system by the person seeking
                connection;

         (d)    for maintenance and repair (including any capitalised charge)
                required of electrical lines or electrical plant or meters
                provided or installed for making a connection to the
                licensee's transmission system; and

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         (e)    for disconnection from the licensee's transmission system and
                the removal of electrical plant, electrical lines and meters
                following disconnection,

         and the statement referred to in this paragraph shall be in such form
         and in such detail as shall be necessary to enable any person to
         determine that the charges to which he would become liable for the
         provision of such services are in accordance with such statement.

5.       An approval by the Authority pursuant to paragraph 1(a) and 4 may be
         granted subject to such conditions relating to further action to be
         undertaken by the licensee in relation to the connection charging
         methodology better meeting the relevant objectives as identified in any
         initial consultation by the Authority as the Authority deems
         appropriate. Such conditions may include (but are not limited to)
         elements relating to the time by which actions under this condition
         need to be completed.

6.       Nothing in this condition shall affect the ability of the licensee to
         charge according to the statement issued pursuant to paragraph 4.

7.       Unless otherwise determined by the Authority, the licensee shall only
         enter into a bilateral agreement or a construction agreement which
         secures that the connection charges will conform with the statement of
         the connection charging methodology last furnished under paragraphs 4
         or 10 either:

         (a)    before it enters into the arrangements; or

         (b)    before the charges in question from time to time fall to be
                made.

8.       The connection charging methodology shall make provision for connection
         charges for those items referred to in paragraph 4 to be set at a level
         for connections made after 30 March 1990 which will enable the licensee
         to recover:

         (a)    the appropriate proportion of the costs directly or indirectly
                incurred in carrying out any works, the extension or
                reinforcement of the licensee's transmission system or the
                provision and installation, maintenance and repair or (as the
                case may be) removal following disconnection of any electric
                lines, electric plant or meters; and

         (b)    a reasonable rate of return on the capital represented by such
                costs,

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         and for connections made before 30 March 1990 the connection charging
         methodology for those items referred to in paragraph 4 shall as far as
         is reasonably practicable reflect the principles in sub-paragraphs (a)
         and (b).

9.       Except with the consent of the Authority, before making a modification
         to the connection charging methodology the licensee shall:

         (a)    consult the CUSC users on the  proposed modification and allow
                them a period of not less than 28 days within which to make
                written representations;

         (b)    send a copy of the terms of the proposed modification to any
                person who asks for them;

         (c)    furnish the Authority with a report setting out:

                (i)    the terms originally proposed for the modification;

                (ii)   the representations (if any) made to the licensee;

                (iii)  any change in the terms of the modification intended in
                       consequence of such representations;

                (iv)   how the intended modification better achieves the
                       relevant objectives; and

                (v)    a timetable for implementation of the modification and
                       the date with effect from which the modification (if
                       made) is to take effect, such date being not earlier than
                       the date on which the period referred to in paragraph 10
                       expires; and

          (d)   where the Authority has given a direction that sub-paragraphs
                (a), (b) and/or (c) should not apply, comply with such other
                requirements (if any) that the Authority may specify in the
                direction.

10.      Where the licensee:

         (a)    has complied with the requirements of paragraph 9, it shall,
                unless the Authority has within 28 days of the report being
                furnished to it given a direction that the modification may not
                be made, make the modification to the

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                 connection charging methodology;

         (b)     makes a modification to the connection charging methodology,
                 furnish the Authority with a revised statement showing the
                 changed connection charging methodology and such revised
                 statement of the connection charging methodology shall
                 supersede previous statements of the connection charging
                 methodology furnished under paragraph 4 or this paragraph 8
                 from the date specified therein.

11.      In paragraphs 2, 3 and 9 "the relevant objectives" shall mean:

         (a)     the objectives referred to in paragraph 5 of standard
                 condition C7A(Use of System Charging Methodology), as if
                 references therein to the use of system charging methodology
                 were to the connection charging methodology; and

         (b)     in addition, the objective, in so far as consistent with
                 sub-paragraph (a), of facilitating competition in the carrying
                 out of works for connection to the licensee's transmission
                 system.

12.      A statement furnished under paragraphs 4 or 10 shall, where
         practicable, include examples of the connection charges likely to be
         made in different cases as determined in accordance with the methods
         and principles shown in the statement.

13.      The licensee shall send a copy of any statement or revision of a
         statement or report furnished under paragraphs 4, 9 or 10 to any person
         who asks for any such statement or revision thereof or report.

14.      The licensee may make a charge for any statement or revision of a
         statement or report, furnished or sent pursuant to paragraph 13 of an
         amount reflecting the licensee's reasonable costs of providing such
         which costs shall not exceed the maximum amount specified in directions
         issued by the Authority for the purposes of this condition.

15.      Nothing in this condition shall impact on the application of special
         conditions AA5A to AA5E.

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Condition C7C. Non- discrimination

1.       In the provision of use of system or in the carrying out of works for
         the purpose of connection to the licensee's transmission system, the
         licensee shall not discriminate as between any persons or class or
         classes of persons.

2.       Without prejudice to paragraph 1 and subject to paragraph 3, the
         licensee shall not make charges for provision of use of system to any
         authorised electricity operator or class or classes of authorised
         electricity operator which differ in respect of any item separately
         identified in the statement referred to at paragraph 2(b) of standard
         condition C7 (Charges for Use of System) from those for provision of
         similar items under use of system to any other authorised electricity
         operator or class or classes of authorised electricity operator except
         in so far as such differences reasonably reflect differences in the
         costs associated with such provision.

3.       Notwithstanding paragraph 2, the licensee shall not make use of system
         charges in respect of any item of charge separately identified in the
         statement referred to at paragraph 2(b) of standard condition C7
         (Charges for Use of System) on any authorised electricity operator
         whose contract does not provide for him to receive the service to which
         such item of charge refers.

4.       The licensee shall not in setting use of system charges restrict,
         distort or prevent competition in the generation, transmission, supply
         or distribution of electricity.

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Condition C7D. Requirement to Offer Terms

1.       Unless otherwise determined by the Authority under standard condition
         C7E (Functions of the Authority), on application made by:

         (a)   any authorised electricity operator in the case of an application
               for use of system; and

         (b)   any person in the case of an application for connection,

         the licensee shall (subject to paragraph 5) offer to enter into the
         CUSC Framework Agreement.

2.       On application made by any person the licensee shall (subject to
         paragraph 5) offer to enter into a bilateral agreement and/or a
         construction agreement relating to connection or modification to an
         existing connection and such offer shall make detailed provision
         regarding:

         (a)   the carrying out of work (if any) required to connect the
               licensee's transmission system to any other system for the
               transmission or distribution of electricity and for the obtaining
               of any consents necessary for such purpose;

         (b)   the carrying out of works (if any) in connection with the
               extension or reinforcement of the licensee's transmission
               system rendered (in the licensee's discretion) appropriate or
               necessary by reason of making the connection or modification
               to an existing connection and for the obtaining of any
               consents necessary for such purpose;

         (c)   the installation of appropriate meters (if any) required to
               enable the licensee to measure electricity being accepted into
               the licensee's transmission system at the specified entry
               point or points or leaving such system at the specified exit
               point or points;

         (d)   the date by which any works required to permit access to the
               licensee's transmission system (including for this purpose any
               works to reinforce or extend the licensee's transmission
               system) shall be completed (time being of

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               the essence unless otherwise agreed by the person seeking
               connection);

         (e)   the connection charges to be paid to the licensee, such charges:

               (i)   to be presented in such a way as to be referable to the
                     connection charging methodology or any revision thereof;
                     and

               (ii)  to be set in conformity with the  requirements of paragraph
                     8 of standard condition C7B (Connection Charging
                     Methodology) and (where relevant) paragraph 4; and

         (f)   such further terms as are or may be appropriate for the purpose
               of the agreement.

3.       For the purpose of determining an appropriate proportion of the costs
         directly or indirectly incurred in carrying out works under a bilateral
         agreement and/or construction agreement, the licensee will have regard
         to:

         (a)   the benefit (if any) to be obtained or likely in the future to be
               obtained by the licensee or any other person as a result of
               carrying out such works whether by reason of the reinforcement or
               extension of the licensee's transmission system or the provision
               of additional entry or exit points on such system or otherwise;
               and

         (b)   the ability or likely future ability of the licensee to recoup a
               proportion of such costs from third parties.

4.       The licensee shall offer terms in accordance with paragraphs 1 and 2
         above as soon as practicable and (except where the Authority consents
         to a longer period) in any event not more than the period specified in
         paragraph 6 below after receipt by the licensee of an application
         containing all such information as the licensee may reasonably require
         for the purpose of formulating the terms of the offer.

5.       The licensee shall not be obliged pursuant to this condition to offer
         to enter or to enter into any agreement if:

         (a)   to do so would be likely to involve the licensee:

               (i)   in breach of its duties under section 9 of the Act;

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               (ii)  in breach of any regulations made under section 29 of the
                     Act or of any other enactment relating to safety or
                     standards applicable in respect of the transmission
                     business;

               (iii) in breach of the licensee's Grid Code; or

               (iv)  in breach of the conditions; or

         (b)   the person making the application does not undertake to be bound
               insofar as applicable by the terms of the licensee's Grid Code
               and/or the CUSC from time to time in force; or

         (c)   in the case of persons making application for use of system under
               paragraph 1, such person ceases to be an authorised electricity
               operator.

6.       For the purpose of paragraph 4, the period specified shall be:

         (a)   in the case of persons seeking use of system only and seeking to
               become a party to the CUSC Framework Agreement if not already a
               party, in connection with such use, 28 days; and

         (b)   in the case of persons seeking a bilateral connection agreement
               or a construction agreement (and seeking to become a party to the
               CUSC Framework Agreement if not already a party, in connection
               with such agreements, 3 months; and

         (c)   in any other case, 28 days.

7.       The licensee shall within 28 days following receipt of a request from
         any person, give or send to such person such information in the
         possession of the licensee as may be reasonably required by such person
         for the purpose of completing an application under the Application
         Regulations or such provisions of similar effect contained in any
         further regulations then in force made pursuant to sections 6(3), 60
         and 64(1) of the Act.

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Condition C7E. Functions of the Authority

1.       If, after a period which appears to the Authority to be reasonable for
         the purpose, the licensee has failed to enter into an agreement with
         (as the case may be) any authorised electricity operator or any person
         entitled or claiming to be entitled thereto pursuant to a request under
         standard condition C7D (Requirement to Offer Terms), the Authority may,
         pursuant to section 7(3)(c) of the Act and on application of such
         authorised electricity operator or such person or the licensee, settle
         any terms in dispute of the agreement to be entered into between the
         licensee and that authorised electricity operator or that person in
         such manner as appears to the Authority to be reasonable having (in so
         far as relevant) regard in particular to the following considerations:

         (a)   that such authorised electricity operator or such person should
               pay to the licensee:

               (i)   in the case of use of  system, use of system charges in
                     accordance with paragraphs 1 and 6 of standard condition C7
                     (Charges for Use of System); or

               (ii)  in the case of connection charges in accordance with
                     paragraphs 1 and 7 of standard condition C7B (Connection
                     Charging Methodology);

         (b)   that the performance by the licensee of its obligations under the
               agreement should not cause it to be in breach of those provisions
               referred to at paragraph 5 of standard condition C7D (Requirement
               to Offer Terms);

         (c)   that any methods by which the licensee's transmission system is
               connected to any other system for the transmission or
               distribution of electricity accord (insofar as applicable to the
               licensee) with the licensee's Grid Code and with the Distribution
               Code; and

         (d)   that the terms and conditions of the agreement so settled by the
               Authority and of any other agreements entered into by the
               licensee pursuant to a request under standard condition C7D
               (Requirement to Offer Terms) should be in as similar a form as is
               practicable.

2.       Insofar as any person entitled or claiming to be entitled to an offer
         under standard

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         condition C7D (Requirement to Offer Terms) wishes to proceed on the
         basis of an agreement as settled by the Authority pursuant to paragraph
         1, the licensee shall forthwith enter into such agreement.

3.       If in respect of any bilateral agreement or construction agreement to
         the licensee's transmission system entered into pursuant to standard
         condition C7D (Requirement to Offer Terms) or this condition either the
         licensee or other party to such agreement proposes to vary the
         contractual terms of such agreement in any manner provided for under
         such agreement, the Authority may, at the request of the licensee or
         other party to such agreement, settle any dispute relating to such
         variation in such manner as appears to the Authority to be reasonable.

4.       Where the licensee is party to a relevant agreement for connection
         and/or use of system which is other than in conformity with the CUSC,
         if either the licensee or other party to such agreement for connection
         and/or use of system proposes to vary the contractual terms of such
         agreement in any manner provided for under such relevant agreement, the
         Authority may, at the request of the licensee or other party to such
         agreement, settle any dispute relating to such variation in such manner
         as appears to the Authority to be reasonable having (in so far as
         relevant) regard to the consideration that the terms so settled are, in
         so far as circumstances allow, similar to the equivalent terms in the
         CUSC.

5.       If the licensee and a CUSC user or other person party to a relevant
         agreement are in dispute as to whether:

         (a)   use of system charges made, or to be made, conform with the
               statement of the use of system charges furnished under paragraphs
               2(b) or 8 of standard condition C7 (Charges for Use of System)
               which applied or applies in relation to the period in respect of
               which the dispute arises;

         (b)   connection charges made, or to be made, conform with the
               statement of the connection charging methodology furnished under
               paragraphs 4 or 10 of standard condition C7B (Connection Charging
               Methodology) which applied or applies in relation to the period
               in respect of which the dispute arises,

         such dispute may be referred to the Authority for him to determine
         whether, in the case of sub-paragraph (a), the charges made, or to be
         made, conformed with the

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         relevant statement(s) furnished under standard condition C7 (Charges
         for Use of System), or whether, in the case of sub-paragraphs (b), the
         charges conformed with the relevant methodology.

6.       For the purposes of this condition:

         "relevant agreement"                   means an agreement in respect of
                                                which paragraph 3 of standard
                                                condition 10C of the licensee's
                                                licence, as such applied
                                                immediately prior to 18
                                                September 2001 had effect.

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Condition C7F. Connection and Use of System Code

1.       The licensee shall establish arrangements for connection and use of
         system in respect of matters other than those to which standard
         conditions 7 (Licensees Grid Code), C5 (Supplementary Grid Code
         Condition for England and Wales) and C7A to C7E relate which are
         calculated to facilitate the achievement of the following objectives:

         (a)   the efficient discharge by the licensee of the obligations
               imposed upon it under the Act and by this licence; and

         (b)   facilitating effective competition in the generation and supply
               of electricity, and (so far as consistent therewith) facilitating
               such competition in the sale, distribution and purchase of
               electricity,

         and the licensee shall be taken to comply with this paragraph by having
         a document setting out the arrangements for connection and use of
         system designated by the Secretary of State for the purposes of this
         condition by the date this condition comes into effect and by modifying
         such document from time to time in accordance with the provisions of
         paragraphs 6 and 7.

2.       The licensee shall prepare a connection and use of system code ("CUSC")
         setting out:

         (a)   the terms of the arrangements made in pursuance of paragraph 1;

         (b)   the procedures established in pursuance of paragraph 6; and

         such other terms as are or may be appropriate for the purposes of the
         CUSC.

3.       The licensee shall only enter into arrangements for connection and use
         of system which are in conformity with any relevant provisions of the
         CUSC.

4.       The CUSC shall provide for:

         (a)   the licensee and each CUSC user to be contractually bound insofar
               as is applicable by the terms of the licensee's Grid Code from
               time to time in force;

         (b)   the licensee and each CUSC user to enter into an agreement or
               agreements,

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                supplemental to and in a form prescribed by the CUSC, setting
                out site specific details in respect of each site at which the
                CUSC user's electrical lines or electrical plant is connected to
                the licensee's transmission system;

         (c)    there to be referred to the Authority for determination such
                matters arising under the CUSC as may be specified in the CUSC;
                and

         (d)    a copy of the CUSC to be provided to any person requesting the
                same upon payment of an amount not exceeding the reasonable
                costs of making and providing such copy.

5.       The provisions of paragraphs 4 and 10 shall not limit the matters which
         may be provided for in the CUSC.

6.       The licensee shall establish and operate procedures for the
         modification of the CUSC (including procedures for modification of the
         modification procedures themselves), so as to better facilitate
         achievement of the applicable CUSC objectives, which procedures shall
         provide:

         (a)    for proposals for modification of the CUSC to be made by the
                licensee, CUSC users and such other persons and bodies as the
                CUSC may provide;

         (b)    where such a proposal is made:

                 (i)   for bringing the proposal to the attention of CUSC
                       Parties and such other persons as may properly be
                       considered to have an appropriate interest in it;

                 (ii)  for proper consideration of any representations on the
                       proposal;

                 (iii) for properly evaluating whether the proposed modification
                       would better facilitate achieving the applicable CUSC
                       objectives, provided that so far as any such evaluation
                       requires information which is not generally available
                       concerning the licensee or the licensee's transmission
                       system, such evaluation shall be made on the basis of the
                       licensee's proper assessment (which the licensee shall
                       make available for these purposes) of the effect of the
                       proposed modification on the matters referred to in
                       paragraph 1(a) and (b);

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                 (iv)  for development of any alternative modification which
                       may, as compared with the proposed modification, better
                       facilitate achieving the applicable CUSC objectives;

                 (v)   for the preparation of a report:

                       -     setting out the proposed modification and any
                             alternative;

                       -     evaluating the proposed modification and any
                             alternative;

                       -     assessing the extent to which the proposed
                             modification or any alternative would better
                             facilitate achieving the applicable CUSC
                             objectives;

                       -     assessing the impact of the modification on the
                             core industry documents and the changes expected to
                             be required to such documents as a consequence of
                             such modification;

                       -     setting out a timetable for implementation
                             of the modification and any alternative,
                             including the date with effect from which
                             such modification (if made) is to take
                             effect; and

                 (vi)  for the submission of the report to the Authority as soon
                       after the proposal is made as is appropriate (taking into
                       account the complexity, importance and urgency of the
                       modification) for the proper execution and completion of
                       the steps in sub-paragraphs (i) to (v); and

         (c)     for the timetable (referred to in sub-paragraph (b)(v)) for
                 implementation of any modification to be such as will enable
                 the modification to take effect as soon as practicable after
                 the Authority has directed such modification to be made,
                 account being taken of the complexity, importance and urgency
                 of the modification, and for that timetable to be extended
                 with the consent of or as required by the Authority.

7.       (a)     If a report has been submitted to the Authority pursuant to
                 procedures described in paragraph 6(b)(vi), and the Authority
                 is of the opinion that a modification set out in such report
                 would, as compared with the then existing provisions of the
                 CUSC and any alternative modifications set out in such report,
                 better facilitate achieving the applicable CUSC objectives

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                 the Authority may direct the licensee to make that
                 modification.

         (b)     The licensee shall only modify the CUSC:

                 (i)   in order to comply with any direction of the Authority
                       pursuant to sub-paragraph (a); or

                 (ii)  with the consent of the Authority,

                 and it shall not have the power to modify the CUSC in any
                 other circumstance; and the licensee shall furnish the
                 Authority with a copy of any modification made.

         (c)     Only the licensee shall have the power to modify the CUSC.

8.       The licensee shall prepare and publish a summary of the CUSC as
         modified or changed from time to time in such form and manner as the
         Authority may from time to time direct.

9.       The licensee shall be a party to the CUSC Framework Agreement and shall
         comply with the CUSC.

10.      The CUSC Framework Agreement shall contain provisions:

         (a)     for admitting as an additional party to the CUSC Framework
                 Agreement any person who accepts the terms and fulfils the
                 conditions (each as specified in the CUSC) on which accession
                 to the CUSC Framework Agreement is offered; and

         (b)     for referring for determination by the Authority any dispute
                 which shall arise as to whether a person seeking to be admitted
                 as a party to the CUSC Framework Agreement has fulfilled any
                 accession conditions; and if the Authority determines that the
                 person seeking accession had fulfilled all relevant standard
                 conditions, for admitting such person to be a party to the CUSC
                 Framework Agreement.

11.      The Authority may issue a direction to the licensee to make such
         amendments to the agreement known as the Master Connection and Use of
         System Agreement ("MCUSA") and the supplemental agreements and
         ancillary services agreements (as

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         defined or referred to in MCUSA) and any associated agreements derived
         from MCUSA as shall be stated as required to be made to amend them
         appropriately into the CUSC Framework Agreement, CUSC, bilateral
         agreements, construction agreements and associated agreements derived
         from CUSC so as to maintain continuity of contractual relationships.

12.      The licensee shall take all reasonable steps to secure and implement
         (consistently with the procedures applicable under or in relation to
         such documents), and shall not take any steps to prevent or unduly
         delay, changes to the core industry documents to which it is a party
         (or in relation to which it holds rights in respect of amendment), such
         changes being changes which are appropriate in order to give full and
         timely effect to and/or in consequence of any modification which has
         been made to the CUSC.

13.      For the avoidance of doubt, paragraph 11 is without prejudice to any
         rights of approval, veto or direction in respect of proposed changes to
         the documents referred to in paragraph 12 which the Authority may have.

14.      The licensee shall comply with any direction to the licensee made
         pursuant to this condition.

15.      In this condition:

         "applicable CUSC objectives"      means:

                                           (a)  in relation to a proposed
                                                modification of the modification
                                                procedures, the requirements of
                                                paragraph 6 (to the extent that
                                                they do not conflict with the
                                                objectives set out in paragraph
                                                1); and

                                           (b)  in relation to any other
                                                proposed modification, the
                                                objectives set out in paragraph
                                                1.

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Condition C7G.  Information about the Licensee's Transmission System

1.       The licensee shall by not later than 31 March in each financial year
         prepare a statement in a form approved by the Authority showing in
         respect of each of the seven succeeding financial years circuit
         capacity, forecast power flows and loading on each part of the
         licensee's transmission system and fault levels for each transmission
         node, together with:

         (a)     such further information as shall be reasonably necessary to
                 enable any person seeking use of system to identify and
                 evaluate the opportunities available when connecting to and
                 making use of such system; and

         (b)     a commentary prepared by the licensee indicating the licensee's
                 views as to those parts of the licensee's transmission system
                 most suited to new connections and transport of further
                 quantities of electricity.

2.       The licensee shall include in every statement prepared under paragraph
         1 above the information required by that paragraph except that the
         licensee may with the prior consent of the Authority omit from such
         statement any details as to circuit capacity, power flows, loading or
         other information, disclosure of which would, in the view of the
         Authority, seriously and prejudicially affect the commercial interests
         of the licensee or any third party.

3.       The licensee may periodically revise the information set out in and,
         with the approval of the Authority, alter the form of the statement
         prepared in accordance with paragraph 1 and shall, at least once every
         year that this licence is in force, revise such statement in order that
         the information set out in the statement shall continue to be accurate
         in all material respects.

4.       The licensee shall send a copy of any such statement or revision given
         under paragraphs 1 or 3 to any person who asks for one.

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5.       The licensee may make a charge for any statement or revision sent
         pursuant to paragraph 4 of an amount reflecting the licensee's
         reasonable costs of providing such which costs shall not exceed the
         maximum amount specified in directions issued by the Authority for the
         purposes of this condition.

                                      100

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Condition C8. Security Arrangements

1.       The licensee shall comply with the provisions of the Fuel Security Code
         and such provisions shall have effect as if they were set out in this
         licence.

                                      101

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SECTION D - SUPPLEMENTARY CONDITIONS FOR SCOTLAND

Condition D1.  Interpretation of Section D

"interconnection"                            means: the 275 kV and 400 kV
                                             circuits between and including the
                                             associated switchgear at Harker
                                             sub-station in Cumbria and the
                                             associated switchgear at Strathaven
                                             sub-station in Lanarkshire;

                                             the 275kV transmission circuit
                                             between and including the
                                             associated switchgear at Cockenzie
                                             in East Lothian and the associated
                                             switchgear at Stella in Tyne and
                                             Wear; and

                                             the 400kV transmission circuit
                                             between and including the
                                             associated switchgear at Torness in
                                             East Lothian and the associated
                                             switchgear at Stella in Tyne and
                                             Wear

                                             all as existing at the date on
                                             which the transmission licence
                                             comes into force as from time to
                                             time maintained, repaired or
                                             renewed, together with any
                                             alteration, modification or
                                             addition (other than maintenance,
                                             repair or renewal) which is
                                             primarily designed to effect a
                                             permanent increase in one or more
                                             particular interconnection
                                             capacities as they exist
                                             immediately prior to such
                                             alteration, modification or
                                             addition and as from time to time
                                             maintained, repaired or renewed;
                                             and

                                             the 132kV transmission circuit
                                             between and including (and directly
                                             connecting) the associated
                                             switchgear at Chapelcross and the

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                                             associated switchgear at Harker
                                             sub-station in Cumbria; and

                                             the 132kV transmission circuit
                                             between and including (and
                                             connecting, via Junction V) the
                                             associated switchgear at
                                             Chapelcross and the associated
                                             switchgear at Harker sub-station in
                                             Cumbria

                                             all as existing at the date on
                                             which the transmission licence
                                             comes into force and as from time
                                             to time maintained, repaired or
                                             renewed.

"Scottish interconnection"                   means such part of the
                                             interconnection as is situated in
                                             Scotland.

"separate business"                          means each or any of:

                                             (a)   any supply business of (i)
                                                   the licensee or (ii) an
                                                   affiliate or related
                                                   undertaking of the licensee;

                                             (b)   any distribution business of
                                                   (i) the licensee or (ii) an
                                                   affiliate or related
                                                   undertaking of the licensee;

                                             (c)   any generation business of
                                                   (i) the licensee or (ii) an
                                                   affiliate or related
                                                   undertaking of the licensee;

"Trading Code"                               means the trading code required to
                                             be adopted pursuant to standard
                                             condition D2 (Trading Code for
                                             Scotland) and approved by the
                                             Authority as from time to time
                                             revised with the approval of the
                                             Authority.

"transmission business"                      means the authorised business of
                                             the licensee or any affiliate or
                                             related undertaking of the licensee
                                             in the planning, development,

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                                             construction and maintenance of the
                                             licensee's transmission system
                                             (whether or not pursuant to
                                             directions of the Secretary of
                                             State made under section 34 or 35
                                             of the Act) and the operation of
                                             such system for transmission by the
                                             licensee, including any business in
                                             providing connections to the
                                             licensee's transmission system, but
                                             shall not include any other
                                             business (whether or not a separate
                                             business) of the licensee or any
                                             affiliate or related undertaking of
                                             the licensee in the provision of
                                             services to or on behalf of any one
                                             or more persons.

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Condition D2. Trading Code for Scotland

1.       The licensee shall, jointly with the other founder member, adopt a
         Trading Code designated by the Authority for the purposes of this
         condition not later than such date as shall be specified in directions
         issued by the Authority for the purposes of this condition and the
         licensee shall comply with the terms of such Trading Code as from time
         to time revised (including any directions, consents, approvals or
         determinations thereunder by the Authority).

2.       The Trading Code shall include:

         (a)   arrangements for the establishment of facilities and procedures
               for effecting trading of electricity between the founder members
               and between and among the founder members and other persons who
               become members of the trading system after the date of the coming
               into force of the Trading Code;

         (b)   arrangements for effecting trading of electricity between members
               of the trading system;

         (c)   arrangements for the establishment of a trading committee to
               carry out the general management and supervision of the trading
               system and its operation;

         (d)   arrangements for the admission to membership of the trading
               system of:

               (i)   any person authorised to generate electricity by a
                     generation licence granted under section 6 (1) (a)of the
                     Act:

                     (aa)  who operates a generating station of a net capacity
                           not less than 50MW (or such other net capacity as the
                           Authority shall direct from time to time); and

                     (bb)  who satisfies such other (if any) requirements as the
                           Authority shall direct from time to time; and

                     (cc)  applies for such membership and agrees to be bound by
                           the

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                           provisions of the Trading Code; and

                     (dd)  whose said generation licence contains a standard
                           condition requiring it to comply with the provisions
                           of the Trading Code.

               (ii)  any licence holder specified or of a description specified
                     by the Authority:

                     (aa)  who applies for such membership and agrees to be
                           bound by the provisions of the Trading Code; and

                     (bb)  whose licence contains a standard condition requiring
                           it to comply with the provisions of the Trading Code.

         (e)   arrangements for charging members for the costs of the trading
               system;

         (f)   provisions for the giving of directions by the Authority to the
               members of the trading system including (without limitation)
               directions in relation to the responsibilities of the trading
               committee, the contents of reports to be prepared by the trading
               committee pursuant to the Trading Code, the confidentiality and
               prevention of disclosure of information and matters relating to
               the trading system and trading of electricity under the trading
               system and the criteria for membership of the trading system;

         (g)   provisions for the approval by the Authority of certain matters
               including (without limitation) approval of the resignation of a
               founder member from membership of the trading system, the
               cessation of the membership of other members in certain
               circumstances, the admission of persons to membership in certain
               circumstances and any adjustment by the Trading Committee to the
               amount of the membership contributions or other sums payable by
               members pursuant to the Trading Code;

         (h)   provisions for referring certain matters to the Authority for its
               determination including (without limitation) certain
               disagreements arising under the Trading Code concerning the
               admission of persons to membership of the trading system

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<PAGE>

               and the cessation of the membership of members;

         (i)   provisions for delivering to the Authority copies of reports
               prepared by the trading committee pursuant to the Trading Code;

         (j)   administration procedures for the trading system.

3.       In complying with the Trading Code the licensee:

         (a)   shall have regard to its duty to facilitate competition as
               specified in section 9(2) (b) of the Act; and

         (b)   shall not unduly discriminate against or unduly prefer:

               (i)   any one or any group of members; or

               (ii)  the licensee in the conduct of any business other than the
                     transmission business

         in favour of or as against any one other or any other group of members.

4.       The licensee shall, jointly with each other transmission licence holder
         with an authorised area in Scotland and in consultation with the
         members of the trading system, review the Trading Code and its
         operation from time to time after the date of the coming into force of
         this transmission licence and the licensee shall do so whenever
         requested by the Authority and in accordance with the terms of such
         request (including any requirement to prepare such revisions to the
         Trading Code as shall be necessary in order to give effect to such
         matters as shall be specified in the request). Any revision to the
         Trading Code resulting from the carrying out of any review shall be
         sent to the Authority for its approval and no revision to the Trading
         Code shall become effective until the Authority has approved the
         revision.

5.       The licensee shall give or send a copy of the Trading Code (as from
         time to time revised) to the Authority.

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<PAGE>

6.       The licensee shall (subject to paragraph 7) give or send a copy of the
         Trading Code (as from time to time revised) to any authorised
         electricity operator who requests it.

7.       The licensee may make a charge for any copy of the Trading Code (as
         from time to time revised) given or sent pursuant to paragraph 6 of an
         amount which will not exceed any amount specified for the time being
         for the purpose of this condition in directions issued by the
         Authority.

8.       If there shall be any disagreement between the licensee and any other
         transmission licence holder within an authorised area in Scotland as to
         the terms of any revision which is to be made to the Trading Code
         pursuant to paragraph 4 then:

         (a)   the licensee shall refer the matter to the Authority for
               determination;

         (b)   the licensee shall jointly with each other transmission licence
               holder with an authorised area in Scotland forthwith prepare such
               revision on the basis of the terms so determined by the
               Authority; and

         (c)   a revision so prepared shall for all the purposes of this
               standard condition be deemed to have been prepared in accordance
               with paragraph 4.

9.       For the purposes of this condition:

         "trading of electricity"       means sales and purchases of electricity
                                        pursuant to short term contracts;

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         "short term contract"             means a contract under which a person
                                           has a right or an obligation (whether
                                           or not conditional or contingent) to
                                           receive or provide electricity other
                                           than:

                                           (i)    a contract:

                                           which is performed without the use of
                                           any part of the Scottish transmission
                                           system ; and

                                           under which the purchaser is not a
                                           person authorised to supply
                                           electricity in Scotland or, if so
                                           authorised, undertakes to the seller
                                           to use the electricity received or
                                           provided pursuant to the contract
                                           only for purposes other than supply
                                           to premises in Scotland;

                                           or

                                           (ii)   a contract under which no
                                           person has a right or an obligation
                                           (whether or not conditional or
                                           contingent) to receive or provide
                                           electricity on a day earlier than the
                                           29th day after the date on which the
                                           contract is made or entered into; or

                                           (iii)  a contract under which; a
                                           person has a right or an obligation
                                           (whether or not conditional or
                                           contingent) to receive or provide
                                           electricity on any one or more of the
                                           28 days after the date on which the
                                           contract is made or entered into; and

                                           that person has a right or an
                                           obligation to receive or provide on
                                           the 29th (or any later) day after
                                           such date (and on the same terms as
                                           the highest daily amount referred to
                                           below) an amount of electricity not
                                           less than the highest daily amount of
                                           electricity which it has a right or
                                           an obligation to receive or provide
                                           during the period of 28 days referred
                                           to in sub-paragraph (a) above.

         "trading system"                  means the facilities and procedures
                                           established under the Trading Code
                                           for the trading of electricity.

         "other founder member"            means the other transmission licence
                                           holder with an authorised area in
                                           Scotland on 1 April 1991 .

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<PAGE>

         "founder members"                 means the licensee and the other
                                           founder member together.

         "Scottish transmission system "   means the transmission systems of the
                                           licensee and any other transmission
                                           licence holder with an authorised
                                           area in Scotland taken together, but
                                           excluding any part thereof which is
                                           not situated in Scotland.

         "contract"                        shall include any contract whether or
                                           not in, or evidenced by writing, but
                                           shall not include the Pooling and
                                           Settlement Agreement or any contract
                                           made or entered into pursuant to the
                                           Pooling and Settlement Agreement.

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<PAGE>

Condition D3. Restriction on Use of Certain Information

1.       Any information relating to or deriving from the management or
         operation of the transmission business shall, for the purposes of this
         condition, be treated as confidential information.

2.       The licensee shall not (and shall procure that its affiliates and
         related undertakings shall not) disclose or authorise access to
         confidential information:

         (a)   save to the extent provided by sub-paragraphs 3(b) to (d), to
               such of its (or its affiliates' or related undertakings')
               employees, agents, advisers, consultants or contractors as are
               engaged in, or in respect of, the management or operation of any
               other business (whether or not a separate business) of the
               licensee; or

         (b)   save to the extent permitted by paragraph 3, to any other person.

3.       Subject to paragraphs 9 to 12 of standard condition D3A (Independence
         of and Appointment of Managing Director of the Transmission Business),
         the licensee shall (and shall procure that its affiliates and related
         undertakings shall) disclose or authorise access to confidential
         information only:

         (a)   in the following circumstances, namely;

               (i)  to such of its (or its affiliates' or related undertakings')
                    employees, agents, advisers, consultants or contractors as
                    are engaged in, or in respect of, the management or
                    operation of the transmission business or any external
                    transmission activities and require access to the
                    information for that purpose;

               (ii) to personnel of any holder of a distribution licence or a
                    transmission licence holder engaged in the external
                    distribution activities of that distribution licence holder,
                    or the external transmission activities of that transmission
                    licence holder (as the case may be), to the extent necessary
                    for the performance by such personnel of those external
                    distribution activities, or those external transmission
                    activities (as the

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<PAGE>

                     case may be), and the use by such personnel of that
                     information for that purpose;

               provided that effective arrangements are maintained in place at
               all times for ensuring that no further disclosure of any
               information supplied or obtained pursuant to this paragraph is
               made and that such information is used only for the purpose of
               the transmission business or any external transmission activities
               of the licensee;

         (b)   where the licensee (or any affiliate or related undertaking of
               the licensee) is required or permitted to disclose such
               information by virtue of:

               (i)   any requirement of a competent authority/3/;

               (iii) the standard conditions of any licence granted under the
                     Act or any document referred to in such a licence with
                     which it is required by virtue of the Act or that licence
                     to comply;

               (iv)  any other requirement of law; or

               (v)   the rules of the Electricity Arbitration Association or of
                     any judicial or other arbitral process or tribunal of
                     competent jurisdiction;

         (c)   where such information was provided by or relates to any person
               who has notified (or otherwise agreed with) the licensee that it
               need not be treated as confidential; or

         (d)   where such information, not being information provided by or
               relating to any person other than the licensee, is placed by the
               licensee in the public domain

         and in each case the licensee shall disclose or authorise access to the
         confidential information only insofar as is necessary or appropriate in
         all the circumstances.

4.       Subject to paragraphs 9 to 12 of standard condition D3A (Independence
         of and Appointment of Managing Director of the Transmission Business),
         the licensee shall use all reasonable endeavours to ensure that any
         person who is in possession of or has access to confidential
         information in accordance with sub-paragraph 3(a) shall use such
         information only for the purposes of the transmission business or any
         external transmission activities.

5.       In this condition

_________________

/3/      Direction issued under Conditions 8 and 8A (of Part IV) of the
         Transmission Licence of Scottish Power UK plc now Standard Conditions
         D3 and D3A of this licence

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<PAGE>

        "competent authority"                   means the Secretary of State,
                                                the Authority, the Compliance
                                                Officer, the Stock Exchange, the
                                                Panel on Take-overs and Mergers,
                                                or any local or national agency,
                                                regulatory body, authority,
                                                department, inspectorate,
                                                minister (including Scottish
                                                Ministers), ministry, official
                                                or public or statutory person
                                                (whether autonomous or not) of,
                                                or of the government of, the
                                                United Kingdom, the United
                                                States of America or the
                                                European Community.

        "confidential information"              bears the meaning given at
                                                paragraph 1.

        "Electricity Arbitration Association"   means the unincorporated
                                                members' club of that name
                                                formed inter alia to promote the
                                                efficient and economic operation
                                                of the procedure for the
                                                resolution of disputes within
                                                the electricity supply industry
                                                by means of arbitration or
                                                otherwise in accordance with its
                                                arbitration rules.

        "external distribution activities"      means any business of the
                                                licensee or any affiliate or
                                                related undertaking comprising
                                                or ancillary to the maintenance,
                                                repair or operation of, or other
                                                activities in connection with
                                                any electricity distribution or
                                                transmission system other than
                                                the licensee's distribution
                                                system ("an external
                                                distribution system").

        "external transmission activities"      has the meaning given to that
                                                term in standard condition D3A
                                                (Independence of and Appointment
                                                of Managing Director of the
                                                Transmission Business) of this
                                                part of this licence.

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<PAGE>

Condition D3. Independence of and Appointment of Managing Director of the
Transmission Business

1

        (a)    The licensee shall establish and shall thereafter maintain the
               full managerial and operational independence of the transmission
               business and any external transmission activities from each other
               business (whether or not a separate business) of the licensee and
               of its affiliates and related undertakings.

        (b)    The licensee shall appoint an officer (hereafter referred to as
               "the Managing Director of Transmission") to be responsible for
               the conduct of the transmission business and any external
               transmission activities.

2.      The Managing Director of Transmission may be a director:

        (a)    of the transmission licensee; or

        (b)    in the circumstances set out in paragraph 12 only, of the
               licensee and of an affiliate or related undertaking of the
               licensee which holds a distribution licence or a holding company
               only engaged in ownership or management of distribution or
               transmission businesses or both;

        provided that the licensee shall ensure that the Managing Director of
        Transmission shall not be a director of any other affiliate or related
        undertaking of the licensee and that he shall not be engaged by the
        licensee in any other capacity than as Managing Director of
        Transmission.

3.      The licensee shall arrange for the Managing Director of Transmission in
        the course of discharging his responsibility under paragraph 1 to be
        provided from time to time with:

        (a)    the services of such persons (as the Managing Director of
               Transmission may from time to time select), whose services:

               (i)   may be dispensed with at the sole  discretion (subject to
                     compliance  with relevant UK employment legislation) of the
                     Managing Director of

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                      Transmission; and

               (ii)   will only be utilised if such persons execute a contract
                      of or for services containing an appropriate
                      confidentiality clause regarding that information which
                      may be acquired by such person whilst working for the
                      transmission business and any external transmission
                      activities;

        (b)    such premises, systems, equipment, facilities, property,
               personnel, data and management resources; and

        (c)    such finance;

        as may be reasonably required by the Managing Director of Transmission
        for the efficient and effective management and operation of the
        transmission business in accordance with the licensee's duty under
        section 9(2)(a) of the Act and the transmission licence.

4.      The licensee shall direct the Managing Director of Transmission:

        (a)    to inform the directors of the licensee, in writing, if, at any
               time, he is of the opinion that the provision of those items
               specified in paragraph 3 are not sufficient to enable the
               licensee to comply with its duties under section 9(2)(a) of the
               Act and the transmission licence; and

        (b)    as soon as practicable after the end of the year 2001 and of each
               subsequent calendar year, to furnish to the directors of the
               licensee:

               (i)    an informative report on the provision of those matters
                      made in respect of that year; and

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<PAGE>

               (ii)   a statement of his opinion whether adequate arrangements
                      have been or are likely to be made for the provision of
                      those matters which will be required in respect of the
                      ensuing calendar year to enable the licensee to comply
                      with those duties including, in particular, a description
                      of the differences in the provision of those matters made
                      or likely to be made in that year compared with the
                      provision made in respect of the preceding year and the
                      reasons for those differences.

5.      On receipt of any information under paragraph 4(a) or report and
        statement under paragraph 4(b), the licensee shall, subject to
        compliance with the listing rules (within the meaning of Part IV of the
        Financial Services Act 1986 (c.60)) of the Stock Exchange:

        (a)    give to the Authority forthwith that information or report and
               statement; and

        (b)    where such a report is  received, publish it in such form and
               manner as the Authority may direct.

6.      Except insofar as the Authority consents/4/ to the licensee doing so,
        the licensee shall only give directions to the Managing Director of
        Transmission as to the discharge of his responsibilities under
        paragraph 1:

        (a)    where:

               (i)    in the bona fide and reasonable opinion of the licensee
                      the statutory, licence and contractual obligations of the
                      licensee; or

               (ii)   in the bona fide opinion of the directors, their duties;
                      so require; or

_______________

/4/     Direction issued under Conditions 8 and 8A (of Part IV) of the
        Transmission Licence of Scottish Power UK plc now Standard

                                      116

<PAGE>

         (b)  to ensure compliance with paragraph 4.

7.       The licensee shall give directions under sub- paragraph 6(a) by notice
         in writing, specifying in the notice the statutory, licence or
         contractual obligations of the licensee or duty of the directors of the
         licensee which require the licensee to give directions, which notice
         shall be copied to the Authority.

8.       Except in so far as the Authority consents to the licensee not doing
         so, the licensee shall, subject to paragraph 9 below, ensure that:

         (a)   no business of the licensee (or of any affiliate or related
               undertaking of the licensee), other than the transmission
               business or any external transmission activities, may use or have
               access to:

               (i)     premises or parts of premises occupied by persons engaged
                       in, or in respect of, the management or operation of the
                       transmission business or any external transmission
                       activities;

               (ii)    systems for the recording, processing or storage of data
                       to which persons engaged in, or in respect of, the
                       management or operation of the transmission business or
                       any external transmission activities also have access;

               (iii)   equipment, facilities or property employed for the
                       management or operation of the transmission business or
                       any external transmission activities; or

               (iv)    the services of persons who are (whether or not as their
                       principal occupation) engaged in, or in respect of, the
                       management or operation of the transmission business or
                       any external transmission activities; and

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         (b)   it can and does, insofar as is legally possible, prevent any
               person who has ceased to be engaged in, or in respect of, the
               management or operation of the transmission business from being
               engaged in, or in respect of, the activities of any other
               business of the licensee (or of any affiliate or related
               undertaking of the licensee) until the expiry of an appropriate
               time from the date on which he ceased to be engaged by the
               transmission business.

9.       The Authority may, upon the written request of the licensee, issue a
         direction relieving the licensee of its obligations under standard
         condition D3 (Restriction on Use of Certain Information) and under
         paragraphs 1(a), 2 and 8 of this condition, to such extent and subject
         to such terms and conditions as he may specify in that direction,
         where:

         (a)   it is not reasonably practicable for the licensee to comply with
               any aspect of those obligations;

         (b)   in the case of paragraphs 2 to 4 of standard condition D3
               (Restriction on Use of Certain Information), a failure to comply
               with any aspect of those obligations would be of a trivial
               nature; or

         (c)   in the case of paragraphs 1(a) and 8 of this condition, any
               arrangements for the use of or access to premises, systems,
               equipment, facilities, property or personnel by both the
               transmission business and any other business of the licensee (or
               of any affiliate or related undertaking of the licensee):

               (i)   do not involve a cross-subsidy being either given to the
                     transmission business by such other business or received
                     from the transmission business by such other business;

               (ii)  obtain for the transmission business, in the most efficient
                     and

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                     economical manner possible, the use of the relevant
                     premises, systems, equipment, facilities, property or
                     personnel; and

               (iii) do not restrict, distort or prevent competition in the
                     generation or supply of electricity,

             provided that the licensee shall not thereby be relieved of any
             obligation imposed on it by EU Directive 96/92/EC.

10.      Where, subsequent to the issue of a direction pursuant to paragraph 9,
         the criteria set out at sub-paragraphs 9(a), (b) or (c) cease to be
         satisfied, the Authority may withdraw the direction or modify any terms
         and conditions which may be specified in it.

11.      For the purposes of paragraphs 9 and 10 the Authority shall, following
         consultation with the licensee, determine any question as to whether
         the criteria set out at sub-paragraphs 9(a), (b) or (c) are or continue
         to be satisfied.

12.      If the Authority is requested to issue any direction pursuant to
         paragraph 9 relating to the transmission business being managed or
         operated by the licensee together with any distribution business then
         that direction may provide that for the purposes of this condition and
         of standard condition D3 (Restriction on Use of Certain Information)
         the transmission business shall be taken to include any such
         distribution business and for the Managing Director of Transmission to
         take part in the management of and/or to be a director of any company
         carrying on any such distribution business.

13.      In this condition:

         "appropriate time"                        means 3 months, or such
                                                   shorter period as the
                                                   Authority may approve in
                                                   respect of any person or
                                                   class of persons.

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         "external transmission activities"        means any business of the
                                                   licensee or any affiliate or
                                                   related undertaking of the
                                                   licensee comprising or
                                                   ancillary to the maintenance,
                                                   repair or operation in an
                                                   emergency of any electricity
                                                   distribution or transmission
                                                   system other than the
                                                   licensee's transmission
                                                   system.

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Condition D3B. Appointment of Compliance Officer

1.       The licensee shall prepare a statement in a form approved by the
         Authority setting out the practices, procedures and systems which the
         licensee has adopted (or intends to adopt) to ensure its compliance
         with the relevant duties.

2.       The licensee may periodically revise the information set out in and,
         with the approval of the Authority, alter the form of the statement
         prepared in accordance with paragraph 1 and shall, at least once every
         year during which this licence is in force, review such statement in
         order that the information set out therein shall continue to be
         accurate in all material respects.

3.       The licensee shall send a copy of the statement prepared in accordance
         with paragraph 1, and of each revision of such statement in accordance
         with paragraph 2, to the Authority.

4.       The licensee shall, following consultation with the Authority, appoint
         a competent person (who shall be known as the "Compliance Officer") for
         the purpose of facilitating compliance by the licensee with the
         relevant duties.

5.       The licensee shall at all times engage the services of the Compliance
         Officer for the performance of such duties and tasks as the licensee
         considers it appropriate to assign to him for the purposes specified at
         paragraph 4, which duties and tasks shall include those set out at
         paragraph 8.

6.       The licensee shall procure that the Compliance Officer:

         (a)   is provided with such staff, premises, equipment, facilities and
               other resources; and

         (b)   has such access to its premises, systems, information and
               documentation

         as, in each case, he might reasonably expect to require for the
         fulfilment of the duties

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         and tasks assigned to him.

7.       The licensee shall make available to the Compliance Officer a copy of
         any complaint or representation received by it from any person in
         relation to any of the practices, procedures and systems adopted by the
         licensee in accordance with the statement referred to at paragraph 1.

8.       The duties and tasks assigned to the Compliance Officer shall include:

         (a)   providing relevant advice and information to the licensee for the
               purpose of ensuring its compliance with the Relevant Duties;

         (b)   monitoring the effectiveness of the practices, procedures and
               systems adopted by the licensee in accordance with the statement
               referred to at paragraph 1;

         (c)   investigating any complaint or representation made available to
               him in accordance with paragraph 7;

         (d)   recommending and advising upon the remedial action which any such
               investigation has demonstrated to be necessary or desirable;

         (e)   providing relevant advice and information to the licensee for the
               purpose of ensuring its effective implementation of:

               (i)   the practices, procedures and systems adopted in accordance
                     with the statement referred to at paragraph 1; and

               (ii)  any remedial action recommended in accordance with
                     sub-paragraph (d); and

         (f)   reporting annually to the directors of the licensee - in respect
               of the year ending 31 December 2001 and of each subsequent year -
               as to his activities during the period covered by the report,
               including the fulfilment of the other

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                  duties and tasks assigned to him by the licensee.

9.   As soon as is reasonably practicable following each annual report of the
     Compliance Officer, the licensee shall produce a report:

     (a)   as to its compliance during the relevant year with the relevant
           duties; and

     (b)   as to its implementation of the practices, procedures and systems
           adopted in accordance with the statement referred to at paragraph 1.

10.  The report produced in accordance with paragraph 9 shall in particular:

     (a)   detail the activities of the Compliance Officer during the relevant
           year;

     (b)   refer to such other matters as are or may be appropriate in relation
           to the implementation of the practices, procedures and systems
           adopted in accordance with the statement referred to at paragraph 1;
           and

     (c)   set out the details of any investigations conducted by the Compliance
           Officer, including:

           (i)    the number, type and source of the complaints or
                  representations on which such investigations were based;

           (ii)   the outcome of such investigations; and

           (iii)  any remedial action taken by the licensee following such
                  investigations.

11.  The licensee shall submit to the Authority a copy of the report produced in
     accordance with paragraph 9, and shall give or send a copy of the report to
     any person who requests such a copy.

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12.  In this condition:

     "relevant duties"           means the obligations set out in standard
                                 condition D3 (Restriction on Use of Certain
                                 Information).

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Condition D4. Transmission System Outages

1.   The licensee shall notify the Authority in writing forthwith in the event
     that the licensee and the transmission licence holder for the other
     transmission system in Scotland have not agreed a programme of planned
     outages for their respective transmission systems for the financial year
     commencing on 1 April 2002 or any subsequent financial year on or before
     the 1st day of January prior to the commencement of the relevant financial
     year.

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Condition D5. Supplementary Grid Code Condition for Scotland

1.   In addition to the list of items referred to in paragraph 5 of standard
     condition 7 (Licensee's Grid Code) which are to be included in the
     licensee's Grid Code, the licensee shall also include in the licensee's
     Grid Code procedures relating to outages of generation sets and a
     scheduling and despatch code specifying procedures for the scheduling and
     despatch of generating stations connected to the licensee's transmission
     system.

2.   The licensee shall keep and maintain such records concerning its
     implementation and compliance with the licensee's Grid Code as are in the
     opinion of the Authority, sufficient to enable the Authority to assess
     whether the licensee is performing the obligation imposed upon it under
     paragraph 9 of standard condition 7 (Licensee's Grid Code) concerning these
     matters and the licensee shall furnish to the Authority such records (or
     such of these as the Authority may require) in such manner and at such
     times as the Authority may require.

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Condition D6. Settlement Agreement for Scotland

1.   Insofar as the licensee transmits electricity to any premises situate in
     Scotland or to the extent that the Settlement Agreement for Scotland may
     apply in respect of the activities of the transmission business, the
     licensee shall comply with the relevant provisions of the Settlement
     Agreement for Scotland.

2.   In this condition:

     "Settlement Agreement for Scotland" means the agreement of that title, as
     nominated by the Authority for the purposes of this condition, to be
     prepared in accordance with and comprise such matters as are set out in
     special condition I (The Settlement Agreement for Scotland) of each of the
     electricity distribution licences of SP Distribution Limited, and Scottish
     Hydro-Electric Power Distribution limited (and any other name by which any
     of these companies come to be known).

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Condition D7. Security Arrangements

         (a)    If so directed in directions issued by the Authority for the
                purposes of this condition, the licensee shall, not later than
                such date as may be specified in such directions, enter into
                an agreement designated by the Secretary of State for the
                purposes of this condition relating to compliance with
                directions issued by the Secretary of State under section 34
                and/or section 35 of the Act.

         (b)    The licensee shall comply with and perform its obligations
                under any agreement which it enters into pursuant to
                sub-paragraph (a) above.

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<PAGE>

Condition D8. Basis of charges for use of system and connection to system:
requirements for transparency

1.   The licensee shall as soon as practicable after this licence has come into
     force and, in any event, not later than such date as the Authority shall
     specify prepare a statement approved by the Authority setting out the basis
     upon which charges will be made for use of the licensee's transmission
     system and for connection to the licensee's transmission system, such
     statement to be in such form and to contain such detail as shall be
     necessary to enable any person to make a reasonable estimate of the charges
     to which it would become liable for the provision of such services, and
     (without prejudice to the foregoing) including such of the information set
     out in paragraphs 2 and 3 as is required by such paragraphs to be included
     in the relevant statement.

2.   Except to the extent that the Authority shall otherwise specify, the
     statement referred to in paragraph 1 shall in respect of use of system
     include:

     (a)  a schedule of charges for the transmission of electricity under use of
          system;

     (b)  the charge for maintaining voltage and frequency within statutory
          limits;

     (c)  a schedule of adjustment factors to be made in respect of transmission
          losses, in the form of additional supplies required to cover those
          transmission losses;

     (d)  the methods by which and the principles on which charges (if any) for
          availability of transmission capacity on the licensee's transmission
          system will be made;

     (e)  a schedule of the charges (if any) which may be made for the provision
          and installation of any meters or electrical plant at entry or exit
          points, the provision and installation of which is ancillary to the
          grant of use of system, and for the maintenance of such meters or
          electrical plant;

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     (f)  the methods by which and the principles on which entry and exit
          charges for connections in operation before the date on which this
          licence comes into force will be calculated; and

     (g)  such other matters as shall be specified in directions issued by the
          Authority from time to time for the purposes of this condition.

3.   The statement referred to in paragraph 1 shall in respect of connections to
     the licensee's transmission system include -

     (a)  a schedule listing those items (including the carrying out of works
          and the provision and installation of electric lines or electrical
          plant or meters) of significant cost liable to be required for the
          purpose of connection (at entry or exit points) to the licensee's
          transmission system for which connection charges may be made or levied
          and including (where practicable) indicative charges for each such
          item and (in other cases) an explanation of the methods by which and
          the principles on which such charges will be calculated;

     (b)  the methods by which and the principles on which any charges will be
          made in respect of extension or reinforcement of the licensee's
          transmission system rendered necessary or appropriate by virtue of
          providing connection to or use of system to any person seeking
          connection;

     (c)  the methods by which and the principles on which connection charges
          will be made in circumstances where the electric lines or electrical
          plant to be installed are (at the licensee's discretion) of greater
          size or capacity than that required for use of system by the person
          seeking connection;

     (d)  the methods by which and the principles on which any charges
          (including any capitalised charge) will be made for maintenance,
          replacement and repair required of electric lines, electrical plant or
          meters provided and installed for making a connection to the
          licensee's transmission system;

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     (e)  the methods by which and principles on which any charges will be made
          for disconnection from the licensee's transmission system and the
          removal of electrical plant, electric lines and ancillary meters
          following disconnection; and

     (f)  such other matters as shall be specified in directions issued by the
          Authority from time to time for the purposes of this condition.

4.   Connection charges for those items referred to in paragraph 3 shall be set
     at a level which will enable the licensee to recover:

     (a)  the appropriate proportion of the costs directly or indirectly
          incurred in carrying out any works, the extension or reinforcement of
          the licensee's transmission system or the provision and installation,
          maintenance, replacement and repair or (as the case may be) removal
          following disconnection of any electric lines, electrical plant,
          meters or other items; and

     (b)  a reasonable rate of return on the capital represented by such costs.

5.   The licensee shall as soon as practicable after this licence has come into
     force and, in any event, not later than such date as the Authority shall
     specify prepare a statement approved by the Authority showing in respect of
     each of the 7 succeeding financial years circuit capacity, forecast power
     flows and loading on each part of its transmission system and fault levels
     for each transmission node, together with:

     (a)  such further information as shall be reasonably necessary to enable
          any person seeking use of system to identify and evaluate the
          opportunities available when connecting to and making use of such
          system;

     (b)  a commentary prepared by the licensee indicating the licensee's views
          as to those parts of the licensee's transmission system most suited to
          new connections and the transmission of further quantities of
          electricity; and

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<PAGE>

     (c)  such other matters as shall be specified in directions issued by the
          Authority from time to time for the purposes of this condition.

6.   The licensee shall include in every statement prepared or (as the case may
     be) given or sent under paragraph 5 the information required by such
     paragraph, save that the licensee may, with the prior consent of the
     Authority, omit from any such statement any details as to circuit capacity,
     power flows, loading or other information, disclosure of which would, in
     the view of the Authority, seriously and prejudicially affect the
     commercial interests of the licensee or any third party.

7.   In addition to, and without prejudice to, the licensee's obligations under
     paragraph 1, the licensee shall, upon being directed to do so in directions
     issued by the Authority from time to time for the purposes of this
     condition and within such period as shall be specified in the directions,
     prepare a statement or statements approved by the Authority providing that
     charges for use of the licensee's transmission system and/or for connection
     to the licensee's transmission system will be made on such basis as shall
     be specified in the directions and such statement or statements shall be in
     such form and contain such detail as shall be necessary to enable any
     person to make a reasonable estimate of the charges to which it would
     become liable for the provision of such services and (without prejudice to
     the foregoing) including such information as shall be specified in the
     directions. Each statement prepared in accordance with this paragraph
     shall, with effect from the date on which it is approved by the Authority
     or such later date as the Authority shall specify, replace the
     corresponding statement prepared by the licensee in accordance with
     paragraph 1 or, as the case may be, this paragraph (as from time to time
     revised in accordance with paragraph 8) which is in force at such date and
     the licensee shall, with effect from such date make charges in accordance
     with the statement (as from time to time revised in accordance with
     paragraph 8) which has replaced such corresponding statement.

8.   The licensee may periodically revise the statements prepared in accordance
     with paragraphs 1, 5 and 7 and shall, at least once in every year this
     licence is in force, make any necessary revisions to such statements in
     order that the information set out in the statements shall continue to be
     accurate in all material respects.

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<PAGE>

9.   The licensee shall send a copy of the statements prepared in accordance
     with paragraphs 1, 5 and 7, and of each revision of such statements in
     accordance with paragraph 8, to the Authority. Each such revision shall
     require to be approved by the Authority and shall not become effective
     until approved by the Authority.

10.  The licensee shall give or send a copy of the statements prepared in
     accordance with paragraphs 1, 5 and 7 or (as the case may be) of the latest
     revision of such statements in accordance with paragraph 8 approved by the
     Authority pursuant to such paragraph to any person who requests a copy of
     such statement or statements.

11.  The licensee may make a charge for any statement given or sent pursuant to
     paragraph 10 of an amount reflecting the licensee's reasonable costs of
     providing such a statement which shall not exceed the maximum amount
     specified in directions issued by the Authority for the purposes of this
     condition.

12.  The licensee shall, not less than 5 months prior to the date on which it
     proposes to amend its use of system charges in respect of any agreement for
     use of system, send to the Authority a notice setting out the licensee's
     proposals in relation to such amendment together with an explanation of the
     proposed amendment (including a statement of any assumptions on which such
     proposals are based), and the licensee shall send a copy of such notice to
     any person who has entered into an agreement for use of system under
     standard condition D8B (Requirement to Offer Terms).

13.  Except with the prior consent of the Authority, the licensee shall not
     amend its use of system charges in respect of any agreement for use of
     system save to the extent that it has given prior notice of the amendment
     in accordance with paragraph 12 and such amendment reflects the proposals
     made in the notice (subject only to revisions consequent upon material
     changes in the matters which were expressed, in the statement which
     accompanied the notice, to be assumptions on which the proposals were
     based).

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Condition D8A. Non-discrimination in the provision of use of system and
connection to system

1.   In the provision of use of system or in the carrying out of works for the
     purpose of connection to the licensee's system or in providing for the
     retention of a connection to its system the licensee shall not discriminate
     as between any persons or class or classes of person.

2.   Without prejudice to paragraph 1, and subject to paragraph 4, the licensee
     shall not make charges for use of system to any person or class or classes
     of persons which differ from the charges for such provision to any other
     person or class or classes of persons except insofar as such differences
     reasonably reflect differences in the costs associated with such provision.

3.   Notwithstanding paragraph 2, the licensee shall not make or levy use of
     system charges in respect of any item of charge separately identified in
     the statement referred to at paragraph 1 of standard condition D8 (Basis of
     Charges for Use of System and Connection to System: Requirement for
     Transparency) on any person whose contract does not provide for him to
     receive the service to which such item of charge refers.

4.   The licensee shall not in setting its charges for use of system restrict,
     distort or prevent competition in the generation, transmission,
     distribution or supply of electricity.

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<PAGE>

Condition D8B. Requirement to offer terms

1.   On application made by any authorised electricity operator, the licensee
     shall (subject to paragraph 5 ) offer to enter into an agreement for use of
     system:

     (a)  to accept into the licensee's transmission system at such entry point
          or points and in such quantities as may be specified in the
          application, electricity to be provided by or on behalf of such
          authorised electricity operator;

     (b)  to deliver such quantities of electricity as are referred to in
          sub-paragraph (a) (less any transmission losses) to such exit point or
          points on the licensee's transmission system and to such person or
          persons as the authorised electricity operator may specify;

     (c)  specifying the use of system charges to be paid by the authorised
          electricity operator, such charges (unless manifestly inappropriate)
          to be referable to the statement prepared in accordance with (as
          appropriate) paragraph 1 (or, as the case may be, paragraph 8 ) of
          standard condition D8 (Basis of Charges for Use of System and
          Connection to System: Requirement for Transparency) or any revision
          thereof; and

     (d)  containing such further terms as are or may be appropriate for the
          purposes of the agreement.

2.   On application made by any person the licensee shall (subject to paragraph
     5) offer to enter into an agreement for the provision of a connection or
     for the modification of an existing connection to the licensee's
     transmission system, and such offer shall make detailed provision
     regarding:

     (a)  the carrying out of works (if any) required to connect the licensee's
          transmission system to any other system for the transmission of
          electricity, and for the obtaining of any consents necessary for such
          purposes;

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<PAGE>

     (b)  the carrying out of works (if any) in connection with the extension or
          reinforcement of the licensee's transmission system rendered necessary
          or appropriate by reason of making the connection or modification to
          an existing connection and for the obtaining of any consents necessary
          for such purposes;

     (c)  the installation of appropriate meters (if any) required to enable the
          licensee to measure electricity being accepted into the licensee's
          system at the specified entry point or points or leaving such system
          at the specified exit point or points;

     (d)  the installation of such switchgear or other apparatus (if any) as may
          be required for the interruption of supply where the person seeking
          connection or modification of an existing connection does not require
          the provision by an affiliate or related undertaking of the licensee
          of top-up or standby supplies or sales of electricity;

     (e)  the date by which any works required so as to permit access to the
          licensee's transmission system (including for this purpose any works
          to reinforce or extend the licensee's transmission system) shall be
          completed and so that, unless otherwise agreed by the person making
          the application, a failure to complete such works by such date shall
          be a material breach of the agreement entitling the person to
          repudiate the agreement;

     (f)  the connection charges to be paid to the licensee, such charges
          (unless manifestly inappropriate):

          (i)  to be presented in such a way as to be referable to the
               statements prepared in accordance with (as appropriate) paragraph
               1 (or, as the case may be, paragraph 8) of standard condition D8
               (Basis of Charges for Use of System and Connection to System:
               Requirement for Transparency) or any revision thereof; and

          (ii) to be set in conformity with the requirements of paragraph 4 of
               standard condition D8 (Basis of Charges for Use of System and
               Connection to

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<PAGE>

               System: Requirement for Transparency) and (where relevant) of
               paragraph 3 of this condition;

     (g)  the installation of special metering or telemetry or data processing
          equipment (if any) for the purpose of enabling any person which is a
          party to the Settlement Agreement for Scotland to comply with its
          obligations in respect to metering thereunder or the performance by
          the licensee of any service in relation to such metering thereunder;
          and

     (h)  such further matters as are or may be appropriate for the purposes of
          the agreement.

3.   For the purpose of determining an appropriate proportion of the costs
     directly or indirectly incurred in carrying out works (or in relation to
     any of the other matters referred to in sub-paragraph 4(a) of standard
     condition D8 (Basis of Charges for Use of System and Connection to System:
     Requirement for Transparency)) under an agreement for making a connection
     or modification to an existing connection, the licensee shall have regard
     to:

     (a)  the benefit (if any) to be obtained or likely in the future to be
          obtained by the licensee or any other person as a result of the
          carrying out of such works (or of such other matters) whether by
          reason of the reinforcement or extension of the licensee's
          transmission system or the provision of additional entry or exit
          points on such system or otherwise; and

     (b)  the ability or likely future ability of the licensee to recoup a
          proportion of such costs from third parties.

4.   The licensee shall offer terms for agreements in accordance with paragraphs
     1 and 2 as soon as practicable and (save where the Authority consents to a
     longer period) in any event not more than the period specified in paragraph
     6 after receipt by the licensee (or its agent) of all such information as
     the licensee may reasonably require for the purpose of formulating the
     terms of the offer.

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5.   The licensee shall not be obliged pursuant to this condition to offer to
     enter or to enter into any agreement:

     (a)  if to do so would be likely to involve the licensee being:

          (i)   in breach of its duties under section 9 of the Act;

          (ii)  in breach of any regulations made under section 29 of the Act or
                of any other enactment relating to safety or standards
                applicable in respect to the transmission business;

          (iii) in breach of the conditions to which this licence is subject; or

          (iv)  in breach of any relevant Grid Code;

     (b)  if the person making the application does not undertake to be bound,
          insofar as applicable, by the terms of any relevant Grid Code from
          time to time in force;

6.   For the purpose of paragraph 4, the period specified shall be:

     (a)  in the case of persons seeking use of system only, 28 days;

     (b)  in the case of persons seeking connection or a modification to an
          existing connection, 3 months; and

     (c)  in the case of person seeking use of system in conjunction with
          connection, 3 months.

7.   The licensee shall within 28 days following receipt of a request from any
     person, give or send to such person such information in the possession of
     the licensee as may be reasonably required by such person for the purpose
     of completing an application under the Application Regulations or such
     provisions to like effect contained in any further regulations then in
     force made pursuant to sections 6(3), 60 and 64(1) of the Act.

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<PAGE>

Condition D8C. Functions of the Authority

1.   If, after a period which appears to the Authority to be reasonable for the
     purpose, the licensee has failed to enter into an agreement with any person
     entitled or claiming to be entitled thereto pursuant to a request under
     standard condition D8B (Requirement to Offer Terms), the Authority may, on
     the application of that person or the licensee, settle any terms of the
     agreement in dispute between the licensee and that person in such manner as
     appears to the Authority to be reasonable having (insofar as relevant)
     regard in particular to the following considerations:

     (a)  that such person should pay to the licensee:

          (i)  in the case of provision of use of system, the use of system
               charges determined in accordance with paragraphs 1 and 2 of
               standard condition D8 (Basis of Charges for Use of System and
               Connection to System: Requirement for Transparency); and

          (ii) in the case of provision of a connection, or a modification to an
               existing connection, to the system the whole or an appropriate
               proportion (as determined in accordance with paragraph 3 of
               standard condition D8B (Requirement to Offer Terms)) of the costs
               referred to in sub-paragraph 4(a) of standard condition D8 (Basis
               of Charges for Use of System and Connection to System:
               Requirement for Transparency), together with a reasonable rate of
               return on the capital represented by such costs;

     (b)  that no such person should pay any charges such as are referred to in
          sub-paragraph 3(b) of standard condition D8 (Basis of Charges for Use
          of System and Connection to System: Requirement for Transparency) in
          respect of any connection to the licensee's transmission system or any
          modification to an existing connection made prior to such date as
          shall be specified in a direction issued by the Authority for the
          purposes of this condition and that no such charges should be paid in
          respect of any such connection or modification made after such date
          unless the Authority is satisfied that the extension or

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<PAGE>

          reinforcement in respect of which the charges are to be paid was
          rendered necessary or appropriate by virtue of providing connection to
          or use of system to the person or making such a modification;

     (c)  that the performance by the licensee of its obligations under the
          agreement should not involve the licensee in a breach such as is
          referred to in sub-paragraph 5 (a) of standard condition D8B
          (Requirement to Offer Terms);

     (d)  that any methods by which the licensee's transmission system is
          connected to any other system for the transmission of electricity
          accord (insofar as applicable to the licensee) with any relevant Grid
          Code and with any relevant Distribution Code; and

     (e)  that the terms and conditions of the agreement so settled by the
          Authority and of any other agreements entered into by the licensee
          pursuant to an application under standard condition D8B (Requirement
          to Offer Terms) should be, so far as circumstances allow, in as
          similar a form as is practicable.

2.   In so far as any person entitled or claiming to be entitled to an offer
     under standard condition D8B (Requirement to Offer Terms) wishes to proceed
     on the basis of the agreement as settled by the Authority, the licensee
     shall forthwith enter into and implement such agreement in accordance with
     its terms.

3.   If either party to such agreement proposes to vary the contractual terms of
     any agreement for the provision of a connection or for the modification of
     an existing connection to the licensee's transmission system, for the
     retention of an established connection to such system or for use of system
     entered into pursuant to standard condition D8B (Requirement to Offer
     Terms) or under this condition in any manner provided for under such
     agreement, the Authority may, at the request of that party, settle any
     dispute relating to such variation in such manner as appears to the
     Authority to be reasonable.

Department of Trade and Industry
September 2001

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SPECIAL CONDITIONS AND SCHEDULES

                           PART IV: SPECIAL CONDITIONS

Special Condition A: Interpretation

1.   Unless the context otherwise requires words and expressions used in the
     standard conditions of this licence shall bear the same meaning in these
     Special Conditions.

2.   Any reference in these Special Conditions to-

     (a) a provision thereof;

     (b) a provision of the standard conditions;

     (c) a provision of the standard conditions of electricity supply licences;

     (d) a provision of the standard conditions of electricity distribution
     licences;

     (e) a provision of the standard conditions of electricity generation
     licences;

     shall, if these or the standard conditions in question come to be modified,
     be construed, so far as the context permits, as a reference to the
     corresponding provision of these or the standard conditions in question as
     modified.

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Special Condition B:  Basis of charges for use of the Scottish interconnection

1.   Unless (and except for so long as) the Authority approves otherwise,
     charges for use of the Scottish interconnection shall be set at a level
     which will enable the licensee to recover no more than a reasonable rate of
     return on the relevant proportion of the capital represented by the
     Scottish interconnection.

2.   The licensee shall as soon as practicable after the transmission licence
     has come into force, and, in any event, not later than such date as the
     Authority shall specify, prepare a statement approved by the Authority
     setting out the basis upon which charges for use of the Scottish
     interconnection will be made, such statement to be in such form and to
     contain such detail as shall be necessary to enable any person to make a
     reasonable estimate of the charges to which it would become liable for use
     of the Scottish interconnection, and (without prejudice to the foregoing)
     including the information required to be included therein pursuant to
     paragraph 3.

3.   Except to the extent that the Authority shall otherwise specify, the
     statement referred to in paragraph 2 shall include:

     (a)  a schedule of charges for transport of electricity under use of the
          Scottish interconnection;

     (b)  the charge for maintaining voltage and frequency within statutory
          limits;

     (c)  a schedule of the adjustment factors to be made in respect of
          transmission losses, in the form of additional supplies required to
          cover those transmission losses;

     (d)  the methods by which and the principles on which charges (if any) will
          be made for availability of capacity on the Scottish interconnection;
          and

     (e)  such other matters as shall be specified in directions issued by the
          Authority from time to time for the purposes of this Condition.

4.   In addition to, and without prejudice to, the licensees obligations under
     paragraph 2, the licensee shall, upon being directed to do so in directions
     issued by the Authority from time to time for the purposes of this
     Condition and within such period as shall be specified in the directions,
     prepare a statement approved by the Authority providing that charges for
     use of the Scottish interconnection will be made on such basis as shall be
     specified in the directions and such statement shall be in such form and
     contain such

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     detail as shall be necessary to enable any person to make a reasonable
     estimate of the charges to which it would become liable for use of the
     Scottish interconnection and (without prejudice to the foregoing) including
     such information as shall be specified in the directions. Each statement
     prepared in accordance with this paragraph shall, with effect from the date
     on which it is approved by the Authority or such later date as the
     Authority shall specify, replace the corresponding statement prepared by
     the licensee in accordance with paragraph 2 or, as the case may be, this
     paragraph (as from time to time revised in accordance with paragraph 5)
     which is in force at such date and the licensee shall, with effect from
     such date, make charges for use of the Scottish interconnection in
     accordance with the statement (as from time to time revised in accordance
     with paragraph 5) which has replaced such corresponding statement.

5.   The licensee may periodically revise the statement prepared in accordance
     with paragraph 2 or, in the event that the licensee shall have prepared a
     statement in accordance with paragraph 4, that statement or the latest of
     such statements and shall, at least once in every year the transmission
     licence is in force, revise such statement in order that the information
     set out therein shall continue to be accurate in all material respects.
     Each such revision shall require to be approved by the Authority and shall
     not become effective until approved by the Authority.

6.   The licensee shall as soon as practicable after the transmission licence
     has come into force and, in any event, not later than such date as the
     Authority shall specify prepare a statement approved by the Authority
     showing:

     (a)  the amount of the capacity of the Scottish interconnection which the
          licensee anticipates will be available for the transfer of electricity
          from Scotland to England and England to Scotland during each remaining
          week of the year ending on 31 March 1991 as notified by the licensee
          to Scottish Hydro-Electric Transmission Limited pursuant to the
          Interconnector Agreement;

     (b)  the amount of that capacity in relation to which Scottish
          Hydro-Electric Transmission Limited has a right to require the
          licensee to receive and deliver electricity as referred to in
          sub-paragraph (b) of paragraph 13;

     (c)  the licensees forecast of the amount of the remainder of the capacity
          of the Scottish interconnection which will be used for the transfer of
          electricity from

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          Scotland to England and from England to Scotland during each week
          referred to in sub-paragraph (a) above; and

     (d)  such other matters (if any) as the Authority shall specify prior to
          its approval of the statement.

7.   The licensee shall, as soon as practicable (and, in any event, within such
     period as the Authority shall specify) after giving a notification such as
     is referred to in sub-paragraph (a) of paragraph 6 to Scottish Hydro
     Electric Transmission Limited in respect of the year ending on 31 March
     1992 and each subsequent year, prepare a statement approved by the
     Authority showing the matters referred to in sub-paragraphs (a) to (d) of
     paragraph 6 in respect of that year.

8.   The licensee shall send a copy of the statement prepared in accordance with
     paragraph 2 and any statement prepared in accordance with paragraph 4, and
     of each revision of such statements in accordance with paragraph 5, and of
     each statement prepared in accordance with paragraphs 6 and 7 and with
     paragraphs 3(a) and 8 of Special Condition D (Requirement to Offer Terms),
     to the Authority.

9.   The licensee shall give or send a copy of the statement prepared in
     accordance with paragraph 2, any statement prepared in accordance with
     paragraph 4 or (as the case may be) of the latest revision of the relevant
     statement in accordance with paragraph 5 approved by the Authority pursuant
     to such paragraph and of each statement prepared in accordance with
     paragraphs 6 and 7 to any person who requests a copy of such statement.

10.  The licensee shall also give or send a copy of each statement prepared in
     accordance with paragraphs 3(a) and 8 of Special Condition D (Requirement
     to Offer Terms) to any person who requests a copy of such statement.

11.  The licensee may make a charge for any statement given or sent pursuant to
     paragraph 9 of an amount reflecting the licensee's reasonable costs of
     providing such a statement which shall not exceed the maximum amount
     specified in directions issued by the Authority for the purposes of this
     Condition.

12.  The licensee may within 10 days after receipt of the relevant request
     provide an estimate of its reasonable costs in the preparation of any
     statement referred to in paragraph 10, and its obligation to provide such
     statement shall be conditional on the person requesting such

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     statement agreeing to pay the amount estimated or such other amount as the
     Authority may, upon the application of the licensee or the person
     requesting such statement, direct.

13.  For the purposes of this Condition and Special Conditions C
     (Non-discrimination in the provision of use of the Scottish
     Interconnection), D (Requirement to Offer Terms), E (Functions of the
     Authority) and G (Requests for Transit):

     "Combined Delivery Point"          means the points at the boundary between
                                        the licensee's authorised transmission
                                        area and Scottish Hydro-Electric
                                        Transmission Limited's authorised
                                        transmission area defined as such in
                                        the Interconnector Agreement.

     "co-operator"                      means any person other than the
                                        licensee who owns assets which are used
                                        in conjunction with the interconnection
                                        or who is able to exercise jointly with
                                        the licensee control over the use made
                                        of the interconnection.

     "interconnection"                  means:

                                        the 275 kV transmission circuits between
                                        and including the associated switchgear
                                        at Harker sub- station in Cumbria and
                                        the associated switchgear at Strathaven
                                        sub-station in Lanarkshire; the 275 kV
                                        transmission circuit between and
                                        including the associated switchgear at
                                        Cockenzie in East Lothian and the
                                        associated switchgear at Stella in Tyne
                                        and Wear; and the 400 kV transmission
                                        circuit between and including the
                                        associated switchgear at Tomess in East
                                        Lothian and the associated switchgear at
                                        Stella in Tyne and Wear all as existing
                                        at the date on which the transmission
                                        licence comes into force and as

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                                        from time to time maintained, repaired
                                        or renewed, together with any
                                        alteration, modification or addition
                                        (other than maintenance, repair or
                                        renewal) which is primarily designed to
                                        effect a permanent increase in one or
                                        more Particular Interconnection
                                        Capacities as they exist immediately
                                        prior to such alteration. modification
                                        or addition and as from time to time
                                        maintained, repaired or renewed; and the
                                        132 kV transmission circuit between and
                                        including (and directly connecting) the
                                        associated switchgear at Chapelcross and
                                        the associated switchgear at Harker
                                        sub-station in Cumbria; and the 132 kV
                                        transmission circuit between and
                                        including (and connecting, via Junction
                                        V) the associated switchgear at
                                        Chapelcross and the associated
                                        switchgear at Harker sub-station in
                                        Cumbria all as existing at the date on
                                        which the transmission licence comes
                                        into force and as from time to time
                                        maintained, repaired or renewed.

         "Interconnector Agreement"     means at any time the agreement relating
                                        to the matter referred to in
                                        sub-paragraph (a) of paragraph 2 of
                                        Special Condition F (Submission of
                                        Certain Agreements) in force at that
                                        time which has been entered into and
                                        submitted to the Authority pursuant to
                                        that Condition as the same may be
                                        amended from

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                                                      time to time with the
                                                      approval of the Authority
                                                      given pursuant to such
                                                      Condition.

         "Particular Capacity Interconnection"        means the capacity of the
                                                      interconnection for
                                                      transferring electricity
                                                      from Scotland to England
                                                      or vice versa in respect
                                                      of any particular system
                                                      conditions.

         "relevant proportion of the capital          means at any time, a
         represented by the Scottish                  proportion of such capital
         interconnection"                             equal to the percentage of
                                                      the Reserved Share (as
                                                      defined in the
                                                      Interconnector Agreement)
                                                      of the licensee at that
                                                      time.

         "Scottish interconnection"                   means such part of the
                                                      interconnection as is
                                                      situated in Scotland.

         "Southern Delivery Point"                    means the points at the
                                                      boundary between the
                                                      licensee's authorised
                                                      transmission area and the
                                                      Transmission Company's
                                                      authorised transmission
                                                      area defined as such in
                                                      the Interconnector
                                                      Agreement.

         "Transmission Company"                       means The National Grid
                                                      Company plc or any other
                                                      person who holds a
                                                      transmission licence
                                                      under Section 6(l)(b) of
                                                      the Act for an authorised
                                                      area in England and
                                                      Wales.

         "Upgrade"                                    means any alteration,
                                                      modification or addition
                                                      to the Interconnected
                                                      Scottish Power System (as
                                                      defined in the
                                                      Interconnector Agreement)
                                                      which is primarily
                                                      designed to effect a
                                                      permanent increase in one
                                                      or more Particular
                                                      Interconnection
                                                      Capacities.

         "use of the Scottish interconnection"        shall exclude:

                                                      the rights conferred upon
                                                      Scottish Hydro-Electric
                                                      Transmission Limited
                                                      under the Interconnector
                                                      Agreement to require the

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                                            licensee:

                                            (a)   to receive electricity from
                                                  Scottish Hydro- Electric
                                                  Transmission Limited at the
                                                  Combined Delivery Point (and
                                                  from certain generating
                                                  stations referred to in the
                                                  Interconnector Agreement) and
                                                  deliver such electricity (less
                                                  losses as referred to in the
                                                  lnterconnector Agreement) to
                                                  the Transmission Company at
                                                  the Southern Delivery Point;
                                                  and/or

                                            (b)   to receive electricity from
                                                  the Transmission Company at
                                                  the Southern Delivery Point
                                                  and deliver such electricity
                                                  (less losses as referred to in
                                                  the Interconnector Agreement)
                                                  to Scottish Hydro-Electric
                                                  Transmission Limited at the
                                                  Combined Delivery Point.

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Special Condition C:  Non-discrimination in the provision of use of the Scottish
interconnection

1.   In the provision of use of the Scottish interconnection the licensee shall
     not discriminate:

     (a)   between any person or class or classes of persons; or

     (b)   between any affiliate of the licensee which holds a supply licence or
           generation licence and any other person or class or classes of
           person.

2.   Without prejudice to paragraph 1, and subject to paragraph 3, the licensee
     shall not make charges for the provision of use of the Scottish
     interconnection to any person or class or classes of persons which differ
     from the charges for such provision:

     (a)   to any other person or class or classes of persons; or

     (b)   to any affiliate of the licensee holding a supply licence or a
           generation licence;

     except insofar as such differences reasonably reflect differences in the
     costs associated with such provision.

3.   Notwithstanding paragraphs I and 2, the licensee shall not make charges for
     use of the Scottish interconnection in respect of any item of charge
     separately identified in any statement such as is referred to at paragraphs
     2 and 4 of Special Condition B (Basis for Charges for use of the Scottish
     interconnection) on any person whose contract does not provide for it to
     receive the service to which such item of charge refers.

4.   The licensee shall not in setting its charges for use of the Scottish
     interconnection restrict. distort or prevent competition in the
     transmission, supply, distribution or generation of electricity.

5.   The licensee shall:

     (a)   comply with and perform its obligations under the Interconnector
           Agreement;

     (b)   exercise its rights and perform its obligations under the
           Interconnector Agreement in a manner which is designed to facilitate
           the carrying out of Upgrades proposed by Scottish Hydro-Electric
           Transmission Limited pursuant to the Interconnector Agreement (but,
           for the avoidance of doubt, so that the licensee shall have no
           obligation to participate in any Upgrade proposed by Scottish
           Hydro-Electric Transmission Limited;

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     (c)   not exercise or perform such rights or obligations in a manner which
           is designed to have the effect of inhibiting or preventing
           competition in the supply of electricity from Scotland to England or
           from England to Scotland; and

     (d)   not exercise or perform its rights or obligations under any related
           document in a manner which is designed to have the effect referred to
           in sub-paragraph (c) above.

6.   The licensee shall not be in breach of this Condition or Special Conditions
     B (Basis of Charges for use of the Scottish interconnection), D
     (Requirement to Offer Terms) or E (Functions of the Authority), by reason
     only of a failure to do or not do any thing which it is prevented from
     doing or not doing by reason of a failure by Scottish Hydro-Electric
     Transmission Limited to comply with and perform its obligations under the
     Interconnector Agreement or by a party to a related document or a person
     who is obliged to comply with a related document to comply with and perform
     its obligations under the related document in question.

7.   The licensee shall keep and maintain such records concerning the provision
     of use of the Scottish interconnection as are, in the opinion of the
     Authority, sufficient to enable the Authority to assess whether the
     licensee is performing its obligations under paragraph 1 and the licensee
     shall furnish to the Authority such records (or such of these as the
     Authority may require), in such manner and at such times as the Authority
     may require.

8.   In this Condition:

     "related document"                 means any agreement, code, rules, or
                                        arrangement relating to the use of the
                                        E&W interconnection for the time being
                                        in force and to which the licensee is a
                                        party or with which the licensee is
                                        obliged to comply.

     "E&W interconnection"              means such part of the interconnection
                                        as is not situated in Scotland.

     "generation licence"               means a licence granted under Section
                                        6(l)(a) of the Act.

     "supply licence"                   means a licence granted under Section
                                        6(l)(d) of the Act.

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Special Condition D: Requirement to offer terms

1.   On application made by any person, the licensee shall (except in a case
     where paragraph 2 applies and subject to paragraph 7) offer to enter into
     an agreement for use of the Scottish interconnection to transport across
     the Scottish interconnection in such quantities and for such periods as may
     be specified in the application, electricity to be provided by or on behalf
     of such person:

     (a)   specifying the charges for use of the Scottish interconnection to be
           paid by the person seeking use of the Scottish interconnection, such
           charges to be referable to the statement referred to at paragraph 2
           or (as the case may be) paragraph 4 of Special Condition B (Basis of
           Charges for use of the Scottish interconnection) or any revision
           thereof; and

     (b)   containing such further terms as are or may be appropriate for the
           purposes of the agreement.

2.   This paragraph applies in any case where, on the application of the
     licensee or any person entitled or claiming to be entitled to an offer
     pursuant to an application under paragraph 1, the Authority shall determine
     that (having regard to the part of the capacity of the Scottish
     interconnection already contracted to persons other than affiliates and
     related undertakings of the licensee and the part thereof approved by the
     Authority as being reserved to affiliates and related undertakings of the
     licensee) the capacity of the Scottish interconnection is insufficient to
     accommodate the requirements of the person who has made application for an
     offer pursuant to paragraph 1.

3.   In a case where paragraph 2 applies:

     (a)   the licensee shall (subject to paragraph 12 of Special Condition B
           (Basis of Charges for use of the Scottish interconnection)), if
           requested by the person who has made application for an offer
           pursuant to paragraph 1 and within such period as the Authority shall
           specify in its determination Linder paragraph 2, prepare a statement
           approved by the Authority setting out the basis upon which charges
           will be made for the costs which the licensee would incur if an
           Upgrade were to be carried out in accordance with the Interconnector
           Agreement to accommodate the requirements of the person who has made
           the application for an offer pursuant to paragraph 1 such statement
           to be in such form and to contain such detail as shall

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           be necessary to enable such person to make a reasonable estimate of
           the charges to which he would become liable in respect of the
           Upgrade; and

     (b)   following the preparation of a statement under sub-paragraph (a)
           above, the licensee shall, on the application of the person who has
           made the application for an offer pursuant to paragraph 1 offer to
           enter into:

           (i)   an agreement pursuant to which the licensee undertakes to
                 exercise its rights under the Interconnector Agreement to
                 require the carrying out of an Upgrade; and

           (ii)  an agreement such as is referred to in paragraph 1 but so that
                 the licensee shall not be bound to make use of the Scottish
                 interconnection available pursuant to such agreement until the
                 time of completion of the Upgrade.

4.   Charges in respect of Upgrades carried out pursuant to an agreement such as
     is referred to in sub-paragraph (b)(i) of paragraph 3 will be set at a
     level which will enable the licensee to recover:

     (a)   the appropriate proportion of the costs directly incurred by the
           licensee in connection with Upgrades; and

     (b)   a reasonable rate of return on the capital represented by such costs.

5.   For the purpose of determining an appropriate proportion of the costs
     directly incurred in connection with an Upgrade, the licensee shall have
     regard to:

     (a)   the benefit (if any) to be obtained or likely in the future to be
           obtained by the licensee or any other person from the increase in the
           capacity of the Scottish interconnection resulting from the Upgrade;
           and

     (b)   the ability or likely future ability of the licensee to recoup a
           proportion of such costs from third parties.

6.   The licensee shall offer terms for agreements in accordance with paragraph
     1 and paragraph 3(b) as soon as practicable and (save where the Authority
     consents to a longer period) in any event not more than the period
     specified in paragraph 9 after receipt by the licensee of an application
     containing all such information as the licensee may reasonably require for
     the purpose of formulating the terms of the offer.

7.   The licensee shall not be obliged pursuant to this Condition to offer to
     enter or to enter into any agreement:

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<PAGE>

     (a)   if to do so would involve the licensee:

           (i)   in breach of its duties under Section 9 of the Act; or

           (ii)  in breach of the Electricity Supply Regulations 1988 or of any
                 regulations made under Section 29 of the Act or of any other
                 enactment relating to safety or standards applicable to the
                 interconnection; or

           (iii) in breach of the standard conditions or Special Conditions of
                 this licence: or

     (b)   if the person making the application does not undertake to be bound
           by the terms of any code of general application or agreement between
           the licensee and any co-operator of the interconnection governing the
           operation of and maintenance of the interconnection approved for the
           time being by the Authority; or

     (c)   if (in the case of an application for an agreement for use of the
           Scottish interconnection to transport electricity from the Southern
           Delivery Point) the electricity to be so transported is to be
           transported from the northern end of the Scottish interconnection to
           the Combined Delivery Point under an agreement for use of the
           licensee's transmission system or the distribution system of the
           licensee's affiliate or related undertaking; or

     (d)   if (in the case of an application for an agreement for use of the
           Scottish interconnection to transport electricity to the Southern
           Delivery Point) the electricity to be so transported is to be
           transported from the Combined Delivery Point to the northern end of
           the Scottish interconnection under an agreement for use of the
           licensee's transmission system or the distribution system of the
           licensee's affiliate or related undertaking.

8.   If so requested by any person, the licensee shall (subject to paragraph 12
     of Special Condition B (Basis of Charges for use of the Scottish
     interconnection)), as soon as practicable and in any event not later than
     the expiry of such period as the Authority, on the application of the
     person making the request, shall determine for this purpose, give or send
     to such person a statement approved by the Authority setting out the basis
     upon which charges will be made for the costs which the licensee would
     incur if an Upgrade were to be carried out in accordance with the
     Interconnector Agreement to accommodate the requirements of such person as
     specified in the request, such statement to be in such

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     form and to contain such detail as shall be necessary to enable such person
     to make a reasonable estimate of the charges to which it would become
     liable in respect of the Upgrade.

9.   For the purpose of paragraph 1, the period specified shall be 28 days. For
     the purpose of paragraph 3(b), the period specified shall be 3 months.

10.  The licensee shall within 28 days following receipt of a request from any
     person, give or send to such person such information in the possession of
     the licensee as may be reasonably required by such person for the purpose
     of completing paragraph 8 of Part I and paragraphs 2(v) and (vi) of Part 2
     of Schedule 2 to the Electricity (Application for Licences and Extensions
     of Licences) Regulations 1990 or such provisions to like effect contained
     in any further regulations then in force made pursuant to Sections 6A(2),
     60 and 64(1) of the Act.

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Special Condition E:  Functions of the Authority

1.   If, after a period which appears to the Authority to be reasonable for the
     purpose the licensee has failed to enter into an agreement with any person
     entitled or claiming to be entitled thereto pursuant to a request under
     Special Condition D (Requirement to Offer Terms) the Authority may, on the
     application of such person or the licensee, settle any terms of the
     agreement in dispute between the licensee and that person in such manner as
     appears to the Authority to be reasonable having (insofar as relevant)
     regard in particular to the following considerations:

     (a)  that such person should pay to the licensee charges determined in
          accordance with Special Conditions B (Basis of Charges for use of the
          Scottish interconnection), C (Non-discrimination in the provision of
          use of the Scottish interconnection) and D (Requirement to Offer
          Terms); and

     (b)  that the performance by the licensee of its obligations under the
          agreement should not involve it in such a breach as is referred to in
          paragraph 7 of Special Condition D (Requirement to Offer Terms);

     (c)  that the obligations of the licensee under the agreement should not be
          in conflict with the provisions of the lnterconnector Agreement or any
          relevant document for the time being approved by the Authority; and

     (d)  that the terms and conditions of the agreement so settled by the
          Authority and of any other agreements entered into by the licensee
          pursuant to a request under Special Condition D (Requirement to Offer
          Terms) should be, so far as circumstances allow, in as similar a form
          as is practicable.

2.   If the person wishes to proceed on the basis of the agreement as settled by
     the Authority, the licensee shall forthwith enter into and implement such
     agreement in accordance with its terms.

3.   If the licensee proposes to vary the contractual terms of any agreement
     entered into pursuant to Special Condition D (Requirement to Offer Terms)
     or this Condition in any manner provided for under such agreement, the
     Authority may, at the request of the licensee or other party to such
     agreement, settle any dispute relating to such variation in such manner as
     appears to the Authority to be reasonable.

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Special Condition F: Submission of certain agreements

1.   The licensee shall not make an amendment to a specified agreement or enter
     into any agreement which amends a specified agreement except with the prior
     written approval of the Authority.

2.   For the purposes of this Condition:

     "specified agreements"             means agreements relating to the
                                        following matters, namely:

                                        (a)  the provision by the licensee
                                             to Scottish Hydro-Electric
                                             Transmission Limited of a share
                                             (initially 46%) of the export and
                                             import capacity of the
                                             Interconnector with England and
                                             Wales (after deduction of an
                                             allowance for the share of such
                                             capacity dedicated to the existing
                                             agreement between South of Scotland
                                             Electricity Board and British
                                             Nuclear Fuels plc relative to the
                                             transmission of output from
                                             Chapelcross Power Station); and

                                        (b)  operational provisions for the
                                             implementation of all or some of
                                             the agreements relating to the
                                             matters referred to in (a) above;
                                             provisions supporting the
                                             co-ordination, planning and
                                             operation of an electricity supply
                                             system within Scotland; an
                                             operational

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                                            basis to support trading
                                            relationships between SSE Generation
                                            Limited and the licensee and/or
                                            between either of them and any third
                                            party and/or between third parties
                                            using the electricity transmission
                                            systems in Scotland; and a framework
                                            for accommodating generators of
                                            electricity using the electricity
                                            transmission system of Scottish
                                            Hydro-Electric Transmission Limited
                                            and the licensee.

        "amendment"                    in relation to any agreement shall
                                       (without limiting the generality) include
                                       the making, entering into and granting
                                       of:

                                       (a)  any agreement which terminates.
                                            extends the duration of, varies or
                                            has the effect of affecting in any
                                            other way any right and/or
                                            obligation (or the enforceability of
                                            any right and/or obligation) of any
                                            person under the first mentioned
                                            agreement; and

                                       (b)  any waiver or purported waiver
                                            (whether or not constituted or
                                            evidenced by any written document,
                                            and whether express, implied or
                                            otherwise) of any right of any
                                            person under that agreement.

        "agreement"                    includes any contract or arrangement

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                                            (whether or not constituted or
                                            evidenced by any written document).

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Special Condition G: Requests for Transit

1.   In this Condition:

     "entity"                             means any of the entities referred to
                                          in Article 3.1 of the Directive of the
                                          Council of the European Communities,
                                          dated 29 October 1990, (No.90/547/EEC)
                                          on the transit of electricity through
                                          transmission grids ("the Directive").

     "grid"                               means any high-voltage electricity
                                          transmission grid for the time being
                                          listed in the Annexe to the Directive.

     "Member State"                       means a Member State of the European
                                          Union.

     "transit"                            means a transaction for the transport
                                          of electricity between grids where:

                                          (a)  the grid of origin or final
                                               destination is situated in a
                                               Member State; and

                                          (b)  the transport involves:

                                               (i)    the crossing of at least
                                                      one frontier between
                                                      Member States; and

                                               (ii)   the use of the licensee's
                                                      transmission system and at
                                                      least two other grids.

2.   The licensee shall, after receiving in connection with transit for a
     minimum duration of one year an application by an entity for an agreement
     for:

     (a)  use of system;

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     (b)   connection to the licensee's transmission system or modification to
           an existing connection; or

     (c)   use of the licensee's share of Scottish interconnection, notify the
           Secretary of State, the Authority and the European Commission without
           delay of the matters set out in paragraph 3 below.

3.   The matters of which notification must be given are:

     (a)   the application;

     (b)   if an agreement has not been concluded within 12 months of the date
           of receipt of the application, the reasons for the failure to
           conclude it;

     (c)   the conclusion of the agreement, whether it is concluded before or
           after the expiry of the period mentioned in sub-paragraph (b) above.

4.   If, in relation to an application for transit by any entity, the Authority
     has been requested to exercise its powers under standard condition D8C
     (Functions of the Authority) or Special Condition E (Functions of the
     Authority), the Authority may delay the exercise of its said powers until
     the terms have been considered by the body set up under Article 3.4 of the
     Directive and the Authority may give such weight to the opinion (if any) of
     that body as it thinks fit in exercising its said powers.

                                      160

<PAGE>

Special Condition H: Transmission System Security Standard and Quality of
Service (Scotland)

1.   The licensee shall:

     (a)   plan and develop its transmission system in accordance with the
           document number TDM13/10,001 and entitled Security of Supply (Issue 2
           dated October 1985) (incorporating Engineering Recommendation P2/5
           (October 1978 revision) of the Electricity Council Chief Engineers'
           Conference) and the planning document numbered NSP366 entitled
           Security of the 400kV and 275kV Systems in Scotland (each such
           document being as submitted by or on behalf of the licensee to the
           Authority on or before the date of grant of this licence or such
           later date as the Authority shall agree) as appropriate to the
           purpose under consideration, and the Grid Code or such other standard
           of planning as the licensee may, following consultation with any
           authorised electricity operator liable to be materially affected
           thereby and with the approval of the Authority adopt from time to
           time; and

     (b)   operate its transmission system in accordance with the document
           entitled Grid Control Instruction (system) BI-SSEB Operational
           Standards of Security of Supply (dated 30 March 1981) and (each such
           document being as submitted by or on behalf of the licensee to the
           Authority on or before the date of grant of this licence), as
           appropriate to the purpose under consideration and the Grid Code or
           such other standard of operation as the licensee may, following
           consultation with any authorised electricity operator liable to be
           materially affected thereby and with the approval of the Authority,
           adopt from time to time.

2.   The licensee shall, in consultation with authorised electricity operators
     liable to be materially affected thereby, review the documents (other than
     the Grid Code) referred to in paragraph 1 and their implementation on each
     occasion that it carries out a review of the Grid Code in accordance with
     paragraph 2 of standard condition 7 (Licensee's Grid Code).

     Following any such review, the licensee shall send to the Authority:

                                      161

<PAGE>

     (a)   a report on the outcome of such review; and

     (b)   any revision which the licensee proposes to make to such documents
           from time to time (having regard to the outcome of such review); and

     (c)   any written representations or objections from authorised electricity
           operators (including any proposals by such operators for revisions to
           such documents not accepted by the licensee in the course of the
           review) arising during the consultation process and subsequently
           maintained.

3.   Revisions to the documents (other than the Grid Code) referred to in
     paragraph 1 proposed by the licensee and sent to the Authority pursuant to
     paragraph 2 shall require to be approved by the Authority.

4.   Having regard to any written representations or objections referred to in
     sub-paragraph (c) of paragraph 2, and following such further consultation
     (if any) as the Authority may consider appropriate, the Authority may issue
     directions requiring the licensee to revise the documents (other than the
     Grid Code) referred to in paragraph 1 in such manner as may be specified in
     the directions, and the licensee shall forthwith comply with any such
     directions.

5.   The licensee shall within 3 months after the transmission licence comes
     into force draw up and submit to the Authority for its approval a statement
     setting out criteria by which the performance of the licensee in
     maintaining transmission system security and availability and quality of
     service may be measured.

6.   The licensee shall within 2 months after the end of each financial year
     submit to the Authority a report providing details of the performance of
     the licensee during the previous financial year against the criteria
     referred to in paragraph 5 of this condition.

7.   The Authority may (following consultation with the licensee and, where
     appropriate, any relevant authorised electricity operator) issue directions
     1 relieving the licensee of its obligations under paragraph 1 in respect of
     such parts of the licensee's transmission system and to such extent as may
     be specified in the directions.

8.   The licensee shall give or send a copy of the documents (other than the
     Grid Code) referred to in paragraph 1 (as from time to time revised) to the
     Authority.

______________________

/5/ Direction issued under Special Licence Condition H of this licence
    (12.11.01)

                                      162

<PAGE>

9.   The licensee shall (subject to paragraph 10) give or send a copy of such
     documents (as from time to time revised) to any person requesting the same.

10.  The licensee may make a charge for any copy given or sent pursuant to
     paragraph 9 of an amount which will not exceed any amount specified for the
     time being for the purposes of this condition in a direction issued by the
     Authority.

                                      163

<PAGE>

Special Condition I:  Definitions

In this condition and in Special Conditions J to N and Schedule A:

"average charge per regulated unit transmitted"   means the regulated
                                                  transmission revenue in the
                                                  relevant year divided by the
                                                  regulated quantity transmitted
                                                  in that year.

"average specified rate"                          means the average of the daily
                                                  base rates of Governor and
                                                  Company of the Bank of
                                                  Scotland (or such other bank
                                                  as the Authority shall specify
                                                  from time to time) current
                                                  from time to time during the
                                                  period in respect of which the
                                                  calculation falls to be made.

"charge restriction conditions"                   means Special Conditions I to
                                                  N inclusive together with
                                                  Schedule A to this licence, as
                                                  from time to time modified or
                                                  replaced in accordance with
                                                  the provisions of the Act.

"excluded services"                               means those services provided
                                                  as part of the transmission
                                                  business which in accordance
                                                  with the principles set out in
                                                  Part A of Schedule A fall to
                                                  be treated as excluded
                                                  services.

"maximum average charge per regulated unit        means the maximum average
transmitted"                                      charge per regulated unit
                                                  transmitted by the licensee
                                                  for relevant year commencing
                                                  on 1 April 1999 calculated in
                                                  accordance with the formula in
                                                  paragraph 2.1 of the Schedule
                                                  5 of the version of the
                                                  licence in force (or deemed to
                                                  be in force) as at 31 March
                                                  2000.

"maximum regulated transmission revenue"          means the regulated
                                                  transmission revenue of the
                                                  licensee calculated in
                                                  accordance with the

                                      164

<PAGE>

                                        formula contained in Special Condition J
                                        (Restriction of Transmission Charges).

"metered"                               means in relation to any quantity of
                                        units of electricity transmitted, as
                                        measured by a meter installed for such
                                        purpose or (where no such meter is
                                        installed) as otherwise reasonably
                                        calculated.

"notified value"                        means in relation to any term, such
                                        value as the Secretary of State shall
                                        ascribe to that term in a written notice
                                        given to the licensee as soon as
                                        practicable after the date of grant of
                                        this licence.

"regulated quantity transmitted"        means the aggregate quantity of units
                                        transmitted through the licensee's
                                        transmission system in that relevant
                                        year metered at exit points on leaving
                                        the licensee's transmission system.

"regulated transmission revenue"        means the revenue (measured on an
                                        accruals basis) derived from the
                                        provision of transmission services
                                        (including to any separate business,
                                        other than the transmission business) in
                                        the relevant year, after deduction of
                                        value added tax (if any) and any other
                                        taxes based directly on the amounts so
                                        derived.

"regulated unit transmitted"            means any unit within the regulated
                                        quantity transmitted.

"relevant year"                         means a financial year commencing on or
                                        after 1 April 1990.

"relevant year t"                       means that relevant year for the
                                        purposes of which any calculation falls
                                        to be made.

"relevant year t-1"                     means the relevant year preceding
                                        relevant year

                                      165

<PAGE>

                                        t or, in respect of the period prior to
                                        1 April 1990, the period of 12 calendar
                                        months commencing on 1 April 1989: and
                                        similar expressions shall be construed
                                        accordingly.

"transmission services"                 means all services provided as part of
                                        the transmission business other than
                                        excluded services.

"unit"                                  means a kilowatt hour.

                                      166

<PAGE>

Special Condition J:  Restriction of transmission charges

Basic Formula

1.   Without prejudice to Special Condition M (Allowances in respect of
     Security costs), the licensee shall in setting its charges for the
     provision of transmission services use its best endeavours to secure
     that in any relevant year the regulated transmission revenue shall not
     exceed the maximum regulated transmission revenue calculated in
     accordance with the following formula:

     TR\\t\\ = R\\t\\ - KK\\Tt\\ + LF\\t\\

     where:

     TR\\t\\  means the maximum regulated transmission revenue in relevant year
              t; and

     R\\t\\   in relation to the relevant year commencing 1 April 2000, shall
              have a value equal to (pound)114.36 million and in relation to any
              subsequent relevant year the value of it shall be derived from the
              following formula:

                                             /RPIt-X/T]
                     R\\t\\ = R\\t-1\\ [1+ ------------
                                                100
              where

     RPI\\t\\ means the percentage change (whether of a positive or a
              negative value) in the arithmetic average of the Retail Price
              Index figures published or determined with respect to each of
              the six months July to December (inclusive) in relevant year
              t-l and the arithmetic average of the Retail Price Index
              figures published or determined with respect to the same
              months in relevant year t-2.

     X\\T\\   means 0.

     KK\\Tt\\ means the correction factor (whether of a positive or negative
              value) to be applied to the regulated transmission revenue in
              relevant year t (subject to paragraph 3 of Special Condition K
              (Restriction of transmission charges: adjustments)) which
              factor is to be derived as follows:

              (a)    in the relevant year commencing 1 April 2000:

                          Q//t-1//    (C//t-1//-T//t-1)x-(1+//1Rt//)
              KK//Tt// = ---------- x--------------------------------
                            100                      100

              where

                                      167

<PAGE>

                  C\\t-1\\  means the average charge per regulated unit
                            transmitted in relevant year commencing 1 April
                            1999.

                  IR\\t\\   means that interest rate which is equal to, where
                            KK\\Tt\\ in relevant year commencing 1 April 2000
                            (taking no account of IR for this purpose) has a
                            positive value and C\\t-1\\ exceeds T\\t-1\\ by more
                            than 2 per cent, the average specified rate plus 4
                            or, where KK\\Tt\\ in that relevant year commencing
                            1 April 2000 (taking no account of IR for this
                            purpose) has a negative value and C\\t-1\\ does not
                            exceed T\\t-1\\ by more than 2 percent, the average
                            specified rate.

                  Q\\t-1\\  has the value 30, 399 (which represents the
                            regulated quantity transmitted (expressed in GWh) by
                            the licensee in relevant year commencing 1 April
                            1999).

                  T\\t-1\\  means the maximum average charge per regulated unit
                            transmitted in relevant year commencing 1 April
                            1999; as determined in accordance with Schedule 5 of
                            the form of ScottishPower's transmission licence in
                            force as at 31 March 2000; and

                  (b)       in subsequent relevant years KKdt is to be derived
                            from the following formula:

                                                          It
                  KK\\Tt\\ = (CR\\t-1\\ - TR\\t-1\\)(l+ -----)
                                                         100

                  where:

                  CR\\t-1\\ means the regulated transmission revenue in relevant
                            year t-1.

                  TR\\t-1\\ means the maximum regulated transmission revenue in
                            relevant year t-l.
                  I\\t\\    means that interest rate in relevantyear t which is
                            equal to, where KK\\Tt\\ (taking no account of I for
                            this purpose) has a positive value and CR\\t-1\\
                            exceeds TR\\t-1\\ by more than 2 percent, the
                            average specified rate plus 4 or, where KK\\Tt\\
                            (taking no account of I for this purpose) has a
                            negative value and CR\\t-1\\ does not exceed
                            TR\\t-1\\ by more than 2 per cent, the average
                            specified rate.

                                      168

<PAGE>

                 LFt       for the tenth and preceding years shall be zero and
                           in the eleventh and for any subsequent relevant year,
                           is derived from the following formula:

                           LF\\t\\ = LP\\t\\ - LA\\t\\ where:

                 LP\\t\\   means an amount equal to the payments made by the
                           licensee, in the relevant year t, in accordance with
                           its obligations set out in Standard Licence Condition
                           4 or, in respect of the eleventh relevant year,
                           payments made by the predecessor company of the
                           licence holder to the Director General of Electricity
                           Supply under the licence condition entitled 'Payment
                           of fees' in the Generation, Transmission and Public
                           Electricity Supply Licence referred to above.

                 LA\\t\\   is derived from the following formula:

                           LA\\t\\= PF.PIF\\t\\

                 PF        means, in the eleventh and all subsequent relevant
                           years, the amount given against the licensee's name
                           in column PF of Annex A to this Condition.

                 PIF\\t\\  is derived from the following formula:

                                          RPI//t//
                           PIF\\t\\= (1+---------- PIF\\t\\-1
                                           100

                           where for the ninth relevant year PIF\\t-1\\ equals
                           1.

                                      169

<PAGE>

ANNEX A TO SPECIAL CONDITION J (RESTRICTION OF TRANSMISSION CHARGES)
---------------------------------------------------------------------

--------------------------------------------------------------------------------
                                                                      PF
                                                                      --
--------------------------------------------------------------------------------
                                                                      (pound)m
                                                                      --------
--------------------------------------------------------------------------------
SP TRANSMISSION LIMITED                                               0.313
-----------------------                                               -----
--------------------------------------------------------------------------------
SCOTTISH HYDRO-ELECTRIC TRANSMISSION LIMITED                          0.117
--------------------------------------------                          -----
--------------------------------------------------------------------------------

                                      170

<PAGE>

Special Condition K:  Restriction of transmission charges: adjustments

1.   If, in respect of any relevant year, the regulated transmission revenue
     exceeds the maximum regulated transmission revenue by more than 3 per cent
     of the latter, the licensee shall furnish an explanation to the Authority
     and in the next following relevant year the licensee shall not effect any
     increase in charges for the provision of transmission services, the revenue
     from which is regulated under Special Conditions I to N, unless it has
     demonstrated to the reasonable satisfaction of the Authority that the
     regulated transmission revenue in that next following relevant year would
     not be likely to exceed the maximum regulated transmission revenue in that
     same relevant year.

2.   If, in respect of any two successive relevant years, the sum of the amounts
     by which the regulated transmission revenue has exceeded the maximum
     regulated transmission revenue is more than 4 per cent of the maximum
     regulated transmission revenue for the second of these relevant years, then
     in the next following relevant year the licensee shall, if required by the
     Authority, adjust its charges for the provision of transmission services,
     the revenue from which is regulated under the Special Conditions I to N,
     such that the regulated transmission revenue would not be likely, in the
     judgment of the Authority, to exceed the maximum regulated transmission
     revenue in that next following relevant year.

3.   If, in respect of any two successive relevant years, the regulated
     transmission revenue is less than 90 per cent of the maximum regulated
     transmission revenue, the Authority, after consultation with the licensee,
     may direct that in calculating KKTt, in respect of the next following
     relevant year, there shall be substituted for CRt-1 in the formula set out
     in paragraph 1 of Special Condition J (Restriction of transmission charges)
     such figure as the Authority may specify being not less than CRt-1 and not
     more than 0.90 (TR\\t-1\\).

                                      171

<PAGE>

Special Condition L:  Information to be provided to the Authority in connection
with the charge restriction conditions

1.   Where the licensee is intending to make any change in charges for the
     provision of transmission services regulated under Special Condition J
     (Restriction of transmission charges), the licensee shall not later than
     the time of publication of such changes provide the Authority with:

     (i)   a written forecast of the maximum regulated transmission revenue,
           together with its components, in respect of the relevant year t in
           which such a change is to take effect and in respect of the next
           following relevant year t+l; and

     (ii)  (ii) a written estimate of the maximum regulated transmission
           revenue, together with its components, in respect of the relevant
           year t-l immediately preceding the relevant year in which the change
           is to take effect unless a statement complying with paragraph 5 in
           respect of relevant year t-l has been furnished to the Authority
           before the publication of the proposed change.

2.   If within three months of the commencement of any relevant year t the
     licensee has not made any such change in charges as is referred to in
     paragraph 1, the licensee shall provide the Authority with a written
     forecast of the maximum regulated transmission revenue together with its
     components, in respect of relevant year t.

3.   Any forecast or estimate provided in accordance with paragraph 1 or 2 shall
     be accompanied by such information as regards the assumptions underlying
     the forecast or estimate as may be necessary to enable the Authority to be
     satisfied that the forecast or estimate has been properly prepared on a
     consistent basis.

4.   Not later than six weeks after the commencement of each relevant year t,
     the licensee shall send to the Authority a statement as to:

     (a)   whether or not the provisions of Special Condition K (Restriction of
           transmission charges: adjustments) are likely to be applicable in
           consequence of the regulated transmission revenue in the preceding
           relevant year t-l or the two preceding relevant years t-l and t-2;
           and

     (b)   its best estimate as to the relevant correction factor KKTt
           calculated in accordance with the formula set out in Special
           Condition J (Restriction of Transmission

                                      172

<PAGE>

           Charges) to be applied in calculating the maximum regulated
           transmission revenue in respect of relevant year t.

5.   Not later than three months after the end of each relevant year the
     licensee shall send to the Authority a statement, in respect of that
     relevant year, showing the specified items referred to in paragraph 7.

6.   The statement referred to in the preceding paragraph shall be:

     (a)   accompanied by a report from the Auditors that in their opinion such
           statement fairly presents each of the specified items referred to in
           paragraph 7 in accordance with the requirements of the charge
           restriction conditions and that the amounts shown in respect of each
           of the specified items are in accordance with the licensee's
           accounting records which have been maintained in respect of the
           transmission business in accordance with standard condition 5
           (Regulatory Accounts); and

     (b)   certified by a director of the licensee on behalf of the licensee
           that to the best of his knowledge, information and belief after
           having made all reasonable inquiries:

           (i)    there is no amount included in its calculations under Special
                  Condition J (Restriction of transmission charges) and Schedule
                  A which represents other than bona fide consideration for the
                  provision of transmission services the revenue from which is
                  regulated under Special Conditions I to N and Schedule A;

           (ii)   no service has been treated as an excluded service other than
                  a service permitted to be so treated in accordance with
                  Schedule A;  and

           (iii)  no amount included in the revenues stated in respect of
                  excluded services represents other than bona fide
                  consideration for the provision of the excluded service to
                  which it relates.

7.   The specified items to be shown in the statement referred to in paragraph 5
     shall be the following:

     (a)   the regulated quantity transmitted;

     (b)   [no longer used]

     (c)   the regulated transmission revenue;

                                      173

<PAGE>

     (d)   the nature of all services provided as part of the transmission
           business and treated as excluded services, together with a statement
           of the revenues derived from each service so treated;

     (e)   [no longer used]

     (f)   [no longer used]

     (g)   the details referred to in paragraph 5 of Special Condition M
           (Allowances in respect of security costs); and

     (h)   the value of the term LF\\t\\ together with the value of each of its
           component parts, as detailed in paragraph 1 of special condition J
           (Restriction of transmission charges)

     (i)   such other items as shall be specified in directions issued by the
           Authority for the purposes of Special Conditions I to N

8.   Where the Authority issues directions in accordance with paragraph 6 of
     Special Condition M (Allowances in respect of Security costs ) or paragraph
     7 of Schedule A (Supplementary provisions of the charge restriction
     conditions), the licensee shall, if so required by the Authority and within
     such period as the Authority shall specify, send to the Authority a revised
     statement in substitution for the licensee's statement under paragraph 5 in
     respect of the relevant year in question and such revised statement shall
     give effect to such directions.

                                      174

<PAGE>

Special Condition M:  Allowances in respect of security costs

1.   At any time during a security period, the licensee may give notice in
     writing to the Authority suspending, with effect from the date of receipt
     of the notice by the Authority ,application of such of the charge
     restriction conditions as may be specified in the notice, for the unexpired
     term of the security period.

2.   At any time during a security period, the Authority may (having regard to
     its duties under the Act) by means of directions:

     (a)   suspend or modify for the unexpired term of the security period the
           charge restriction conditions or any part or parts thereof; or

     (b)   introduce for the unexpired term of the security period new charge
           restriction conditions; in either case, so as to make such provision
           as in the opinion or estimation of the Authority is requisite or
           appropriate to enable the licensee to recover by means of a uniform
           percentage increase on all charges made in the course of the licence
           an amount estimated as being equal to the licensee's allowed security
           costs during such period, and the licensee shall comply with the
           terms of any directions so issued.

3.   Subject to paragraphs 4 and 6, the licensee shall in any relevant year be
     entitled to recover an aggregate amount equal to the licensee's allowed
     security costs in that year or (in so far as not previously recovered) any
     previous year, by means of appropriate equitable increases in the charges
     made by the licensee in the course of the transmission business.

4.   Paragraph 3 shall not apply in so far as such licensee's allowed
     transmission related security costs

     (a)   were otherwise recovered by the licensee; or

     (b)   were taken into account by the Authority in setting the charge
           restriction conditions by means of directions issued under paragraph
           2.

5.   The licensee shall following the end of each relevant year provide to the
     Authority details in respect of that relevant year of:

     (a)   the aggregate amounts charged under paragraph 3 on account of the
           licensee's allowed security costs; and

                                      175

<PAGE>

     (b)  the basis and calculation underlying the increases in charges made by
          the licensee in the course of the transmission business.

6.   Where the Authority is satisfied that the licensee has recovered amounts in
     excess of the licensee's allowed security costs, the Authority may issue
     directions requiring the licensee to take such steps as may be specified to
     reimburse customers of the licensee for the excess amounts charged to them,
     and the licensee shall comply with any directions so issued.

7.   No amounts charged by the licensee under this Condition (whether or not
     subsequently required to be reimbursed) shall be taken into account for the
     purpose of applying the charge restriction provisions of Special Condition
     J (Restriction of transmission charges).

8.   In this Condition:

     "allowed security cost"                means any cost allowed by the
                                            Authority (upon receipt of such
                                            information, including a certificate
                                            from the auditors, as the Authority
                                            may request) as being a cost which
                                            is directly attributable to any
                                            action taken or omitted to be taken
                                            by the licensee in its capacity as
                                            holder of the license for the
                                            purpose of complying with directions
                                            issued by the Secretary of State
                                            under Section 34(4) of the Act.

     "security period"                      means a period commencing on the
                                            date on which any direction issued
                                            by the Secretary of State under
                                            Section 34(4)(b) of the Act enters
                                            effect and terminating on the date
                                            (being not earlier than the date
                                            such direction, as varied, is
                                            revoked or expires) as the
                                            Authority, after consultation with
                                            such persons (including without
                                            limitation, licence holders liable
                                            to be principally affected) as it
                                            shall consider appropriate, may with
                                            the consent of the

                                      176

<PAGE>

                                            Secretary of State by notice to all
                                            licence holders determine after
                                            having regard to the views of such
                                            persons.

                                      177

<PAGE>

Special Condition N:  Duration of charge restriction conditions

1.   The charge restriction conditions shall apply so long as this licence
     continues in force but shall cease to have effect (in whole or in part, as
     the case may be) if the licensee delivers to the Authority a disapplication
     request made in accordance with paragraph 2 and:

     (a)   the Authority agrees in writing to the disapplication request; or

     (b)   their application (in whole or in part) is terminated by notice given
           by the licensee in accordance with either paragraph 4 or paragraph 5.

2.   A disapplication request pursuant to this Condition shall

     (a)   be in writing addressed to the Authority;

     (b)   specify the charge restriction conditions (or any part or parts
           thereof) to which the request relates; and

     (c)   state the date from which the licensee wishes the Authority to agree
           that the specified charge restriction conditions shall cease to have
           effect.

3.   Save where the Authority otherwise agrees, no disapplication following
     delivery of a disapplication request pursuant to this Condition shall have
     effect earlier than the date which is the later of:

     (a)   the date being not less than 18 months after delivery of the
           disapplication request; and,

     (b)   31 March 2005.

4.   If the Authority has not made a reference to the Competition Commission
     under Section 12 of the Act relating to the modification of the charge
     restriction conditions before the beginning of the period of 12 months
     which will end with the disapplication date, the licensee may deliver
     written notice to the Authority terminating the application of such of the
     charge restriction conditions (or any part or parts thereof) as are
     specified in the disapplication request with effect from the disapplication
     date or a later date.

5.   If the Competition Commission makes a report on a reference made by the
     Authority relating to the modification of the charge restriction conditions
     (or any part or parts thereof) specified in the disapplication request and
     such report does not include a conclusion that the cessation of such
     transmission charge restriction conditions, in whole or in part, operates
     or may be expected to operate against the public interest, the licensee

                                      178

<PAGE>

     may within 30 days after the publication of the report by the Authority in
     accordance with Section 13 of the Act deliver to it written notice
     terminating the application of such charge restriction conditions (or any
     part or parts thereof) with effect from the disapplication date or a later
     date.

                                      179

<PAGE>

Schedule A: Supplementary Provisions of the Charge Restriction Conditions

Part A: Excluded services

1.   There may be treated as excluded services provided by the transmission
     business such services in respect of which charges are made:

     (a)   which fall within paragraph 6; or

     (b)   which:

           (i)    do not fall within paragraph 2; and

           (ii)   may be determined by the licensee as falling under one of the
                  principles  set out in paragraphs 3 to 5.

2.   No service provided as part of the transmission business shall be treated
     as an excluded service in so far as it relates to the provision of services
     remunerated under use of system charges in accordance with Condition D8 of
     Part II (Basis of Charges for Use of System and Connection to System:
     Requirement for transparency) including (without prejudice to the
     foregoing):

     (i)   the transport of electricity;

     (ii)  the carrying out of works for the installation of electric lines or
           electrical plant (not otherwise payable in the form of connection
           charges) for the purpose of maintaining or upgrading the licensees
           transmission system;

     (iii) the carrying out of works or the provision of maintenance or repair
           or other services for the purpose of enabling the licensee to comply
           with standard condition 7 (Licensee's Grid Code) and Special
           Condition H (Transmission System Security Standard and Quality of
           Service (Scotland)), the Electricity Supply Regulations 1988 or any
           regulations made under Section 29 of the Act or any other enactment
           relating to safety or standards applicable in respect of the
           transmission business; and

     (iv)  the provision, installation and maintenance of any meters, switchgear
           or other electrical plant ancillary to the grant of use of system.

3.   The whole or an appropriate proportion (as the case may be) of the charges
     of the type described in Condition D8 of Part II (Basis of Charges for Use
     of System and Connection to System) and borne by any person as connection
     charges in respect of connections made after the grant of this licence may
     be treated as excluded services.

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<PAGE>

4.   There may be treated as an excluded service charges for the relocation of
     electric lines or electrical plant and the carrying out of works associated
     therewith pursuant to a statutory obligation (other than under Section 9(2)
     of the Act) imposed on the licensee.

5.   There may with the approval of the Authority be treated as an excluded
     service any service of a type not above referred to which:

     (a)   consists in the provision of services for the specific benefit of a
           third party requesting the same; and

     (b)   is not made available as a normal part of the transmission business
           remunerated by use of system charges.

6.   Services may be regarded as excluded services where the charges are:

     (a)   the rental for transmission business assets hosting fibre-optic
           telecommunications systems and used by third parties;

     (b)   made for the provision of capacity for transferring electricity
           across any part of any Upgrade;

     (c)   to Scottish Hydro-Electric Transmission Limited for the provision of
           capacity for transferring electricity from its authorised
           transmission area to the Scottish interconnection;

     (d)   to the Scottish Hydro-Electric Transmission Limited for the provision
           of capacity for transferring electricity across any part of the
           Scottish interconnection apart from any Upgrade;

     (e)   made for the provision of capacity for transferring electricity
           across any interconnection between Scotland and Northern Ireland.

7.   Where the Authority is satisfied that, in light of the principles set out
     in paragraphs 3 to 6 inclusive, any service treated as being or not being
     an excluded service should not be so treated, the Authority shall issue
     directions to that effect, and such service shall cease to be treated as an
     excluded service with effect from the date of issue of such directions or
     (subject to paragraph 8 of Special Condition L (Information to be provided
     to the Authority in connection with the charge restriction conditions))
     such other date as may be specified in the directions.

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<PAGE>

8.   For the purpose of this Schedule "Scottish interconnection" shall have the
     meaning given in standard condition Dl (Interpretation of Section D
     (Supplementary Standard Conditions for Scotland)) and "Upgrade" shall have
     the meaning given in Special Condition B (Basis of Charges for Use of
     Scottish Interconnection).

                                      182

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Special Condition O: Restriction on Activity and Financial Ringfencing

1.   Save as provided by paragraphs 3 and 4, the licensee shall not conduct any
     business or carry out any activity other than the transmission business.

2.   The licensee shall not without the prior written consent of the Authority
     hold or acquire shares or other investments of any kind except:

     (a)  shares or other investments in a body corporate the sole activity of
          which is to carry on business for a permitted purpose; or

     (b)  shares or other investments in a body corporate which is a subsidiary
          of the licensee and incorporated by it solely for the purpose of
          raising finance for the transmission business; or

     (c)  investments acquired in the usual and ordinary course of the
          licensee's treasury management operations, subject to the licensee
          maintaining in force, in relation to those operations, a system of
          internal controls which complies with best corporate governance
          practice as required (or in the absence of any such requirement
          recommended) from time to time for listed companies in the United
          Kingdom.

3.   Subject to the provisions of paragraph 2, nothing in this Condition shall
     prevent:

     (a)  any affiliate in which the licensee does not hold shares or other
          investments from conducting any business or carrying on any activity;

     (b)  the licensee from holding shares as, or performing the supervisory or
          management functions of, an investor in respect of any body corporate
          in which it holds an interest consistent with the provisions of this
          licence;

     (c)  the licensee from performing the supervisory or management functions
          of a holding company in respect of any subsidiary; or

     (d)  the licensee from carrying on any business or conducting any activity
          to which the Authority has given its consent in writing.

4.   Nothing in this Condition shall prevent the licensee or an affiliate or
     related undertaking of the licensee in which the licensee holds shares or
     other investments (a "relevant associate") conducting de-minimis business
     as defined in this paragraph so long as the limitations specified in this
     paragraph are complied with:

                                      183

<PAGE>

     (a)  For the purpose of this paragraph "de-minimis business" means any
          business or activity carried on by the licensee or a relevant
          associate or relevant associates other than:-

          (i)  the transmission business;

          (ii) and any other business activity to which the Authority has given
               its consent in writing in accordance with paragraph 3(d).

     (b)  The licensee or a relevant associate may carry on de-minimis business
          provided that the relevant associate carries on no other business
          except activities of the transmission business and business activities
          authorised by the Authority under paragraph 3(d), and neither of the
          following limitations is exceeded, namely:

          (i)  the aggregate turnover of all the de-minimis business carried on
               by the licensee and all its relevant associates does not in any
               period of twelve months commencing on 1 April of any year exceed
               2 1/2 % of the aggregate turnover of the transmission business as
               shown by the most recent audited accounting statements of the
               licensee produced under paragraphs 2(b)(i) and (c) of standard
               condition 5 (Regulatory Accounts); and

          (ii) the aggregate amount (determined in accordance with sub-paragraph
               below) of all investments made by the licensee and all its
               relevant associates in their de-minimis business or de-minimis
               businesses does not at any time after the date this Special
               Condition takes effect in this licence exceed 2 1/2 % of the sum
               of share capital in issue, share premium and consolidated
               reserves of the licensee as shown by its most recent audited
               historical cost financial statements then available.

     (c)  For the purpose of sub-paragraph (b) of this paragraph, "Investment"
          means any form of financial support or assistance given by or on
          behalf of the licensee or a relevant associate for the de-minimis
          business whether on a temporary or permanent basis including (without
          limiting the generality of the foregoing) any commitment to provide
          any such support or assistance in the future.

     (d)  At any relevant time, the amount of an investment shall be the sum of:

          (i)  the value at which such investment was included in the audited
               historical cost balance sheet of the licensee or a relevant
               associate as at its latest

                                      184

<PAGE>

                accounting reference date to have occurred prior to the date
                this Special Condition takes effect in this licence (or, where
                the investment was not so included, zero);

          (ii)  the aggregate gross amount of all expenditure (whether of a
                capital or revenue nature) howsoever incurred by the licensee or
                a relevant associate in respect of such investment in all
                completed accounting reference periods since such accounting
                reference date; and

          (iii) all commitments and liabilities (whether actual or contingent)
                of the licensee or a relevant associate relating to such
                investment outstanding at the end of the most recently completed
                accounting reference period.

          (iv)  In this Condition and in Special Condition S (Indebtedness)
                "permitted purpose" means the purpose of all or any of the
                following:

                         (a)  the transmission business or any other business or
                              activity within the limits of paragraph 4 of this
                              Condition;

                         (b)  any business or activity to which the Authority
                              has given its consent in writing in accordance
                              with paragraph 3 (d) of this Condition; and

                         (c)  without prejudice to the generality of
                              sub-paragraph (a), any payment or transaction
                              lawfully made or undertaken by the licensee for a
                              purpose within sub-paragraphs I (b)(i) to (vii) of
                              Special Condition S (Indebtedness).

                                      185

<PAGE>

Special Condition P: Availability of Resources

1.   The licensee shall at all times act in a manner calculated to secure that
     it has available to it all such resources, including (without limitation)
     management and financial resources, personnel, fixed and moveable assets,
     rights, licences, consents and facilities on such terms and with all such
     rights as shall ensure that it is at all times able:

     (a)  properly and efficiently to carry on the transmission business; and

     (b)  to comply in all respects with its obligations under this licence and
          such obligations under the Act as apply to the transmission business
          including, without limitation, its duty to develop and maintain an
          efficient, co-ordinated and economical system of electricity
          transmission.

     2.   The licensee shall submit a certificate to the Authority, approved by
          a resolution of the board of directors of the licensee and signed by a
          director of the licensee pursuant to that resolution. Such certificate
          shall be submitted in June of each year. Each certificate shall be in
          one of the following forms:

          (a)  "After making enquiries, the directors of the licensee have a
               reasonable expectation that the licensee will have available to
               it, after taking into account in particular (but without
               limitation) any dividend or other distribution which might
               reasonably be expected to be declared or paid, sufficient
               financial resources and financial facilities to enable the
               licensee to carry on the transmission business for a period of 12
               months from the date of this certificate."

          (b)  "After making enquiries, the directors of the licensee have a
               reasonable expectation, subject to what is said below, that the
               licensee will have available to it, after taking into account in
               particular (but without limitation) any dividend or other
               distribution which might reasonably be expected to be declared or
               paid, sufficient financial resources and financial facilities to
               enable the licensee to carry on the transmission business for a
               period of twelve months from the date of this certificate.
               However, they would like to draw attention to the following
               factors which may cast doubt on the ability of the licensee to
               carry on the transmission business."

          (c)  "In the opinion of the directors of the licensee, the licensee
               will not have available to it sufficient financial resources and
               financial facilities to enable the licensee to

                                      186

<PAGE>

          carry on the transmission business for a period of 12 months from the
          date of this certificate".

3.   The licensee shall submit to the Authority with that certificate a
     statement of the main factors which the directors of the licensee have
     taken into account in giving that certificate.

4.   The licensee shall inform the Authority in writing immediately if the
     directors of the licensee become aware of any circumstance which causes
     them no longer to have the reasonable expectation expressed in the then
     most recent certificate given under paragraph 2.

5.   The licensee shall use its best endeavours to obtain and submit to the
     Authority with each certificate provided for in paragraph 2 a report
     prepared by its auditors and addressed to the Authority stating whether or
     not the auditors are aware of any inconsistencies between, on the one hand,
     that certificate and the statement submitted with it and, on the other
     hand, any information which they obtained during their audit work.

6.   The directors of the licensee shall not declare or recommend a dividend,
     nor shall the licensee make any other form of distribution within the
     meaning of section 263 of the Companies Act 1985, unless prior to the
     declaration, recommendation or making of the distribution (as the case may
     be) the licensee shall have issued to the Authority a certificate complying
     with the following requirements of this paragraph.

     (a)  The certificate shall be in the following form:

          "After making enquiries, the directors of the licensee are satisfied:

          (i)  that the licensee is in compliance in all material respects with
               all obligations imposed on it by standard condition 11 (Provision
               of Information to the Authority), Special Condition O
               (Restriction on Activity and Financial Ring- fencing), Special
               Condition P (Availability of Resources), Special Condition Q
               (Undertaking from ultimate controller), Special Condition R
               (Credit Rating of Licensee) and Special Condition S
               (Indebtedness) of the licence: and

          (ii) that the making of a distribution of [.] on [.] will not, either
               alone or when taken together with other circumstances reasonably
               foreseeable at

                                      187

<PAGE>

                    the date of this certificate, cause the licensee to be in
                    breach to a material extent of any of these obligations in
                    the future."

          (b)  The certificate shall be signed by a director of the licensee and
               approved by a resolution of the board of directors of the
               licensee passed not more than 14 days before the date on which
               the declaration, recommendation or payment will be made.

          (c)  Where the certificate has been issued in respect of the
               declaration or recommendation of a dividend, the licensee shall
               be under no obligation to issue a further certificate prior to
               payment of that dividend provided such payment is made within six
               months of that certificate.

                                      188

<PAGE>

Special Condition Q: Undertaking from ultimate controller

1.   The licensee shall procure from each company or other person which the
     licensee knows or reasonably should know is at any time an ultimate
     controller of the licensee a legally enforceable undertaking in favour of
     the licensee in the form specified by the Authority that that ultimate
     controller ("the convenantor") will refrain from any action, and will
     procure that any person (including, without limitation, a corporate body)
     which is a subsidiary of, or is controlled by, the covenantor (other than
     the licensee and its subsidiaries) will refrain from any action which would
     then be likely to cause the licensee to breach any of its obligations under
     the Act or this licence. Such undertaking shall be obtained within 7 days
     of the company or other person in question becoming an ultimate controller
     and shall remain in force for as long as the licensee remains the holder of
     this licence and the covenantor remains an ultimate controller of the
     licensee.

2.   The licensee shall:

     (a)  deliver to the Authority evidence (including a copy of each such
          undertaking) that the licensee has complied with its obligation to
          procure undertakings pursuant to paragraph 1;

     (b)  inform the Authority immediately in writing if the directors of the
          licensee become aware that any such undertaking has ceased to be
          legally enforceable or that its terms have been breached; and

     (c)  comply with any direction from the Authority to enforce any such
          undertaking; and shall not, save with the consent in writing of the
          Authority, enter (directly or indirectly) into any agreement or
          arrangement with any ultimate controller of the licensee or of any of
          the subsidiaries of any such corporate ultimate controller (other than
          the subsidiaries of the licensee) at a time when,

          (i)   an undertaking complying with paragraph 1 is not in place in
                relation to that ultimate controller, or

          (ii)  there is an unremedied breach of such undertaking; or

          (iii) the licensee is in breach of the terms of any direction issued
                by the Authority under paragraph 2 of this Condition.

                                      189

<PAGE>

3.   In this Condition

     "ultimate controller"                 means:

                                            (a)  a holding company of the
                                                 licensee which is not itself a
                                                 subsidiary of another company;
                                                 and

                                            (b)  any person who (whether alone
                                                 or with a person or persons
                                                 connected with him) is in a
                                                 position to control, or to
                                                 exercise significant influence
                                                 over, the policy of the
                                                 licensee or any holding company
                                                 of the licensee by virtue of:

                                            (i)  rights under contractual
                                                 arrangements to which he is a
                                                 party or of which he is a
                                                 beneficiary; or

                                            (ii) rights of ownership (including
                                                 rights attached to or deriving
                                                 from securities or rights under
                                                 a trust) which are held by him
                                                 or of which he is a
                                                 beneficiary; but excluding any
                                                 director or employee of a
                                                 corporate body in his capacity
                                                 as such; and

                                            (c)  for the purposes of
                                                 sub-paragraph (b), a person is
                                                 connected with another person
                                                 if they are party to any
                                                 arrangement regarding the
                                                 exercise of any such rights as
                                                 are described in that
                                                 paragraph.

                                      190

<PAGE>

Special Condition R: Credit Rating of Licensee

1.   The licensee shall use all reasonable endeavours to ensure that the
     licensee maintains at all times an investment grade issuer credit rating.

2.   In this Condition and in Special Condition S (Indebtedness): "investment
     grade issuer credit rating" means:

     (a)  an issuer rating of not less than BBB- by Standard & Poor's Ratings
          Group or any of its subsidiaries or a corporate rating of not less
          than Baa3 by Moody's Investors Service, Inc. or any of its
          subsidiaries or such higher rating as shall be specified by either of
          them from time to time as the lowest investment grade credit rating;
          or

     (b)  an equivalent rating from any other reputable credit rating agency
          which, in the opinion of the Authority, notified in writing to the
          licensee, has comparable standing in the United Kingdom and the United
          States of America.

                                      191

<PAGE>

Special Condition S: Indebtedness

1.   In addition to the requirements of standard condition 10 (Disposal of
     Relevant Assets), the licensee shall not without the prior written consent
     of the Authority 2 3 4 (following the disclosure by the licensee of all
     material facts):

     (a)  create or continue or permit to remain in effect any mortgage, charge,
          pledge, lien or other form of security or encumbrance whatsoever,
          undertake any indebtedness to any other person or enter into any
          guarantee or any obligation otherwise than:

          (i)   on an arm's length basis;

          (ii)  on normal commercial terms;

          (iii) for a permitted purpose; and

          (iv)  (if the transaction is within the ambit of standard condition 10
                (Disposal of Relevant Assets) in accordance with that condition.

     (b)  transfer, lease, license or lend any sum or sums, asset, right or
          benefit to any affiliate or related undertaking of the licensee
          otherwise than by way of:

          (i)   a dividend or other distribution omit of distributable reserves;

          (ii)  repayment of capital;

          (iii) payment properly due for any goods, services or assets provided
                on an arm's length basis and on normal commercial terms;

          (iv)  a transfer, lease, licence or loan of any sum or sums, asset,
                right or benefit on an arm's length basis, on normal commercial
                terms and made in compliance with the payment condition;

          (v)   repayment of or payment of interest on a loan not prohibited by
                subparagraph (a);

          (vi)  payments for group corporation tax relief or for the surrender
                of Advance Corporation Tax calculated on a basis not exceeding
                the value of the benefit received; or

          (vii) an acquisition of shares or other investments in conformity with
                paragraph 2 of Special Condition O (Restriction on Activity and
                Financial

_________________
6   Consent issued under Special Licence Condition S of this licence (01.10.01)
7   Consent issued under Special Licence Condition S of this licence and Annex
    thereto (01.10.01)
8   Consent issued under Special Licence Condition S of this licence (20.11.01)

                                      192

<PAGE>

               Ringfencing) made on an arm's length basis and on normal
               commercial terms.

     (c)  enter into an agreement or incur a commitment incorporating a
          cross-default obligation; or

     (d)  continue or permit to remain in effect any agreement or commitment
          incorporating a cross-default obligation subsisting at the date this
          Special Condition takes effect in this licence save that the licensee
          may permit any cross-default obligation in existence at that date to
          remain in effect for a period not exceeding twelve months from that
          date, provided that the cross-default obligation is solely referable
          to an instrument relating to the provision of a loan or other
          financial facilities granted prior to that date and the terms on which
          those facilities have been made available as subsisting on that date
          are not varied or otherwise made more onerous.

     (e)  the provisions of sub-paragraphs (c) and (d) of this paragraph shall
          not prevent the licensee from giving any guarantee permitted by and
          compliant with the requirements of paragraph (a).

     (f)  the payment condition referred to in sub-paragraph (b) (iv) is that
          the consideration due in respect of the transaction in question is
          paid in full when the transaction is entered into unless either:

          (i)  the counter-party to the transaction has and maintains until
               payment is made in full an investment grade issuer credit rating,
               or

          (ii) the obligations of the counter-party to the transaction are fully
               and unconditionally guaranteed throughout the period during which
               any part of the consideration remains outstanding by a guarantor
               which has and maintains an investment grade issuer credit rating.

2.   In this Condition:

     "cross-default obligation"               Means a term of any agreement or
                                              arrangement whereby the licensee's
                                              liability to pay or repay any debt
                                              or other sum arises or is
                                              increased or accelerated or is
                                              capable of arising, increasing or
                                              of acceleration by

                                      193

<PAGE>

                                        reason of a default (howsoever such
                                        default may be described or defined) by
                                        any person other than the licensee
                                        unless:

                                        (i)    that liability can arise only as
                                               the result of a default by a
                                               subsidiary of the licensee,

                                        (ii)   the licensee holds a majority of
                                               the voting rights in that
                                               subsidiary and has the right to
                                               appoint or remove a majority of
                                               its board of directors, and

                                        (iii)  that subsidiary carries on
                                               business only for a purpose
                                               within paragraph (a) of the
                                               definition of permitted purpose
                                               (as defined in Special Condition
                                               O (Restriction on Activity and
                                               Financial Ringfencing)).

        "indebtedness"                  means all liabilities now or hereafter
                                        due owing or incurred, whether actual or
                                        contingent, whether solely or jointly
                                        with any other person and whether as
                                        principal or surety, together with any
                                        interest accruing thereon and all costs,
                                        charges, penalties and expenses incurred
                                        in connection therewith.

                                      194

<PAGE>

                                   SCHEDULE 1

                                 AUTHORISED AREA

1.   Scotland (except the area specified in the Electricity Act 1989 (North of
     Scotland Specified Area) Order 1990 made on 7 March 1990), the Cruachan
     Transmission Line, and the Dalmally Switching Station.

2.   In this Schedule:

     "the Cruachan Transmission Line"

            means the double circuit 275 kV transmission line extending from the
            Cruachan Station Works, to the Dalmally Switching Station and
            thereafter to the Windyhill Substation together with all lattice
            towers, conductors, insulators, associated cables and connections,
            and all other items of plant or equipment making up or supporting
            said transmission line, with the benefit, subject to the applicable
            conditions therein, of all wayleaves and/or servitude rights
            relating thereto.

3.   Expressions used in the definition of the Cruachan Transmission Line which
     are defined in a transfer scheme shall have the same meaning in this
     Schedule as in such transfer scheme.

                                      195

<PAGE>

                                   SCHEDULE 2

                                   REVOCATION

1.   The Authority may at any time revoke the licence by giving no less than 30
     days' notice (24 hours' notice, in the case of a revocation under
     sub-paragraph 1(g)) in writing to the licensee:

     (a)   if the licensee agrees in writing with the Authority that the licence
           should be revoked:

     (b)   if any amount payable under standard condition 4 (Payments by
           licensee to the Authority) is unpaid 30 days after it has become due
           and remains unpaid for a period of 14 days after the Authority has
           given the licensee notice that the payment is overdue - provided that
           no such notice shall be given earlier than the sixteenth day after
           the day on which the amount payable became due;

     (c)   if the licensee fails:

           (i)   to comply with a final order (within the meaning of section 25
                 of the Act) or with a provisional order (within the meaning of
                 that section) which has been confirmed under that section and
                 (in either case) such failure is not rectified to the
                 satisfaction of the Authority within three months after the
                 Authority has given notice in writing of such failure to the
                 licensee - provided that no such notice shall be given by the
                 Authority before the expiration of the period within which an
                 application under section 27 of the Act could be made
                 questioning the validity of the final or provisional order or
                 before the proceedings relating to any such application are
                 finally determined; or

          (ii)   to pay any financial penalty (within the meaning of section 27A
                 of the Act) by the due date for such payment and such payment
                 is not made to the Authority within three months after the
                 Authority has given notice in writing of such failure to the
                 licensee - provided that no such notice shall be given by the
                 Authority before the expiration of the period within which an
                 application under section 27E of the Act could be made
                 questioning the validity or effect of the financial penalty or
                 before the proceedings relating to any such application are
                 finally determined;

                                      196

<PAGE>

     (d)   if the licensee fails to comply with:

           (i)    an order made by the Secretary of State under section 56, 73,
                  74 or 89 of the Fair Trading Act 1973; or

           (ii)   an order made by the court under section 34 of the Competition
                  Act 1998.

     (e)   if the licensee ceases to carry on the transmission business;

     (f)   if the licensee has not commenced carrying on the transmission
           business within 5 years of the date on which the licence comes into
           force;

     (g)   if the licensee:

           (i)    is unable to pay its debts (within the meaning of section
                  123(1) or (2) of the Insolvency Act 1986, but subject to
                  paragraphs 2 and 3 of this schedule) or has any voluntary
                  arrangement proposed in relation to it under section 1 of that
                  Act or enters into any scheme of arrangement (other than for
                  the purpose of reconstruction or amalgamation upon terms and
                  within such period as may previously have been approved in
                  writing by the Authority);

           (ii)   has a receiver (which expression shall include an
                  administrative receiver within the meaning of section 251 of
                  the Insolvency Act 1986) of the whole or any material part of
                  its assets or undertaking appointed;

           (iii)  has an administration order under section 8 of the Insolvency
                  Act 1986 made in relation to it;

           (iv)   passes any resolution for winding-up other than a resolution
                  previously approved in writing by the Authority; or

           (v)    becomes subject to an order for winding-up by a court of
                  competent jurisdiction; or

     (h)   if the licensee is convicted of having committed an offence under
           section 59 of the Act in making its application for the licence.

2.   For the purposes of sub-paragraph 1(g)(i), section 123(1)(a) of the
     Insolvency Act 1986 shall have effect as if for "(pound)750" there was
     substituted "(pound)l00,000" or such higher figure as the Authority may
     from time to time determine by notice in writing to the licensee.

                                      197

<PAGE>

3.   The licensee shall not be deemed to be unable to pay its debts for the
     purposes of sub- paragraph 1(g)(i) if any such demand as is mentioned in
     section 123(l)(a) of the Insolvency Act 1986 is being contested in good
     faith by the licensee with recourse to all appropriate measures and
     procedures or if any such demand is satisfied before the expiration of such
     period as may be stated in any notice given by the Authority under
     paragraph 1.

                                      198

<PAGE>

                             CONSENTS AND DIRECTIONS

                                      199

<PAGE>

Direction issued under Condition 7 (of Part IV) of the Generation, Transmission
and Public Electricity Supply Licence of Scottish Power UK plc now Standard
Condition 10 of this licence (01.04.92)

Our Ref: DIR/S/229
1 April 1992

Mr S R Bucknall
Regulation Manager
Scottish Power plc
Cathcart House
Spean Street

GLASGOW
G44 4BE

GENERATION, TRANSMISSION AND PUBLIC ELECTRICITY SUPPLY LICENCE

Part IV: Condition 7

Disposal of Relevant Assets

The Director General of Electricity Supply ("the Director") hereby directs that
for the purposes of Condition 7 of Part IV of the Generation, Transmission and
Public Electricity Supply Licence (the "Licence") issued to Scottish Power plc
(the "Licensee") on 28 March 1990:

1.   The Licensee may dispose of a relevant asset without giving prior notice if
     the relevant asset is obsolete or redundant.

2.   The consent in paragraph 1 shall not apply:

     (i)   in respect of a relevant asset if:

           (a)   the value of that asset;

           (b)   the value of that asset and other related relevant assets which
                 are being or intended to be disposed of at the same time; or

           (c)   the value of that asset and other relevant assets which
                 together formed a part of the Licensee's transmission system
                 and are being declared obsolete or redundant at the same time
                 or as part of the same operation;

           exceeds (pounds)250,000 (as amended on 1 April each year by the
           percentage change in the Retail Price Index since 1 April 1990);

     (ii)  in respect of a relevant asset which is obsolete unless an
           appropriate replacement or alternative arrangement has been installed
           in the Licensee's transmission

                                      200

<PAGE>

            system, or is being or is intended to be installed in such a manner
            that Continuity of the function of that asset is achieved;

     (iii)  where the disposal constitutes a sale and lease back arrangement; or

     (iv)   where the relevant asset is intended to remain in operational use
            but not under the operational control of the Licensee.

3.   The Licensee may without giving prior notice dispose of any relevant asset
     to a wholly owned subsidiary ("the subsidiary") (as defined in the
     Companies Act 1985 as amended or re-enacted from time-to time) of the
     Licensee if the Licensee has prior to the disposal delivered to the
     Director a document duly executed by the subsidiary and the Licensee (in a
     form capable of being enforced by the Director) undertaking to the Director
     that:

     (i)    the subsidiary in respect of the relevant asset will comply with the
            provision  of Condition 8 of Part II of the Licence as if it were
            the Licensee; and

     (ii)   the Licensee will not cause or permit the subsidiary to cease to be
            its wholly owned subsidiary without the prior written consent of the
            Director to the disposal of the relevant asset(s) owned by the
            subsidiary;

4.   The Licensee may without giving prior notice grant to a third party a
     servitude or easement, wayleave, licence or similar right over any land or
     property in which the Licensee has a legal or beneficial interest and which
     is a relevant asset, save where the grant of such a right would have a
     material adverse effect on the Licensee's ability to use or develop the
     land for the purposes of the Licensee's Transmission Business.

5.   The Licensee may without giving prior notice dispose of any relevant asset
     to another Licensee provided that:

     (i)    the Licensee to whom disposal is made is subject to the provisions
            of licence conditions equivalent to Condition 7 of Part IV and
            Condition 8 of Part II of the Licence;

     (ii)   the relevant asset will become a relevant asset under those
            equivalent licence conditions upon disposal;

     (iii)  the Licensee will be able to fulfil the duties arising under or by
            virtue of the Licence after disposal of the relevant asset.

6.   The consent contained in paragraphs 1, 3,4 and 5 relates only to Condition
     7 of Part IV of the Licence and shall not apply or be deemed to apply for
     the purpose of any consent or approval which the Director may or may be
     required to give in relation to a disposal under any other Condition of the
     Licence or under the Act.

7.   In this direction:

     "obsolete" means unable to perform its required function either in an
     efficient manner or at all through wear and tear, obsolescence, damage,
     failure, unsafe operation or advances in technology and includes equipment
     that the Licensee has decided to render obsolete as a result of inspection;

                                      201

<PAGE>

         "prior notice" means a notice to the Director under paragraph 2 of
         Condition 7 of Part IV of the Licence;

         "redundant" means no longer required or necessary in order to enable
         the Licensee to comply with its obligations under the Act or the
         Licence in relation to the Licensee's transmission system provided that
         a relevant asset shall not be regarded as being redundant solely
         because it is in the ownership or control of a third party;

         "value" means the estimated price that could be expected to be received
         in the market at the time of disposal;

and other words and phrases in this Direction which are defined for the purpose
of the Licence shall have the same meaning as in the Licence.

R N IRVINE
Authorised on behalf of the
Director General of Electricity Supply

                                      202

<PAGE>

Direction issued under Conditions 8 and 8A (of Part IV) of the Transmission
Licence of Scottish Power UK plc now Standard Conditions D3 and D3A of this
licence (28.07.00)

                            The Electricity Act 1989

                                Sections 6 and 7

   Electricity Transmission Licence granted to Scottish Power (UK) plc Public
 Electricity Supply Licences granted to Scottish Power (UK) plc and Manweb plc

                                    Direction
                                     of the
                     Director General of Electricity Supply

Whereas -

(1)  Scottish Power (UK) plc ("SP") is the holder of a transmission licence
     ("the Transmission Licence") granted under section 6(1)(b) of the
     Electricity Act 1989 ("the Act").

(2)  SP and Manweb plc ("Manweb") are the holders of public electricity supply
     licences granted under section 6(1)(c) of the Act ("the SP PES Licence" and
     "the Manweb PES Licence" respectively).

(3)  SP and Manweb are members of the same group of companies.

(4)  Condition 8 in Part IV of the Transmission Licence ("Condition ii")
     prohibits SP from disclosing confidential information.

(5)  Condition 8A in Part IV of the Transmission Licence ("Condition 8A")
     requires SP to maintain the full managerial arid operational independence
     of the Transmission Business of SP from other businesses of SP and of its
     affiliates and related undertakings.

(6)  Paragraph (9) of Condition 8A provides that the Director in certain
     circumstances may issue a direction relieving SP of its obligations under
     Condition 8 and under paragraphs 1(a), 2 and 8 of Condition 8A to such
     extent and subject to such terms and conditions as he may specify in that
     direction.

(7)  Condition 9 in Part V of the SP PES Licence ("Condition 9") and Condition
     12 of the Manweb PES Licence ("Condition 12") require the Distribution
     Businesses of SP and of Manweb to have information separation and
     managerial and operational independence from other businesses of SP and of
     Manweb.

(8)  Paragraph (7) of each of the Condition 9 and Condition 12 provides that the
     Director in certain circumstances may issue a direction relieving SP and
     Manweb from certain of their obligations under the Conditions.

(9)  SP and Manweb have requested the Director to issue directions relieving
     them from their above mentioned obligations to the extent necessary for the
     Transmission and Distribution

                                      203

<PAGE>

      Businesses of SP to be managed and operated as a single business with the
      Distribution Business of Manweb.

(10)  In response to the request the Director is satisfied that, having regard
      to the terms of paragraph (9) of Condition BA and to paragraph (7) of each
      of Condition 9 and Condition 12, he is entitled to issue a direction in
      the manner hereinafter appearing.

NOW THEREFORE THE DIRECTOR ISSUES THE FOLLOWING DIRECTION -

1.    Except where the context requires otherwise, any terms used in this
      direction that are defined in Part 1 of the composite document setting out
      the generation and public electricity supply licences of SP and the
      Transmission Licence shall have the meaning given to them in that Part.

2.    This direction is issued for the purposes of paragraph (9) of Condition 8A
      and of paragraph (7) of each of Condition 9 and Condition 12.

3.    SP is relieved of its obligations under Condition 8 and paragraphs 1(a), 2
      and 8 of Condition 8A and SP and Manweb are relieved of their obligations
      under paragraphs 1 to 6 of Condition 9 and Condition 12 respectively to
      such extent as is necessary for the Transmission and Distribution
      Businesses of SP to be managed and operated as a single business with the
      Distribution Business of Manweb subject to the conditions that:-

      (a)   any arrangements for the use of or access to premises, systems,
            equipment, facilities, property or personnel by the Transmission and
            Distribution Businesses of SP and the Distribution Businesses of
            Manweb:

            (i)    do not involve a cross-subsidy being given by any one of the
                   Transmission or Distribution Businesses of SP or the Manweb
                   Distribution Business to any other of those businesses;

            (ii)   obtain for the Transmission and Distribution Businesses of SP
                   and the Manweb Distribution Business, in the most efficient
                   and economical manner possible, the use of the relevant
                   premises, systems, equipment, facilities, property or
                   personnel; and

            (iii)  do not restrict, distort or prevent competition in the
                   generation or supply of electricity;

      (b)   nothing in this direction shall relieve either SP or Manweb from any
            obligation in respect of any Separation Plan prepared for the
            purpose of any of the conditions of the SP and Manweb PES Licences,
            and

      (c)   nothing in this direction shall relieve either SP or Manweb from any
            obligation imposed on them by Directive 96/92/EC.

4.    This direction shall cease to have effect on the earlier of:-

      (a)   notification by the Director to SP and to Manweb that he is
            satisfied that there has been a material failure to comply with the
            condition set out in paragraph 3 above,

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<PAGE>

          (b)  Condition 8, Condition 8A, Condition 9 or Condition 12 ceasing to
               have effect, or

          (c)  the expiry of 28 days from the date of service on the Director by
               either SP or Manweb of a request for the revocation of the
               direction.

The Official Seal of the Director General
of Electricity Supply hereunto affixed is
authenticated by

Charles Coulthard
Authorised in that behalf by the Director
General of Electricity Supply
Date 28 July 2000

                                      205

<PAGE>

Consent issued under Special Licence Condition S of this licence (01.10.01)

To
SP Transmission Ltd ("the Licensee")
1 Atlantic Quay
Glasgow
G2 8SP

Consent under Transmission Special Licence Condition S  (Indebtedness

1.   This consent is issued by the Gas and Electricity Markets Authority ("the
     Authority") to the Licensee under paragraph 1 of the above condition ("the
     Condition").

2.   The Authority hereby consents to the Licensee being a party to a group
     registration scheme with HM Customs & Excise for value added tax ("VAT")
     purposes, subject to the following condition namely that throughout the
     period during which such registration subsists, the Licensee shall have the
     benefit of a legally enforceable undertaking and indemnity from the
     controlling member of the VAT group in respect of which the registration
     has been made whereby the Licensee is kept indemnified from any liability
     to VAT (including interest, penalties and costs) which does not arise out
     of the authorised business of the Licensee under the Licence but which is
     claimed against the Licensee as a result of such group registration.

3.   This consent shall have effect on and from the date specified below. It
     shall remain in effect until the Authority shall withdraw it or replace it
     by a further consent made under the Condition.

4.   Words and expressions used in this consent have the meaning attributed to
     them in the said Special Licence Condition,

Dated:  1 October 2001
Signed

Charles Coulthard
Duly authorised in that behalf by the Authority

                                      206

<PAGE>

Consent issued under Special Licence Condition S of this licence and Annex
thereo (01.10.01)

ELECTRICITY TRANSMISSION LICENCE
SPECIAL LICENCE CONDITIONS

To SP Transmission Limited ("the Licensee")
1 Atlantic Quay
Glasgow
C2 8SP

Consent under Special Licence Condition S (Indebtedness)

1.   This consent is issued by the Gas and Electricity Markets Authority ("the
     Authority") to the Licensee under paragraph 1 of the above condition ("the
     Condition").

2.   The Authority refers to the application from Scottish Power UK plc ("SPUK"
     to the Authority dated 9 July (and forwarded by fax on 10 July) 2001 ("the
     Application") and hereby consents to the Licensee giving those guarantees
     given or to be given in support of or in relation to the borrowings which
     are referred to or set out in Annex A to the Application, subject to the
     conditions set out in the Annex to this consent.

3.   This consent is given subject to the further Condition that no change shall
     be made to the financial arrangements set out in the Application, or in the
     parties to them, without the prior written consent of the Authority.

4.   This consent shall have effect on and from the date specified below. It
     shall remain in effect until the Authority shall revoke or replace it by a
     further consent pursuant to condition 11 in the Annex to this consent.

5.   Save where the context otherwise requires, words and expressions used in
     this consent have the meaning attributed to them in the said Special
     Licence Conditions.

Dated 1 October 2001

Signed

Charles Coulthard
duly authorised in that behalf by the Authority

                                      207

<PAGE>

SP Transmission Limited ("the Licensee")

Annex to Consent issued under Special Licence Condition S (Indebtedness) in
respect of the Application of the licensee ("the Application") dated 10 July
2001

The following conditions, in addition to those contained in its transmission
licence, are applicable to the Licensee:

1.   any guarantee to be provided by the Licensee pursuant to this consent (each
     an "Upstream Guarantee") is to be in favour of the lender(s) or, as the
     case may be, contract counter-parties from time to time (or where
     applicable their nominee or agent as trustee for their interests) under one
     or more of the borrowing arrangements detailed in Annex A to the
     Application and directly related derivative contracts;

2.   Upstream guarantees may extend only to amounts due and payable from time to
     time by Scottish Power UK plc ("SPUK") (the "guaranteed indebtedness"
     under, and in accordance with the terms of, the bank facility, bonds, and
     notes existing on the date on which SPUK's Transfer Scheme under Schedule 7
     to the Utilities Act 2000 becomes effective ("the transfer date"), and to
     amounts becoming due and payable under, and in accordance with the terms
     of, derivative contracts from time to time entered into solely for the
     purpose of hedging interest rate or currency exposures arising under the
     guaranteed indebtedness ("directly related derivative contracts");

3.   Upstream Guarantees may not: (a) extend to amounts becoming due and payable
     under any extension, renewal or replacement of the bonds and notes other
     than in respect of amounts refinanced on the same terms as those existing
     as at the transfer date or upon terms more beneficial to the borrower (save
     that in no case may the stated maturity of the replacement instrument be
     later than the stated maturity of the instrument replaced); nor (b) may
     they cover amounts becoming due and payable under the bank facility if the
     terms and conditions of such facility are varied after the transfer date in
     any material respect so as to increase the amounts that may become payable
     under the bank facility or to extend its term or otherwise to impose
     additional or more onerous financial obligations on SPUK, nor (c) may they
     cover any other liabilities whatsoever (unless and to the extent incurred
     consistently with the conditions of the Licensee's transmission licence or
     any consent validly issued thereunder);

4.   for so long as any upstream Guarantee remains outstanding, the Licensee is
     to be fully and effectively indemnified, in a form satisfactory to Ofgem,
     against any and all costs, expenses, damages and losses it may incur or
     suffer as a result of any call made, or the performance of any obligation,
     under an Upstream Guarantee. Such indemnities are to be given by Scottish
     Power Investments Limited ("Investments"), may not be limited in time or
     amount, and shall comply with the requirements or paragraphs 5 and 6 below;

5.   it shall be a term of the indemnities that Investments has , for so long as
     the Upstream Guarantees remain in force, an investment grade corporate
     credit rating from either Standard & Poor's Ratings Group or Moody's
     Investors Services, Inc. In the event that such a rating is not held,
     Investments shall take such steps as the Licensee may require in accordance
     with a direction of the Authority, acting reasonably after consultation
     with the Licensee, to secure that the value of the indemnities to the
     Licensee is not materially reduced or, if this is nor practicable, that
     additional or alternative protections are put in place so as to leave the
     Licensee in a position not materially less favourable to it than that which
     would have obtained had such rating been held;

                                      208

<PAGE>

6.   it shall be a further term of the indemnities that, without prejudice to
     the requirement in paragraph 5 above, Investments undertakes not without
     the prior consent of the Authority notified to the Licensee in writing to
     dispose of or refinance the whole or any major part of its business or
     assets, or of the business or assets of Manweb plc, unless the proceeds of
     such sale or refinancing are applied to reduce pro tanto the aggregate
     amount of the obligations covered by Upstream Guarantees then outstanding
     or there are put in place alternative or additional indemnity arrangements
     satisfactory to the Authority, acting reasonably;

7.   for so long as any Upstream Guarantee remains outstanding, the Licensee
     shall, as soon as reasonably practicable, use all reasonable endeavours to
     obtain release of its obligations thereunder;

8.   before any Upstream Guarantee may be entered into, the Licensee shall
     obtain from SPUK legally enforceable undertakings to the following effect;

     (1)   until the occurrence of the Relevant Event (as defined below), SPUK
           shall not conduct any business nor carry on any activity provided,
           however, that this undertaking shall not prevent SPUK from

           (a)   continuing to conduct any business or carry on any activity
                 which it was conducting on the transfer date (or which arises
                 in the ordinary course of any such business or activity) but
                 (without prejudice to the provisions of sub-paragraphs (b), (c)
                 and (d) below) by the date twelve months from the transfer date
                 (or such later date as the Authority may specify to the
                 Licensee in writing) SPUK shall transfer to an affiliate or
                 otherwise cease to conduct or carry on any such business or
                 activity together (so far as reasonably practicable) with all
                 rights and/or obligations of SPUK arising in respect of
                 contracts or other arrangements entered into by SPUK on or
                 prior to such twelve month anniversary which survive such
                 twelve month anniversary. SPUK shall procure an indemnity in
                 respect of any such rights and obligations which are not so
                 transferred in form satisfactory to the Authority from such
                 person or persons as SPUK shall nominate (being in any case not
                 a subsidiary of SPUK. and having and agreeing, for so long as
                 any Upstream Guarantee remains outstanding, to maintain an
                 investment grade corporate credit rating) at such other person
                 or persons as the Authority, acting reasonably, shall approve;

           (b)   holding or acquiring shares or other securities in, or making
                 or receiving loans and advances to or from, any body corporate
                 as, or performing the supervisory or management functions of,
                 an investor, nor performing the supervisory or management
                 functions of a holding company in respect of any subsidiary
                 (including, for the avoidance of doubt, the provision of
                 customary corporate cervices to subsidiaries or holding
                 companies within SPUK's group, including those transport,
                 learning and procurement activities and services currently
                 provided by SPUK);

           (c)   conducting any business or carrying on any activity to which
                 the Authority has given its consent in writing (such consent
                 not to be unreasonably withheld or delayed); or

                                      209

<PAGE>

           (d)   conducting any other business or carrying on any other activity
                 which, were it carried on by the Licensee, would be de minimis
                 business (as defined in Special Condition O of the Licensee's
                 transmission licence but substituting respectively for the
                 turnover and for the aggregate of share capital, share premium
                 and reserves of the Licensee the equivalent figures for SPUK as
                 shown (in the case of turnover) in its consolidated financial
                 statements or (in the case of share capital and reserves) its
                 unconsolidated financial statements, all at the relevant date);

     (2)   until the occurrence of the Relevant Event, SPUK shall not enter into
           nor permit or suffer to exist any guarantee of any obligation nor
           enter into nor permit or suffer to subsist any agreement to which it
           is a party containing a cross-default obligation (as defined in
           Special Condition S of the Licensee's transmission licence) provided,
           however, that this undertaking shall not prevent SPUK from:

           (a)   (without prejudice to the provisions of sub-paragraphs (b) or
                 (C) of this paragraph 8 (2)) permitting or suffering to exist
                 any guarantee that was outstanding on the transfer date or
                 entering into further guarantees in respect of similar
                 obligations during the period commencing on the transfer date
                 and ending twelve months thereafter but by the end of such
                 period except with the consent of the Authority previously
                 notified to the Licensee in writing, SPUK must (so far as
                 reasonably practicable) have obtained unconditional release
                 from or otherwise ceased to have any continuing liability
                 whatsoever under such guarantees. SPUK shall procure an
                 indemnity for any such liability which survives the end of such
                 period in a form reasonably satisfactory to the Authority from
                 such person or persons as SPUK shall nominate (being in any
                 case not a subsidiary of SPUK and having and agreeing for so
                 long as any Upstream Guarantee remains outstanding to maintain
                 an investment grade corporate credit rating) or such other
                 person or persons as the Authority, acting reasonably, shall
                 approve;

           (b)   (without prejudice to the provisions of sub-paragraphs (a) or
                 (c) of this paragraph 8 (2)) permitting or suffering to subsist
                 any agreement subsisting at the transfer date provided that any
                 cross-default obligation therein contained is not referable to
                 the default of any person that is not a wholly owned subsidiary
                 of SPUK nor (save during the period of twelve consecutive
                 months commencing on the transfer date) to the default of
                 Scottish Power Energy Trading Limited ("SPETL" or of any other
                 person carrying on analogous activities to those carried on by
                 SPETL in succession to SPUK or otherwise;

           (c)   (without prejudice to the provisions of sub-paragraphs (a) or
                 (b) of this paragraph 8 (2)), entering into or permitting or
                 suffering to exist any agreement containing a cross-default
                 obligation referable solely to a default of the Licensee, SP
                 Distribution Limited or Manweb plc:

     (3)   until the occurrence of the Relevant event, SPUK (acknowledges that
           it should have a corporate credit rating no lower than either BBB
           from Standard & Poor's Ratings Group or Baa2 from Moody's Investors
           Services, Inc. and shall ensure that the aggregate gross principal
           amount outstanding from time to time in respect of indebtedness for
           money borrowed by it or amounts in the nature of such

                                      210

<PAGE>

           indebtedness shall not exceed(pound)5 billion, if at any relevant
           time SPUK does not hold such credit ratings or exceeds such limit it
           undertakes to procure that the obligations of the Licensee under all
           Upstream Guarantees then outstanding are fully and effectively
           indemnified by (i) an unrelated third party (such as a bank or credit
           insurer), or (ii) any holding company of SPUK (including one as is
           envisaged in terms of paragraph 12 below), or (iii) subject to
           approval the Authority, a Subsidiary or holding company of, or a
           subsidiary of a holding company of, SPUK, in each case having and at
           all times maintaining an investment grade corporate credit rating;

     (4)   until the occurrence of the Relevant Event, SPUK shall not without
           the prior consent of the Authority notified to the Licensee in
           writing dispose of or refinance the whole or any major part of its
           business or assets, or of the business or assets of any of its
           subsidiaries, unless the proceeds of such sale or refinancing are
           applied to reduce pro tanto the aggregate amount of the obligations
           covered by Upstream Guarantees then outstanding or there are put in
           place alternative or additional indemnity arrangements satisfactory
           to Ofgem acting reasonably;

     (5)   for the purposes of these undertakings, the Relevant Event shall be
           the earlier to occur of (a) the first date by which all upstream
           Guarantees have been released or the Licensee has otherwise ceased to
           have any continuing liability thereunder whatsoever, and (b the date
           of publication of the annual regulatory accounts of the Licensee and
           of SP Distribution Limited required by or under their respective
           licences issued pursuant to the Electricity Act 1989 (as amended)
           (or, if each is not published on the same day, the later of their
           respective dates of publication to occur) which first show the total
           combined indebtedness of the Licensee and of SP Distribution Limited
           to be below the level that is equivalent to 78% of their combined
           Regulatory Asset Values (as shown in such accounts or, if not so
           shown, the equivalent figures at the date to which such accounts are
           drawn up as certified by the relevant auditors). For these purposes,
           indebtedness shall include the gross amount of all liabilities for
           money borrowed by each of the Licensee and SP Distribution Limited
           and, in addition, the maximum total liability under all guarantees of
           indebtedness (including Upstream Guarantees) entered into by either
           of them and then outstanding (taking into account contributions to
           which either of them may be entitled as against the other in respect
           of liabilities assumed jointly or jointly and severally), but shall
           exclude liabilities for money borrowed from SPUK if and to the extent
           such liabilities are effectively subordinated to all other claims
           that might be validly brought against the Licensee or, as the case
           may be, SP Distribution Limited;

     (6)   for so long as any Upstream Guarantee remains outstanding, SPUK
           shall, as soon as reasonably practicable, use its reasonable
           endeavours to obtain release of its Obligations thereunder. For the
           avoidance of doubt, this undertaking shall not require SPUK to repay
           any amount or replace any facility before the due date for payment or
           termination thereof nor agree to any variation in the terms and
           conditions of any indebtedness covered by an Upstream Guarantee that
           is prejudicial to SPUK;

9.   the Licensee shall provide satisfactory evidence to the Authority that it
     has obtained the requisite indemnities and undertakings, including
     certified true copies of the indemnities and Deed of Covenant (or other
     instrument) setting forth the undertakings and the Licensee shall procure
     that all such indemnities and undertakings are legally enforceable;

                                      211

<PAGE>

10.  the Licensee shall use all reasonable endeavours to enforce its rights
     under the indemnities arid the undertakings, and shall comply with any
     reasonable directions from the Authority in relation thereto;

11.  the Authority reserves the right to, and if so requested by the Licensee
     shall, review this consent in the light of any material change of
     circumstance, and, if appropriate (and having due regard to the nature and
     extent of any obligations undertaken by the Licensee on the basis of this
     consent), amend or revoke it;

12.  it is acknowledged and agreed that none of the undertakings or restrictions
     hereby required of SPUK shall in any way prevent or restrict any such
     actions being undertaken by any holding company from time to time of SPUK
     (provided SPUK is not thereby prevented from fulfilling its undertakings to
     the Licensee);

13.  in determining the price control limits applicable to the Licensee under
     its transmission licence, the Authority shall be entitled to disregard any
     costs incurred by the Licensee in relation to any Upstream Guarantee or to
     the indemnities or undertakings or any of them (including legal and other
     costs relating to any proceedings whether taken by or against the Licensee)

Date:  27/9/01

                                      212

<PAGE>

Direction issued under Special Licence Condition H of this licence (12.11.01)

The Company Secretary
SP Transmission Limited
New Alderston House
Dove Wynd
Strathclyde Business Park
Bellshill
ML4 3FF

                                           Our Ref: CC.LF476L
                                           Direct Dial: 0141 331 1772
                                           Email: charles.coulthard@ofgem.gov.uk

                                           12 November, 2001

Dear Sir,

Direction issued by the Gas and Electricity Markets Authority under
SP Transmission Limited Licence Special Condition H
'Transmission System Security Standard and Quality of Service (Scotland)'

On 18 January 2001, ScottishPower Power Systems (now SP Transmission Limited)
submitted an application to Ofgem for a direction relieving it of certain
obligations laid on it by Part IV, Condition 4 of its licence. Particulars of
this application are attached to this direction.

The Authority hereby directs pursuant to paragraph 7 of special condition H of
SP Transmission Limited's licence that in respect of such entry in the attached
table, SP Transmission Limited is relieved for the period specified in that
entry in Column 2 of the Table, or until revoked or amended by further directive
of its obligations under paragraph 1 of Condition 4 to plan, develop, operate
and maintain the part of the transmission system specified in that entry in
Column 3 of the Table in accordance with the documents, or parts of them,
specified in that entry in Column 4 of the Table while it is not complying with
any preview included in Column 4 of that entry in the Table.

In respect of entries in column 1, the following additional requirements will
apply:

1.   The company is to publish the following information by the June preceding
     the year 1 April to which is relates:

     (a)   estimates of the number of occasions that the interconnector needs to
           be disconnected to ensure security of supply to customers within the
           licensees authorised area;

     (b)   estimates of the total and average number of minutes that the
           interconnector will be disconnected;

                                      213

<PAGE>

     (c)   estimates of restriction of capability of interconnector including
           but not comprising the level of restriction, frequency and duration
           of occurrence;

     Additionally, the following information should be submitted to Ofgem by the
     June following the year commencing 1 April to which it relates:

     (d)   the reasons for any of the occurrences estimated in (a) to (c) above
           that occurred;

     (e)   to identify by frequency of interruption for whichever case the
           interconnector users affected.

Dated:..........................2001

SIGNED on behalf of the Authority by

Charles Coulthard

Authorised for that purpose by the Authority.

                                      214

<PAGE>

--------------------------------------------------------------------------------
     1                 2                     3                        4
ENTRY NUMBER     PERIOD DURING          PART OF THE               NATURE OF
                   WHICH THE            TRANSMISSION                RELIEF
                   DIRECTION          SYSTEM FOR WHICH
                    APPLIES           RELIEF IS GIVEN
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
1              Until                275Kv single circuit      Transmission
               30 November 2011     line from Coylton to      Planning Standard
                                    Auchencrosh               13/10001 Section A
                                                              Paragraph 2.1
--------------------------------------------------------------------------------
2              Until                2 x 275Kv circuits        Transmission
               30 November 2011     Kilmarnock South - Ayr    Planning Standard
                                    - Coylton                 13/10001 Section A
                                                              Paragraph 2.1
--------------------------------------------------------------------------------
3              Until                2 x 400Kv auto-           Transmission
               30 November 2006     transformer infeed at     Planning Standard
                                    Kilmarnock South          13/10001 Section A
                                                              Paragraph 2.1
--------------------------------------------------------------------------------

                                      215

<PAGE>

Consent issued under Special Licence Condition S of this licence (20.11.01)

The Company Secretary
SP Transmission Limited
("the Licensee")
1 Atlantic Quay
Glasgow
G2 8SP

                                                                20 November 2001

Dear Sir,

ELECTRICITY TRANSMISSION LICENCE
SPECIAL LICENCE CONDITIONS

Consent under Special Licence Condition S (Indebtedness)

1.   This consent is issued by the Gas and Electricity Markets Authority ("the
     Authority") to the Licensee under paragraph 1 of the above condition ("the
     condition").

2.   The Authority refers to the application from Scottish Power UK plc ("SPUK")
     to the Authority dated 9 July (and forwarded by fax on 10 July) 2001 ("the
     Application"), and to the consent ("the Principal Consent") given by the
     Authority, subject to the conditions specified therein, on 1 October 2001
     to certain guarantees by the Licensee pursuant to the Application.

3.   It has been brought to the Authority's notice that the borrowing
     arrangements specified in the Application contain certain cross-default
     obligations affecting SPUK pursuant to the Facility Agreement dated 5 June
     2001 made between SPUK, Royal Bank of Scotland (as agent) and Royal Bank of
     Scotland and others (as lenders) ("the RBoS Facility"), the effect of which
     would be, in the absence of consent thereto by the Authority, to constitute
     a breach of Special Licence Condition S in the Licensee's transmission
     licence notwithstanding the issue to the Licensee of the Principal Consent.

4.   The Authority hereby consents to the inclusion in the borrowing
     arrangements authorised by the Principal Consent of the cross-default
     obligations referred to in paragraph 3 above, subject to the two additional
     conditions set out in paragraphs 5 and 6 below (in addition to those
     imposed under the Principal Consent), and subject to the modification of
     the Principal Consent, in its application to such cross-default
     obligations, specified in paragraph 7 below.

5.   Within seven days of the date of this consent, the Licensee shall have
     obtained from SPUK (in addition to the undertakings required under the
     Principal Consent) enforceable undertakings in favour or the Licensee to
     the effect that:

                                      216

<PAGE>

     (a)   until the occurrence of a Relevant Event or until the date on which
           the RBoS Facility determines or is renegotiated on a basis
           satisfactory to the Authority (whichever is the earlier to occur) and
           for so long as Thus plc ("Thus") is a Subsidiary of SPUK ,(within the
           meaning of the RBoS Facility) SPUK shall:

           (i)   procure that Thus does not at any time have any Borrowings
                 (within the meaning of the RBoS Facility) to which Clause 19.5
                 of the RBoS Facility applies, save Borrowings (as so defined)
                 from SPUK;

           (ii)  not make any demand on or exercise any right (other than the
                 exercise of any right to withhold the making of further
                 advances or to extend further credit to Thus) against Thus
                 which would, or would then be likely to, cause an Event of
                 Default (within the meaning of Clause 19 of the RBoS Facility)
                 to occur; and

           (iii) undertake that, if on the date which is twelve months after the
                 date of this consent Thus remains a Principal Subsidiary of
                 SPUK (within the meaning of the RBoS Facility) SPUK shall
                 forthwith transfer to an affiliate or related undertaking which
                 is not and does not thereafter become a subsidiary of SPUK or
                 otherwise dispose of its investment in Thus in such manner as
                 to ensure that Thus ceases forthwith to be, and does not again
                 become, such a Principal Subsidiary; and

     (b)   for so long as SPUK is a party to any agreement containing a
           cross-default obligation permitted by condition 8(2)(b) in the Annex
           to the Principal Consent (as modified by this consent SPUK shall
           procure that, in respect of all its subsidiaries other than Thus,
           SPUK holds a majority of the voting rights and has the power to
           appoint or remove a majority of the directors of those subsidiaries.

6.   Within seven days of the date of this consent the Licensee shall have
     obtained from Scottish Power plc ("Holdco") enforceable undertakings in
     favour of the Licensee to the effect that until the occurrence of a
     Relevant Event or until the date on which the RBoS Facility determines or
     is re-negotiated on a basis satisfactory to the Authority (whichever is the
     earlier to occur) Holdco shall not:

     (a)   incur or permit or suffer to subsist any Borrowings (within the
           meaning of the RBoS Facility) to which Clause 19.5 of the RBoS
           Facility applies save that for a period of twelve consecutive months
           commencing on the Transfer Date Holdco may permit or suffer to
           subsist any Borrowings to which such clause applies as were
           outstanding on The Transfer Date (but no others); nor

     (b)   enter into a Guarantor Accession Agreement or otherwise become an
           Obligor (within the meaning of the RBoS Facility).

7.   Under paragraph 8(2) in the Annex to the Principal Consent the Licensee is
     under obligation to obtain an undertaking from SPUK not to enter into nor
     permit or suffer to subsist as any agreement containing a cross default
     obligation (as there defined), save that under sub-paragraph 8(2)(b) SPUK
     may permit or suffer to subsist certain agreements provided that any
     cross-default obligation therein contained is not referable to the default
     of any person that is not a wholly-owned subsidiary of SPUK.
     Notwithstanding this provision, SPUK shall not be in breach of its
     obligations under the said paragraph 8(2) if

                                       217

<PAGE>

     the default in relation to which the cross-default obligation is referable
     is that of a subsidiary of SPUK which is not a wholly-owned subsidiary of
     SPUK, so long as SPUK is and remains in compliance with the provisions of
     paragraph 5(b) of this consent in relation to the subsidiary in question.

8.   The Licensee shall comply with the requirements of paragraphs 9 and 10 in
     the Annex to the Principal Consent in relation to the undertakings required
     by this consent.

9.   This consent shall be deemed to have come into effect on and from the 1
     October 2001. it shall remain in effect for so long as the Principal
     Consent continues in force.

10.  Save where the context otherwise requires or this consent specifies
     otherwise, words and expressions used in this consent have the meaning
     attributed to them in the Principal Consent.

Dated 20 November 2001

Signed

duly authorised in that behalf by the Authority

                                      218

<PAGE>

Direction issued under Standard Condition 10 of this licence (28.01.02)

Direction to SP Transmission Limited by the Gas and Electricity Markets
Authority under Paragraph 3(a)(i) of Standard Transmission Licence Condition 10

This Direction is issued by the Gas and Electricity Markets Authority ("the
Authority") under paragraph 3(a)(i) of Condition 10 (Disposal of relevant
assets) in the standard licence conditions of the licence of the above named
electricity transmission licensee granted or treated as granted under section
6(1)(b) of the Electricity Act 1989 (as amended) ("the licence").

The Authority hereby directs that the licensee may enter into an agreement or
arrangement whereby operational control of a relevant asset or relevant assets
ceases to be under the sole management of the licensee without giving prior
notice in any case where the agreement or arrangement (for these purposes called
"the transaction") complies in all respects with the terms set out below:

1.   The transaction shall be consistent with all applicable conditions
     contained in the licence.

2.   Any other consent or clearance required under statue or under the licence
     in respect of the transaction shall have been obtained.

3.   The transaction shall provide for the supply of a service or the provision
     of a resource which relates to a relevant asset or relevant assets by a
     counter-party ("the resource provider") on behalf of the licensee.

4.   The resource provider shall be and remain an affiliate of the licensee but
     shall not be a holding company of the licensee.

5.   The transaction shall be effected by contract made between the licensee and
     the resource provider; such contract shall be binding and enforceable both
     in Great Britain and in any

                                      219

<PAGE>

other jurisdiction in which the resource provider has its principal place of
business; and the contract shall contain provisions to the following effect:

     (a)   no force majeure or equivalent provision in the contract shall excuse
           any failure on the part of the licensee, or the resource provider
           acting on its behalf, to comply with the licensee's statutory or
           licence obligations unless (and to the extent that) the event or
           circumstance in question would have excused the licensee under the
           licence if it had itself performed the service or provided the
           resource

     (b)   responsibility for performance of all obligations to which the
           contract relates shall be clearly specified, subject to the
           overriding requirement that the licensee remains ultimately
           responsible for all statutory and licence obligations applicable to
           the licensee's business

     (c)   the resource provider shall covenant with the licensee to refrain
           from any action which would then be likely to cause the licensee to
           breach any of its licence or statutory obligations

     (d)   the resource provider shall disclose to the licensee the basis or
           bases of all charges for services provided or supplies made pursuant
           to the contract, together with sufficient information and analysis to
           support the basis for the calculation of the total sum payable by the
           licensee; and the resource provider shall not raise any objection to,
           or seek to prevent, disclosure of such information to the Authority

     (e)   the licensee shall be free, at any time after the fifth anniversary
           of the commencement of the contract, without penalty and on
           reasonable notice, to resource any service or supply from an
           alternative source of its choosing if more favourable terms become
           available

                                      220

<PAGE>

       (f)   the resource provider shall be under obligation to provide to the
             licensee any information within its possession or control which the
             licensee may from time to time require in order to enable the
             licensee:

             (i)    to comply with any request by the Authority for information
                    or reports pursuant to Condition 11 (Provision of
                    Information to the Authority) of the licence (subject to
                    paragraphs 2 and 4 of that condition);

             (ii)   to assess the performance or position of the resource
                    provider or any of its subsidiaries with respect to the
                    provision of any service or supply made to the licensee; or

             (iii)  to monitor adherence by the resource provider to the terms
                    of the contract.

6. (1) The licensee shall procure from that company or other corporate body
       which is from time to time the ultimate holding company of the licensee
       and the resource provider, or from such other corporate body as the
       Authority may from time to time agree, acknowledgements and legally
       enforceable undertakings in favour of the licensee in the form annexed to
       this Direction marked A. Such acknowledgements and undertakings shall be
       obtained within seven days of the company or other corporate body in
       question ("the covenantor") becoming such ultimate holding company and
       shall remain in force for so long as the covenantor remains such ultimate
       holding company.

   (2) For the purpose of this paragraph "ultimate holding company" means the
       company or other corporate body which is the holding company of both the
       licensee and the resource provider and is not itself a subsidiary of
       another company or corporate body.

   (3) The licensee shall:

                                      221

<PAGE>

       (a)   deliver to the Authority evidence (including a copy of the
             acknowledgements and undertakings) that the licensee has complied
             with its obligation to procure acknowledgements and undertakings
             pursuant to this paragraph;

       (b)   inform the Authority immediately in writing if the directors of the
             licensee become aware that any such undertaking has ceased to be
             legally enforceable or that its terms have been breached; and

       (c)   comply with any direction from the Authority to enforce any such
             undertaking

   (4) The licensee shall not, save with the consent in writing of the
       Authority, obtain or continue to obtain the service or resource in
       question from the resource provider at any time when:

       (a)   the specified acknowledgements and undertakings are not in place;
             or

       (b)   there is an unremedied breach of any undertaking; or

       (c)   the licensee is in breach of any direction issued by the Authority
             under sub-paragraph (3) of this paragraph

7.   The consent given by this Direction applies only for the purpose of
     Condition 10 and shall not apply or be deemed to apply for any other
     purpose.

8.   Word or phrases in this direction which are defined for the purposes of the
     licence shall have the same meaning as in the licence.

Gas and Electricity Markets Authority
28 January 2002

                                      222

<PAGE>

Form A

Acknowledgements and Undertakings

Acknowledgements

(1)  that it is in the best interests of the covenantor that the licensee
     complies with its statutory and licence obligations; and

(2)  that all matters relating to the enforcement of the licensee's rights under
     the relevant contract(s) shall be reserved to the directors of the licensee
     without regard to other interests.

Undertakings

(1)  to procure that the resource provider will:

     (a)  refrain from any action which would then be likely to cause the
          licensee to breach any of its statutory or licence obligations

     (b)  provide the licensee with any information within its possession or
          control which the licensee may from time to time require in order to
          enable the licensee:

          -    to comply with any request by the Authority for information or
               reports pursuant to Condition 11 (Provision of Information to the
               Authority) of the licence (subject to paragraphs 2 and 4 of that
               condition);

          -    to assess the performance or position of the resource provider or
               any of its subsidiaries with respect to the provision of any
               service or supply made to the licensee; or

                                      223

<PAGE>

          -   to monitor adherence by the resource provider to the terms of the
              contract

     (c)  not unduly discriminate in favour of, or against, the licensee in the
          provision to it of supplies or services

     (d)  not take any action which would constitute disposal of, or
          relinquishment of operational control over, any asset to which
          Condition 10 of the licence applies save in accordance with the
          requirements of that condition and any consent issued by the Authority
          under it (other than to the licensee upon the expiry or termination of
          any relevant contract in accordance with its terms)

(2)  to procure that any contract between the licensee and the resource provider
     shall comply with the requirements set out in the Direction to which this
     form is annexed and shall not be amended so as to cease in any way to be
     compliant with those requirements.

(3)  to procure that the resource provider has and maintains resources and
     operating capacity at a level sufficient to ensure efficient performance of
     the contract and the efficient discharge of the relevant obligations of the
     licensee.

                                      224<PAGE>

                                                                     EXHIBIT 4.8

                                  SP MANWEB PLC
                         CONFORMED DISTRIBUTION LICENCE

     1.   This conformed electricity Distribution licence has been produced by
          Shepherd & Wedderburn from materials supplied by ScottishPower. It is
          intended for use by ScottishPower personnel as a convenient reference
          tool, but is not a substitute for the definitive texts from which it
          has been produced.

     2.   The conformed licence is intended to consolidate (a) the provisions of
          annexe 4 to the licensing scheme made by the Secretary of State on 28
          September 2001 in relation to Scottish Power UK plc and Manweb plc
          (the "scheme") (b) the standard conditions for distribution licences
          determined by the Secretary of State on 27 September 2001 as brought
          into effect in relation to Manweb plc by the scheme (c) all directions
          and consents of a continuing nature issued under the licence and (d)
          all modifications to the licence made since 1 October 2001.

     3.   Those standard conditions which, in accordance with Part II of the
          licence, are not in effect have been included in this document for
          completeness, but are shown in italics.

     4.   The underline and strike through contained in this document reflect
          the changes made by the modification to the electricity distribution
          licence issued to licence holders having a distribution services area
          situated in England and Wales.

                            Shepherd & Wedderburn WS
                                  Saltire Court
                                20 Castle Terrace
                                Edinburgh EH1 2ET

                                     [LOGO]

                               Tel: 0131-228 9900
                               Fax: 0131-228 1222

<PAGE>

                                    CONTENTS

<TABLE>
<CAPTION>
                                   PRELIMINARY
                                   -----------
<S>                                                                                                        <C>
PART I.   TERMS OF THE LICENCE                                                                              5
PART II.  THE STANDARD CONDITIONS                                                                           7
PART III. AMENDMENTS TO STANDARD LICENCE CONDITIONS                                                         9

                        CONSOLIDATED STANDARD CONDITIONS
                        --------------------------------

SECTION A. INTERPRETATION, APPLICATION AND PAYMENTS                                                        10

1.     Definitions and Interpretation                                                                      10
2.     Application of Section C (Distribution Services Obligations)                                        32
3.     Payments by Licensee to the Authority                                                               35

SECTION B. GENERAL                                                                                         38

4.     Basis of Charges for Use of System and Connection to System:
       Requirements for Transparency                                                                       38
4A.    Non-Discrimination in the Provision of Use of System and
       Connection to System                                                                                43
4B.    Requirement to Offer Terms for Use of System and Connection                                         44
4C.    Functions of the Authority                                                                          49
5.     Distribution System Planning Standard and Quality of Service                                        51
6.     Safety and Security of Supplies Enquiry Service                                                     52
7.     Provision of Information about Theft or Abstraction of Electricity,
       Damage and Meter Interference                                                                       54
8.     Provisions Relating to the Connection of Metering Equipment                                         55
9.     Distribution Code                                                                                   57
9A.    Compliance with other Distribution Codes                                                            60
10.    Balancing and Settlement Code and NETA Implementation                                               61
11.    Change Co-ordination for NETA                                                                       64
12.    Settlement Agreement for Scotland                                                                   65
</TABLE>

                                        1

<PAGE>

<TABLE>
<S>                                                                                                          <C>
12A.     Compliance with the Trading Code in Scotland                                                        66
13.      Change Co-ordination for the Utilities Act 2000                                                     67
14.      The Master Registration Agreement                                                                   69
15.      Compliance with the Grid Codes                                                                      70
16.      Security Arrangements                                                                               71
17.      Provision of Services for Persons who are of Pensionable Age or
         Disabled or Chronically Sick                                                                        72
18.      Provision of Services for Persons who are Blind or Deaf                                             73
19.      Code of Practice on Procedures with Respect to Site Access                                          74
20.      Payments in Relation to Standards of Performance                                                    75
21.      Complaint Handling Procedure                                                                        76
22.      Preparation, Review of and Compliance with Customer Service Codes                                   77
23.      Record of and Report on Performance                                                                 79
24.      Provision of Information to the Authority                                                           80
25.      Long Term Development Statement                                                                     82
26.      Compliance with CUSC                                                                                85
27.      Not used                                                                                            87
28.      Not used                                                                                            87
29.      Disposal of Relevant Assets                                                                         88
30.      Not used                                                                                            91
31.      Not used                                                                                            91

SECTION C.  DISTRIBUTION SERVICES OBLIGATIONS                                                                92

32.      Interpretation of Section C (Distribution Services Obligations)                                     92
32A.     Convenience Customers                                                                               94
33.      Not used                                                                                            95
34.      Compulsory Acquisition of Land etc.                                                                 96
35.      Other Powers etc.                                                                                   97
36.      Basis of Charges for Distributor Metering and Data Services:
         Requirements for Transparency                                                                       98
36A.     Non-Discrimination in the Provision of Distributor Metering
         and Data Services                                                                                  100
</TABLE>

                                        2

<PAGE>

<TABLE>
<S>                                                                                                         <C>
36B.     Requirement to offer Terms for the Provision of Distributor Metering
         and Data Services                                                                                  101
36C.     Functions of the Authority                                                                         104
37.      The Metering Point Administration Service and the Master
         Registration Agreement                                                                             106
38.      Establishment of a Data Transfer Service                                                           109
39.      Restriction on Use of Certain Information and Independence of
         the Distribution Business                                                                          112
40.      Appointment of Compliance Officer                                                                  118
41.      Prohibition of Cross-Subsidies                                                                     121
42.      Regulatory Accounts                                                                                122
42A.     Change of Financial Year                                                                           127
43.      Restriction on Activity and Financial Ring Fencing                                                 129
44.      Availability of Resources                                                                          132
45.      Undertaking from Ultimate Controller                                                               135
46.      Credit Rating of Licensee                                                                          137
47.      Indebtedness                                                                                       138
48.      Last Resort Supply: Payment Claims                                                                 141
49.      Incentive Scheme and Associated Information                                                        145

                        SPECIAL CONDITIONS AND SCHEDULES
                        --------------------------------

PART IV. SPECIAL CONDITIONS                                                                                 152

A:  Definitions                                                                                             152
B: Restriction of distribution charges                                                                      158
Annex A to Special Condition B (Restriction of distribution charges)                                        165
Annex B to Special Condition B (Restriction of distribution charges)                                        177
Annex C to Special Condition B (Restriction of Distribution Charges)                                        178
C: Restriction of distribution charges: adjustments                                                         179
D: Information to be provided to the Authority in connection with the charge
       restriction conditions                                                                               180
E: Allowances in respect of Security costs                                                                  185

</TABLE>

                                        3

<PAGE>

<TABLE>
<S>                                                                                                         <C>
F: Duration of charge restriction conditions                                                                189
Schedule A: supplementary provisions of the charge restriction conditions                                   191
SCHEDULE 1 - SPECIFIED AREA                                                                                 203
SCHEDULE 2 - REVOCATION                                                                                     204
SCHEDULE 3 - DISTRIBUTION SERVICES AREA                                                                     207

                             CONSENTS AND DIRECTIONS
                             -----------------------

(01.04.92)        Direction issued under Condition 27 of the Public Electricity
                  Supply Licence of Manweb plc now Standard Condition 29
                  of this licence                                                                           209
(19.04.00)        Direction issued under Condition 12 of the Public Electricity
                  Supply Licence of Manweb plc now Standard Condition 39
                  of this licence                                                                           214
(19.04.00)        Direction issued under Condition 12 of the Public Electricity
                  Supply Licence of Manweb plc now Standard Condition 39
                  of this licence                                                                           217
(28.07.00)        Direction issued under Condition 12 of the Public Electricity
                  Supply Licence of Manweb plc now Standard Condition 39
                  of this licence                                                                           220
(01.10.01)        Consent issued under Standard Condition 47 of this licence                                224
(01.10.01)        General Consent issued under Standard Condition 29
                  of this licence                                                                           226
</TABLE>

                                        4

<PAGE>

                                   PRELIMINARY

                          PART I. TERMS OF THE LICENCE

1.   This licence, treated as granted under section 6(l)(c) of the Electricity
     Act 1989 ("the Act") authorises Manweb plc (a company registered in England
     & Wales under number 02366937 ("the licensee") whose registered office is
     situated at Manweb House, Chester Business Park, Wrexham Road, Chester, CH4
     9RF to distribute electricity for the purpose of giving a supply to any
     premises or enabling a supply to be so given in the area specified in
     Schedule 1 during the period specified in paragraph 3 below, subject to:-

     (a)  the standard conditions of electricity distribution of licences
          referred to in Part II below which shall have effect in the licence
          subject to such amendments (if any) as are set out in Part III below
          (together "the conditions");
     (b)  the special conditions, if any, set out in Part IV below ("the Special
          Conditions"); and
     (c)  such Schedules hereto, if any, as may be referenced in the conditions,
          the Special Conditions or the terms of the licence.

2.   This licence is subject to transfer, modification or amendment in
     accordance with the provisions of the Act, the Special Conditions or the
     conditions.

3.   This licence, unless revoked in accordance with Schedule 2, shall continue
     until determined by not less than 25 years' notice in writing given by the
     Authority to the licensee.

4.   The provisions of section 109(1) of the Act (Service of documents) shall
     have effect as if set out herein and as if for the words "this Act" there
     were substituted the words "the licence".

5.   Without prejudice to sections 11 and 23(1) of the Interpretation Act 1978,
     Parts I to IV inclusive of and the Schedules to this licence shall be
     interpreted and construed in like manner as an Act of Parliament passed
     after the commencement of the Interpretation Act 1978.

6.   References in this licence to a provision of any enactment, where, after
     the date of this licence

                                       5

<PAGE>

     (a)  the enactment has been replaced or supplemented by another enactment,
          and

     (b)  such enactment incorporates a corresponding provision in relation to
          fundamentally the same subject matter,

     shall be construed, so far as the context permits, as including a reference
     to the corresponding provision of that other enactment.

7.   Pursuant to paragraph 6 of standard condition 2 (Application of Section C
     (Distribution Services Obligations)) of the Electricity Distribution
     Licence the "distribution services area "is specified in Schedule 3 hereto.

Pursuant to a licensing scheme made by the Secretary of State under Part II of
schedule 7 to the Utilities Act 2000 on 28th September 2001 this licence was
made and is treated as granted under section 6(l)(c) of the Electricity Act
1989.

                                       6

<PAGE>

                        PART II. THE STANDARD CONDITIONS

Standard conditions in effect in this licence

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Section A                        Section B                        Section C
-------------------------------------------------------------------------------------------------------------
<S>                              <C>                              <C>
Standard condition 1             Standard condition 4             Standard condition 32
-------------------------------------------------------------------------------------------------------------
Standard condition 2             Standard condition 4A            Standard condition 32A
-------------------------------------------------------------------------------------------------------------
Standard condition 3             Standard condition 4B            Standard condition 34
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 4C            Standard condition 35
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 5             Standard condition 36
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 6             Standard condition 36A
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 7             Standard condition 36B
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 8             Standard condition 36C
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 9             Standard condition 37
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 9A            Standard condition 38
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 10            Standard condition 39
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 11            Standard condition 40
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 12            Standard condition 41
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 12A           Standard condition 42
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 13            Standard condition 42A
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 14            Standard condition 43
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 15            Standard condition 44
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 16            Standard condition 45
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 17            Standard condition 46
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 18            Standard condition 47
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 19            Standard condition 48
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 20            Standard condition 49
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 21
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 22
-------------------------------------------------------------------------------------------------------------
                                 Standard condition 23
-------------------------------------------------------------------------------------------------------------

</TABLE>

                                       7

<PAGE>

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

                           Standard condition 24
--------------------------------------------------------------------------------
                           Standard condition 25
--------------------------------------------------------------------------------
                           Standard condition 26
--------------------------------------------------------------------------------
                           Standard condition 29
--------------------------------------------------------------------------------

Note: A copy of the current standard conditions of electricity distribution
licences can be inspected at the principal office of the Authority. The above
list is correct at the date of this licence but may be changed by subsequent
amendments or modifications to the licence. The authoritative up-to-date version
of this licence is available for public inspection at the principal office of
the Authority.

                                       8

<PAGE>

               PART III. AMENDMENTS TO STANDARD LICENCE CONDITIONS

                                       9

<PAGE>

                        CONSOLIDATED STANDARD CONDITIONS

               SECTION A. INTERPRETATION, APPLICATION AND PAYMENTS

Condition 1. Definitions and Interpretation

1.       In these standard conditions, unless the context otherwise requires:

         the "Act"                             means the Electricity Act 1989.

         "affiliate"                           in relation to the licensee means
                                               any holding company of the
                                               licensee, any subsidiary of the
                                               licensee or any subsidiary of a
                                               holding company of the licensee
                                               in each case within the meaning
                                               of section 736, 736A and 736B of
                                               the Companies Act 1985.

         "alternative accounting rules"        for the purposes of standard
                                               condition 42 (Regulatory
                                               Accounts) only, has the meaning
                                               given in that condition.

         "amendment"                           for the purposes of standard
                                               condition 49 (Incentive Scheme
                                               and Associated Information) only,
                                               has the meaning given in that
                                               condition.

         "Application Regulations"             means the Electricity
                                               (Applications for Licences and
                                               Extensions and Restrictions of
                                               Licences) Regulations 2001.

         "appropriate time"                    for the purposes of standard
                                               condition 39 (Restriction on Use
                                               of Certain Information and
                                               Independence of the Distribution
                                               Business) only, has the meaning
                                               given in that condition.

                                       10

<PAGE>

        "auditors"                             means the licensee's auditors for
                                               the time being holding office in
                                               accordance with the requirements
                                               of the Companies Act 1985.

        "authorised"                           in relation to any business or
                                               activity means authorised by
                                               licence granted or treated as
                                               granted under section 6 or by
                                               exemption granted under section 5
                                               of the Act.

        "authorised electricity operator"      means any person (other than the
                                               licensee) who is authorised to
                                               generate, transmit, distribute,
                                               or supply electricity and shall
                                               include any person who has made
                                               an application to be so
                                               authorised which application has
                                               not been refused and any person
                                               transferring electricity to or
                                               from or across an interconnector
                                               or Scottish interconnection or
                                               who has made an application for
                                               use of an interconnector or
                                               Scottish interconnection which
                                               has not been refused.

        the "Authority"                        means the Gas and Electricity
                                               Markets Authority established
                                               under section 1 of the Utilities
                                               Act 2000.

        "BSC"                                  for the purposes of Section B
                                               only, has the meaning given in
                                               standard condition 10 (Balancing
                                               and Settlement Code and NETA
                                               Implementation).

        "BSC Framework Agreement"              for the purposes of standard
                                               condition 10 (Balancing and
                                               Settlement Code and NETA
                                               Implementation) only, has the
                                               meaning given in that condition.

        "bilateral agreement"                  for the purposes of standard
                                               condition 26 (Compliance

                                       11

<PAGE>

                                               with CUSC) only, has the meaning
                                               given in that condition.

        "charge restriction conditions"        for the purposes of standard
                                               condition 49 (Incentive Scheme
                                               and Associated Information) only,
                                               has the meaning given in that
                                               condition.

        "charging review date"                 for the purposes of standard
                                               condition 49 (Incentive Scheme
                                               and Associated Information) only,
                                               has the meaning given in that
                                               condition.

        "competent authority"                  for the purposes of standard
                                               condition 39 (Restriction on Use
                                               of Certain Information and
                                               Independence of the Distribution
                                               Business) only, has the meaning
                                               given in that condition.

        "confidential information"             for the purposes of standard
                                               condition 39 (Restriction on Use
                                               of Certain Information and
                                               Independence of the Distribution
                                               Business) only, has the meaning
                                               given in that condition.

        "consolidated distribution business"   for the purposes of standard
                                               condition 42 (Regulatory
                                               Accounts) only, has the meaning
                                               given in that condition.

        "construction agreement"               for the purposes of standard
                                               condition 26 (Compliance with
                                               CUSC) only, has the meaning given
                                               in that condition.

        "Consumer Council"                     means the Gas and Electricity
                                               Consumer Council as

                                       12

<PAGE>

                                               established under section 2 of
                                               the Utilities Act 2000.

        "convenience customers"                means customers supplied or
                                               requiring to be supplied at any
                                               premises which are (i) connected
                                               to the licensee's distribution
                                               system; and (ii) situated within
                                               the distribution services area of
                                               a distribution services provider
                                               other than the licensee.

        "core industry documents"              for the purposes of standard
                                               conditions 10 (Balancing and
                                               Settlement Code and NETA
                                               Implementation) and 11 (Change
                                               Co-ordination for NETA) only, has
                                               the meaning given in standard
                                               condition 10; and for the
                                               purposes of standard condition 26
                                               (Compliance with CUSC) only, has
                                               the meaning given in that
                                               condition.

        "cross-default obligation"             for the purposes of standard
                                               condition 47 (Indebtedness) only,
                                               has the meaning given in that
                                               condition.

        "current cost assets"                  for the purposes of standard
                                               condition 42 (Regulatory
                                               Accounts) only, has the meaning
                                               given in that condition.

        "CUSC"                                 for the purposes of standard
                                               condition 26 (Compliance with
                                               CUSC) only, has the meaning given
                                               in that condition.

        "CUSC Framework agreement"             for the purposes of standard
                                               condition 26 (Compliance with
                                               CUSC) only, has the meaning given
                                               in that condition.

                                       13

<PAGE>

        "customer"                             means any person supplied or
                                               requiring to be supplied with
                                               electricity at any premises in
                                               Great Britain, but shall not
                                               include any authorised
                                               electricity operator in its
                                               capacity as such.

        "data aggregation"                     has the meaning given in standard
                                               condition 36B (Requirement to
                                               Offer Terms for the Provision of
                                               Distributor Metering and Data
                                               Services).

        "data processing"                      has the meaning given in standard
                                               condition 36B (Requirement to
                                               Offer Terms for the Provision of
                                               Distributor Metering and Data
                                               Services).

        "data retrieval"                       has the meaning given in standard
                                               condition 36B (Requirement to
                                               Offer Terms for the Provision of
                                               Distributor Metering and Data
                                               Services).

        "data transfer service"                for the purposes of Section C
                                               only, has the meaning given in
                                               standard condition 32
                                               (Interpretation of Section C
                                               (Distribution Services
                                               Obligations)).

        "declared net capacity"                means, in relation to generation
                                               plant, the highest generation of
                                               electricity at the main
                                               alternator terminals which can be
                                               maintained for an indefinite
                                               period of time without causing
                                               damage to the plant, less so much
                                               of that capacity as is consumed
                                               by the plant.

        "disposal"                             for the purposes of standard
                                               condition 29 (Disposal of
                                               Relevant Assets) only, has the
                                               meaning given in that

                                       14

<PAGE>

                                      condition.

 "distribution arrangements"          has the meaning given in standard
                                      condition 25 (Long Term Development
                                      Statement).

 "distribution business"              means a business of the licensee, or in
                                      relation to sub-paragraphs (a) and (b)
                                      below, and except to the extent otherwise
                                      specified by the authority in a direction
                                      to the licensee, any business of any
                                      affiliate or related undertaking of the
                                      licensee comprising:

                                      (a)  the distribution of electricity
                                           through the licensee's distribution
                                           system, including any business in
                                           providing connections to such system;

                                      (b)  the provision of the services
                                           specified in sub-paragraphs (c) and
                                           (d) of paragraph 1 of standard
                                           condition 36B (Requirement to Offer
                                           Terms for the Provision of
                                           Distributor Metering and Data
                                           Services); and

                                      (c)  the provision of the services
                                           specified in sub-paragraphs (a) and
                                           (b) of paragraph 1 of standard
                                           condition 36B (Requirement to Offer
                                           Terms for the Provision of
                                           Distributor Metering and Data
                                           Services),

                                      or any business ancillary thereto.

"Distribution Code"                   means a distribution code required to be
                                      prepared by a licensed distributor
                                      pursuant to standard condition 9
                                      (Distribution Code) and approved by the
                                      Authority as revised from time to time
                                      with the approval of the Authority.

                                       15

<PAGE>

"distribution licence"                    means a distribution licence granted
                                          or treated as granted under section
                                          6(1)(c) of the Act.

"distribution services area"              has the meaning given at sub-paragraph
                                          5(b) of standard condition 2
                                          (Application of Section C
                                          (Distribution Services Obligations)).

"Distribution Services Direction"         has the meaning given in standard
                                          condition 2 (Application of Section C
                                          (Distribution Services Obligations)).

"distribution services provider"          means a licensed distributor in whose
                                          licence Section C has effect.

"distribution system"                     means the system consisting (wholly or
                                          mainly) of electric lines owned or
                                          operated by an authorised distributor
                                          and used for the distribution of
                                          electricity from grid supply points or
                                          generation sets or other entry points
                                          (and bulk supply points in Scotland)
                                          to the points of delivery to customers
                                          or authorised electricity operators or
                                          any transmission company within Great
                                          Britain in its capacity as operator of
                                          a transmission system and includes any
                                          remote transmission assets (owned by a
                                          transmission licensee within England
                                          and Wales) operated by such
                                          distributor and any electrical plant,
                                          meters and metering equipment owned or
                                          operated by such distributor in
                                          connection with the distribution of
                                          electricity, but shall not include any
                                          part of a transmission system.

                                       16

<PAGE>

"distributor metering and data services"  for the purposes of Section C only,
                                          has the meaning given in paragraph 9
                                          of standard condition 36B (Requirement
                                          to Offer Terms for the Provision of
                                          Distributor Metering and Data
                                          Services).

"domestic customer"                       means a customer supplied or requiring
                                          to be supplied with electricity at
                                          domestic premises (but excluding such
                                          customer in so far as he is supplied
                                          or requires to be supplied at premises
                                          other than domestic premises).

"domestic premises"                       means premises at which a supply is
                                          taken wholly or mainly for domestic
                                          purposes.

"Electricity Arbitration Association"     for the purposes of standard condition
                                          39 (Restriction on Use of Certain
                                          Information and Independence of the
                                          Distribution Business) only, has the
                                          meaning given in that condition.

"electricity supplier"                    means any person authorised to supply
                                          electricity.

"estimated costs"                         for the purposes of standard condition
                                          3 (Payments by the Licensee to the
                                          Authority) only, has the meaning given
                                          in that condition.

"existing connection"                     means, in relation to any premises,
                                          an existing connection to the
                                          licensee's distribution system which
                                          does not require modification, or a
                                          new or modified connection to such
                                          system in respect of which all works
                                          have been completed, such that in
                                          either case

                                       17

<PAGE>

                                          electricity is able to be supplied to
                                          the premises in accordance with the
                                          terms of the relevant supply
                                          agreement.

"external distribution activities"        for the purposes of standard condition
                                          39 (Restriction on Use of Certain
                                          Information and Independence of the
                                          Distribution Business) only, has the
                                          meaning given in that condition.

"financial year"                          subject to standard condition 42A
                                          (Change of Financial Year) (where
                                          applicable), means a period of 12
                                          months beginning on 1 April of each
                                          year and ending on 31 March of the
                                          following calendar year.

"Fuel Security Code"                      for the purposes of Section B only,
                                          has the meaning given in standard
                                          condition 16 (Security Arrangements).

"generation set"                          means any plant or apparatus for the
                                          production of electricity and shall
                                          where appropriate include a generating
                                          station comprising more than one
                                          generation set.

"Grid Code"                               means the Grid Code which each
                                          transmission company is required to
                                          prepare and have approved by the
                                          Authority as from time to time revised
                                          with the approval of the Authority.

"grid supply point"                       means any point at which electricity
                                          is delivered from a transmission
                                          system to any distribution system.

                                       18

<PAGE>

"the handbook"                            for the purposes of standard condition
                                          42 (Regulatory Accounts) only, has the
                                          meaning given in that condition.

"holding company"                         means a company within the meaning of
                                          sections 736, 736A and 736B of the
                                          Companies Act 1985.

"indebtedness"                            for the purposes of standard condition
                                          47 (Indebtedness) only, has the
                                          meaning given in that condition.

"information"                             includes any documents, accounts,
                                          estimates, returns, records or reports
                                          and data in written, verbal or
                                          electronic form and information in any
                                          form or medium whatsoever (whether or
                                          not prepared specifically at the
                                          request of the Authority or the
                                          Consumer Council) of any description
                                          specified by the Authority.

"interconnection"                         means:

                                          the 275 kV and 400 kV circuits between
                                          and including the associated
                                          switchgear at Harker sub-station in
                                          Cumbria and the associated switchgear
                                          at Strathaven sub-station in
                                          Lanarkshire;

                                          the 275 kV transmission circuit
                                          between and including the associated
                                          switchgear at Cockenzie in East
                                          Lothian and the associated switchgear
                                          at Stella

                                       19

<PAGE>

                                   in Tyne and Wear; and

                                   the 400 kV transmission circuit between and
                                   including the associated switchgear at
                                   Torness in East Lothian and the associated
                                   switchgear at Stella in Tyne and Wear

                                   all as existing at the date on which the
                                   transmission licence comes into force as from
                                   time to time maintained, repaired or renewed,
                                   together with any alteration, modification or
                                   addition (other than maintenance, repair or
                                   renewal) which is primarily designed to
                                   effect a permanent increase in one or more
                                   particular interconnection capacities as they
                                   exist immediately prior to such alteration,
                                   modification or addition and as from time to
                                   time maintained, repaired or renewed; and

                                   the 132 kV transmission circuit between and
                                   including (and directly connecting) the
                                   associated switchgear at Chapelcross and the
                                   associated switchgear at Harker sub-station
                                   in Cumbria; and

                                   the 132 kV transmission circuit between and
                                   including (and connecting, via Junction V)
                                   the associated switchgear at Chapelcross and
                                   the associated switchgear at Harker
                                   sub-station in Cumbria

                                   all as existing at the date on which the
                                   transmission licence comes into force and as
                                   from time to time

                                       20

<PAGE>

                                        maintained, repaired or renewed.

     "interconnector(s)"                means the electric lines and electrical
                                        plant and meters owned or operated by a
                                        transmission company solely for the
                                        transfer of electricity to or from a
                                        transmission system into or out of
                                        England and Wales.

     "investment"                       for the purposes of Section C only, has
                                        the meaning given in standard condition
                                        43 (Restriction on Activity and
                                        Financial Ring Fencing).

     "investment grade issuer credit    for the purposes of Section C only, has
     rating"                            the meaning given in standard condition
                                        46 (Credit Rating of Licensee).

     "licensed distributor"             means any holder of a distribution
                                        licence.

     "licensee's Distribution Code"     means the distribution code required to
                                        be prepared by the licensee pursuant to
                                        standard condition 9 (Distribution Code)
                                        and approved by the Authority as revised
                                        from time to time with the approval of
                                        the Authority.

     "licensee's distribution system"   means the distribution system owned or
                                        operated by the licensee.

     "Master Registration Agreement"    means the agreement of that title
                                        referred to and comprising such matters
                                        as are set out in standard condition 37
                                        (The Metering Point Administration
                                        Service and the Master Registration
                                        Agreement).

                                       21

<PAGE>

     "metering equipment"               includes any electricity meter and any
                                        associated equipment which materially
                                        affects the operation of that meter.

     "Metering Point Administration     for the purposes of Section C only, has
     Service"                           the meaning given in standard condition
                                        32 (Interpretation of Section C
                                        (Distribution Services Obligations)).

     "metering point administration     for the purposes of Section C only, has
     services"                          the meaning given in standard condition
                                        32 (Interpretation of Section C
                                        (Distribution Services Obligations)).

     "Metering Point Administration     has the meaning given in standard
     Service operator"                  condition 38 (Establishment of a Data
                                        Transfer Service).

     "non-domestic customer"            means a customer who is not a domestic
                                        customer.

     "other Distribution Codes"         means the distribution codes which the
                                        holder(s) of a distribution licence
                                        (other than the licensee) are required
                                        to draw up and have approved by the
                                        Authority pursuant to standard condition
                                        9 (Distribution Code) of their
                                        distribution licence, as from time to
                                        time revised with the approval of the
                                        Authority.

     "owned"                            in relation to an electricity meter or
                                        other property includes leased and
                                        cognate expressions shall be construed
                                        accordingly.

     "participating interest"           has the meaning given by section 260 of
                                        the Companies Act 1985 as amended by
                                        section 22 of the

                                       22

<PAGE>

                                        Companies Act 1989.

     "permitted purpose"                for the purposes of Section C only, has
                                        the meaning given in standard condition
                                        32 (Interpretation of Section C
                                        (Distribution Services Obligations)).

     "Pooling and                       means the agreement of that title
     Settlement Agreement"              approved by the Secretary of State as
                                        from time to time amended.

     "regulatory instructions and       for the purposes of standard condition
     guidance"                          49 (Incentive Scheme and Associated
                                        Information) only, has the meaning given
                                        in that condition.

     "related undertaking"              in relation to the licensee means any
                                        undertaking in which the licensee has a
                                        participating interest.

     "relevant asset"                   means any asset for the time being
                                        forming part of the licensee's
                                        distribution system, any control centre
                                        for use in conjunction therewith, and
                                        any legal or beneficial interest in land
                                        upon which any of the foregoing is
                                        situate (which for the purposes of
                                        property located in Scotland means any
                                        estate, interest, servitude or other
                                        heritable or leasehold right in or over
                                        land including any leasehold interests
                                        or other rights to occupy or use and any
                                        contractual or personal rights relating
                                        to such property or the acquisition
                                        thereof).

     "relevant duties"                  for the purposes of standard condition
                                        40 (Appointment of a Compliance Officer)
                                        only, has the meaning given in that
                                        condition.

                                       23

<PAGE>

     "relevant proportion"              for the purposes of standard condition 3
                                        (Payments by the Licensee to the
                                        Authority) only, has the meaning given
                                        in that condition.

     "relevant year"                    for the purposes of standard condition 3
                                        (Payments by the Licensee to the
                                        Authority) only, has the meaning given
                                        in that condition; and for the purposes
                                        of standard condition 48 (Last Resort
                                        Supply: Payment Claims) only, has the
                                        meaning given in that condition.

     "relinquishment of operational     for the purposes of standard condition
     control"                           29 (Disposal of Relevant Assets) only,
                                        has the meaning given in that condition.

     "remote transmission assets"       means any electric lines, electrical
                                        plant or meters in England and Wales
                                        owned by a transmission company ("the
                                        owner transmission company") which:

                                        (a)  are embedded in the licensee's
                                             distribution system or the
                                             distribution system of any
                                             authorised distributor and are not
                                             directly connected by lines or
                                             plant owned by the owner
                                             transmission company to a
                                             sub-station owned by the owner
                                             transmission company; and

                                        (b)  are by agreement between the owner
                                             transmission company and the
                                             licensee or such authorised
                                             distributor operated under the
                                             direction and control of the
                                             licensee or such authorised
                                             distributor.

     "Scottish interconnection"         means such part of the interconnection
                                        as is situated in Scotland.

                                       24

<PAGE>

     "Secretary of State's costs"       for the purposes of standard condition 3
                                        (Payments by Licensee to the Authority)
                                        only, has the meaning given in that
                                        condition.

     "separate business"                for the purposes of standard condition
                                        39 (Restriction on Use of Certain
                                        Information and Independence of the
                                        Distribution Business) only, has the
                                        meaning given in that condition.

     "the scheme"                       for the purposes of standard condition
                                        49 (Incentive Scheme and Associated
                                        Information) only, has the meaning given
                                        in that condition.

     "Settlement Agreement for          has the meaning given in standard
     Scotland"                          condition 12 (Settlement Agreement for
                                        Scotland).

     "settlement purposes"              means for the purposes of settlement as
                                        set out in the Balancing and Settlement
                                        Code or the Settlement Agreement for
                                        Scotland.

     "specified information"            for the purposes of standard condition
                                        49 (Incentive Scheme and Associated
                                        Information) only, has the meaning given
                                        in that condition.

     "standby"                          means the periodic or intermittent
                                        supply or sale of electricity:

                                        (a)  to an authorised electricity
                                             operator to make good any shortfall
                                             in the availability of electricity
                                             to that operator for the purposes
                                             of its supply of electricity to
                                             persons seeking such

                                       25

<PAGE>

                                             supply; or

                                        (b)  to a customer of the licensee to
                                             make good any shortfall between the
                                             customer's total supply
                                             requirements and that met either by
                                             its own generation or by
                                             electricity supplied by an
                                             electricity supplier other than the
                                             licensee.

     "statutory accounts"               means the accounts that the licensee
                                        prepares under the Companies Act 1985
                                        (as amended by the Companies Act 1989).

     "subsidiary"                       means a subsidiary within the meanings
                                        of sections 736, 736A and 736B of the
                                        Companies Act 1985.

     "supply licence"`                  means a supply licence granted or
                                        treated as granted under section 6(1)(d)
                                        of the Act.

     "top-up"                           means the supply or sale of electricity
                                        on a continuing or regular basis:

                                        (a)  to an authorised electricity
                                             operator to make good any shortfall
                                             in the availability of electricity
                                             to that operator for the purposes
                                             of its supply of electricity to
                                             persons seeking such supply; or

                                        (b)  to a customer of the licensee to
                                             make good any shortfall between the
                                             customer's total supply
                                             requirements and that met either by
                                             its own

                                       26

<PAGE>

                                            generation or by electricity
                                            supplied by an electricity supplier
                                            other than the licensee.

     "trading code"                    for the purposes of Section B only, has
                                       the meaning given in standard condition
                                       12A (Compliance with Trading Code in
                                       Scotland).

     "transmission company"            means the holder for the time being of a
                                       transmission licence.

     "transmission licence"            means a transmission licence granted or
                                       treated as granted under section 6(1)(b)
                                       of the Act.

     "transmission system"             means a system consisting (wholly or
                                       mainly) of high voltage electric lines
                                       owned or operated by a transmission
                                       company and used for the transmission of
                                       electricity from one generating station
                                       to a sub-station or to another generating
                                       station, or between sub-stations or to or
                                       from any interconnector or Scottish
                                       interconnection in question and in
                                       relation to Scotland including any
                                       interconnector and Scottish
                                       interconnection, and includes any
                                       electrical plant and meters owned or
                                       operated by the transmission company in
                                       connection with the transmission of
                                       electricity but shall not include any
                                       remote transmission assets.

     "ultimate controller"             means:

                                       (a)  a holding company of the licensee
                                            which is not itself a subsidiary of
                                            another company;

                                       27

<PAGE>

                                       and

                                 (b)   any person who (whether alone or with a
                                       person or persons connected with him) is
                                       in a position to control, or to exercise
                                       significant influence over, the policy of
                                       the licensee or any holding company of
                                       the licensee by virtue of:

                                       (i)     rights under contractual
                                               arrangements to which he is a
                                               party or of which he is a
                                               beneficiary; or

                                       (ii)    rights of ownership (including
                                               rights attached to or deriving
                                               from securities or rights under a
                                               trust) which are held by him or
                                               of which he is a beneficiary;

                                       but excluding any director or employee of
                                       a corporate body in his capacity as such;
                                       and

                                 (c)   for the purposes of sub-paragraph (b), a
                                 person is connected with another person if they
                                 are party to any arrangement regarding the
                                 exercise of any such rights as are described in
                                 that paragraph.

        "undertaking"            has the meaning  given by section 259 of the
                                 Companies Act 1985.

        "unmetered supply"       means a supply of electricity to premises which
                                 is not, for the purpose of calculating the
                                 charges for electricity customer at such
                                 premises, measured by metering equipment.

                                       28

<PAGE>

        "use of system"          means use of the licensee's distribution system
                                 for the distribution of electricity by the
                                 licensee for any person.

        "use of system charges"  means charges made or levied or to be made or
                                 levied by the licensee for the provision of
                                 services as part of the distribution business
                                 to any person as more fully described in
                                 standard condition 4 (Basis of Charges for Use
                                 of System and Connection to System:
                                 Requirements for Transparency) but shall not
                                 include connection charges.

2.   Any words or expressions used in the Utilities Act 2000 or Part I of the
     Act shall, unless the contrary intention appears, have the same meanings
     when used in the standard conditions.

3.   Except where the context otherwise requires, any reference to a numbered
     standard condition (with or without a letter) or Schedule is a reference to
     the standard condition (with or without a letter) or Schedule bearing that
     number in this licence, and any reference to a numbered paragraph (with or
     without a letter) is a reference to the paragraph bearing that number in
     the standard condition or Schedule in which the reference occurs, and
     reference to a Section is a reference to that Section in these standard
     conditions.

4.   These standard conditions shall have effect as if, in relation to a licence
     holder who is a natural person, for the words "it", "its" and "which" there
     were substituted the words "he", "him", "his", "who" and "whom", and
     cognate expressions shall be construed accordingly.

5.   Except where the context otherwise requires, a reference in a standard
     condition to a paragraph is a reference to a paragraph of that standard
     condition and a reference in a paragraph to a sub-paragraph is a reference
     to a sub-paragraph of that paragraph.

                                       29

<PAGE>

6.   Any reference in these standard conditions to -

     (a)  a provision thereof;

     (b)  a provision of the standard conditions of electricity supply licences,
          or

     (c)  a provision of the standard conditions of electricity generation
          licences,

     (d)  a provision of the standard conditions of electricity transmission
          licences,

     shall, if these standard conditions or the standard conditions in question
     come to be modified, be construed, so far as the context permits, as a
     reference to the corresponding provision of these standard conditions or
     the other standard conditions in question as modified.

7.   In construing these standard conditions, the heading or title of any
     standard condition or paragraph shall be disregarded.

8.   Any reference in a standard condition to the purposes of that condition
     generally is a reference to the purposes of that standard condition as
     incorporated in this licence and as incorporated in each other licence
     under section 6(1)(c) of the Act (whenever granted) which incorporates it.

9.   Where any obligation of the licence is required to be performed by a
     specified date or time, or within a specified period, and where the
     licensee has failed so to perform, such obligation shall continue to be
     binding and enforceable after the specified date or time, or after the
     expiry of the specified period (but without prejudice to all the rights and
     remedies available against the licensee by reason of the licensee's failure
     to perform by that date or time, or within that period).

10.  Anything required by or under these standard conditions to be done in
     writing may be done by facsimile transmission of the instrument in question
     or by other electronic means and, in such case -

                                       30

<PAGE>

(a)  the original instrument or other confirmation in writing shall be delivered
     or sent by pre-paid first-class post as soon as is reasonably practicable,
     and

(b)  where the means of transmission had been agreed in advance between the
     parties concerned, in the absence of and pending such confirmation, there
     shall be a rebuttable presumption that what was received duly represented
     the original instrument.

11.  The definitions referred to in this condition may include some definitions
     which are not used or not used exclusively in Sections A and B (which
     Sections are incorporated in all distribution licences). Where:

     (a)  any definition is not used in Sections A and B, that definition shall,
          for the purposes of this licence, be treated:

          (i)   as part of the standard condition or conditions (and the
                Section) in which it is used;

          (ii)  as not having effect in the licence until such time as the
                standard condition in which the definition is used has effect
                within the licence in pursuance of standard condition 2
                (Application of Section C (Distribution Services Obligations);

     (b)  any definition which is used in Sections A and B is also used in one
          or more other Sections:

          (i)   that definition shall only be modifiable in accordance with the
                modification process applicable to each of the standard
                conditions in which it is used; and

          (ii)  if any such standard condition is modified so as to omit that
                definition, then the reference to that definition in this
                condition shall automatically cease to have effect.

                                       31

<PAGE>

Condition 2.  Application of Section C (Distribution Services Obligations)

1.   Where the Secretary of State provides, by a scheme made under Schedule 7 to
     the Utilities Act 2000, for Section C (in whole or in part) to have effect
     within this licence:

     (a)  paragraphs 4 to 8 shall cease to be suspended and shall have effect in
          the licensee's licence; and

     (b)  the licensee shall be obliged to comply with the requirements of
          Section C (in whole or, as the case may be, in part) of this licence,

     from the date the said scheme takes effect. Such provision made by the
     Secretary of State in the said scheme shall be treated, for the purposes of
     paragraphs 5, 6, and 7 of this condition, as if it were a Distribution
     Services Direction made by the Authority.

2.   Until -

     (a)  the Secretary of State provides, by a scheme made under Schedule 7 to
          the Utilities Act 2000, for Section C (in whole or in part) to have
          effect within this licence; or

     (b)  the Authority has issued to the licensee a direction pursuant to
          paragraph 4,

     the standard conditions in Section C (in whole or, as the case may be, in
     part) shall not have effect within this licence; and the licensee shall not
     be obliged to comply with any of the requirements of Section C (in whole
     or, as the case may be, in part) of this licence.

3.   Except where paragraph 1 applies to the licensee, paragraphs 4 to 8 of this
     standard condition shall be suspended and shall have no effect in this
     licence until such time as

                                       32

<PAGE>

     the Authority, with the consent of the licensee, issues to the licensee a
     notice ending the suspension and providing for those paragraphs to have
     effect in this licence with effect from the date specified in the notice.

4.   The Authority may, with the consent of the licensee, issue a direction (a
     "Distribution Services Direction"). Where the Authority has issued to the
     licensee a Distribution Services Direction the standard conditions in
     Section C (in whole or, as the case may be, in part) shall have effect
     within this licence from the date specified in the direction; and the
     licensee shall be obliged to comply with the requirements of Section C (in
     whole or, as the case may be, in part) to the extent and subject to the
     terms specified in such direction.

5.   A Distribution Services Direction:

     (a)  may specify that the standard conditions in Section C (in whole or in
          part) are to have effect in this licence;

     (b)  shall specify or describe an area (the "distribution services area")
          within which the licensee shall be obliged to comply with any of the
          requirements of Section C (in whole or, as the case may be, in part);
          and

     (c)  shall specify whether or not the requirements of Section C (in whole
          or, as the case may be, in part) apply to convenience customers.

6.   The Authority may, with the consent of the licensee:

     (a)  vary the terms (as set out in the Distribution Services Direction or
          elsewhere) under which Section C (or parts thereof) has effect in this
          licence; or

     (b)  provide for Section C (or parts thereof) to cease to have effect in
          this licence.

7.   The variation or cessation provided for in paragraph 6 shall take effect
     from the date

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<PAGE>

     specified in the variation or cessation notice given to the licensee by the
     Authority.

8.   With effect from the date of cessation referred to in paragraph 7,
     paragraphs 4 to 7 of this condition shall be suspended and shall cease to
     have effect in this licence, but the Authority may at any time thereafter,
     with the consent of the licensee, give to the licensee a notice ending the
     suspension and providing for those paragraphs to have effect again in this
     licence with effect from the date specified in the notice.

                                       34

<PAGE>

Condition 3. Payments by Licensee to the Authority

1.   The licensee shall, at the times stated, pay to the authority such amounts
     as are determined by or under this condition.

2.   In respect of each relevant year at the beginning of which the licensee
     holds this licence, the licensee shall pay to the Authority the aggregate
     of:

     (a)  an amount which is the relevant proportion of the estimated costs of
          the Authority during the year in question;

     (b)  an amount which is the relevant proportion of the estimated costs of
          the Consumer Council during the year in question;

     (c)  an amount which is the relevant proportion of the estimated costs
          incurred in the previous relevant year by the Competition Commission
          in connection with references made to it with respect to the licence
          or any other electricity distribution licence;

     (d)  an amount which is the relevant proportion of the Secretary of State's
          costs during the year in question;

     (e)  an amount which is the relevant proportion of the difference (being a
          positive or negative amount), if any, between:

          (aa) any costs estimated by the Authority or, in the case of
          sub-paragraph 2(d), the Secretary of State in the previous relevant
          year under sub-paragraphs 2(a), (b), (c), and (d); and

          (bb) the actual costs of the Authority, the Consumer Council, the
          Competition Commission (in connection with that reference) and the
          Secretary of State for the previous relevant year or, in the case of
          the Competition Commission, for the relevant year prior to the
          previous relevant year; and

                                       35

<PAGE>

     (f)  in respect of the relevant year ending on 31 March 2002, an amount
          which is the relevant proportion of the actual unrecovered costs of
          the Director General of Electricity Supply and the Relevant Consumers'
          Committees.

3.   The amounts determined in accordance with paragraph 2 shall be paid by the
     licensee to the Authority in two instalments, with:

     (a)  the first instalment being due for payment by 30 June in each year;
          and

     (b)  the second instalment being due for payment by 31 January in each year

     provided that, in each case, if the Authority has not given notice of the
     amount of the instalment due at least 30 days before the payment date
     stated above, the licensee shall pay the amount due within 30 days from the
     actual giving of notice by the Authority to the licensee (whenever notice
     is given).

4.   Where the licensee fails to pay the amount determined in accordance with
     paragraph 2 within 30 days of the due date set out in paragraph 3, it shall
     pay simple interest on the amount at the rate which is from time to time
     equivalent to the base rate of NatWest Bank plc or, if there is no such
     base rate, such base rate as the Authority may designate for the purposes
     hereof.

5.   In relation to any data or information specified by the Authority in a
     direction given for the purposes of this condition generally, the licensee
     shall submit a certificate to the Authority, approved by a resolution of
     the board of directors of the licensee and signed by a director of the
     licensee pursuant to that resolution. Such certificate shall be submitted
     to the Authority each year on the date specified by the Authority. Each
     certificate shall be in the following form -

     "In the opinion of the directors of [the licensee], all data and
     information provided to the Authority on [date provided to the Authority]
     for the purposes of enabling the Authority to calculate the licence fee
     payable by [the licensee] pursuant to standard condition 3 (Payments by the
     Licensee to the Authority) is accurate."

                                       36

<PAGE>

6.   In this condition:

     "estimated costs"             means costs estimated by the Authority as
                                   likely to be:

                                   (a)  the costs of the Authority and the
                                        consumer Council; and

                                   (b)  the costs incurred by the Competition
                                        Commission, such estimate having regard
                                        to the views of the Competition
                                        Commission.

     "relevant proportion"         means the proportion of the costs
                                   attributable to the licensee in accordance
                                   with principles determined by the Authority
                                   for the purposes of this condition generally
                                   and notified to the licensee.

     "relevant year"               means a year beginning on 1 April of each
                                   calendar year and ending on 31 March of the
                                   following calendar year.

     "Secretary of State's costs"  means costs estimated by the Secretary of
                                   State as likely to be his costs in
                                   relation to:

                                   (a)  the establishment of the Authority and
                                        the Consumer Council; and

                                   (b)  Schedule 7 to the Utilities Act 2000.

7.   In sub-paragraph 2(f) of this condition:

     "Director General of Electricity Supply"      means the office previously
                                                   established under section 1
                                                   of the Act;

     "Relevant Consumers' Committees"              means the committees
                                                   previously appointed by the
                                                   Director General of
                                                   Electricity Supply under
                                                   section 2 of that Act

                                       37

<PAGE>

SECTION B. GENERAL

Condition 4. Basis of Charges for Use of System and Connection to System:
Requirements for Transparency

1.   The licensee shall as soon as practicable prepare statements in a form
     approved by the Authority setting out the basis upon which charges will be
     made for the provision of:

     (a)  use of system; and

     (b)  connections to the licensee's distribution system,

     in each case in such form and with such detail as shall be necessary to
     enable any person to make a reasonable estimate of the charges which the
     person would become liable to pay for the provision of such services, and
     (without prejudice to the foregoing) including the information set out in
     paragraphs 2 and 3 respectively.

2.   The statement referred to at sub-paragraph 1(a) shall include:

     (a)  a schedule of charges for the distribution of electricity under use of
          system;

     (b)  a schedule of adjustment factors to be made in respect of distribution
          losses, in the form of additional supplies required to cover those
          distribution losses;

     (c)  the methods by which and the principles on which the charges (if any)
          for availability of distribution capacity on the licensee's
          distribution system will be made;

     (d)  a schedule of charges in respect of accounting and administrative
          services; and

     (e)  a schedule of the charges (if any) which may be made for the provision
          and installation of any electrical plant at entry or exit points, the
          provision and installation of which are ancillary to the grant of use
          of system, and for the maintenance of such electrical plant.

3.   The statement referred to at sub-paragraph 1(b) shall include:

     (a)  a schedule listing those items (including the carrying out of works
          and the provision and installation of electric lines or electrical
          plant) of significant cost liable to be

                                       38

<PAGE>

          required for the purpose of connection (at entry or exit points) to
          the licensee's distribution system for which connection charges may be
          made or levied and including (where practicable) indicative charges
          for each such item and (in other cases) an explanation of the methods
          by which and the principles on which such charges will be calculated;

     (b)  the methods by which and the principles on which any charges will be
          made in respect of extension or reinforcement of the licensee's
          distribution system rendered (in the licensee's discretion) necessary
          or appropriate by virtue of providing connection to or use of system
          to any person seeking connection;

     (c)  the methods by which and the principles on which connection charges
          will be made in circumstances where the electric lines or electrical
          plant to be installed are (at the licensee's discretion) of greater
          size or capacity than that required for use of system by the person
          seeking connection;

     (d)  the methods by which and the principles on which any charges
          (including any capitalised charge) will be made for maintenance,
          repair and replacement required of electric lines or electrical plant
          provided and installed for making a connection to the licensee's
          distribution system;

     (e)  (save to the extent that such matters are included in any agreement
          offered in accordance with standard condition 36B (Requirement to
          Offer Terms for the Provision of Distributor Metering and Data
          Services) the methods by which and principles on which any charges
          will be made for the provision of special metering or telemetry or
          data processing equipment by the licensee for the purposes of enabling
          any person who is party to the Pooling and Settlement Agreement and/or
          the Balancing and Settlement Code to comply with its obligations in
          respect of metering thereunder, or for the performance by the licensee
          of any service in relation to such metering thereto; and

     (f)  the methods by which and principles on which any charges will be made
          for disconnection from the licensee's distribution system and the
          removal of electrical plant and electric lines following
          disconnection.

4.   Connection charges for those items referred to in paragraph 3 shall be set
     at a level which will enable the licensee to recover:

                                       39

<PAGE>

     (a)  the appropriate proportion to be determined having regard to the
          factors set out in paragraph 4 of standard condition 4B (Requirement
          to Offer Terms for Use of System and Connection) of the costs directly
          or indirectly incurred in carrying out any works, the extension or
          reinforcement of the licensee's distribution system or the provision
          and installation, maintenance, repair, and replacement or (as the case
          may be) removal following disconnection of any electric lines or
          electrical plant; and

     (b)  a reasonable rate of return on the capital represented by such costs.

5.   If so requested and subject to paragraphs 6 and 10, the licensee shall, as
     soon as practicable and in any event within 28 days (or where the Authority
     so approves such longer period as the licensee may reasonably require
     having regard to the nature and complexity of the request) after the date
     referred to in paragraph 12 give or send to any person making such request
     a statement showing present and future circuit capacity, forecast power
     flows and loading on the part or parts of the licensee's distribution
     system specified in the request and fault levels for each distribution node
     covered by the request and containing:

     (a)  such further information as shall be reasonably necessary to enable
          such person to identify and evaluate the opportunities available when
          connecting to and making use of the part or parts of the licensee's
          distribution system specified in the request; and

     (b)  if so requested, a commentary prepared by the licensee indicating the
          licensee's views as to the suitability of the part or parts of the
          licensee's distribution system specified in the request for new
          connections and the distribution of further quantities of electricity.

6.   The licensee shall include in every statement given or sent under paragraph
     5 the information required by that paragraph except that the licensee may:

     (a)  with the prior consent of the Authority omit from any such statement
          any details as to circuit capacity, power flows, loading or other
          information, disclosure of which would, in the view of the Authority,
          seriously and prejudicially affect the commercial interests of the
          licensee or any third party; and

                                       40

<PAGE>

     (b)  omit information the disclosure of which would place the licensee in
          breach of standard condition 39 (Restriction on Use of Certain
          Information and Independence of the Distribution Business) (if
          applicable).

7.   The licensee:

     (a)  shall, at least once in every year, review the information set out in
          the statements prepared in accordance with paragraph 1 in order that
          the information set out in such statements shall continue to be
          accurate in all material respects; and

     (b)  may, with the approval of the Authority, from time to time alter the
          form of such statements.

8.   The licensee shall send a copy of the statements prepared in accordance
     with paragraph 1 and of any revision of such statements, to the Authority.

9.   The licensee shall give or send a copy of the statements prepared in
     accordance with paragraph 1, or (as the case may be) of the latest revision
     of such statements, to any person who requests a copy of such statement or
     statements.

10.  The licensee may make a charge for any statement given or sent pursuant to
     paragraph 9 of an amount which shall not exceed the amount specified in
     directions issued by the Authority for the purposes of this condition based
     on the Authority's estimate of the licensee's reasonable costs of providing
     such a statement.

11.  The licensee may within 10 days after receipt of the request provide an
     estimate of its reasonable costs in the preparation of any statement
     referred to in paragraph 5, and its obligation to provide such statement
     shall be conditional on the person requesting such statement agreeing to
     pay the amount estimated or such other amount as the Authority may, upon
     application of the licensee or the person requesting such statement,
     direct.

12.  For the purposes of paragraph 5, the date referred to shall be the later
     of:

                                       41

<PAGE>

     (a)  the date of receipt of the request referred to in paragraph 5; or

     (b)  the date on which the licensee receives agreement from the person
          making the request to pay the amount estimated or such other amount as
          is determined by the Authority (as the case may be) under paragraph
          11.

13   The licensee shall, not less than 5 months prior to the date on which it
     proposes to amend its use of system charges in respect of any agreement for
     use of system, send to the Authority a notice setting out the licensee's
     proposals in relation to such amendment together with an explanation of the
     proposed amendment (including a statement of any assumptions on which such
     proposals are based), and the licensee shall send a copy of such notice to
     any person who has entered into an agreement for use of system under
     standard condition 4B (Requirement to Offer Terms for Use of System and
     Connection).

14.  Except with the prior consent of the Authority, the licensee shall not
     amend its use of system charges in respect of any agreement for use of
     system save to the extent that it has given prior notice of the amendment
     in accordance with paragraph 13 and such amendment reflects the proposals
     made in the notice (subject only to revisions consequent upon material
     changes in the matters which were expressed, in the statement which
     accompanied the notice, to be assumptions on which the proposals were
     based).

                                       42

<PAGE>

Condition 4A. Non-Discrimination in the Provision of Use of System and
Connection to System

1.   In the carrying out of works for the purpose of connection to the
     licensee's distribution system, or in providing for the modification to or
     retention of an existing connection to its distribution system, the
     licensee shall not discriminate between any persons or class or classes of
     persons.

2.   In the provision of use of system the licensee shall not discriminate
     between any persons or class or classes of persons.

3.   Without prejudice to paragraphs 1 and 2, and subject to the provisions of
     standard condition 4 (Basis of Charges for Use of System and Connection to
     System), the licensee shall not make charges for the provision of use of
     system to any person or class or classes of persons which differ from the
     charges for such provision to any other person or to any class or classes
     of persons, except in so far as such differences reasonably reflect
     differences in the costs associated with such provision.

4.   The licensee shall not in setting its charges for connection or use of
     system restrict, distort or prevent competition in the generation,
     transmission, distribution or supply of electricity.

                                       43

<PAGE>

Condition 4B. Requirement to Offer Terms for Use of System and Connection

1.   On application made by any person the licensee shall (subject to paragraph
     4) offer to enter into an agreement for use of system:

     (a)  to accept into the licensee's distribution system at such entry point
          or points and in such quantities as may be specified in the
          application, electricity to be provided by or on behalf of such
          person; and/or

     (b)  to distribute such quantities of electricity as are referred to in
          sub-paragraph (a) (less any distribution losses) at such exit point or
          points on the licensee's distribution system and to such person or
          persons as the applicant for use of system may specify.

2.   On application made by any person for a connection, the licensee shall
     offer terms for making the connection pursuant to section 16 and section
     16A of the Act. Such offer of a connection shall comply with the provisions
     of this condition.

3.   Where the licensee:

     (i)  makes an offer to enter into a connection agreement pursuant to
          section 22 of the Act; or

     (ii) replies to a request for a connection made to it under section 16A of
          the Act

     the licensee shall, in making the offer or replying to the applicant, make
     detailed provision regarding:

     (a)  the carrying out of the works (if any) required to connect the
          licensee's distribution system to any other system for the
          transmission or distribution of electricity, and for the obtaining of
          any consents necessary for such purpose;

     (b)  the carrying out of the works (if any) in connection with the
          extension or reinforcement of the licensee's distribution system
          rendered (in the licensee's

                                       44

<PAGE>

          discretion) appropriate or necessary by reason of making the
          connection or modification to an existing connection and for the
          obtaining of any consents necessary for such purpose;

     (c)  (save to the extent that such matters are included in any agreement
          offered in accordance with standard condition 36B (Requirement to
          Offer Terms for the Provision of Distributor Metering and Data
          Services)) the installation of appropriate meters (if any) required to
          enable the licensee to measure electricity being accepted into the
          licensee's distribution system at the specified entry point or points
          or leaving such system at the specified exit point or points;

     (d)  the installation of such switchgear or other apparatus (if any) as may
          be required for the interruption of supply where the person seeking
          connection or modification of an existing connection does not require
          the provision of top-up or standby; and

     (e)  (save to the extent that such matters are included in any agreement
          offered in accordance with standard condition 36B (Requirement to
          Offer Terms for the Provision of Distributor Metering and Data
          Services) the installation of special metering, telemetry or data
          processing equipment (if any) for the purpose of enabling any person
          who is party to the Pooling and Settlement Agreement and/or the
          Balancing and Settlement Code whilst such agreement is still in
          existence to comply with its obligations in respect to metering or the
          performance by the licensee of any service in relation to such
          metering thereunder.

4.   In making an offer pursuant to this condition to enter into any connection
     agreement or in replying to a request for connection under section 16A of
     the Act, the licensee shall set out:

     (a)  the date by which in the case of an agreement under paragraph 2, any
          works required to permit access to the licensee's distribution system
          (including for this purpose any works to reinforce or extend the
          licensee's distribution system) shall be completed, time being of the
          essence unless, in the case of connection agreements only, otherwise
          agreed between the parties;

                                       45

<PAGE>

(b)  the charges to be paid in respect of the services required, such charges
     (unless manifestly inappropriate):

     (i)    to be presented in such a way as to be referable to the statements
            prepared in accordance with paragraph 1 of standard condition 4
            (Basis of Charges for Use of System and Connection to System:
            Requirements for Transparency) or any revision thereof; and

     (ii)   to be set in conformity with the requirements of standard condition
            4 (Basis of Charges for Use of System and Connection to System:
            Requirements for Transparency); and

     (iii)  in the case of a connection agreement under paragraph 2,
            additionally to be set in conformity with the requirements of
            paragraph 5.

(c)  such other detailed terms in respect of each of the services required as
     are or may be appropriate for the purpose of the agreement.

5. For the purpose of determining an appropriate proportion of the costs
     directly or indirectly incurred in carrying out works under an agreement
     for providing a connection or modification to or retention of an existing
     connection, the licensee shall have regard to:

     (a)    the benefit (if any) to be obtained or likely in the future to be
            obtained by the licensee or any other person as a result of the
            carrying out of such works whether by reason of the reinforcement or
            extension of the licensee's distribution system or the provision of
            additional entry or exit points on such system or otherwise;

     (b)    the ability or likely future ability of the licensee to recoup a
            proportion of such costs from third parties; and

     (c)    the principles that:

                                       46

<PAGE>

          (i)  no charge will normally be made for reinforcement of the existing
               distribution system if the new or increased load requirement does
               not exceed 25 per cent of the existing effective capacity at the
               relevant points on the system; and

          (ii) charges will not generally take into account system reinforcement
               carried out at more than one voltage level above the voltage of
               connection.

6.   The licensee shall offer terms for agreements in accordance with paragraphs
     2 and 4 as soon as practicable and (save where the Authority consents to a
     longer period) in any event not more than the period specified in paragraph
     7 after receipt by the licensee (or its agent) from any person of an
     application containing all such information as the licensee may reasonably
     require for the purpose of formulating the terms of the offer.

7.   For the purposes of paragraph 6, the period specified shall be:

     (a)  in the case of persons seeking the provision of use of system only, 28
          days;

     (b)  in the case of persons seeking connection or a modification to an
          existing connection, 3 months; and

     (c)  in the case of persons seeking use of system in conjunction with
          connection or a modification to an existing connection, 3 months.

8.   The licensee shall not be obliged pursuant to this condition to offer to
     enter or to enter into any agreement:

     (a)  under paragraphs 2 and 4 if to do so would be likely to involve the
          licensee being:

          (i)  in breach of its duties under section 9 of the Act;

                                       47

<PAGE>

          (ii)  in breach of any regulations made under section 29 of the Act or
                of any other enactment relating to safety or standards
                applicable in respect to the distribution business;

          (iii) in breach of the Grid Codes or the licensee's Distribution Code;
                or

          (iv)  in breach of the conditions; or

     (b)  under paragraph 2 or 4, if the person making the application does not
          undertake to be bound, in so far as applicable, by the terms of the
          licensee's Distribution Code or the applicable Grid Code from time to
          time in force; or

     (c) under paragraphs 2 and 4, if to do so would be likely to involve the
          licensee doing something which, without the consent of another person,
          would require the exercise of a power conferred by any provision of
          Schedules 3 or 4 to the Act; where the licence does not provide for
          that provision to have effect in relation to it; and any necessary
          consent has not, at the time the request is made, been given.

9.   The licensee shall within 28 days following receipt of a request from any
     person, give or send to such person such information in the possession of
     the licensee as may be reasonably required by such person for the purpose
     of completing an application under the Application Regulations or such
     provisions to like effect contained in any further regulations then in
     force made pursuant to sections 6(3), 60 and 64(1) of the Act.

                                       48

<PAGE>

Condition 4C. Functions of the Authority

1.   If, after a period which appears to the Authority to be reasonable for the
     purpose, the licensee has failed to enter into an agreement with any person
     entitled or claiming to be entitled thereto pursuant to a request under
     standard condition 4B (Requirement to Offer Terms for Use of System and
     Connection) for use of system, or an agreement for connection, the
     Authority may, on the application of such person or the licensee, settle
     any terms of the agreement in dispute between the licensee and that person
     in such manner as appears to the Authority to be reasonable having (in so
     far as relevant) regard in particular to the following considerations:

     (a)  that such a person should pay to the licensee, in the case of
          provision of use of system, the use of system charges determined in
          accordance with standard condition 4 (Basis of Charges for Use of
          System and Connection to System: Requirements for Transparency); and

          in the case of provision of a connection or modification to an
          existing connection to the system, the whole or an appropriate
          proportion (as determined in accordance with paragraph 4 of standard
          condition 4B (Requirement to Offer Terms for Use of System and
          Connection)) of the costs referred to in paragraph 4 of standard
          condition 4 (Basis of Charges for Use of System and Connection to
          System: Requirements for Transparency), together with a reasonable
          rate of return on the capital represented by such costs;

     (b)  that the performance by the licensee of its obligations under the
          agreement should not cause it to be in breach of those provisions
          referred to at sub-paragraph 8(a) of standard condition 4B
          (Requirement to Offer Terms for Use of System and Connection);

     (c)  that any methods by which the licensee's distribution system is
          connected to any other system for the transmission or distribution of
          electricity accord (in so far as applicable to the licensee) with the
          applicable Distribution Codes and Grid Codes; and

                                       49

<PAGE>

     (d)  that the terms and conditions of the agreement so settled by the
          Authority and of any other agreements entered into by the licensee
          pursuant to a request under standard condition 4B (Requirement to
          Offer Terms for Use of System and Connection) should be in as similar
          a form as is practicable.

2.   In so far as any person entitled or claiming to be entitled to an offer
     under standard condition 4B (Requirement to Offer Terms for Use of System
     and Connection) wishes to proceed on the basis of an agreement as settled
     by the Authority pursuant to paragraph 1, the licensee shall forthwith
     enter into and implement such agreement in accordance with its terms.

3.   If either party to such agreement proposes to vary the contractual terms of
     any agreement for use of system, for the provision of a connection or for
     the modification to an existing connection to the licensee's distribution
     system, entered into pursuant to standard condition 4B (Requirement to
     Offer Terms for Use of System and Connection) or under this condition in
     any manner provided for under such agreement, the Authority may, at the
     request of that party, settle any dispute relating to such variation in
     such manner as appears to the Authority to be reasonable.

                                       50

<PAGE>

Condition 5. Distribution System Planning Standard and Quality of Service

1.   The licensee shall plan and develop the licensee's distribution system in
     accordance with a standard not less than that set out in Engineering
     Recommendation P.2/5 (October 1978 revision) of the Electricity Council
     Chief Engineers' Conference in so far as applicable to it or such other
     standard of planning as the licensee may, following consultation (where
     appropriate) with the transmission company and any other authorised
     electricity operator liable to be materially affected thereby and with the
     approval of the Authority, adopt from time to time.

2.   The licensee shall within 3 months after this condition comes into force
     draw up and submit to the Authority for its approval a statement setting
     out criteria by which the quality of performance of the licensee in
     maintaining the licensee's distribution system's security and availability
     and quality of service may be measured.

3.   The licensee shall within 2 months after the end of each financial year
     submit to the Authority a report providing details of the performance of
     the licensee during the previous financial year against the criteria
     referred to in paragraphs 1 and 2.

4.   The Authority may (following consultation with the licensee and, where
     appropriate, with the transmission company and any other authorised
     electricity operator liable to be materially affected thereby) issue
     directions relieving the licensee of its obligation under paragraph 1 in
     respect of such parts of the licensee's distribution system and to such
     extent as may be specified in the directions.

                                       51

<PAGE>

Condition 6. Safety and Security of Supplies Enquiry Service

1.   The licensee shall establish, or procure the establishment of, and
     subsequently operate and maintain, or procure the subsequent operation and
     maintenance of, an enquiry service for use by any person for the purposes
     of receiving reports and offering information, guidance or advice about any
     matter or incident which:

     (a)  affects or is likely to affect the maintenance of the security,
          availability and quality of service of the licensee's distribution
          system; or

     (b)  arises from or in connection with the operation of, or otherwise
          relates to, the licensee's distribution system and which causes danger
          or requires urgent attention or is likely to cause danger or require
          urgent attention.

2.   The service established, operated and maintained in accordance with
     paragraph 1 shall:

     (a)  be provided without charge by the licensee to the user at the point of
          use;

     (b)  ensure that all reports and enquiries are processed in a prompt and
          efficient manner whether made by telephone, in writing or in person;
          and

     (c)  be available to receive and process telephone reports and enquiries at
          all times on every day of each year.

3.   In the establishment and operation and maintenance of the enquiry service
     in accordance with paragraph 1 the licensee shall not discriminate between
     any persons or class or classes of persons.

4.   In the establishment, operation and maintenance of the enquiry service in
     accordance with paragraph 1 the licensee shall not restrict, distort or
     prevent competition in the supply of electricity.

5.   The licensee shall have in force at all times a statement approved by the
     Authority setting out details of the service to be provided in accordance
     with paragraph 1, and the licensee shall give or send a copy of such
     statement to any person requesting it.

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6.   The licensee shall give to the Authority notice of any amendments it
     proposes to make to the statement prepared under paragraph 5, and shall not
     make such amendments until either:

     (a)  a period of one month from the date of the notice has expired; or

     (b)  prior to the expiry of such period, the licensee has obtained the
          written approval of the Authority to such amendments.

7.   The licensee shall take steps to inform each authorised electricity
     operator which uses the service of any change to the address or telephone
     number of such service established, operated and maintained in accordance
     with paragraph 1, as soon as is practicable but in any event prior to such
     change becoming effective.

                                       53

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Condition 7. Provision of Information about Theft or Abstraction of Electricity,
Damage and Meter Interference

1.   Where a person other than the licensee is the owner of any electrical
     plant, electric lines or meter the licensee shall, as soon as is reasonably
     practicable, inform that person of any incident where the licensee has
     reason to believe:

     (a)  that there has been damage to such electrical plant, electric line or
          metering equipment; or

     (b)  that there has been interference with the metering equipment to alter
          its register or prevent it from duly registering the quantity of
          electricity supplied;

     provided that the licensee shall not be obliged to inform the owner of any
     electrical plant, electrical line or meter of any such incident where it
     has reason to believe that the damage or interference referred to above was
     caused by such owner.

2.   Where the licensee, in the course of providing services to any person
     supplying electricity to premises directly connected to the licensee's
     distribution system, has reason to believe that:

     (a)  there has been damage to any electrical plant, electric line or
          metering equipment through which such premises are supplied with
          electricity; or

     (b)  there has been interference with the metering equipment through which
          such premises are supplied to alter its register or prevent it from
          duly registering the quantity of electricity supplied,

     the licensee shall, as soon as reasonably practicable, inform that person
     (the person supplying electricity to the premises in question) of the
     incident in question.

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Condition 8. Provisions Relating to the Connection of Metering Equipment

1.   On application made by any person the licensee shall, subject to paragraph
     5, offer to enter into an agreement authorising that person to connect
     metering equipment to the licensee's distribution system.

2.   In making an offer to enter into an agreement specified in paragraph 1, the
     licensee shall set out:

     (a)  the date from which the applicant is authorised to undertake
          connections;

     (b)  the procedures to be adopted by the applicant when making connections,
          with particular regard to those relating to safety; and

     (c)  such other detailed terms as are or may be appropriate for the
          purposes of the agreement.

3.   The licensee shall offer terms for an agreement in accordance with
     paragraph 1 as soon as practicable and (save where the Authority consents
     to a longer period) in any event not more than 28 days after receipt by the
     licensee from any person of an application containing all such information
     as the licensee may reasonably require for the purpose of formulating the
     terms of the offer.

4.   In the offering of the terms in accordance with paragraph 1, the licensee
     shall not show undue preference to or exercise undue discrimination against
     any person or class or classes of persons and shall not offer terms or
     operate in such a way as to restrict, distort or prevent competition.

5.   The licensee shall not be obliged pursuant to this condition to offer to
     enter or to enter into any agreement where to do so would be likely to
     cause the licensee to be in breach of those provisions referred to at
     paragraph 7(a) of standard condition 4B (Requirement to Offer Terms for Use
     of System and Connection).

6.   If, after a period which appears to the Authority to be reasonable for the
     purpose, the licensee has failed to enter into an agreement with any person
     entitled or claiming to be entitled thereto pursuant to a request under
     this condition, the Authority may, on the

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<PAGE>

     application of such person or the licensee, settle any terms of the
     agreement in dispute between the licensee and that person in such manner as
     appears to the Authority to be reasonable.

7.   If the licensee or other party to such agreement proposes to vary the terms
     of any agreement entered into pursuant to this condition in any manner
     provided for under such agreement, the Authority may, at the request of the
     licensee or other party to such agreement, settle any dispute relating to
     such variation in such manner as appears to the Authority to be reasonable.

8.   In so far as any person entitled or claiming to be entitled to an offer
     under this condition wishes to proceed on the basis of an agreement or a
     variation to it as settled by the Authority pursuant to paragraphs 6 and 7,
     the licensee shall forthwith enter into and implement such agreement or
     variation in accordance with its terms.

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<PAGE>

Condition 9. Distribution Code

1.   The licensee shall in consultation with authorised electricity operators
     liable to be materially affected thereby prepare and at all times have in
     force and shall implement and (subject to paragraph 10 of this condition)
     comply with a Distribution Code:

     (a)  covering all material technical aspects relating to connections to and
          the operation and use of the licensee's distribution system or (in so
          far as relevant to the operation and use of the licensee's
          distribution system) the operation of electric lines and electrical
          plant connected to the licensee's distribution system and (without
          prejudice to the foregoing) making express provision as to the matters
          referred to in paragraph 5 below; and

     (b)  which is designed so as:

          (i)  to permit the development, maintenance and operation of an
               efficient, co-ordinated and economical system for the
               distribution of electricity; and

          (ii) to facilitate competition in the generation and supply of
               electricity.

2.   The Distribution Code in force at the date this condition comes into force
     shall be sent to the Authority for its approval. Thereafter the licensee
     shall (in consultation with authorised electricity operators liable to be
     materially affected thereby) periodically review (including upon the
     request of the Authority) the Distribution Code and its implementation.
     Following any such review, the licensee shall send to the Authority:

     (a)  a report on the outcome of such review; and

     (b)  any proposed revisions to the Distribution Code from time to time as
          the licensee (having regard to the outcome of such review) reasonably
          thinks fit for the achievement of the objectives referred to in
          sub-paragraph 1(b); and

     (c)  any written representations or objections from authorised electricity
          operators (including any proposals by such operators for revisions to
          the Distribution Code not accepted by the licensee in the course of
          the review) arising during the consultation process and subsequently
          maintained.

3.   Revisions to the Distribution Code proposed by the licensee and sent to the
     Authority pursuant to paragraph 2 must receive the prior approval of the
     Authority before being implemented.

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<PAGE>

4.   Having regard to any written representations or objections referred to in
     sub-paragraph 2(c), and following such further consultation (if any) as the
     Authority may consider appropriate, the Authority may issue directions
     requiring the licensee to revise the Distribution Code in such manner as
     may be specified in the directions, and the licensee shall forthwith comply
     with any such directions.

5.   The Distribution Code shall include:

     (a)  a distribution planning and connection code containing:

          (i)  connection conditions specifying the technical, design and
               operational criteria to be complied with by any person connected
               or seeking connection to the licensee's distribution system; and

          (ii) planning conditions specifying the technical and design criteria
               and procedures to be applied by the licensee in the planning and
               development of the licensee's distribution system and to be taken
               into account by persons connected or seeking connection with the
               licensee's distribution system in the planning and development of
               their own plant and systems; and

     (b)  a distribution operating code specifying the conditions under which
          the licensee shall operate the licensee's distribution system and
          under which persons shall operate their plant and/or distribution
          systems in relation to the licensee's distribution system, in so far
          as necessary to protect the security and quality of supply and safe
          operation of the licensee's distribution system under both normal and
          abnormal operating conditions.

6.   The licensee shall give or send a copy of the Distribution Code (as from
     time to time revised) to the Authority.

7.   The licensee shall (subject to paragraph 8) give or send a copy of the
     Distribution Code (as from time to time revised) to any person requesting
     the same.

8.   The licensee may make a charge for any copy of the Distribution Code (as
     from time to time revised) given or sent pursuant to paragraph 7 of an
     amount which will not exceed any

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<PAGE>

     amount specified for the time being for the purposes of this condition in
     directions issued by the Authority.

9.   In preparing, implementing and complying with the Distribution Code
     (including in respect of the scheduling of maintenance of the licensee's
     distribution system), the licensee shall not unduly discriminate between or
     unduly prefer any person or class or classes of persons.

10.  The Authority may (following consultation with the licensee) issue
     directions relieving the licensee of its obligations under the Distribution
     Code in respect of such parts of the licensee's distribution system and to
     such extent as may be specified in the directions.

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<PAGE>

Condition 9A. Compliance with other Distribution Codes

1.   The licensee shall comply with the provisions of the other Distribution
     Codes insofar as applicable to the licensee or the licensee's distribution
     business.

2.   The Authority may, following consultation with the licensed distributor(s)
     responsible for any other Distribution Code(s) and any authorised
     electricity operators directly affected thereby, issue directions relieving
     the licensee of its obligation in paragraph 1 in respect of such parts of
     the other Distribution Code(s) and to such extent and subject to such
     conditions as may be specified in those directions.

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<PAGE>

Condition 10.  Balancing and Settlement Code and NETA Implementation

1.   Insofar as the licensee shall distribute or offer to distribute electricity
     within any area of England and Wales, the licensee shall be a party to the
     BSC Framework Agreement and shall comply with the BSC.

2.   The licensee shall comply with the programme implementation scheme
     established in accordance with paragraph 3 as modified from time to time in
     accordance with paragraph 5.

3.   The programme implementation scheme is a scheme designated by the Secretary
     of State setting out the steps, including without limitation steps as to
     the matters referred to in paragraph 4, to be taken (or procured) by the
     licensee (and/or by authorised electricity operators) which are, in the
     Secretary of State's opinion, appropriate in order to give full and timely
     effect to:

     (a)  any modifications made to this licence and to the licences of
          authorised electricity operators by the Secretary of State pursuant to
          the power vested in him under section 15A of the Act;
     (b)  any conditions imposed by any exemption from the requirement to hold
          any such licence; and
     (c)  the matters envisaged by such modifications and conditions.

4.   The programme implementation scheme may include provisions, inter alia,

     (a)  to secure or facilitate the amendment of any of the core industry
          documents;
     (b)  to secure that any systems, persons or other resources employed in the
          implementation of the Pooling and Settlement Agreement may be employed
          in the implementation of the BSC;
     (c)  for the giving of the indemnities against liabilities to which parties
          to the Pooling and Settlement Agreement may be exposed;
     (d)  for securing the co-ordinated and effective commencement of
          implementation of and operations under the BSC, including the testing,
          trialling and start-up of the

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<PAGE>

          systems, processes and procedures employed in such implementation and
          employed by authorised electricity operators and others in connection
          with such operations;

     (e)  for co-ordinating the administration and implementation of the BSC and
          the administration of the Pooling and Settlement Agreement;

     (f)  for the licensee to refer to the Authority for determination, whether
          of its own motion or as provided in the programme implementation
          scheme, disputes, as to matters covered by the scheme, between persons
          who are required (by conditions of their licences or exemptions) or
          who have agreed to comply with the scheme or any part of it; and

     (g)  for the Authority, in the circumstances set out in the scheme, to
          require that consideration be given to the making of a proposal to
          modify the BSC and, if so, to require the making of such proposal in
          the manner set out in the scheme, such power to be exercisable at any
          time within the period of 12 months after the start of the first
          period for trading under the BSC as determined by the Secretary of
          State.

5.   (a)  The Secretary of State may at any time direct, in accordance with the
          provisions of the programme implementation scheme, that the programme
          implementation scheme be modified in the manner set out in such
          direction, in order to give (or continue to give) full and timely
          effect to the matters described in paragraph 3.

     (b)  The Secretary of State shall serve a copy of any such direction on the
          licensee, and thereupon the licensee shall comply with the scheme as
          modified by the direction.

6.   If there is any conflict between the requirements contained in the
     programme implementation scheme pursuant to paragraph 4(a) and/or imposed
     on the licensee by paragraphs 2 and 5 of this condition, and those imposed
     on the licensee by any other condition, the provisions of paragraph(s)
     4(a), 2 and/or 5 (as appropriate) shall prevail.

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<PAGE>

7.   Without prejudice to paragraph 2, the licensee shall use all reasonable
     endeavours to do such things as may be requisite and necessary in order to
     give full and timely effect to the modifications made to this licence as
     determined by the Secretary of State pursuant to the power vested in him
     under section 15A of the Act (and to give full and timely effect to the
     matters envisaged by such modifications).

8.   In this condition:

     "BSC"                        means the balancing and settlement code
                                  required to be in place, pursuant to the
                                  transmission licence granted to the
                                  transmission company in England and Wales, as
                                  from time to time modified.

     "BSC Framework Agreement"    means the agreement of that title, in the form
                                  approved by the Secretary of State, by which
                                  the BSC is made contractually binding between
                                  the parties to that agreement, as from time to
                                  time amended, with the consent of the
                                  Secretary of State.

     "core industry documents"    mean those documents which:

                                  (a) in the Secretary of State's opinion are
                                      central industry documents associated with
                                      the activities of the licensee and
                                      authorised electricity operators, the
                                      subject matter of which relates to or is
                                      connected with the BSC or the balancing
                                      and settlement arrangements, and

                                  (b) have been so designated by the Secretary
                                      of State.

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<PAGE>

Condition 11. Change Co-ordination for NETA

1.   Insofar as the licensee shall distribute or offer to distribute electricity
     within any area of England and Wales, the licensee shall take all
     reasonable measures to secure and implement (consistently with the
     procedures applicable under or in relation to the core industry documents
     to which it is party (or in relation to which it holds rights in respect of
     amendment) as modified or replaced from time to time), and shall not take
     any steps to prevent or unduly delay, changes to those documents , such
     changes being changes which are appropriate in order to give full and
     timely effect to and/or in consequence of any modification which has been
     made to the BSC.

2.   For the purposes of paragraph 1, core industry documents has the meaning
     given in paragraph 8 of standard condition 10 (Balancing and Settlement
     Code and NETA Implementation).

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<PAGE>

Condition 12. Settlement Agreement for Scotland

1.   In so far as the licensee shall distribute or offer to distribute
     electricity within any area of Scotland or to the extent that the
     Settlement Agreement for Scotland may apply in respect of the activities of
     the distribution business, the licensee shall comply with the relevant
     provisions of the Settlement Agreement for Scotland.

2.   In this condition:

     "Settlement Agreement for Scotland" means the agreement of that title, as
     nominated by the Authority for the purposes of this condition, to be
     prepared in accordance with and comprise such matters as are set out in
     special condition I (The Settlement Agreement for Scotland) of each of the
     electricity distribution licences of SP Distribution Limited, and Scottish
     Hydro-Electric Power Distribution Limited (and any other name by which any
     of these companies come to be known), as from time to time revised with the
     approval of the Authority.

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<PAGE>

Condition 12A. Compliance with the Trading Code in Scotland

1.   (a)  Insofar as the licensee shall distribute or offer to distribute
          electricity within any area of Scotland, the licensee shall comply
          with the provisions of the Trading Code during any period that the
          licensee is a member of the trading system established by the Trading
          Code, including any requirements thereunder for the Authority's
          approval or consent, for compliance with directions issued by the
          Authority or relating to determinations made by the Authority.

     (b)  The Authority may (following consultation with such other members of
          such trading system as the Authority shall consider appropriate) issue
          directions relieving the licensee of its obligation under
          sub-paragraph (a) in respect of such parts of the Trading Code and to
          such extent as may be specified in those directions.

2.   In this condition:

     "Trading Code"     means the trading code required to be adopted pursuant
                        to standard condition D2 (Trading Code for Scotland) of
                        the standard conditions of transmission licences and
                        approved by the Authority as from time to time revised
                        with the approval of the Authority.

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<PAGE>

Condition 13.  Change Co-ordination for the Utilities Act 2000

1.   The licensee shall take all reasonable measures to secure and implement,
     and shall not take any steps to prevent or unduly delay, such changes to
     the industry framework documents as are necessary or expedient to give full
     and timely effect to the provisions of the Utilities Act 2000.

2.   In complying with paragraph 1, the licensee shall act in the case of each
     industry framework document consistently with the change procedures
     currently applicable to that document, except where to do so would be
     inconsistent with any provision of the Utilities Act 2000, in which event
     that provision shall take precedence.

3.   For the purposes of this condition, "industry framework document" means,
     subject to paragraph 4, any of the following documents to which the
     licensee is a party, or in relation to which it holds rights in respect of
     amendment or termination, together with any documents which are
     supplemental or ancillary thereto:

     (a) the Pooling and Settlement Agreement;
     (b) the Balancing and Settlement Code;
     (c) Master Connection and Use of System Agreement or the Connection and Use
         of System Code;
     (d) the Settlement Agreement for Scotland;
     (e) the Master Registration Agreement;
     (f) the Data Transfer services Agreement;
     (g) the Radio Teleswitch Agreement;
     (h) any Grid Code or Scottish Grid Code;
     (i) any Distribution Code;
     (j) the Trading Code;
     (k) the Fuel Security Code;
     (l) any agreement for use of an interconnector or Scottish interconnection;
         and

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<PAGE>

     (m)  any agreement for the provision of distribution use of system, meter
          provision services, meter maintenance services, data retrieval
          services, data processing services, data aggregation services, or
          prepayment meter services.

4.   Where the Authority considers that the list of industry framework documents
     set out in paragraph 3 should be modified for the purposes of this
     condition generally, the licensee shall discuss any proposed modification
     (including addition) to the list in good faith and use all reasonable
     endeavours to agree such modification with the Authority.

5.   This condition shall cease to have effect on 30 June 2002 or such earlier
     date as the Authority may specify in a direction given for the purposes of
     this condition generally.

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<PAGE>

Condition 14. The Master Registration Agreement

1.   The licensee shall be a party to and shall comply with the provisions of
     the Master Registration Agreement.

                                       69

<PAGE>

Condition 15. Compliance with the Grid Codes

1.   The licensee shall comply with the provisions of every Grid Code in so far
     as applicable to it.

2.   The Authority may (following consultation with the transmission company
     responsible for the relevant Grid Code) issue directions relieving the
     licensee of its obligation under paragraph 1 in respect of such parts of
     such Grid Code and to such extent and subject to such conditions as may be
     specified in those directions.

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<PAGE>

Condition 16. Security Arrangements

1.   Insofar as the licensee shall distribute or offer to distribute electricity
     within any area of England and Wales, the licensee shall comply with the
     provisions of the Fuel Security Code and such provisions shall have effect
     as if they were set out in this licence.

2.   Insofar as the licensee shall distribute or offer to distribute electricity
     within any area of Scotland:

     (a)  if so directed in directions issued by the Authority for the purposes
          of this condition, the licensee shall, not later than such date as may
          be specified in such directions, enter into an agreement designated by
          the Secretary of State for the purposes of this condition relating to
          compliance with directions issued by the Secretary of State under
          section 34 and/or section 35 of the Act; and

     (b)  the licensee shall comply with and perform its obligations under any
          agreement which it enters into pursuant to sub-paragraph (a) above.

3.   In this condition:

        "Fuel Security Code"        means the document of that title designated
                                    as such by the Secretary of State as from
                                    time to time amended.

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<PAGE>

Condition 17. Provision of Services for Persons who are of Pensionable Age or
Disabled or Chronically Sick

1.   The licensee shall, no later than 1 November 2001, prepare and submit to
     the Authority for its approval a code of practice detailing the special
     services the licensee will make available for domestic customers who are of
     pensionable age or disabled or chronically sick.

2.   The code of practice shall include arrangements whereby the licensee will:

     (a)  maintain a register of customers who have special communication needs
          or depend on electricity for medical reasons by virtue of being of
          pensionable age or disabled or chronically sick, and who require
          advance notice of planned interruptions to the supply of electricity,
          comprising the relevant details of each customer who requests or whose
          supplier requests his inclusion on it;

     (b)  give to all customers so registered, either via the relevant supplier
          or, where appropriate, directly, in respect of interruptions to the
          supply of electricity, such information and advice as may be
          appropriate and is of such nature as shall be set out in the code of
          practice, provided that where the licensee is providing the supplier
          with any such information, the licensee shall provide such information
          as soon as is practicable; and

     (c)  in the case where the request for the inclusion in the register is
          made directly to the licensee, provide the relevant supplier with the
          relevant details in such form and at such intervals as is relevant to
          the supplier's licence obligations.

3.   This condition is subject to the provisions of standard condition 22
     (Preparation, Review of and Compliance with Customer Service Codes).

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<PAGE>

Condition 18. Provision of Services for Persons who are Blind or Deaf

1.   The licensee shall, no later than 1 November 2001, prepare and submit to
     the Authority for its approval a code of practice detailing the special
     services the licensee will make available for domestic customers who are
     disabled by virtue of being blind or partially sighted, or deaf or hearing
     impaired.

2.   The code of practice shall include arrangements by which the licensee will,
     on request, in each case free of charge:

     (a)  make available to blind and partially sighted domestic customers a
          facility for enquiring or complaining about any service provided by
          the licensee, by telephone or other appropriate means; and

     (b)  make available to deaf and hearing impaired domestic customers, being
          in possession of appropriate equipment, facilities to assist them in
          enquiring or complaining about any service provided by the licensee.

3.   This condition is subject to the provisions of standard condition 22
     (Preparation, Review of and Compliance with Customer Service Codes).

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<PAGE>

Condition 19. Code of Practice on Procedures with Respect to Site Access

1.   The licensee shall, no later than 1 November 2001, prepare and submit to
     the Authority for its approval a code of practice setting out the
     principles and procedures the licensee will follow in respect of any person
     acting on its behalf who requires access to customers' premises.

2.   The code of practice shall include procedures calculated to ensure that
     persons visiting customers' premises on behalf of the licensee:

     (a)  possess the skills necessary to perform the required duties;

     (b)  are readily identifiable to members of the public;

     (c)  use passwords provided for vulnerable customers;

     (d)  are appropriate persons to visit and enter customers' premises;

     (e)  are able to inform customers, on request, of a contact point for help
          and advice they may require in relation to the safety and security of
          the supply of the electricity; and

     (f)  comply with the provisions of the Rights of Entry (Gas and Electricity
          Boards) Act 1954.

3.   This condition is subject to the provisions of standard condition 22
     (Preparation, Review of and Compliance with Customer Service Codes).

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<PAGE>

Condition 20.  Payments in Relation to Standards of Performance

1.   The licensee shall not enter into a use of system agreement with any
     electricity supplier that does not provide for the licensee to make
     payments in respect of the performance of the distribution business of the
     licensee to the electricity supplier for the benefit of any customer of
     that electricity supplier equivalent to such sums as would have been paid
     pursuant to any provision of Regulations made under section 39A of the Act.

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<PAGE>

     Condition 21. Complaint Handling Procedure

1.   The licensee shall, no later than 1 November 2001, prepare and submit to
     the Authority for its approval a code of practice detailing the procedure
     for handling complaints from domestic customers about the manner in which
     the licensee conducts its distribution business.

2.   Any procedure established in accordance with this condition shall specify
     the periods within which it is intended that different descriptions of
     complaint should be processed and resolved.

3.   This condition is subject to the provisions of standard condition 22
     (Preparation, Review of and Compliance with Customer Service Codes).

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<PAGE>

Condition 22. Preparation, Review of and Compliance with Customer Service Codes

1.   This condition applies to any code of practice required to be prepared by
     the licensee pursuant to standard condition 17 (Provision of Services for
     Persons who are of Pensionable Age or Disabled or Chronically Sick),
     standard condition 18 (Provision of Services for Persons who are Blind or
     Deaf), standard condition 19 (Code of Practice on Procedures in Respect of
     Site Access) and standard condition 21 (Complaint Handling Procedure) of
     this licence.

2.   In first preparing such a code the licensee shall, prior to submitting that
     code to the Authority, consult the Consumer Council and shall have regard
     to any representations made by the Consumer Council about such code or the
     manner in which it is likely to be operated.

3.   Where before the expiry of 30 days of the licensee first submitting such
     code to the Authority for its approval the Authority notifies the licensee
     that the Authority considers the code is not sufficient for the purposes of
     meeting the requirements of this licence, the licensee shall forthwith make
     such changes as the Authority may require.

4.   The licensee shall, whenever requested to do so by the Authority, review
     such code and the manner in which it has been operated, with a view to
     determining whether any modification should be made to it or to the manner
     of its operation.

5.   In carrying out any such review the licensee shall consult the Consumer
     Council and shall have regard to any representations made by the Consumer
     Council about such code or the manner in which it is likely to be or (as
     the case may be) has been operated.

6.   The licensee shall submit any revision of such code which, after consulting
     the Consumer Council in accordance with paragraph 5, the licensee wishes to
     make, to the Authority for its approval and following its approval in
     writing shall then revise the code accordingly.

7.   The licensee shall:

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<PAGE>

     (a)  as soon as practicable following the preparation of any code or any
          revision made to it send to the Authority and the Consumer Council a
          copy of such code or such revision (in each case in the form approved
          by the Authority);

     (b)  at least once in each year, draw the attention of those customers to
          whom such code applies, to the existence of the code and of each
          substantive revision of it and to the means by which a copy of such
          code may be inspected in its latest form, in such manner as in the
          reasonable opinion of the licensee will give adequate publicity to it;
          and

     (c)  give or send free of charge a copy of such code (as from time to time
          revised) to any person who requests it.

8.   No changes may be made to any code otherwise than in accordance with the
     foregoing procedures.

9.   The licensee shall ensure, so far as reasonably practicable, that it
     complies with such arrangements or procedures (as the case may be) as are
     contained in or described by any code to which this condition applies and
     approved by the Authority or any revision to such code approved by the
     Authority.

                                       78

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Condition 23. Record of and Report on Performance

1.   The licensee shall keep a record of its general operation of the
     arrangements mentioned in standard conditions 17 to 22 and if the Authority
     so directs in writing, of its operation of any particular cases specified,
     or of a description specified, by the Authority.

2.   The licensee shall keep a statistical record of its performance in relation
     to the provision of services to domestic customers.

3.   The licensee shall, from time to time as required by the Authority, provide
     to the Authority and to the Consumer Council such of the information
     contained in the records prepared in accordance with paragraphs 1 and 2 as
     the Authority may request in writing.

4.   As soon as is reasonably practicable after the end of each calendar year,
     the licensee shall submit to the Authority and the Consumer Council a
     report dealing with the matters mentioned in paragraphs 1 and 2 in relation
     to that year and shall:

     (a)  publish the report so submitted in such manner as will in the
          reasonable opinion of the licensee secure adequate publicity for it;
          and

     (b)  send a copy of it free of charge to any person requesting one,

     except that, in performing its obligations under sub-paragraphs (a) and
     (b), the licensee shall exclude from the report such information as
     appears to it to be necessary or expedient to ensure that, save where
     they consent, individual domestic customers referred to therein cannot
     readily be identified.

5.   The report shall be presented, so far as is reasonably practicable, in a
     standard form designated by the Authority for the purposes of this
     condition.

                                       79

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Condition 24. Provision of Information to the Authority

1.   Subject to paragraphs 5 and 7, the licensee shall furnish to the Authority,
     in such manner and at such times as the Authority may reasonably require,
     such information and shall procure and furnish to it such reports, as the
     Authority may reasonably require or as may be necessary for the purpose of
     performing:

     (a)  the functions conferred on it by or under the Act; and

     (b)  any functions transferred to or conferred on it by or under the
          Utilities Act 2000.

2.   The licensee shall procure from each company or other person which the
     licensee knows or reasonably should know is at any time an ultimate
     controller of the licensee a legally enforceable undertaking in favour of
     the licensee in a form specified by the Authority that that ultimate
     controller ("the information covenantor") will give to the licensee, and
     will procure that any person (including, without limitation, a corporate
     body) which is a subsidiary of, or is controlled by, the information
     covenantor (other than the licensee and its subsidiaries) will give to the
     licensee, all such information as may be necessary to enable the licensee
     to comply fully with the obligation imposed on it in paragraph 1. Such
     undertaking shall be obtained within 7 days of such corporate body or other
     person in question becoming an ultimate controller of the licensee and
     shall remain in force for so long as the licensee remains the holder of
     this licence and the information covenantor remains an ultimate controller
     of the licensee.

3.   The licensee shall deliver to the Authority evidence (including a copy of
     each such undertaking) that the licensee has complied with the obligation
     to procure undertakings pursuant to paragraph 2, and shall comply with any
     direction from the Authority to enforce any undertaking so procured.

4.   The licensee shall not, save with the consent in writing of the Authority,
     enter (directly or indirectly) into any agreement or arrangement with any
     ultimate controller of the licensee or, where the ultimate controller is a
     corporate body, any of the subsidiaries of such a corporate ultimate
     controller (other than the subsidiaries of the licensee) at a time when:

                                       80

<PAGE>

     (a)  an undertaking complying with paragraph 2 is not in place in relation
          to that ultimate controller; or

     (b)  there is an unremedied breach of such undertaking; or

     (c)  the licensee is in breach of the terms of any direction issued by the
          Authority under paragraph 3 of this condition.

5.   The licensee shall not be required by the Authority to furnish it under
     this condition with information for the purpose of the exercise of its
     functions under section 47 of the Act.

6.   The licensee shall, if so requested by the Authority, give reasoned
     comments on the accuracy and text of any information or advice (so far as
     relating to its activities as holder of an electricity distribution
     licence) which the Authority proposes to publish pursuant to section 48 of
     the Act.

7.   This condition shall not require the licensee to produce any documents or
     give any information which it could not be compelled to produce or give in
     evidence in civil proceedings before a court.

8.   The power of the Authority to call for information under this condition is
     in addition to the power of the Authority to call for information under or
     pursuant to any other condition. There shall be a presumption that the
     provision of information in accordance with any other condition is
     sufficient for the purposes of that condition, but that presumption shall
     be rebutted, if the Authority states in writing that in its opinion such
     further information is, or is likely to be, necessary to enable it to
     exercise functions under the condition in question.

                                       81

<PAGE>

Condition 25. Long Term Development Statement

1.   The purposes of this condition are:

     (a)  to secure the provision by the licensee of information which will
          assist any person who contemplates entering into distribution
          arrangements with the licensee to identify and evaluate the
          opportunities for doing so; and

     (b)  to ensure the general availability of such information in the public
          domain.

2.   Where the Authority gives the licensee a direction to do so, the licensee
     shall prepare and maintain a statement in such form as may be specified in
     the direction for the purposes of this condition generally, containing,
     with respect to each of the 5 succeeding years on a rolling basis beginning
     with 1st April in any year, such information as it is reasonably
     practicable for the licensee to provide which identifies or relates to the
     matters specified in paragraph 4.

3.   The direction specified in paragraph 2 may be given by the Authority at any
     time during a year. Any statement to be prepared by the licensee pursuant
     to paragraph 2 shall be prepared within 3 months of the giving of the
     direction. The licensee shall be obliged to include in the first such
     statement prepared the information referred to in paragraph 2 with respect
     to each year of the 5 succeeding years on a rolling basis beginning with
     1st April of the year in which the direction is given.

4.   The matters referred to at paragraph 2 are:

     (a)  the use likely to be made of the licensee's distribution system;

     (b)  the likely development of the licensee's distribution system;

     (c)  the likely development of those facilities which the licensee expects
          to be taken into account from time to time in determining charges for
          making connections to its distribution system and for use of system;

     (d)  the licensee's plans for modifying its distribution system, including
          works which it expects to be carried out for that purpose within the
          forthcoming 2 years (from the date of the statement);

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<PAGE>

     (e)  the identification of those parts of the licensee's distribution
          system which are likely to reach the limit of their capability during
          the succeeding 5 year period, including those parts which may
          experience thermal overloading, voltage problems or excess fault
          levels;

     (f)  the licensee's plans to alleviate or rectify any predicted
          shortcomings in the operation and/or capability of its distribution
          system; and

     (g)  (where applicable) how the actual developments in the recent past
          compared with the licensee's plans contained in previous statements.

5.   Any statement to be prepared by the licensee pursuant to paragraph 2 shall
     be prepared within 3 months of the giving of the relevant direction.

6.   Except in so far as the Authority otherwise consents, the licensee shall on
     an annual basis prepare a revision of any statement prepared under
     paragraph 2 so as to ensure that, so far as is reasonably practicable, the
     information in the revised statement is up to date.

7.   The licensee shall, subject to any requirement to comply with the listing
     rules (within the meaning of Part IV of the Financial Services Act 1986) of
     The Stock Exchange and with paragraph 8 -

     (a)  furnish the Authority with a copy of the statement prepared under
          paragraph 2 and of each revision of the statement prepared under
          paragraph 6;

     (b)  in such form and manner as the Authority may direct, publish such a
          summary of the statement or, as the case may be, of a revision of the
          statement as will assist a person in deciding whether to ask for a
          copy of the statement;

     (c)  prepare a version of the statement or revision which excludes, so far
          as is practicable, any such matter as is mentioned in paragraph 8 and
          send a copy thereof to any person who asks for one and makes such
          payment to the licensee in respect of the cost thereof as it may
          require not exceeding such amount as the Authority may from time to
          time approve for the purposes hereof.

                                       83

<PAGE>

8.   In complying with the requirements of paragraph 7(b), the licensee shall
     have regard to the need for excluding, so far as is practicable, any matter
     which relates to the affairs of a person where the publication of that
     matter would or might seriously and prejudicially affect his interests.

9.   Any question arising under paragraph 8 as to whether the publication of
     some matter which relates to the affairs of a person would or might
     seriously and prejudicially affect his interests shall be determined by the
     Authority.

10.  A direction given under paragraph 2 is only effective where the Authority
     has informed the licensee of its intention to do so in a notice which:

     (a)  states the date on which it is proposed that the direction should take
          effect;

     (b)  sets out the proposed contents of the direction with respect to the
          form in which the statement is to be prepared and maintained for the
          purposes of this condition;

     (c)  specifies the time (not being less than 28 days from the date of the
          notice) within which representations with respect to the proposed
          direction may be made,

     and has considered any representations which are duly made by the licensee
     and are not withdrawn.

11.  Any consultation undertaken by the Authority with the holder of a licence
     granted under section 6(1)(c) of the Act before the determination of this
     standard condition by the Secretary of State pursuant to section 33(1) of
     the Utilities Act 2000 shall be effective for the purposes of paragraph 10.

12.  In this condition, "distribution arrangements" includes distribution
     arrangements which relate to -

     (a)  the utilisation of the licensee's distribution system; and

     (b)  connections to the licensee's distribution system. -

                                       84

<PAGE>

Condition 26. Compliance with CUSC

1.   Insofar as the licensee distributes or offers to distribute to any premises
     situated in England and Wales, the licensee shall be a party to the CUSC
     Framework Agreement and shall comply with the CUSC and, if it is party to
     the agreement known as the Master Connection and Use of System Agreement
     ("MCUSA"), execute such other documents as shall be stated as required to
     be made in any direction issued by the Authority to enable the MCUSA and
     its supplemental agreements and ancillary service agreements (as defined or
     referred to in MCUSA) and any associated agreements derived from MCUSA to
     be amended appropriately into the CUSC Framework Agreement, CUSC, bilateral
     agreements, construction agreements and, so far as is appropriate,
     associated agreements derived from CUSC so as to maintain continuity of
     contractual relationships.

2.   The licensee shall take all reasonable steps to secure and implement
     (consistently with the procedures applicable under or in relation to the
     core industry documents to which it is a party (or in relation to which it
     holds rights in respect of amendment)as modified or replaced from time to
     time), and shall not take any steps to prevent or unduly delay, changes to
     those documents, such changes being changes which are appropriate in order
     to give full and timely effect to and/or in consequence of any modification
     which has been made to the CUSC.

3.   For the avoidance of doubt, paragraph 2 is without prejudice to any rights
     of approval, veto or direction in respect of proposed changes to the core
     industry documents which the Authority may have.

4.   In this condition:

     "bilateral agreement"           means an agreement between the holder of a
                                     transmission licence in England and Wales
                                     and a CUSC user supplemental to the CUSC
                                     relating to a direct connection to that
                                     transmission system identifying the
                                     relevant connection site and setting

                                       85

<PAGE>

                                     out other site specific details in relation
                                     to that connection to the transmission
                                     system, including provisions relating to
                                     payment of connection charges.

     "construction agreement"        means an agreement between the holder of a
                                     transmission licence in England and Wales
                                     and a CUSC user in respect of construction
                                     works required on that transmission system
                                     and the associated construction works of
                                     the CUSC user in relation to a connection
                                     to the transmission system or in relation
                                     to a generating station connected to a
                                     distribution system in England and Wales,
                                     whether for the initial connection or a
                                     modification of the connection.

     "core industry documents"       means those documents which have been
                                     designated by the Secretary of State as
                                     such.

     "CUSC"                          means the Connection and Use of System Code
                                     required to be in place pursuant to the
                                     transmission licence granted to the
                                     transmission company in England and Wales,
                                     as from time to time modified.

     "CUSC Framework Agreement"      means the agreement of that title, in the
                                     form approved by the Secretary of State, by
                                     which the CUSC is made contractually
                                     binding between the parties to that
                                     agreement, as amended from time to time
                                     with the approval of the Secretary of
                                     State.

                                       86

<PAGE>

Condition 27.  Not used

Condition 28.  Not used

                                       87

<PAGE>

Condition 29. Disposal of Relevant Assets

1.   The licensee shall not dispose of or relinquish operational control over
     any relevant asset otherwise than in accordance with the following
     paragraphs of this condition.

2.   Save as provided in paragraph 3, the licensee shall give to the Authority
     not less than two months' prior written notice of its intention to dispose
     of or relinquish operational control over any relevant asset, together with
     such further information as the Authority may request relating to such
     asset or the circumstances of such intended disposal or relinquishment of
     control or to the intentions in regard thereto of the person proposing to
     acquire such asset or operational control over such asset.

3.   Notwithstanding paragraphs 1 and 2, the licensee may dispose of or
     relinquish operational control over any relevant asset:

     (a)   where:

           (i)      the Authority has issued directions/1/ /2/for the purposes
                    of this condition containing a general consent (whether or
                    not subject to conditions) to:

                    (aa)   transactions of a specified description; or
                    (bb)   the disposal of or relinquishment of operational
                           control over relevant assets of a specified
                           description; and

           (ii)     the transaction or the relevant assets are of a description
                    to which such directions apply and the disposal or
                    relinquishment is in accordance with any conditions to which
                    the consent is subject; or

     (b)   where the disposal or relinquishment of operational control in
           question is required by or under any enactment or subordinate
           legislation.

4.   Notwithstanding paragraph 1, the licensee may dispose of or relinquish
     operational control over any relevant asset as is specified in any notice
     given under paragraph 2 in circumstances where:

     (a)   the Authority confirms in writing that it consents to such disposal
           or relinquishment (which consent may be made subject to the
           acceptance by the licensee or any third

____________________
/1/  Direction issued under Condition 27 of the Public Electricity Supply
     Licence of Manweb plc now Standard Condition 29 of this licence (01.04.92)

/2/  General Consent issued under Standard Condition 29 of this licence

                                       88

<PAGE>

           party in favour of whom the relevant asset is proposed to be disposed
           or operational control is proposed to be relinquished to) of such
           conditions as the Authority may specify; or

     (b)   the Authority does not inform the licensee in writing of any
           objection to such disposal or relinquishment of control within the
           notice period referred to in paragraph 2.

5.   In this condition:

     "disposal"                      means:

                                     (a)  in relation to disposal of a relevant
                                     asset situated in England and Wales
                                     includes any sale, gift, exchange,
                                     assignment, lease, licence, loan, mortgage,
                                     charge, or grant of any other encumbrance
                                     or the permitting of any encumbrance to
                                     subsist or any other disposition;

                                     (b) in relation to disposal of a relevant
                                     asset situated in Scotland includes the
                                     grant of any disposition, conveyance,
                                     contract of excambion, any lease,
                                     assignation, licence, the grant of any
                                     right of possession, loan, standard
                                     security, floating charge to a third party,
                                     or the grant of any servitude right,
                                     wayleave or any other transaction or event
                                     which is capable under any enactment or
                                     rule of law of affecting the title to a
                                     registered interest in land

                                     and "dispose" and cognate expressions shall
                                     be construed accordingly;

                                     includes, without limitation, entering into
                                     any agreement or arrangement whereby
                                     operational

                                       89

<PAGE>

                                     control of a relevant asset or relevant
                                     assets is not or ceases to be under the
                                     sole management of the licensee.

     "relinquishment of operational
     control"

                                       90

<PAGE>

Condition 30.  Not used

Condition 31.  Not used

                                       91

<PAGE>

SECTION C.  DISTRIBUTION SERVICES OBLIGATIONS

Condition 32.  Interpretation of Section C (Distribution Services Obligations)

1.   In this Section of the standard conditions, unless the context otherwise
     requires:

     "data transfer catalogue"         has the meaning given at paragraph 5(c)
                                       of standard condition 37 (The Metering
                                       Point Administration Service and the
                                       Master Registration Agreement).

     "data transfer service"           means the data transfer service and
                                       service facility to be established,
                                       operated and maintained by the licensee,
                                       in conjunction and co-operation with all
                                       other distribution services providers, in
                                       accordance with and comprising the
                                       elements set out in standard condition 38
                                       (Establishment of a Data Transfer
                                       Service).

     "Metering Point Administration
     Service"                          means the service to be established,
                                       operated and maintained by the licensee
                                       in accordance with standard condition 37
                                       (The Metering Point Administration
                                       Service and the Master Registration
                                       Agreement).

     "metering point administration
     services"                         means the services of the Metering Point
                                       Administration Service established in
                                       accordance with standard condition 37
                                       (The Metering Point Administration
                                       Service and the Master Registration
                                       Agreement) or, where the context
                                       requires, means the

                                       92

<PAGE>

                                       equivalent services provided by any other
                                       distribution services provider in
                                       accordance with the provisions of its
                                       distribution licence.

     "permitted purpose"               means the purpose of all or any of the
                                       following:

     (a)  the distribution business or any other business or activity within the
          limits of paragraph 4 of standard condition 43 (Restriction on
          Activity and Financial Ring Fencing);

     (b)  any business or activity to which the Authority has given its consent
          in writing in accordance with paragraph 3 (d) of condition 43; and

     (c)  without prejudice to the generality of sub-paragraph (a), any payment
          or transaction lawfully made or undertaken by the licensee for a
          purpose within sub-paragraphs 1(b)(i) to (vii) of standard condition
          47 (Indebtedness);

                                       93

<PAGE>

Condition 32A.  Convenience Customers

1.   The licensee shall establish and maintain an accurate list of any
     convenience customers.

2.   The licensee shall update the list referred to in paragraph 1 at least once
     in every period of 12 months.

                                       94

<PAGE>

Condition 33.  Not used

                                       95

<PAGE>

Condition 34. Compulsory Acquisition of Land etc.

1.   The powers and rights conferred by or under the provisions of Schedule 3 to
     the Act (Compulsory Acquisition of Land etc. by Licence Holders) shall have
     effect in relation to the licensee to enable the licensee to carry on the
     activities authorised by this licence and which:

     (a)  are comprised within its distribution business; and

     (b)  are carried on within the distribution services area or necessitate
          the use of the licensee's distribution system, including any extension
          of or addition to the licensee's distribution system, whether or not
          connected to such system.

                                       96

<PAGE>

Condition 35.  Other Powers etc.

1.   The powers and rights conferred by or under the provisions of Schedule 4 to
     the Act (Other Powers etc. of Licence Holders) shall have effect in
     relation to the licensee to enable the licensee to carry on the activities
     authorised by this licence and which:

     (a)  are comprised within its distribution business; and

     (b)  are carried on within the distribution services area or necessitate
          the use of the licensee's distribution system, including any extension
          of or addition to the licensee's distribution system, whether or not
          connected to such system.

                                       97

<PAGE>

Condition 36. Basis of Charges for Distributor Metering and Data Services:
Requirements for Transparency

1.   The licensee shall as soon as practicable prepare statements in a form
     approved by the Authority setting out the basis upon which charges will be
     made for the provision of each of the distributor metering and data
     services, in each case in such form and with such detail as shall be
     necessary to enable any person to make a reasonable estimate of the charges
     to which the person would become liable to pay for the provision of such
     services and of the other terms, likely to have a material impact on the
     conduct of the person's business, upon which the service would be provided
     and (without prejudice to the foregoing) including the information set out
     in paragraph 2.

2.   The statements referred to at paragraph 1 shall include a schedule of
     charges for each of the distributor metering and data services, together
     with an explanation of the methods by which and the principles on which
     such charges will be calculated.

3.   The Authority may, upon the written request of the licensee, issue a
     direction relieving the licensee of its obligations under paragraph 1 to
     such extent and subject to such terms and conditions as the Authority may
     specify in that direction.

4.   The licensee shall not in setting its charges for, or in setting the other
     terms that will apply to the provision of any of the distributor metering
     and data services, restrict, distort or prevent competition in the
     generation, distribution or supply of electricity or in the provision of
     meter maintenance or data retrieval services.

5.   The licensee:

     (a)  shall, at least once in every year, review the information set out in
          the statements prepared in accordance with paragraph 1 in order that
          the information set out in such statements shall continue to be
          accurate in all material respects; and

     (b)  may, with the approval of the Authority, from time to time alter the
          form of such statements.

                                       98

<PAGE>

6.   The licensee shall send a copy of the statement prepared in accordance with
     paragraph 1, and of each revision of such statement, to the Authority.

7.   The licensee shall give or send a copy of the statement prepared in
     accordance with paragraph 1, or (as the case may be) of the latest revision
     of such statement, to any person who requests a copy of such statement or
     statements.

8.   The licensee may make a charge for any statement given or sent pursuant to
     paragraph 7 of an amount which shall not exceed the amount specified in
     directions issued by the Authority for the purposes of this condition based
     on the Authority's estimate of the licensee's reasonable costs of providing
     such a statement.

                                       99

<PAGE>

Condition 36A. Non-Discrimination in the Provision of Distributor Metering and
Data Services

1.   In the provision of any of the distributor metering and data services, the
     licensee shall not discriminate between any persons or class or classes of
     persons.

2.   Without prejudice to paragraph 1, and subject to the provisions of standard
     condition 36 (Basis of Charges for Distributor Metering and Data Services:
     Requirements for Transparency), the licensee shall not make charges for the
     provision of any of the distributor metering and data services to any
     person or class or classes of persons which differ from the charges for
     such provision to any other person or class or classes of person except in
     so far as such differences reasonably reflect differences in the costs
     associated with such provision.

                                      100

<PAGE>

Condition 36B. Requirement to offer Terms for the Provision of Distributor
Metering and Data Services

1.   This condition sets out the obligations relating to the following services:

     (a)  the provision of metering equipment which, at the discretion of the
          licensee, may be metering equipment which is owned by him or by any
          person other than the person making such application;

     (b)  the installation, commissioning, testing, repair, maintenance, removal
          and replacement of metering equipment;

     (c)  metering point administration services pursuant to and in accordance
          with the Master Registration Agreement; and

     (d)  data transfer services.

2.   On application made by any person, the licensee shall (subject to paragraph
     6) offer to enter into an agreement for the provision within its
     distribution services area of such of the services described in
     sub-paragraphs 1(a), (b) and (c) as may be required.

3.   On application made by any person the licensee shall (subject to paragraph
     6) offer to enter into an agreement for the provision of data transfer
     services.

4.   In making an offer pursuant to this condition to enter into any agreement,
     the licensee shall set out:

     (a)  the date by which the services required shall be provided (time being
          of the essence, unless otherwise agreed between parties);

     (b)  the charges to be paid in respect of the services required, such
          charges (unless manifestly inappropriate):

          (i)  to be presented in such a way as to be referable to the
               statements prepared in accordance with paragraph 1 of standard
               condition 36 (Basis of Charges for Distributor Metering and Data
               Services: Requirements for Transparency) or any revision thereof;

                                      101

<PAGE>

          (ii) to be set in conformity with the requirements of standard
               condition 36 (Basis of Charges for Distributor Metering and Data
               Services: Requirements for Transparency); and

     (c)  such other detailed terms in respect of each of the services required
          as are or may be appropriate for the purpose of the agreement.

5.   The licensee shall offer terms for agreements in accordance with paragraphs
     2 and 3 as soon as practicable and (save where the Authority consents to a
     longer period) in any event not more than 28 days after receipt by the
     licensee (or its agent) from any person of an application containing all
     such information as the licensee may reasonably require for the purpose of
     formulating the terms of the offer.

6.   The licensee shall not be obliged pursuant to this condition to offer to
     enter or to enter into any agreement if to do so would be likely to involve
     the licensee being:

     (a)  in breach of its duties under section 9 of the Act;

     (b)  in breach of any regulations made under section 29 of the Act or of
          any other enactment relating to safety or standards applicable in
          respect of the distribution business;

     (c)  in breach of any Grid Code or Distribution Code; or

     (d)  in breach of the conditions.

7.   The licensee shall undertake each of the services referred to in paragraph
     1 in the most efficient and economic manner practicable having regard to
     the alternatives available and the other requirements of the licence and of
     the Act in so far as they relate to the provision of those services.

8.   In the provision of any of the services referred to in paragraph 1 the
     licensee shall not restrict, distort or prevent competition in the supply
     of electricity.

9.   The services referred to in paragraph 1 shall collectively be referred to
     as the distributor metering and data services. For the avoidance of doubt
     distributor metering and data services as referred to in this licence
     excludes data retrieval, data processing and data aggregation.

                                      102

<PAGE>

10.      In this condition:

         "data retrieval"           means services comprising any or all of the
                                    following:

                                    the retrieval and verification of meter
                                    reading data from electricity meters and the
                                    delivery of such data to any person for the
                                    purpose of data processing.

         "data processing"          means services comprising any or all of the
                                    following:

                                    the processing, validation and estimation of
                                    meter reading data, and the creation,
                                    processing and validation of data in respect
                                    of the consumption of electricity at
                                    premises which receive an unmetered supply,
                                    and the delivery of such data to any person
                                    for the purpose of data aggregation.

         "data aggregation"         means services comprising any or all of the
                                    following:

                                    the collation and summation of meter reading
                                    data (whether actual or estimated) and of
                                    data in respect of the consumption of
                                    electricity at premises which receive an
                                    unmetered supply, and the delivery of such
                                    data to any person for settlement purposes.

                                      103

<PAGE>

Condition 36C. Functions of the Authority

1.   If, after a period which appears to the Authority to be reasonable for the
     purpose, the licensee has failed to enter into an agreement with any person
     entitled or claiming to be entitled thereto pursuant to a request under
     standard condition 36B (Requirement to Offer Terms for the Provision of
     Distributor Metering and Data Services), the Authority may, on the
     application of such person or the licensee, settle any terms of the
     agreement in dispute between the licensee and that person in such manner as
     appears to the Authority to be reasonable having (in so far as relevant)
     regard in particular to the following considerations:

     (a)  that the performance by the licensee of its obligations under the
          agreement should not cause it to be in breach of those provisions
          referred to at paragraph 6 of standard condition 36B (Requirement to
          Offer Terms for the Provision of Distributor Metering and Data
          Services); and

     (b)  that the terms and conditions of the agreement so settled by the
          Authority and of any other agreements entered into by the licensee
          pursuant to a request under standard condition 36B (Requirement to
          Offer Terms for the Provision of Distributor Metering and Data
          Services) should be in as similar a form as is practicable.

2.   In so far as any person entitled or claiming to be entitled to an offer
     under standard condition 36B (Requirement to Offer Terms for the Provision
     of Distributor Metering and Data Services) wishes to proceed on the basis
     of the agreement as settled by the Authority pursuant to paragraph 1, the
     licensee shall forthwith enter into and implement such agreement in
     accordance with its terms.

3.   If either party to such agreement proposes to vary the contractual terms of
     any agreement for the provision of any of the distributor metering and data
     services entered into pursuant to standard condition 36B (Requirement to
     Offer Terms for the Provision of Distributor Metering and Data Services) or
     this condition in any manner provided for under such agreement, the
     Authority may, at the request of that party, settle any dispute relating to
     such variation in such manner as appears to the Authority to be reasonable.

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4.   The Authority may (following consultation with the licensee) issue
     directions relieving the licensee of its obligations under standard
     condition 36B (Requirement to Offer Terms for the Provision of Distributor
     Metering and Data Services) relating to distributor metering and data
     services in respect of such parts of that condition and to such extent as
     may be specified in the directions.

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Condition 37. The Metering Point Administration Service and the Master
Registration Agreement

1.    The licensee shall establish, or procure the establishment of, and
      subsequently operate and maintain, or procure the subsequent operation
      and maintenance of, a service to be known as the "Metering Point
      Administration Service."

2.    The Metering Point Administration Service shall, within the distribution
      services area, fulfil the following functions:

      (a)   the maintenance of such a register of technical and other data as is
            necessary to facilitate supply by any electricity supplier to all
            premises connected to the licensee's distribution system within the
            distribution services area or, where so requested, connected to
            another distribution system within the distribution services area
            and to meet the reasonable requirements of electricity suppliers in
            respect of such premises for information for settlement purposes,
            including (where so required):

            (i)    the identity of the electricity supplier responsible under
                   the Balancing and Settlement Code (where the distribution
                   services area is within England and Wales) and/or the
                   Settlement Agreement for Scotland (where the distribution
                   services area is within Scotland) for the metering point at
                   such premises;

            (ii)   the type of metering equipment installed at each such
                   premises; and

            (iii)  a unique and accurate address of each such premises so far as
                   is reasonably practicable having regard to the nature and
                   source of the information provided to the licensee;

      (b)   the amendment of the register maintained in accordance with sub-
            paragraph (a) to reflect changes of electricity supplier in respect
            of any premises;

      (c)   the provision, in a timely and efficient manner, of such data
            contained in the register as is reasonably required and requested
            to:

            (i)    any electricity supplier or agent thereof;

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            (ii)   any person identified in the Balancing and Settlement Code
                   (where the distribution services area is within England and
                   Wales) and/or the Settlement Agreement for Scotland (where
                   the distribution services area is within Scotland) as an
                   appropriate person for the receipt of data for settlement
                   purposes; and

            (iii)  any person identified in the Master Registration Agreement as
                   entitled to such data for the purpose of facilitating changes
                   of electricity supplier in respect of any premises; and

      (d)   the maintenance of an enquiry service for the provision to any
            customer or an electricity supplier, on request and free of charge
            to that customer, of such data contained in the register as is
            relevant to the supply of electricity to premises which are (or are
            to be) owned or occupied by the customer, and the taking of such
            steps as will in the opinion of the licensee secure adequate
            publicity for the operation of the enquiry service.

3.    The licensee shall use its best endeavours, in conjunction and co-
      operation with all other distribution services providers, to prepare and
      maintain a form of agreement to be known as the Master Registration
      Agreement.

4.    The Master Registration Agreement shall be an agreement made between:

      (a)   on the one part, the licensee and all other distribution services
            providers in their capacity as providers of metering point
            administration services; and

      (b)   on the other part:

            (i)    all electricity suppliers (or their agents) which require
                   the provision of metering point administration services from
                   at least one distribution services provider; and

            (ii)   such other persons as are, for settlement purposes,
                   appropriate parties to the agreement.

5.    The Master Registration Agreement shall comprise:

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      (a)  terms for the provision of metering point administration services in
           accordance with the requirements of paragraph 2 and the equivalent
           requirements in the distribution licences of all other distribution
           services providers;

      (b)  provisions to facilitate, and procedures and practices to be
           followed by electricity suppliers in relation to changes of
           electricity supplier in respect of any premises;

      (c)  a catalogue of definitions, flows and forms of such data as may
           require to be transferred by or to parties to the Master
           Registration Agreement, or as between any persons for settlement
           purposes or for any related purposes (the "data transfer catalogue");

      (d)  arrangements for the variation of the Master Registration  Agreement
           following consultation with the parties, or representatives of the
           parties, to that agreement;

      (e)  provisions (which shall require to be approved in advance by the
           Authority) by virtue of which the whole or specified parts of the
           Master Registration Agreement shall not be capable of variation
           without the prior approval of the Authority; and

      (f)  such other matters as are or may be appropriate for the development,
           maintenance and operation of an efficient, co-ordinated and
           economical system for the supply of electricity and for the purpose
           of facilitating competition in electricity supply.

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Condition 38. Establishment of a Data Transfer Service

1.    The licensee shall use its best endeavours, in conjunction and co-
      operation with all other distribution services providers:

      (a)  to establish, or to procure the establishment of, a service to be
           known as the data transfer service; and

      (b)  subsequently to operate and maintain, or to procure the subsequent
           operation and maintenance of, such data transfer service in
           accordance with the provisions of this condition.

2.    The data transfer service shall:

      (a)  provide a network over which may be made all of the electronic data
           transfers  specified at paragraph 3;

      (b)  operate and maintain that network; and

      (c)  provide a connection to that network, on request, to any person who
           is or will be a party to any of the electronic data transfers
           specified at paragraph 3.

3.    The electronic data transfers specified at this paragraph are those which
      are reasonably required for any of the purposes set out at paragraph 4 and
      which are made between:

      (a)  a Metering Point Administration Service operator and an electricity
           supplier or any agent thereof;

      (b)  a Metering Point Administration Service operator and any person
           identified in the Balancing and Settlement Code or the Settlement
           Agreement for Scotland as an appropriate person for the receipt of
           data from the Metering Point Administration Service operator for
           settlement purposes;

      (c)  any transmission company (or any agent thereof) or Scottish
           Electricity Settlements Limited or its successor in title (or any
           agent thereof) and an electricity supplier (or any agent thereof);

      (d)  an electricity supplier (or any agent thereof) and another
           electricity supplier (or any agent thereof);

      (e)  an electricity supplier and any of its agents;

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      (f)  different agents of the same electricity supplier;

      (g)  electricity suppliers (or their agents) and generators (or their
           agents) which are parties to the Settlement Agreement for Scotland;
           and

      (h)  Scottish Electricity Settlements Limited or its successor in title
           (or any agent thereof) and any person (or any agent thereof) who is a
           party to or complies with the Settlement Agreement for Scotland.

4.    The purposes of this paragraph are to:

      (a)  meet obligations with respect to the transfer of data for settlement
           purposes;

      (b)  communicate meter reading and meter standing data;

      (c)  facilitate the provision of metering point administration services;

      (d)  communicate distribution use of system information; and

      (e)  fulfil such other requirements relating to the transfer of data as
           may be requisite for the supply of electricity to customers and
           compliance by electricity suppliers with the Master Registration
           Agreement.

5.    The data transfer service shall, where relevant, transmit data in a form
      which complies with the provisions of the data transfer catalogue.

6.    In fulfilling its obligations under paragraph 1 the licensee shall not, or
      (if appropriate) shall ensure that any third party acting on the
      licensee's instruction or behalf shall not, restrict, distort or prevent
      competition in the provision of meters, meter maintenance, data retrieval,
      data processing, data aggregation or prepayment meter services and markets
      for any of the distributor metering and data services.

7.    Any obligation placed on the licensee under standard conditions 36A to 36C
      in respect of the provision of the data transfer service shall (for the
      purposes of those conditions) be treated as a requirement on the licensee
      to use its best endeavours, in conjunction and co-operation with all other
      distribution services providers, to fulfil that obligation or to procure
      the fulfilment of that obligation by a third party, and standard
      conditions 36A to 36C shall apply mutatis mutandis to the provision of
      data transfer services by the

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      distribution services providers acting co-operatively and by means of
      procurement of third party services.

8.    Further, in relation to the provision of data transfer services the
      reference at paragraph 1 of standard condition 36C (Functions of the
      Authority) to the licensee failing to enter into an agreement shall be a
      reference to the licensee, in conjunction with all other distribution
      services providers, failing to enter into, or failing to procure that a
      third party enters into, an agreement for the provision of those services.

9.    In this condition:

      "Metering Point Administration means the licensee or any other
      Service operator"      distribution services provider in its capacity as a
                             provider of metering point administration services.

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Condition 39. Restriction on Use of Certain Information and Independence of the
Distribution Business

1.       Any information relating to or deriving from the management or
         operation of the distribution business shall, for the purposes of this
         condition, be treated as confidential information.

2.       The licensee shall not (and shall procure that its affiliates and
         related undertakings shall not) disclose or authorise access to
         confidential information:

         (a)   save to the extent provided by sub-paragraphs 3(a) to (d), to
               such of its (or its affiliates' or related undertakings')
               employees, agents, advisers, consultants or contractors as are
               engaged in, or in respect of, the management or operation of any
               supply business; or

         (b)   save to the extent permitted by paragraph 3, to any other person.

3.       The licensee shall (and shall procure that its affiliates and related
         undertakings shall) disclose or authorise access to confidential
         information only:

          (a)  in the following circumstances, namely;

               (i)      to such of its (or its affiliates' or related
                        undertakings') employees, agents, advisers, consultants
                        or contractors as are engaged in, or in respect of, the
                        management or operation of the distribution business or
                        any external distribution activities and require access
                        to the information for that purpose; and

               (ii)     to personnel of any other holder of a distribution
                        licence (a distribution licence holder) engaged in the
                        external distribution activities of that distribution
                        licence holder to the extent necessary for the
                        performance by such personnel of those external
                        distribution activities, and the use by such personnel
                        of that information for that purpose;

provided that effective arrangements are maintained in place at all times for
ensuring that no further disclosure of any information supplied or obtained
pursuant to this paragraph is made and that such information is used only for
the purpose of the distribution business or any external distribution activities
of the licensee

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         (b)   where the licensee (or any affiliate or related undertaking of
               the licensee) is required or permitted to disclose such
               information by virtue of:

               (i)      any requirement of a competent authority;

               (ii)     the conditions of any licence granted under the Act or
                        any document referred to in such a licence /3/4/5/ with
                        which it is required by virtue of the Act or that
                        licence to comply;

               (iii)    any other requirement of law; or

               (iv)     the rules of the Electricity Arbitration Association or
                        of any judicial or other arbitral process or tribunal of
                        competent jurisdiction;

         (c)   where such information was provided by or relates to any person
               who has notified (or otherwise agreed with) the licensee that it
               need not be treated as confidential; or

         (d)   where such information, not being information provided by or
               relating to any person other than the licensee, is placed by the
               licensee in the public domain,

         and in each case the licensee shall disclose or authorise access to the
         confidential information only insofar as is necessary or appropriate in
         all the circumstances.

4.       The licensee shall use all reasonable endeavours to ensure that any
         person who is in possession of or has access to confidential
         information in accordance with sub-paragraph 3(a) shall use such
         information only for the purposes of the distribution business or any
         external distribution activities.

5.       For the purpose of facilitating its compliance with paragraphs 1 to 4,
         the licensee shall establish and shall thereafter maintain the full
         managerial and operational independence of the distribution business
         and any external distribution activities from each other business
         (whether or not a separate business) of the licensee and of its
         affiliates and related undertakings.

_____________________

/3/      Direction issued under Condition 12 of the Public Electricity Supply
         Licence of Manweb plc now Standard Condition 39 of this licence
         (19.04.00)

/4/      Direction issued under Condition 12 of the Public Electricity Supply
         Licence of Manweb plc now Standard Condition 39 of this licence
         (19.04.00)

/5/      Direction issued under Condition 12 of the Public Electricity Supply
         Licence of Manweb plc now Standard Condition 39 of this licence
         (28.07.00)

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6.       In order to facilitate its compliance with paragraphs 1 to 5, the
         licensee shall ensure that:

         (a)      the distribution business is provided with such premises,
                  systems, equipment, facilities, property, personnel, data and
                  management resources as are necessary for its efficient and
                  effective management and operation of such business;

         (b)      no business of the licensee (or of any affiliate or related
                  undertaking of the licensee) other than the distribution
                  business, may use or have access to:

                  (i)   premises or parts of premises occupied by persons
                        engaged in, or in respect of, the management or
                        operation of the distribution business or any external
                        distribution activities;

                  (ii)  systems for the recording, processing or storage of data
                        to which persons engaged in, or in respect of, the
                        management or operation of the distribution business or
                        any external distribution activities also have access;

                  (iii) equipment, facilities or property employed for the
                        management or operation of the distribution business or
                        any external distribution activities; or

                  (iv)  the services of persons who are (whether or not as their
                        principal occupation) engaged in, or in respect of, the
                        management or operation of the distribution business or
                        any external distribution activities; and

         (c)      it can and does, insofar as is legally possible, prevent any
                  person who has ceased to be engaged in, or in respect of, the
                  management or operation of the distribution business from
                  being engaged in, or in respect of, the activities of any
                  other business of the licensee (or of any affiliate or related
                  undertaking of the licensee) until the expiry of an
                  appropriate time from the date on which the person ceased to
                  be engaged by the distribution business.

7.       The Authority may, upon the written request of the licensee, issue a
         direction relieving the licensee of its obligations under paragraphs 1
         to 6 to such extent and subject to such terms and conditions as the
         Authority may specify in that direction - where:

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         (a)      it is not reasonably practicable for the licensee to comply
                  with any aspect of those obligations;

         (b)      in the case of paragraphs 2 to 4, a failure to comply with any
                  aspect of those obligations would be of a trivial nature; or

         (c)      in the case of paragraph 5 and sub-paragraph 6(b), any
                  arrangements for the use of or access to premises, systems,
                  equipment, facilities, property or personnel by both the
                  distribution business and any other business of the licensee
                  (or of any affiliate or related undertaking of the licensee):

                  (i)      do not involve a cross-subsidy being either given to
                           the distribution business by such other business or
                           received from the distribution business by such other
                           business;

                  (ii)     obtain for the distribution business, in the most
                           efficient and economical manner possible, the use of
                           the relevant premises, systems, equipment,
                           facilities, property or personnel; and

                  (iv)     do not restrict, distort or prevent competition in
                           the generation or supply of electricity.

8.       Where, subsequent to the issue of a direction pursuant to paragraph 7,
         the criteria set out at sub-paragraph 7(a), (b) or (c) cease to be
         satisfied, the Authority may withdraw the direction or modify any terms
         and conditions which may be specified in it.

9.       For the purposes of paragraphs 7 and 8 the Authority shall, following
         consultation with the licensee, determine any question as to whether
         the criteria set out at sub-paragraph 7(a), (b) or (c) are or continue
         to be satisfied.

10.

         (a)      This paragraph applies only in circumstances in which the
                  licensee does not itself carry out any distributor metering
                  and data services as part of the distribution business but
                  those services are provided for it by an agent acting
                  independently of the licensee which is not an affiliate of the
                  licensee and in which the licensee holds no shares or other
                  financial interest ('a metering agent')

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         (b)   Where paragraph (a) applies, the licensee may disclose
               confidential information to its metering agent notwithstanding
               that the metering agent provides distributor metering and data
               services to others, provided that the licensee maintains, and
               procures that the metering agent also maintains, in place at all
               times effective arrangements so that the metering agent does not
               disclose information relating to the distribution business to any
               affiliate or related undertaking of the licensee except to the
               extent necessary for the metering agent to provide distributor
               metering and data services as part of the distribution business
               to that affiliate or related undertaking.

11.      In this condition:

         "appropriate time"                     means 3 months, or such shorter
                                                period as the Authority may
                                                approve in respect of any person
                                                or class of persons.

         "competent authority"                  means the Secretary of State,
                                                the Authority, the compliance
                                                officer, the Stock Exchange, the
                                                Panel on Take-overs and Mergers,
                                                or any local or national agency,
                                                regulatory body, authority,
                                                department, inspectorate,
                                                minister (including Scottish
                                                Ministers), ministry, official
                                                or public or statutory person
                                                (whether autonomous or not) of,
                                                or of the government of, the
                                                United Kingdom, the United
                                                States of America, or the
                                                European Community.

         "confidential information"             has the meaning given at
                                                paragraph 1.

         "external distribution activities"     means any business of the
                                                licensee or any affiliate or
                                                related undertaking of the
                                                licensee comprising or ancillary
                                                to the maintenance,

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                                                repair or operation of, or other
                                                activities in connection with
                                                any electricity distribution
                                                system other than the licensee's
                                                distribution system ('an
                                                external distribution system').

      "Electricity Arbitration Association"     means the unincorporated
                                                members' club of that name
                                                formed inter alia to promote the
                                                efficient and economic operation
                                                of the procedure for the
                                                resolution of disputes within
                                                the electricity supply industry
                                                by means of arbitration or
                                                otherwise in accordance with its
                                                arbitration rules.

      "separate business"                       means the distribution business
                                                taken separately from any other
                                                business of the licensee, but so
                                                that where all or any part of
                                                such business is carried on by
                                                an affiliate or related
                                                undertaking of the licensee such
                                                part of the business as is
                                                carried on by that affiliate or
                                                related undertaking shall be
                                                consolidated with any other such
                                                business of the licensee (and of
                                                any other affiliate or related
                                                undertaking) so as to form a
                                                single separate business.

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Condition 40.  Appointment of Compliance Officer

1.       The licensee shall no later than 28 days after the date of the
         Authority's direction prepare a statement in a form approved by the
         Authority setting out the practices, procedures and systems which the
         licensee has adopted (or intends to adopt) to ensure its compliance
         with the relevant duties.

2.       The licensee may periodically revise the information set out in and,
         with the approval of the Authority, alter the form of the statement
         prepared in accordance with paragraph 1 and shall, at least once in
         every year during which this licence is in force, review such statement
         in order that the information set out therein shall continue to be
         accurate in all material respects.

3.       The licensee shall send a copy of the statement prepared in accordance
         with paragraph 1, and of each revision of such statement in accordance
         with paragraph 2, to the Authority.

4.       The licensee shall, following consultation with the Authority, appoint
         a competent person (who shall be known as the "compliance officer") for
         the purpose of facilitating compliance by the licensee with the
         relevant duties.

5.       The licensee shall at all times engage the services of the compliance
         officer for the performance of such duties and tasks as the licensee
         considers it appropriate to assign to him for the purposes specified at
         paragraph 4, which duties and tasks shall include those set out at
         paragraph 8.

6.       The licensee shall procure that the compliance officer:

         (a)   is provided with such staff, premises, equipment, facilities and
               other resources; and

         (b)   has such access to its premises, systems, information and
               documentation

         as, in each case, he might reasonably expect to require for the
         fulfilment of the duties and tasks assigned to him.

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7.       The licensee shall make available to the compliance officer a copy of
         any complaint or representation received by it from any person in
         respect of a matter arising under or by virtue of standard condition 39
         (Restriction on Use of Certain Information and Independence of the
         Distribution Business) or in relation to any of the practices,
         procedures and systems adopted by the licensee in accordance with the
         statement referred to at paragraph 1.

8.       The duties and tasks assigned to the compliance officer shall include:

         (a)   providing relevant advice and information to the licensee for the
               purpose of ensuring its compliance with the relevant duties;

         (b)   monitoring the effectiveness of the practices, procedures and
               systems adopted by the licensee in accordance with the statement
               referred to at paragraph 1;

         (c)   investigating any complaint or representation made available to
               him in accordance with paragraph 7;

         (d)   recommending and advising upon the remedial action which any such
               investigation has demonstrated to be necessary or desirable;

         (e)   providing relevant advice and information to the licensee for the
               purpose of ensuring its effective implementation of:

               (i)  the practices, procedures and systems adopted in accordance
                    with the statement referred to at paragraph 1; and

               (ii) any remedial action recommended in accordance with
                    sub-paragraph (d); and

         (f)   reporting annually to the directors of the licensee in respect of
               each year after this condition comes into force as to his
               activities during the period covered by the report, including the
               fulfilment of the other duties and tasks assigned to him by the
               licensee.

9.       As soon as is reasonably practicable following each annual report of
         the compliance officer, the licensee shall produce a report:

         (a)   as to its compliance during the relevant year with the relevant
               duties; and

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         (b)   as to its implementation of the practices, procedures and systems
               adopted in accordance with the statement referred to at paragraph
               1.

10.      The report produced in accordance with paragraph 9 shall in particular:

         (a)   detail the activities of the compliance officer during the
               relevant year;

         (b)   refer to such other matters as are or may be appropriate in
               relation to the implementation of the practices, procedures and
               systems adopted in accordance with the statement referred to at
               paragraph 1; and

         (c)   set out the details of any investigations conducted by the
               compliance officer, including:

               (i)      the number, type and source of the complaints or
                        representations on which such investigations were based;

               (ii)     the outcome of such investigations; and

               (iii)    any remedial action taken by the licensee following such
                        investigations.

11.      The licensee shall submit to the Authority a copy of the report
         produced in accordance with paragraph 9, and shall give or send a copy
         of the report to any person who requests such a copy.

12.      In this condition:

         "relevant             duties" means the obligations set out at standard
                               condition 39 (Restriction on Use of Certain
                               Information and Independence of the Distribution
                               Business) and the terms and conditions of any
                               direction issued pursuant to paragraph 7 of
                               standard condition 39.

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Condition 41. Prohibition of Cross-Subsidies

1.       The licensee shall procure that the distribution business shall not
         give any cross-subsidy to, or receive any cross-subsidy from, any other
         business of the licensee or of an affiliate or related undertaking of
         the licensee.

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Condition 42. Regulatory Accounts

1.       The following paragraphs of this condition apply for the purpose of
         ensuring that the licensee (and any affiliate or related undertaking)
         maintains accounting and reporting arrangements which enable regulatory
         accounts to be prepared for the consolidated distribution business and
         showing the financial affairs of the consolidated distribution
         business.

2.       Unless the Authority otherwise consents (such consent may be given in
         relation to some or all of the obligations in this condition and may be
         given subject to such conditions as the Authority considers
         appropriate), the licensee shall:

         (a)   keep or cause to be kept for the period referred to in section
               222(5)(b) of the Companies Act 1985 and in the manner referred to
               in that section such accounting records in respect of the
               consolidated distribution business so that the revenues, costs,
               assets, liabilities, reserves and provisions of, or reasonably
               attributable to, the consolidated distribution business are
               separately identifiable in the accounting records of the licensee
               (and any affiliate or related undertaking) from those of any
               other business of the licensee;

         (b)   prepare on a consistent basis from such accounting records in
               respect of:

               (i)      each financial year, accounting statements comprising a
                        profit and loss account, a statement of total recognised
                        gains and losses, a balance sheet, and a cash flow
                        statement, together with notes thereto, and showing
                        separately in respect of the consolidated distribution
                        business and in appropriate detail the amounts of any
                        revenue, cost, asset, liability, reserve or provision
                        which has been either:

                        (aa)  charged from or to any other business together
                              with a description of the basis of that charge; or

                        (bb)  determined by apportionment or allocation between
                              the consolidated distribution business and any
                              other business together with a description of the
                              basis of the apportionment or allocation; and

               (ii)     the first six months of each financial year, an interim
                        profit and loss account; and

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               (iii)     each financial year, sufficient accounting information
                         in respect of the consolidated distribution business to
                         allow the preparation of consolidated accounting
                         statements of the licensee or, where applicable, the
                         ultimate controller. Such information shall include a
                         profit and loss account, a statement of total
                         recognised gains and losses, a balance sheet, and a
                         cash flow statement together with notes thereto;

         (c)   procure, in respect of the accounting statements prepared in
               accordance with this condition in respect of each financial year,
               a report by the auditors and addressed to the Authority stating
               whether in their opinion those statements have been properly
               prepared in accordance with this condition and give a true and
               fair view of the revenues, costs, assets, liabilities, reserves
               and provisions of, or reasonably attributable to, the
               consolidated distribution business to which the statements
               relate; and

         (d)   deliver to the Authority a copy of the account referred to in
               sub-paragraph (b)(ii), the auditors' report referred to in
               sub-paragraph (c), the accounting statements referred to in
               sub-paragraph (b)(i) and the accounting information referred to
               in sub-paragraph (b)(iii), as soon as reasonably practicable, and
               in any event not later than three months after the end of the
               period to which it relates in the case of the account referred to
               in sub-paragraph (b)(ii) and six months after the end of the
               financial year to which they relate in the case of the accounting
               statements, auditors' report and accounting information referred
               to in sub-paragraphs (b)(i), (b)(iii) and (c).

3.       Unless the Authority so specifies in directions issued for the purposes
         of this condition, or with the Authority's prior written approval, the
         licensee shall not in relation to the accounting statements in respect
         of a financial year change the bases of charge or apportionment or
         allocation referred to in sub-paragraph 2(b)(i) from those applied in
         respect of the previous financial year.

4.       Where, in relation to the accounting statements in respect of a
         financial year, the licensee has changed such bases of charge or
         apportionment or allocation from those adopted for the immediately
         preceding financial year, the licensee shall, if so directed in
         directions issued by the Authority, in addition to preparing accounting
         statements on those bases which it has

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         adopted, prepare such accounting statements on the bases which applied
         in respect of the immediately preceding financial year.

5.       Accounting statements and information in respect of a financial year
         prepared under sub-paragraph 2(b)(i) and (b)(iii) shall, so far as
         reasonably practicable and unless otherwise approved by the Authority
         having regard to the purposes of this condition:

         (a)   have the same content and format as the statutory accounts of the
               licensee prepared under section 226 and, where appropriate,
               section 227 of the Companies Act 1985 and conform to the best
               commercial accounting practices including all relevant accounting
               standards issued or adopted by the Accounting Standards Board
               currently in force;

         (b)   state the accounting policies adopted; and

         (c)   with the exception of the part of such statements and information
               which shows separately the amounts charged, apportioned or
               allocated and describes the bases of charge or apportionment or
               allocation respectively, be published with the statutory accounts
               of the licensee.

6.       Unless the accounting statements and information prepared under
         sub-paragraph 2(b)(i) and (b)(iii) are prepared on the current cost
         basis as provided by the alternative accounting rules, the licensee
         shall, unless otherwise agreed by the Authority, in addition to
         preparing those accounting statements under that paragraph, prepare
         accounting statements for the consolidated distribution business
         covering the same period, which shall comprise and show separately:

         (a)   a profit and loss account, a statement of total recognised gains
               and losses, a balance sheet, and a cash flow statement, together
               with notes thereto, which shall:

               (i)      include in respect of current cost assets amounts
                        determined on the current cost basis as provided by the
                        alternative accounting rules; and

               (ii)     show or disclose the information and other matters
                        required by the alternative accounting rules to be shown
                        or disclosed in accounts where the amounts included in
                        respect of assets covered by any items shown in those
                        accounts have been determined on any basis mentioned in
                        paragraph 31 of section C of Part II of Schedule 4 to
                        the Companies Act 1985;

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         (b)   in respect of the consolidated distribution business the adjusted
               amount of any such provision for depreciation as is referred to
               in paragraph 32(2) of section C of Part II of Schedule 4 to the
               Companies Act 1985 and the items shown in the profit and loss
               account of the consolidated distribution business for the
               relevant period which are affected by the determination of
               amounts on the current cost basis as provided by the alternative
               accounting rules, including the profit (or loss) before taxation;
               and

         (c)   such other current cost information as is referred to in the
               handbook as the Authority may reasonably require;

         and shall deliver the same, together with an auditors' report prepared
         in relation to the current cost basis accounting statements in the form
         referred to in sub-paragraph 2(c), to the Authority within the time
         limit referred to in sub-paragraph 2(d), and shall (with the exception
         of the part of such statements and information which shows separately
         the amounts charged, apportioned or allocated and describes the bases
         of charge or apportionment or allocation respectively) publish the same
         with the statutory accounts of the licensee.

7.       References in this condition to costs or liabilities of, or reasonably
         attributable to, the consolidated distribution business shall be
         construed as excluding taxation and capital liabilities which do not
         relate principally to the consolidated distribution business, and
         interest thereon; and references to any profit and loss account shall
         be construed accordingly.

8.       Without prejudice to paragraph 5 of the terms of this licence,
         references in this condition to sections of the Companies Act 1985 are
         references to those provisions as amended, substituted or inserted by
         the relevant provisions of the Companies Act 1989 and if such
         provisions of the Companies Act 1989 are not in force at the date of
         grant of this licence shall be construed as if such provisions were in
         force at such date.

9.       For the purposes of paragraph 6:

         "alternative accounting rules"      means the rules set out in section
                                             C of Part II of Schedule 4 to the
                                             Companies Act

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                                                  1985.

         "current cost assets"                    means assets of any
                                                  description mentioned in
                                                  paragraph 31 of section C of
                                                  Part II of Schedule 4 to the
                                                  Companies Act 1985.

         "the handbook"                           means the handbook issued by
                                                  the Accounting Standards
                                                  Committee of the Consultative
                                                  Committee of Accounting Bodies
                                                  (CCAB Limited) or any
                                                  successor body entitled
                                                  "Accounting for the effects of
                                                  changing prices: a handbook"
                                                  in its current edition for the
                                                  time being or in the event
                                                  that no such handbook shall be
                                                  in issue such guidance or
                                                  publication as may be issued
                                                  in replacement or substitution
                                                  therefor.

10.     For the purposes of this condition:

         "consolidated distribution business"     means the consolidation, for
                                                  regulatory accounting
                                                  purposes, of the businesses
                                                  referred to in the definition
                                                  of "distribution business" as
                                                  defined in standard condition
                                                  1 (Definitions and
                                                  Interpretation).

         "regulatory accounts"                    means the accounts required to
                                                  be prepared by the licensee
                                                  pursuant to this condition.

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Condition 42A. Change of Financial Year

1.       The definition of "financial year" in standard condition 1 (Definitions
         and Interpretation) shall, for the purpose only of the statutory
         accounts of the licensee, cease to apply to the licensee from the date
         the licensee sends a notice to the Authority for that purpose.

2.       Such notice:

         (a)   shall specify the date from which, for the purpose set out at
               paragraph 1, the current and subsequent financial years of the
               licensee shall run; and

         (b)   shall continue in effect until revoked by the licensee issuing a
               further notice.

3.       While the notice continues in effect the licensee shall procure the
         preparation of and shall deliver to the Authority audited group
         accounts for its group of companies for each financial year.

4.       Audited group accounts produced in accordance with paragraph 3:

         (a)   shall comprise consolidated group accounts in respect of the
               group of companies;

         (b)   shall, save insofar as is necessary to reflect a different
               financial year, have the same form and content as the statutory
               accounts of the licensee;

         (c)   shall be accompanied by a report by the auditors and addressed to
               the Authority stating whether in their opinion the audited group
               accounts have been properly prepared in accordance with this
               condition and give a true and fair view of the state of affairs
               of the group of companies and of its profits or losses, total
               recognised gains or losses and cash flows during the financial
               year;

         (d)   may, with the prior written consent of the Authority, omit or
               provide in a different form, specified in the consent, such
               information as may be specified in the consent; and

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         (e)   shall clearly disclose any differences between the accounting
               policies underlying the preparation of the statutory accounts of
               the licensee and the accounting policies underlying the
               preparation of the audited group accounts.

5.       The licensee may, for the purpose only of its statutory accounts,
         change its financial year from that previously notified by sending to
         the Authority a new notice pursuant to paragraph 1. Where the licensee
         sends the Authority a new notice the previous notice shall be revoked,
         as provided by sub-paragraph 2(b). The licensee's financial year-end
         will change with effect from the date specified in the new notice. The
         new notice shall specify the licensee's new financial year-end.

6.       No provisions of this condition shall apply to the financial year of
         the licensee as defined in standard condition 1 (Definitions and
         Interpretation) for the purpose of accounts produced in compliance with
         standard condition 42 (Regulatory Accounts). No provisions of this
         condition shall affect the licensee's obligations in respect of payment
         of licence fees under standard condition 3 (Payments by the Licensee to
         the Authority).

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Condition 43. Restriction on Activity and Financial Ring Fencing

1.   Save as provided by paragraphs 3 and 4, the licensee shall not conduct any
     business or carry on any activity other than the distribution business.

2.   The licensee shall not without the prior written consent of the Authority
     hold or acquire shares or other investments of any kind except:

     (a)   shares or other investments in a body corporate the sole activity of
           which is to carry on business for a permitted purpose; or

     (b)   shares or other investments in a body corporate which is a subsidiary
           of the licensee and incorporated by it solely for the purpose of
           raising finance for the distribution business; or

     (c)   investments acquired in the usual and ordinary course of the
           licensee's treasury management operations, subject to the licensee
           maintaining in force, in relation to those operations, a system of
           internal controls which complies with best corporate governance
           practice as required (or in the absence of any such requirement
           recommended) from time to time for listed companies in the United
           Kingdom.

3.   Subject to the provisions of paragraph 2 nothing in this condition shall
     prevent:

     (a)   any affiliate in which the licensee does not hold shares or other
           investments from conducting any business or carrying on any activity;

     (b)   the licensee from holding shares as, or performing the supervisory or
           management functions of, an investor in respect of any body corporate
           in which it holds an interest consistent with the provisions of this
           licence;

     (c)   the licensee from performing the supervisory or management functions
           of a holding company in respect of any subsidiary; or

     (d)   the licensee from carrying on any business or conducting any activity
           to which the Authority has given its consent in writing;

4.   Nothing in this condition shall prevent the licensee or an affiliate or
     related undertaking of the licensee in which the licensee holds shares or
     other investments (a 'relevant associate') conducting de-minimis business
     as defined in this paragraph so long as the limitations specified in this
     paragraph are complied with.

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     (a)   For the purpose of this paragraph " de-minimis business" means any
           business or activity carried on by the licensee or a relevant
           associate or relevant associates other than:

           (i)    the distribution business; and

           (ii)   any other business activity to which the Authority has given
                  its consent in writing in accordance with paragraph 3(d).

     (b)   The licensee or a relevant associate may carry on de-minimis business
           provided that the relevant associate carries on no other business
           except activities of the distribution business and business
           activities authorised by the Authority under paragraph 3(d), and
           neither of the following limitations is exceeded, namely:

           (i)    the aggregate turnover of all the de-minimis business carried
                  on by the licensee and all its relevant associates does not in
                  any period of twelve months commencing on 1 April of any year
                  exceed 2 1/2% of the aggregate turnover of the distribution
                  business as shown by the most recent audited accounting
                  statements of the licensee produced under paragraphs 2(b)(i)
                  and (c) of standard condition 42 (Regulatory Accounts); and

           (ii)   the aggregate amount (determined in accordance with sub-
                  paragraph (d) below) of all investments made by the licensee
                  and all its relevant associates in their de-minimis business
                  or de-minimis businesses does not at any time after the date
                  this condition takes effect in this licence exceed 2 1/2% of
                  the sum of share capital in issue, share premium and
                  consolidated reserves of the licensee as shown by its most
                  recent audited historical cost financial statements then
                  available.

     (c)   For the purpose of sub-paragraph (b) of this paragraph, "investment"
           means any form of financial support or assistance given by or on
           behalf of the licensee or a relevant associate for the de-minimis
           business whether on a temporary or permanent basis including (without
           limiting the generality of the foregoing) any commitment to provide
           any such support or assistance in the future.

     (d)   At any relevant time, the amount of an investment shall be the sum
           of:

           (i)    the value at which such investment was included in the audited
                  historical cost balance sheet of the licensee or a relevant
                  associate as at its latest

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           accounting reference date to have occurred prior to the date this
           condition takes effect in this licence (or, where the investment was
           not so included, zero);

     (ii)  the aggregate gross amount of all expenditure (whether of a capital
           or revenue nature) howsoever incurred by the licensee or a relevant
           associate in respect of such investment in all completed accounting
           reference periods since such accounting reference date; and

     (iii) all commitments and liabilities (whether actual or contingent) of the
           licensee or a relevant associate relating to such investment
           outstanding at the end of the most recently completed accounting
           reference period.

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<PAGE>

Condition 44.  Availability of Resources

1.   The licensee shall at all times act in a manner calculated to secure that
     it has available to it all such resources, including (without limitation)
     management and financial resources, personnel, fixed and moveable assets,
     rights, licences, consents and facilities on such terms and with all such
     rights as shall ensure that it is at all times able:

     (a)   to properly and efficiently to carry on the distribution business;
           and

     (b)   to comply in all respects with its obligations under this licence and
           such obligations under the Act as apply to the distribution business
           including, without limitation, its duty to develop and maintain an
           efficient, co-ordinated and economical system of electricity
           distribution.

2.   The licensee shall submit a certificate to the Authority, approved by a
     resolution of the board of directors of the licensee and signed by a
     director of the licensee pursuant to that resolution. Such certificate
     shall be submitted in June of each year. Each certificate shall be in one
     of the following forms:

     (a)   "After making enquiries, the directors of the licensee have a
           reasonable expectation that the licensee will have available to it,
           after taking into account in particular (but without limitation) any
           dividend or other distribution which might reasonably be expected to
           be declared or paid, sufficient financial resources and financial
           facilities to enable the licensee to carry on the distribution
           business for a period of 12 months from the date of this
           certificate."

     (b)   "After making enquiries, the directors of the licensee have a
           reasonable expectation, subject to what is said below, that the
           licensee will have available to it, after taking into account in
           particular (but without limitation) any dividend or other
           distribution which might reasonably be expected to be declared or
           paid, sufficient financial resources and financial facilities to
           enable the licensee to carry on the distribution business for a
           period of 12 months from the date of this certificate. However, they
           would like to draw attention to the following factors which may cast
           doubt on the ability of the licensee to carry on the distribution
           business."

     (c)   "In the opinion of the directors of the licensee, the licensee will
           not have available to it sufficient financial resources and financial
           facilities to enable the licensee to

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<PAGE>

           carry on the distribution business for a period of 12 months from the
           date of this certificate."

3.   The licensee shall submit to the Authority with that certificate a
     statement of the main factors which the directors of the licensee have
     taken into account in giving that certificate.

4.   The licensee shall inform the Authority in writing immediately if the
     directors of the licensee become aware of any circumstance which causes
     them no longer to have the reasonable expectation expressed in the then
     most recent certificate given under paragraph 2.

5.   The licensee shall use its best endeavours to obtain and submit to the
     Authority with each certificate provided for in paragraph 2 a report
     prepared by its auditors and addressed to the Authority stating whether or
     not the auditors are aware of any inconsistencies between, on the one hand,
     that certificate and the statement submitted with it and, on the other
     hand, any information which they obtained during their audit work.

6.   The directors of the licensee shall not declare or recommend a dividend,
     nor shall the licensee make any other form of distribution within the
     meaning of section 263 of the Companies Act 1985, unless prior to the
     declaration, recommendation or making of the distribution (as the case may
     be) the licensee shall have issued to the Authority a certificate complying
     with the following requirements of this paragraph.

     (a)   The certificate shall be in the following form:

           "After making enquiries, the directors of the licensee are satisfied:

           (i)    that the licensee is in compliance in all material respects
                  with all obligations imposed on it by standard condition 24
                  (Provision of Information to the Authority), standard
                  condition 43 (Restriction on Activity and Financial
                  Ring-fencing), standard condition 44 (Availability of
                  Resources), standard condition 45 (Undertaking from Ultimate
                  Controller), standard condition 46 (Credit Rating) and
                  paragraph 1 of standard condition 47 ( Indebtedness) of the
                  licence; and

           (ii)   that the making of a distribution of [ ] on [ ] will not,
                  either alone or when taken together with other circumstances
                  reasonably foreseeable at

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<PAGE>

                  the date of this certificate, cause the licensee to be in
                  breach to a material extent of any of these obligations in the
                  future.

     (b)   The certificate shall be signed by a director of the licensee and
           approved by a resolution of the board of directors of the licensee
           passed not more than 14 days before the date on which the
           declaration, recommendation or payment will be made.

     (c)   Where the certificate has been issued in respect of the declaration
           or recommendation of a dividend, the licensee shall be under no
           obligation to issue a further certificate prior to payment of that
           dividend provided such payment is made within six months of that
           certificate.

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<PAGE>

Condition 45.  Undertaking from Ultimate Controller

1.       The licensee  shall  procure from each company or other person which
         the licensee knows or reasonably should know is at any time an ultimate
         controller of the licensee a legally enforceable undertaking in favour
         of the licensee in the form specified by the Authority that that
         ultimate controller ("the covenantor") will refrain from any action,
         and will procure that any person (including, without limitation, a
         corporate body) which is a subsidiary of, or is controlled by, the
         covenantor (other than the licensee and its subsidiaries) will refrain
         from any action, which would then be likely to cause the licensee to
         breach any of its obligations under the Act or this licence. Such
         undertaking shall be obtained within 7 days of the company or other
         person in question becoming an ultimate controller and shall remain in
         force for as long as the licensee remains the holder of this licence
         and the covenantor remains an ultimate controller of the licensee.

2.       The licensee shall:

         (a)   deliver to the Authority evidence (including a copy of each such
               undertaking) that the licensee has complied with its obligation
               to procure undertakings pursuant to paragraph 1;

         (b)   inform the Authority immediately in writing if the directors of
               the licensee become aware that any such undertaking has ceased to
               be legally enforceable or that its terms have been breached; and

         (c)   comply with any direction from the Authority to enforce any such
               undertaking;

         and shall not, save with the consent in writing of the Authority, enter
         (directly or indirectly) into any agreement or arrangement with any
         ultimate controller of the licensee or of any of the subsidiaries of
         any such corporate ultimate controller (other than the subsidiaries of
         the licensee) at a time when,

         (i)   an undertaking complying with paragraph 1 is not in place in
               relation to that ultimate controller; or

         (ii)  there is an unremedied breach of such undertaking; or

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<PAGE>

         (iii)    the licensee is in breach of the terms of any direction issued
                  by the Authority under paragraph 2 of this condition.

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<PAGE>

Condition 46.  Credit Rating of Licensee

1.       The licensee shall use all reasonable endeavours to ensure that the
         licensee maintains at all times an investment grade issuer credit
         rating.

2.       In this condition:

         "investment grade issuer credit rating" means:

         (a)      an issuer rating of not less than BBB- by Standard & Poor's
                  Ratings Group or any of its subsidiaries or a corporate rating
                  of not less than Baa3 by Moody's Investors Service, Inc. or
                  any of its subsidiaries or such higher rating as shall be
                  specified by either of them from time to time as the lowest
                  investment grade credit rating, or

         (b)      an equivalent rating from any other reputable credit rating
                  agency which, in the opinion of the Authority, notified in
                  writing to the licensee, has comparable standing in the United
                  Kingdom and the United States of America.

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<PAGE>

Condition 47. Indebtedness

1.       In addition to the requirements of standard condition 29 (Disposal of
         Relevant Assets), the licensee shall not without the prior written
         consent of the Authority/6/ (following the disclosure by the licensee
         of all material facts):

         (a)      create or continue or permit to remain in effect any mortgage,
                  charge, pledge, lien or other form of security or encumbrance
                  whatsoever, undertake any indebtedness to any other person or
                  enter into any guarantee or any obligation otherwise than:

                  (i)    on an arm's length basis;

                  (ii)   on normal commercial terms;

                  (iii)  for a permitted purpose; and

                  (iv)   (if the transaction is within the ambit of standard
                         condition 29 (Disposal of Relevant Assets)) in
                         accordance with that condition;

         (b)      transfer, lease, license or lend any sum or sums, asset, right
                  or benefit to any affiliate or related undertaking of the
                  licensee otherwise than by way of:

                  (i)    a dividend or other distribution out of distributable
                         reserves;

                  (ii)   repayment of capital;

                  (iii)  payment properly due for any goods, services or assets
                         provided on an arm's length basis and on normal
                         commercial terms;

                  (iv)   a transfer, lease, licence or loan of any sum or sums,
                         asset, right or benefit on an arm's length basis, on
                         normal commercial terms and made in compliance with the
                         payment condition;

                  (v)    repayment of or payment of interest on a loan not
                         prohibited by sub-paragraph (a);

________________________

/6/ Consent issued under Standard Condition 47 of this licence

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<PAGE>

                  (vi)   payments for group corporation tax relief or for the
                         surrender of Advance Corporation Tax calculated on a
                         basis not exceeding the value of the benefit received;
                         or

                  (vii)  an acquisition of shares or other investments in
                         conformity with paragraph 2 of standard condition 43
                         (Restriction on Activity and Financial Ring Fencing)
                         made on an arm's length basis and on normal commercial
                         terms;

          (c)     enter into an agreement or incur a commitment incorporating a
                  cross-default obligation; or

          (d)     continue or permit to remain in effect any agreement or
                  commitment incorporating a cross-default obligation subsisting
                  at the date this condition takes effect in this licence, save
                  that the licensee may permit any cross-default obligation in
                  existence at that date to remain in effect for a period not
                  exceeding twelve months from that date, provided that the
                  cross-default obligation is solely referable to an instrument
                  relating to the provision of a loan or other financial
                  facilities granted prior to that date and the terms on which
                  those facilities have been made available as subsisting on
                  that date are not varied or otherwise made more onerous.

          (e)     the provisions of sub-paragraphs (c) and (d) of this paragraph
                  shall not prevent the licensee from giving any guarantee
                  permitted by and compliant with the requirements of
                  sub-paragraph (a).

          (f)     The payment condition referred to in sub-paragraph (b)(iv) is
                  that the consideration due in respect of the transaction in
                  question is paid in full when the transaction is entered into
                  unless either:

                  (i)    the counter-party to the transaction has and maintains
                         until payment is made in full an investment grade
                         issuer credit rating, or

                  (ii)   the obligations of the counter-party to the transaction
                         are fully and unconditionally guaranteed throughout the
                         period during which any part of the consideration
                         remains outstanding by a guarantor which has and
                         maintains an investment grade issuer credit rating.

2.        In this condition:

          "cross-default obligation"      means a term of any agreement or
                                          arrangement

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<PAGE>

                                           whereby the licensee's liability to
                                           pay or repay any debt or other sum
                                           arises or is increased or accelerated
                                           or is capable of arising, increasing
                                           or of acceleration by reason of a
                                           default (howsoever such default may
                                           be described or defined) by any
                                           person other than the licensee,
                                           unless:

                                           (i)      that liability can arise
                                                    only as the result of a
                                                    default by a subsidiary of
                                                    the licensee,

                                           (ii)     the licensee holds a
                                                    majority of the voting
                                                    rights in that subsidiary
                                                    and has the right to appoint
                                                    or remove a majority of its
                                                    board of directors, and

                                           (iii)    that subsidiary carries on
                                                    business only for a purpose
                                                    within paragraph (a) of the
                                                    definition of permitted
                                                    purpose.

         "indebtedness"                    means all liabilities now or
                                           hereafter due, owing or incurred,
                                           whether actual or contingent, whether
                                           solely or jointly with any other
                                           person and whether as principal or
                                           surety, together with any interest
                                           accruing thereon and all costs,
                                           charges, penalties and expenses
                                           incurred in connection therewith.

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<PAGE>

Condition 48.  Last Resort Supply: Payment Claims

1.       This condition sets out the circumstances in which the licensee shall
         increase its use of system charges in order to compensate any
         electricity supplier (a "claimant") which claims for losses that it has
         incurred in complying with a last resort supply direction.

2.       The following provisions apply where the licensee receives from a
         claimant a valid claim for a last resort supply payment.

3.       Where the licensee receives a valid claim it shall, during the relevant
         year, make a consequential increase to its use of system charges in
         respect of that year which relate to the distribution of electricity to
         premises to such an extent as it reasonably estimates to be appropriate
         to secure that such consequential increase in its revenue equals the
         specified amount.

4.       The licensee shall, during, or as soon as practicable after the end of,
         the relevant year, pay to the claimant, by quarterly or monthly
         instalments (as specified in the claim), the amount of that
         consequential increase in revenue mentioned in paragraph 3 to the
         extent that it does not exceed the specified amount.

5.       If the amount paid to the claimant under paragraph 4 is less than the
         specified amount, the licensee shall in the following year -

         (a)    pay to the claimant (in accordance with any directions given by
                the Authority) the shortfall together with 12 months' interest
                thereon; and

         (b)    increase the charges which relate to the distribution of
                electricity to premises during the year following the relevant
                year to such extent as it reasonably estimates to be appropriate
                to secure that the consequential increase in its revenue equals
                the amount of that shortfall together with 12 months' interest
                thereon.

6.       If the amount of the consequential increase mentioned in paragraph 3
         exceeds the specified amount, the licensee shall, during the year
         following the relevant year,

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<PAGE>

         decrease the charges which relate to the distribution of electricity to
         premises to the extent that it reasonably estimates to be necessary in
         order to reduce its use of system revenue for that year by an amount
         equal to the excess together with 12 months' interest thereon.

7.       Any question whether any estimate for the purposes of paragraph 3, 5 or
         6 is a reasonable one shall be determined by the Authority.

8.       The licensee shall not enter into any use of system agreement with an
         electricity supplier which does not permit variation of its use of
         system charges in pursuance of this condition.

9.       The provisions of this condition shall have effect notwithstanding that
         the licensee has not provided the notice required by paragraph 13 of
         standard condition 4 (Basis of Charges for Use of System and Connection
         to System: Requirements for Transparency).

10.      In calculating the licensee's use of system revenue during any period
         for the purposes of a price control condition any increase or decrease
         in revenue attributable to the licensee's compliance with this
         condition shall be treated as if it had not occurred.

11.      The licensee shall prepare, in respect of each year in which it
         increases or decreases charges in pursuance of paragraph 3, 5 or 6, a
         statement showing -

         (a)    the aggregate amount of its revenue derived from increases in
                charges in pursuance of paragraph 3;

         (b)    the aggregate amount of its revenue derived from increases in
                charges in pursuance of paragraph 5;

         (c)    the aggregate amount of the decrease in its revenue resulting
                from decreases in charges in pursuance of paragraph 6; and

         (d)    in the case of each last resort supply payment, the aggregate
                payments to the claimant made in respect of the year in question
                (whenever those payments were made).

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12.      The licensee shall give the statements referred to in paragraph 11 to
         the Authority within the first 4 months of the year following that to
         which they relate.

13.      On giving the statement mentioned in paragraph 11(d) to the Authority,
         the licensee shall publish it in such manner as, in the reasonable
         opinion of the licensee, will secure adequate publicity for it.

14.      Where the licensee receives more than one claim for a last resort
         payment, this condition (other than sub-paragraphs 11(a), (b) and (c))
         shall apply separately as respects each separate claim but in so far as
         it results in changes to the licensee's use of system charges it shall
         have the cumulative effect of such separate applications.

15.      (a)      For the purposes of this condition -

                  "last resort supply direction" and "last resort supply
                  payment" have, respectively the meanings given to them in
                  standard conditions 29 (Supplier of Last Resort) and 29A
                  (Supplier of Last Resort Supply Payments) of the standard
                  conditions of the electricity supply licence;

                  "price control condition" means any condition of the licence
                  which places a monetary limitation on the use of system
                  charges which may be levied or the use of system revenue which
                  may be recovered by the licensee during a given period;

                  "relevant year" means, in relation to any valid claim  -

                  (a)   where the claim was received by the licensee at least 60
                        days before the beginning of a year, that year; or

                  (b)   where the claim was received by the licensee less than
                        60 days before the beginning of a year, the next year;

                  "specified amount" means the amount specified on a valid claim
                  together with interest calculated in accordance with
                  sub-paragraph (b);

                  "valid claim" means a claim for which a claimant has been give
                  a consent by the Authority pursuant to standard condition 29A
                  (Supplier of Last Resort

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                Supply Payments) of the standard conditions of the electricity
                supply licence; and

                "year" means a period of 12 months beginning with 1st April.

         (b)    The interest referred to in sub-paragraph (a) is simple interest
                for the period commencing with the date on which the valid claim
                was received by the licensee and ending with the date which is
                61 days before the start of the relevant year, except where that
                period is of 30 days or less, in which case no interest shall be
                payable.

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<PAGE>

Condition 49. Incentive Scheme and Associated Information

1.   The principal purpose of this condition is to secure the collection of
     information on a common basis, and to an appropriate degree of accuracy, by
     each distribution services provider so as:

     (a)  to facilitate the establishment and operation of an incentive scheme
          ("the scheme") to improve the operation and delivery of appropriate
          outputs of the licensee; and

     (b)  to monitor any perverse incentives arising from the collection and
          publication of such information and from the operation of the scheme
          and the charge restriction conditions.

2.   The licensee shall establish appropriate systems, processes and procedures
     to measure and record specified information from the dates specified in
     paragraph 4 and in accordance with Regulatory Instructions and Guidance
     (including any associated information specified therein).

3.   For the purposes of this condition:

     "charge restriction conditions" shall have the same meaning as in special
     condition A (Definitions) for licensed distributors in England and Wales or
     special condition B for licensed distributors in Scotland;

     "charging review date" means the date from which modifications to the
     charge restriction conditions relating to all distribution services
     providers have effect:

     (a)  whether before or after the date upon which the modifications are
          made;

     (b)  whether or not the same modifications are made in respect of each
          distribution services provider; and

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<PAGE>

     (c)  where such modifications have been proposed by the Authority following
          a review by the Authority of the charge restriction conditions (or
          that part to which the modifications relate) in relation to all
          distribution services providers;

     "Regulatory Instructions and Guidance" means any instructions and guidance
     issued by the Authority for the purposes of this condition as modified from
     time to time by notice under paragraph 9 and may include:

     (a)  instructions and guidance as to the establishment of different
          systems, processes, procedures and manners for providing and recording
          information and of standards for different classes of information;

     (b)  a timetable for the development of the systems, processes and
          procedures required to achieve the appropriate standards of accuracy
          and reliability with which specified information shall be recorded;

     (c)  the meaning of words and phrases used in defining specified
          information;

     (d)  requirements for the recording of information associated with
          specified information which are reasonably necessary to enable an
          examiner to determine the accuracy and reliability of specified
          information;

     (e)  requirements as to the form and manner in which specified information
          shall be provided to the Authority;

     (f)  requirements as to the manner in which specified information shall be
          recorded and as to the standards of accuracy and reliability with
          which it shall be recorded; and

     (g)  a statement as to whether and to what extent each category of
          specified information is required for the purposes of the scheme;

     "specified information" means:

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<PAGE>

     (a)  the number of interruptions in the supply of electricity through the
          licensee's distribution system which occur in each period of 12 months
          commencing on 1 April in each calendar year and have a duration of -

          (i)    less than three minutes, together (in respect of each
                 interruption) with the number of customers whose supply was
                 interrupted and the cause of that interruption; and

          (ii)   three minutes or more, together (in respect of each
                 interruption) with -

                 (aa) the number of customers whose supply of electricity was
                      interrupted and the duration of the interruption;
                 (bb) the source, voltage level and HV circuit; and
                 (cc) the aggregate number of re-interruptions;

     (b)  in relation to telephone calls made to the enquiry service operated
          under paragraph 1 of standard condition 6 (Safety and Security of
          Supplies Enquiry Service) -

          (i)    the speed of response for answering each call; and

          (ii)   in the case of each call answered by a human operator -

                 (aa) the telephone number of the caller;
                 (bb) the time of the call; and
                 (cc) if known, the name of the caller and whether the caller is
                      or is not a domestic customer;

     (c)  (i)    the aggregate number and cause of faults occurring in specified
                 classes or types of electrical plant or electric lines:

          (ii)   a statement setting out the asset management strategy of the
                 licensee in respect of the licensee's distribution system; and

          (iii)  a statement of the reasons for any material increase or
                 decrease in the number and cause of faults referred to in
                 sub-paragraph (i) having regard to equivalent data held in
                 respect of previous years; and

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<PAGE>

     (d)  such other information as may from time to time be specified by the
          Authority, by notice to the licensee in accordance with paragraph 9.

4.   The licensee shall collect specified information in respect of:

     (a)  the matters specified in sub-paragraphs (a), (b) and (c) of the
          definition of specified information from and including 1 April 2001;
          and

     (b)  any matter specified under sub-paragraph (d) of that definition from
          the date specified in a notice given in accordance with paragraph 9.

5.   The licensee shall provide to the Authority:

     (a)  the information referred to in sub-paragraph (b)(ii) of the definition
          of specified information for each week within 4 days of the end of
          that week;

     (b)  the information referred to in sub-paragraphs (a),(b)(i) and (c) of
          that definition on or before 31 May 2002 and 30 April in each
          succeeding year (or such later date as the Authority may by notice
          specify) in respect of the period of 12 months expiring on the
          preceding 31 March; and

     (c)  the information referred to in sub-paragraph (d) of that definition in
          respect of such period and by such date as shall be specified in the
          relevant notice given under that sub-paragraph.

6.   The licensee shall permit a person or persons nominated by the Authority
     (in each case "an examiner") to examine the systems, processes and
     procedures referred to in paragraph 2 and their operation, the specified
     information and the extent to which each complies, and is in accordance,
     with Regulatory Instructions and Guidance.

7.   The licensee shall (and shall procure, insofar as it is able to do so, that
     any affiliate of the licensee, any person by whom it procures the
     performance of the obligation in paragraph 2 and any auditor of such person
     or of the licensee shall) co-operate fully with an

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<PAGE>

     examiner so as to enable him to carry out, complete and report to the
     Authority on any examination carried out in accordance with paragraph 6.

8.   The licensee's obligation under paragraph 7 to co-operate or procure
     co-operation with an examiner shall include, without limitation and insofar
     as necessary or expedient for such purpose, in each case subject to
     reasonable prior notice to the licensee:

     (a)  providing access to management, employees, agents or independent
          contractors of the licensee sufficient to enable the examiner to make
          any enquiries and to discuss any matters which he reasonably considers
          to be relevant to the carrying out of the examination;

     (b)  giving to the examiner access at reasonable hours to any premises
          occupied by the licensee or any other person in performing the
          obligations set out in this condition; and

     (c)  allowing the examiner at reasonable hours:

          (i)   to inspect and make copies of, and take extracts from, any
                documents and records of the licensee maintained in relation to
                specified information (other than information which is subject
                to legal privilege);

          (ii)  to carry out inspections, measurements and tests on or in
                relation to any systems maintained and operated for or in
                relation to the requirements of this condition; and

          (iii) to take onto such premises or onto or into any assets used for
                the purpose of the licensee such other persons and such
                equipment as may be necessary or expedient for the purpose of
                carrying out the examination.

9.   A notice published by the Authority which adds to the categories of
     specified information or which modifies Regulatory Instructions and
     Guidance (in each case, an "amendment") shall have effect where the
     Authority has:

     (a)  given prior notice to all distribution services providers:

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<PAGE>

          (i)   stating that it proposes to make the amendment and setting out
                its effect, the date it is proposed it should take effect and
                (where relevant) whether the additional category of specified
                information is required for the purposes of the scheme;

          (ii)  stating the reasons why it proposes to make the amendment; and

          (iii) specifying the time (not being less than 28 days from the date
                of publication of the notice) within which representations or
                objections with respect to the proposed amendment may be made;
                and

     (b)  considered any representations or objections which are duly made and
          not withdrawn.

10.  A notice under paragraph 9 may not, where the amendment relates to a
     requirement in Regulatory Instructions and Guidance to provide any
     specified information to a greater level of accuracy or the introduction of
     an additional category of specified information which is or is intended to
     be required for the purposes of the scheme, specify a date for the purpose
     of paragraph 9(a)(i) other than a charging review date nor be given less
     than 12 months prior to that date unless all distribution services
     providers have agreed an alternative date or period of notice.

11.  The reasons for proposing an amendment which relates to any change in
     Regulatory Instructions and Guidance (other than that referred to in
     paragraph 10) in respect of specified information which is or is intended
     to be required for the purposes of the scheme may have regard in particular
     to the desirability of:

          (i)   removing or reducing inconsistencies between distribution
                services providers in the application of the Regulatory
                Instructions and Guidance or its interpretation;

          (ii)  improving the presentation or style of the Regulatory
                Instructions and Guidance or of the form and manner in which the
                specified information is to be provided;

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<PAGE>

          (iii) summarising the terms of reference and instructions from time to
                time given to an examiner; or

          (iv)  setting out any of the matters referred to in paragraphs (a) to
                (f) of the definition of Regulatory Instructions and Guidance in
                respect of any additional category of specified information

          so as more effectively to achieve the purposes of this condition.

Department of Trade and Industry
September 2001

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<PAGE>

                        SPECIAL CONDITIONS AND SCHEDULES

                           PART IV. SPECIAL CONDITIONS

Special Condition A:  Definitions

1.   This Condition and Special Conditions B to F and Schedule A only apply to
     the distribution services area (as defined in standard condition 1
     (Definitions and Interpretation)) of the licensee.

2.   Unless the context otherwise requires words and expressions used in the
     standard conditions of this licence shall bear the same meaning in these
     Special Conditions.

3.   In this Condition and in Special Conditions B to F and Schedule A:

     "attributed"                              means when used in relation to
                                               transmission connection point
                                               charges or remote transmission
                                               asset rentals or distribution
                                               losses, attributed in accordance
                                               with the principles set out in
                                               Part A of Schedule A and
                                               attribute, attributed,
                                               attributable and attribution
                                               shall be construed accordingly.

     "average charge per unit distributed"     means the distribution revenue in
                                               the relevant year divided by the
                                               regulated quantity distributed in
                                               that year.

     "average specified rate"                  means the average of the daily
                                               base rates of Barclays Bank plc
                                               current from time to time during
                                               the period in respect of which
                                               the calculation falls to be made.

     "charge restriction conditions"           means Special Conditions A to F
                                               inclusive together with Schedule
                                               A to this licence, as from time
                                               to time modified or replaced in

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<PAGE>

                                               accordance with the provisions of
                                               the Act.

     "distribution losses"                     means units unaccounted for on
                                               the licensee's distribution
                                               system, measured as being the
                                               difference between the units
                                               metered on entry into the system
                                               and the units metered on leaving
                                               the system.

     "distribution revenue                     means the revenue (measured on an
                                               accruals basis) derived by the
                                               licensee from the provision of
                                               distribution services in the
                                               relevant year, after deduction
                                               of:

                                               (i)  an amount equal to such part
                                                    of the total amount payable
                                                    in that relevant year to the
                                                    transmission company
                                                    (measured on an accruals
                                                    basis) in respect of
                                                    transmission connection
                                                    point charges and remote
                                                    transmission asset rentals
                                                    and which would otherwise be
                                                    included in distribution
                                                    revenue by reason of being
                                                    recovered in that relevant
                                                    year by the licensee in its
                                                    use of system charges, as
                                                    falls to be attributed to
                                                    the regulated quantity
                                                    distributed in that relevant
                                                    year; and

                                               (ii) value added tax (if any) and
                                                    any other taxes based
                                                    directly on the amounts so
                                                    derived.

     "distribution services"                   means all services provided by
                                               the licensee as part of its
                                               distribution business other than
                                               excluded services.

     "EHV premises"                            means those premises to which
                                               units are delivered by the
                                               licensee which fall to be

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<PAGE>

                                               treated as EHV premises in
                                               accordance with Part B of
                                               Schedule A.

     "EHV units"                               means units distributed by the
                                               licensee which are delivered or
                                               deemed to be delivered to EHV
                                               premises.

     "eleventh relevant year                   means the relevant year
                                               commencing 1st April 2000.

     "excluded services"                       means those services provided by
                                               the licensee which in accordance
                                               with the principles set out in
                                               Part C of Schedule A fall to be
                                               treated as excluded services.

     "HV units"                                means units (other than EHV
                                               units) distributed by the
                                               licensee which are delivered to
                                               premises connected to the
                                               licensee's distribution system at
                                               a voltage at or higher than 1000
                                               volts.

     "LV units"                                means units distributed by the
                                               licensee which are delivered to
                                               premises connected to the
                                               licensee's distribution system at
                                               a voltage less than 1000 volts.

     "LV1 units"                               means LV units which are
                                               distributed by the licensee
                                               outside night-time periods to
                                               domestic premises or small
                                               premises (other than domestic
                                               premises) where the appropriate
                                               use of system charges apply
                                               different rates in night-time
                                               periods as opposed to other times
                                               of day, for the avoidance of
                                               doubt including the use of system
                                               charges under the tariffs
                                               specified in paragraph D2 of Part
                                               D of Schedule A.

     "LV2 units"                               means LV units which are
                                               distributed by the licensee to
                                               domestic premises or small
                                               premises (other than domestic
                                               premises):

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<PAGE>

                                               (a)  During night-time periods,
                                                    where the appropriate use of
                                                    system charges apply
                                                    different rates in
                                                    night-time periods as
                                                    opposed to other times of
                                                    the day; or

                                               (b)  Where the appropriate use of
                                                    system charges are
                                                    incorporated into tariffs
                                                    which restrict availability
                                                    of supply to specified
                                                    off-peak periods,

                                               for the avoidance of doubt
                                               including the use of system
                                               charges under the tariffs
                                               specified in paragraph D3 of Part
                                               D of Schedule A.

     "LV3 units"                               means LV units other than LVI and
                                               LV2 units, for the avoidance of
                                               doubt including units distributed
                                               under the tariffs specified in
                                               paragraph D4 of Part D of
                                               Schedule A.

     "maximum average charge per unit          means the charge calculated in
     distributed"                              accordance with the formula in
                                               paragraph 1 of Special Condition
                                               B (Restriction of distribution
                                               charges).

     "metered"                                 means, in relation to any
                                               quantity distributed as measured
                                               by a meter installed for such
                                               purpose or (where no such meter
                                               is installed or it is not
                                               reasonably practicable to measure
                                               the quantity by such meter) as
                                               otherwise reasonably calculated.

     "regulated distribution unit category"    means as the case may be HV units
                                               or LV1 units or LV2 units or LV3
                                               units.

     "regulated quantity distributed"          means the aggregate quantity of
                                               units distributed (for any person
                                               under use of system) by the
                                               licensee through the licensee's

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<PAGE>

                                               distribution system in relevant
                                               year t metered at exit points on
                                               leaving the licensee's
                                               distribution system but excluding
                                               for this purpose:

                                               (a)  Units distributed for the
                                                    purpose of supply to
                                                    premises outside the
                                                    licensee's distribution
                                                    services area; and

                                               (b)  EHV units.

     "relevant year                            means a financial year commencing
                                               on or after 1st April 1990.

     "relevant year t"                         means that relevant year for the
                                               purposes of which any calculation
                                               falls to be made.

     "relevant year t-1"                       means the relevant year preceding
                                               relevant year t or, in respect of
                                               the period prior to 1st April
                                               1990. the period of 12 calendar
                                               months commencing on 1st April
                                               1989: and similar expressions
                                               shall be construed accordingly.

     "remote transmission asset rental"        means any rent or other periodic
                                               payment payable by the
                                               distribution business of the
                                               licensee to the transmission
                                               company in respect of remote
                                               transmission assets forming part
                                               of the licensee's distribution
                                               system.

     "transmission connection point charges"   means charges levied by the
                                               transmission company as
                                               connection charges by direct
                                               reference to the number or nature
                                               of the connections between the
                                               licensee's distribution system
                                               and the transmission system and
                                               payable by the distribution
                                               business of the licensee.

     "unit"                                    means a kilowatt hour.

4.   Any reference in these Special Conditions to -

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<PAGE>

     (a)  a provision thereof;

     (b)  a provision of the standard conditions of electricity distribution
          licences;

     (c)  a provision of the standard conditions of electricity supply licences;

     (d)  a provision of the standard conditions of electricity generation
          licences;

     (e)  a provision of the standard conditions of electricity transmission
          licences;

     shall, if these or the standard conditions in question come to be modified,
     be construed, so far as the context permits, as a reference to the
     corresponding provision of these or the standard conditions in question as
     modified.

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<PAGE>

Special Condition B: Restriction of distribution charges

Basic Formula

1.   Without prejudice to Special Condition E (Allowances in respect of Security
     costs), the licensee shall in setting its charges for the provision of
     distribution services use its best endeavours to ensure that in any
     relevant year the average charge per unit distributed shall not exceed the
     maximum average charge per unit distributed calculated in accordance with
     the following formula:

          M\\dt\\ = P\\dt\\ + PN\\dt\\ + LF\\dt\\ - PM\\dt\\ - K\\dt\\
                                         --------

2.   For the purposes of paragraph 1, Mdt means the maximum average charge per
     unit distributed in relevant year t.

Formula for P\\dt\\ as used in paragraph 1

3.   For the purposes of paragraph 1, P\\dt\\ is derived from the following
     formula:

                where:

                P\\dt\\ = (PUM.GR\\t\\PID\\t\\) + (PL.(AL\\t\\-L\\t\\).PIL\\t\\)
                          ------------------------------------------------------
                                             D\\t\\

     PUM        means the amount set against that term in the part of Annexe A
                to this Condition that applies to the licensee.

     GR\\t\\    in the eleventh relevant year has the value of 1 and in each
                subsequent relevant year is derived from the following formula:

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<PAGE>

                 GR\\t\\ = 0.5 ( (SIGMA)P\\oi\\.D\\it\\     C\\dt\\ )
                               (------------------------ + ---------) GR\\t-1\\
                               ((SIGMA)P\\oi\\.D\\it-1\\   C\\dt-1\\)

                 Where

     (SIGMA)     means the summation across all regulated distribution unit
                 categories i as described in the definition of the term
                 P\\oi\\.

     P\\oi\\     means, in respect of each regulated distribution unit category
                 i set out in column 1 under that term in the part of Annexe A
                 to this Condition which applies to the licensee, the value
                 opposite that category in column 2.

     D\\it\\     means that number of units in each regulated distribution unit
                 category i distributed in relevant year t.

     D\\it-1\\   means that number of units in each regulated distribution unit
                 category i distributed in relevant year t-l.

     C\\dt\\     means a notional figure, representing the number of customers
                 in the licensee's distribution services area (for the purpose
                 of this term Cd, only) for each relevant year, given in the
                 table appearing under that term in the part of Annexe A to this
                 Condition that applies to the licensee.

     C\\dt-1\\   means the number equal to C\\dt\\, in relevant year t-1.

     PID\\t\\    in the eleventh relevant year has the value of 1 and in each
                 subsequent relevant year is derived from the following formula:

                 PID\\dt\\ = (1 + RPI\\t\\ - Xd\\t\\) PID\\t-1\\
                                  ------------------
                                         100

                                       159

<PAGE>

                 Where

     RPI\\t\\    means the percentage change (whether of a positive or a
                 negative value) in the arithmetic average of the Retail Price
                 Index numbers published or determined with respect to each of
                 the six months July to December (inclusive) in relevant year t-
                 1 and the arithmetic average of the Retail Price Index numbers
                 published or determined with respect to the same months in
                 relevant year t-2.

     Xd\\t\\     shall equal 3.

     PL          means an amount equal to 2.9p.

     AL\\t\\     means an amount (in units) representing allowed distribution
                 losses in relevant year t, being the allowed percentage of the
                 adjusted units distributed (calculated as provided in paragraph
                 E5 of Part E of Schedule A) where, in respect of each relevant
                 year t, the allowed percentage shall equal that percentage
                 which the aggregate of adjusted distribution losses (calculated
                 as provided in paragraphs E2 to E5 of Part E of Schedule A)
                 over the 10 preceding relevant years bears to the aggregate of
                 adjusted units distributed (calculated as aforesaid) over the
                 corresponding relevant years.

     L\\t\\      means in respect of relevant year t, adjusted grid supply point
                 purchases less adjusted units distributed (calculated as
                 provided in paragraphs E2 to E5 of Part E of Schedule A).

     PIL\\t\\    is derived from the following formula:

                 PIL\\t\\ = (1 + RPI\\t\\) PIL\\t-1\\
                                 --------
                                   100

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<PAGE>

                 where, for the eleventh relevant year, PIL\\t-1\\ equals 1.

     D\\t\\      means the regulated quantity distributed in relevant year t.

Formula for PN\\dt\\ as used in paragraph 1

4.   For the purposes of paragraph 1, in the eleventh and subsequent relevant
     years the term PN\\dt\\ shall be calculated in accordance with the
     following formula:

                 PN\\dt\\ = (PS + PR)PIR\\t\\
                            -----------------
                                 D\\t\\

     where:

     PS          means an amount equal to (Pound)3.25 million for each of the
                 eleventh to the fifteenth relevant years, and thereafter shall
                 be 0.

     PR          means, in the eleventh and all subsequent relevant years, the
                 amount given against the licensee's name in Annexe B to this
                 Condition.

     PIR\\t\\    is derived from the following formula:

                 PIR\\t\\ = (1 + RPI\\t\\) PIR\\t-1\\
                                 --------
                                    100

                 where for the ninth relevant year PIR\\t-1\\ equals 1

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<PAGE>

Formula for PM\\dt\\ as used in paragraph 1

5.   For the purposes of paragraph 1, PM\\dt\\ is derived from the following
     formula:

                 PMd\\t\\ = RM\\dt\\
                            --------
                             D\\t\\

     where:

     RM\\dt\\    means an amount equal to the licensee's relevant reduction in
                 costs in relevant year t, resulting from the fact that the
                 licensee has ceased to provide meter provision services and
                 meter operation services (as defined in paragraph 1 of standard
                 condition 36B (Requirement to Offer Terms for the Provision of
                 Distributor Metering and Data Services)) in respect of
                 customers in respect of whom it provided meter provision
                 services and meter operation services at 31 March 2000. The
                 licensee's relevant reduction in costs shall be calculated in
                 real terms, and shall be the amount, if any, by which the
                 licensee's cash operating costs (excluding costs of a
                 non-recurring nature) of providing such services in the
                 relevant year t fall short of its cash operating costs
                 (excluding costs of a non-recurring nature) of providing such
                 services in the tenth relevant year, to the extent that such
                 shortfall is attributable to the fact that the licensee has
                 ceased, since 31 March 2000, to provide (whether directly or
                 through an agent acting on its behalf) meter provision services
                 and meter operation services in respect of such customers. The
                 licensee's relevant reduction in costs shall exclude the amount
                 of any reduction in costs in providing any services which
                 constitute

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<PAGE>

                 excluded services.

Formula for K\\dt\\ as used in Paragraph 1

6.   For the purposes of paragraph 1, K\\dt\\ means the correction factor per
     unit (whether of a positive or a negative value) derived, subject to
     paragraph 3 of Special Condition C (Restriction of distribution charges:
     adjustments), from the following formula: provided that the value of
     K\\dt\\ for the eleventh relevant year shall be the value of K\\dt\\
     arising for that year from the application of the formula applicable under
     Licence Condition 3A of the Public Electricity Supply licence previously
     granted to Manweb in the form of that condition in force on 31 March 2000,
     but adjusted by adding the amount of TA\\dt\\, for the tenth relevant year,
     calculated by the application of the formula applicable under Licence
     Condition 3A of that Public Electricity Supply licence as then in force:

                 K\\dt\\= R\\dt-1\\-(D\\t-1.M\\dt-1)
                          --------------------------(1+I\\dt\\)
                                     D\\t\\            -------
                                                         100
     where:

     R\\dt-1\\   means the distribution revenue in relevant year t-l.

     D\\t-1\\    means the regulated quantity distributed in relevant year t-l.

     M\\dt-1\\   means maximum average charge per unit distributed in relevant
                 year t-1.

     I\\dt\\     means that interest rate in relevant year t which is equal to,
                 where Kdt (taking no account of Id for this purpose) has a
                 positive value, the average specified rate plus 4, or where Kdt
                 (taking no account of Id for this purpose) has a negative
                 value, the average specified rate.

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<PAGE>

Formula for LF\\dt\\ as used in Paragraph 1

7.   For the purposes of paragraph 1, for the tenth and preceding relevant years
     LF\\dt\\ shall be zero, and for any subsequent relevant year LF\\dt\\ is
     derived from the following formula:

     LF\\dt\\ LP\\dt\\ - LA\\dt\\
              -------------------
                     D\\t\\

     where:

     LP\\dt\\    means an amount equal to the payments made by the licensee, in
                 the relevant year t, in accordance with its obligations set out
                 in Standard Licence Condition 3 or in respect of the eleventh
                 relevant year made by the predecessor company of the licence
                 holder to the Director General of Electricity Supply under the
                 licence condition entitled "Payment of fees" in the public
                 electricity supply licence referred to in paragraph 6.

     LA\\dt\\    is derived from the following formula:

                 LA\\dt\\ = PF.PIF\\t\\

     PF          means, in the eleventh and all subsequent relevant years, the
                 amount given against the licensee's name in column PF of Annex
                 C to this Condition.

     PIF\\t\\    is derived from the following formula:

                 PIF\\t\\ = (1 + RPI\\t\\)
                            (    --------) PIF\\t-1\\
                            (      100   )

                 where for the ninth relevant year PIF\\t-1\\ equals 1.

                                       164

<PAGE>

Annex A to Special Condition B (Restriction of distribution charges)

EASTERN ELECTRICITY Ltd

                                             (Pound)m

PUM                                           287.9

C\\dt\\ for relevant year beginning on

                                                        '000s

       1 April 2000                                       3249
       1 April 2001                                       3281
       1 April 2002                                       3314
       1 April 2003                                       3347
       1 April 2004                                       3381

every subsequent relevant year 3415

P\\0i\\

Column 1                                                  Column 2

unit category i                                           value (p)

                      LV1
                   2.0009

                      LV2
                   0.3031

                      LV3
                   1.3431

                       HV
                   0.4584

                                       165

<PAGE>

EAST MIDLANDS DISTRIBUTION plc

                                             (Pound)m

                PUM
                240.3

C\\dt\\ for relevant year beginning on

                                 '000s

     1 April 2000                            2376
     1 April 2001                            2400
     1 April 2002                            2424
     1 April 2003                            2448
     1 April 2004                            2472

every subsequent relevant year 2497

P\\0i\\

Column 1                                     Column 2

unit category I                              value (p)
                     LV1
                  1.6131

                     LV2
                  0.5557

                     LV3
                  1.5711

                      HV
                  0.6350

                                       166

<PAGE>

GPU POWER NETWORKS (UK) PLC

                                             (Pound)m

PUM             243.5

C\\dt\\ for relevant year beginning on

     '000s

     1 April 2000                                2303
     1 April 2001                                2326
     1 April 2002                                2349
     1 April 2003                                2373
     1 April 2004                                2397

every subsequent relevant year 2420

P\\0i\\

Column 1                         Column 2

unit category i                  value (p)

                     LV1
                  1.9729

                     LV2
                  0.3966

                     LV3
                  1.6108

                      HV
                  0.5992

                                       167

<PAGE>

LONDON POWER NETWORKS LIMITED

                                             (Pound)m

PUM                220.8

C\\dt\\ for relevant year beginning on

                                    '000s

     1 April 2000                                2072
     1 April 2001                                2093
     1 April 2002                                2114
     1 April 2003                                2135
     1 April 2004                                2156

every subsequent relevant year 2178

P\\0i\\

Column 1                         Column 2

unit category i                  value (p)

                     LV1
                  2.2073

                     LV2
                  0.4057

                     LV3
                  1.5912

                      HV
                  0.5932

                                       168

<PAGE>

MANWEB plc

                                             (Pound)m

PUM                158.0

C\\dt\\ for relevant year beginning on

                                 '000s

     1 April 2000                                1423
     1 April 2001                                1437
     1 April 2002                                1452
     1 April 2003                                1466
     1 April 2004                                1481

every subsequent relevant year 1496

P\\0i\\

Column 1                         Column 2

unit category i                  value (p)

                     LV1
                  2.1041

                     LV2
                  0.4323

                     LV3
                  1.7558

                      HV
                  0.5097

                                       169

<PAGE>

NORTHERN ELECTRIC DISTRIBUTION LIMITED

                                             (Pound)m

PUM                152.6

C\\dt\\ for relevant year beginning on

                                 '000s

     1 April 2000                               1500
     1 April 2001                               1515
     1 April 2002                               1530
     1 April 2003                               1545
     1 April 2004                               1561

every subsequent relevant year 1577

P\\0i\\

Column 1                                         Column 2

unit category i                                  value (p)
                     LV1
                  2.0911

                     LV2
                  0.3273

                     LV3
                  1.9284

                      HV
                  0.4723

                                       170

<PAGE>

NORWEB plc

                                              (Pound)m

PUM               208.9

C\\dt\\ for relevant year beginning on

            '000s

     1 April 2000                                 2250
     1 April 2001                                 2272
     1 April 2002                                 2295
     1 April 2003                                 2318
     1 April 2004                                 2341

every subsequent relevant year 2365

P\\0i\\

Column 1                             Column 2

unit category i                      value (p)

                  LV1                2.1750
                  LV2 0               .2821
                  LV3                1.6304
                   HV                0.5335

                                       171

<PAGE>

SEEBOARD POWER NETWORKS PLC

                                                                (Pound)m

PUM                                  159.1

C\\dt\\ for relevant year beginning on

        '000s

     1 April 2000                                    2153
     1 April 2001                                    2175
     1 April 2002                                    2196
     1 April 2003                                    2218
     1 April 2004                                    2240

every subsequent relevant year 2263

P\\0i\\

Column 1                                             Column 2

unit category i                                      value (p)
                        LV1
                     1.8735

                        LV2
                     0.3213

                        LV3
                     1.4098

                         HV
                     0.5892

                                       172

<PAGE>

SOUTHERN ELECTRIC POWER DISTRIBUTION PLC

                                           (Pound)m

PUM             297.7

C\\dt\\ for relevant year beginning on

            '000s

     1 April 2000                                 2728
     1 April 2001                                 2755
     1 April 2002                                 2783
     1 April 2003                                 2811
     1 April 2004                                 2839

every subsequent relevant year 2867

P\\0i\\

Column 1                             Column 2

unit category i                      value (p)

                     LV1
                  2.0600

                     LV2
                  0.3816

                     LV3
                  1.4815

                      HV
                  0.5560

                                       173

<PAGE>

WESTERN POWER DISTRIBUTION (SOUTH WALES) PLC

                                              (Pound)m

PUM                125.6

C\\dt\\ for relevant year beginning on

            '000s

     1 April 2000                                     998
     1 April 2001                                    1008
     1 April 2002                                    1018
     1 April 2003                                    1028
     1 April 2004                                    1039

every subsequent relevant year 1049

P\\0i\\

Column 1                             Column 2

unit category i                      value (p)

                     LV1
                  2.4442

                     LV2
                  0.3641

                     LV3
                  2.2009

                      HV
                  0.7272

                                       174

<PAGE>

WESTERN POWER DISTRIBUTION (SOUTH WEST) PLC

                                     (Pound)m

PUM               171.0

C\\dt\\ for relevant year beginning on

            '000s

     1 April 2000           1369
     1 April 2001           1383
     1 April 2002           1397
     1 April 2003           1410
     1 April 2004           1425

every subsequent relevant year 1439

P\\0i\\

Column 1                             Column 2

unit category i                      Value (p)

             LV1
             2.3889

             LV2                     0.6679
             LV3                     1.8707
             HV                      0.5072

                                       175

<PAGE>

YORKSHIRE ELECTRICITY DISTRIBUTION plc

                                                                (Pound)m

PUM                                      215.4

C\\dt\\ for relevant year beginning on

                                                        '000s

     1 April 2000                               2129
     1 April 2001                               2150
     1 April 2002                               2172
     1 April 2003                               2194
     1 April 2004                               2215

every subsequent relevant year 2238

P\\0i\\

Column 1                                        Column 2

unit category i                                 value (p)

                     LV1
                  1.9497

                     LV2                        0.3271

                     LV3                        1.6654

                      HV                        0.5750

                                       176

<PAGE>

Annex B to Special Condition B (Restriction of distribution charges)

----------------------------------------------------------------------------
                                                           PR
                                                           (Pound)M
----------------------------------------------------------------------------
EASTERN ELECTRICITY LTD                                                2.97
----------------------------------------------------------------------------
EAST MIDLANDS DISTRIBUTION PLC                                         2.35
----------------------------------------------------------------------------
GPU POWER NETWORKS (UK) PLC                                            2.34
----------------------------------------------------------------------------
LONDON POWER NETWORKS LIMITED                                          2.14
----------------------------------------------------------------------------
MANWEB PLC                                                             1.69
----------------------------------------------------------------------------
NORTHERN ELECTRIC DISTRIBUTION LIMITED                                 1.76
----------------------------------------------------------------------------
NORWEB PLC                                                             2.28
----------------------------------------------------------------------------
SEEBOARD POWER NETWORKS PLC                                            2.15
----------------------------------------------------------------------------
SOUTHERN ELECTRIC POWER DISTRIBUTION PLC                               2.64
----------------------------------------------------------------------------
WESTERN POWER DISTRIBUTION (SOUTH WALES) PLC                           1.38
----------------------------------------------------------------------------
WESTERN POWER DISTRIBUTION (SOUTH WEST) PLC                            1.65
----------------------------------------------------------------------------
YORKSHIRE ELECTRICITY DISTRIBUTION PLC                                 2.19
----------------------------------------------------------------------------
SCOTTISH POWER DISTRIBUTION LTD                                        2.01
----------------------------------------------------------------------------
SCOTTISH HYDRO ELECTRIC POWER DISTRIBUTION LTD                         1.16
----------------------------------------------------------------------------

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

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

                                       177

<PAGE>

Annex C to Special Condition B (Restriction of Distribution Charges)

------------------------------------------------------------------------------
                                                                  PF
------------------------------------------------------------------------------
                                                                (Pound)m
------------------------------------------------------------------------------
EASTERN ELECTRICITY LIMITED                                       0.731
------------------------------------------------------------------------------
EAST MIDLANDS ELECTRICITY DISTRIBUTION PLC                        0.579
------------------------------------------------------------------------------
LONDON POWER NETWORKS PLC                                         0.492
------------------------------------------------------------------------------
SP MANWEB PLC                                                     0.452
------------------------------------------------------------------------------
GPU POWER NETWORKS (UK) PLC                                       0.575
------------------------------------------------------------------------------
NORTHERN ELECTRIC DISTRIBUTION LIMITED                            0.352
------------------------------------------------------------------------------
UNITED UTILITIES ELECTRICITY PLC (FORMERLY NORWEB PLC)            0.527
------------------------------------------------------------------------------
SEEBOARD POWER NETWORKS PLC                                       0.442
------------------------------------------------------------------------------
SOUTHERN ELECTRIC POWER DISTRIBUTION PLC                          0.649
------------------------------------------------------------------------------
WESTERN POWER DISTRIBUTION (SOUTH WALES) PLC                      0.269
------------------------------------------------------------------------------
WESTERN POWER DISTRIBUTION (SOUTH WEST) PLC                       0.317
------------------------------------------------------------------------------
YORKSHIRE ELECTRICITY DISTRIBUTION PLC                            0.529
------------------------------------------------------------------------------

                                       178

<PAGE>

Special Condition C:  Restriction of distribution charges:  adjustments

1.   If, in respect of any relevant year, the average charge per unit
     distributed exceeds the maximum average charge per unit distributed by more
     than 3 per cent, the licensee shall furnish an explanation to the Authority
     and in the next following relevant year the licensee shall not effect any
     increase in charges unless it has demonstrated to the reasonable
     satisfaction of the Authority that the average charge per unit distributed
     would not be likely to exceed the maximum charge per unit distributed in
     that next following relevant year.

2.   If, in respect of any two successive relevant years, the sum of the amounts
     by which the average charge per unit distributed has exceeded the maximum
     average charge per unit distributed is more than 4 per cent, then in the
     next following relevant year the licensee shall, if required by the
     Authority, adjust its charges such that the average charge per unit
     distributed would not be likely, in the judgement of the Authority, to
     exceed the maximum average charge per unit in that next following relevant
     year.

3.   If, in respect of two successive relevant years, the average charge per
     unit distributed is less than 90 per cent of the maximum average charge per
     unit distributed, the Authority. after consultation with the licensee, may
     direct that in calculating K\\dt\\ for the purposes of paragraph 6 of
     Special Condition B (Restriction of distribution charges) in respect of the
     next following relevant year, there shall be substituted for R\\dt-1\\ in
     the formula at paragraph 6 of Special Condition B (Restriction of
     distribution charges) such figure as the Authority may specify being not
     less than R\\dt-1\\ and not more than 0.90 (Dt-1.M\\dt-1\\).

                                       179

<PAGE>

Special Condition D: Information to be provided to the Authority in connection
with the charge restriction conditions

1.   Where the licensee is intending to make any change in charges for the
     provision of distribution services regulated under Special Condition B
     (Restriction of distribution charges) the licensee shall (unless otherwise
     agreed by the Authority) not later than the date of publication of such
     charges provide the Authority with:

     (a)  written forecast of the maximum average charge per unit distributed,
          together with its components, in respect of the relevant year t in
          which such a change is to take effect and in respect of the next
          following relevant year t+1; and

     (b)  a written estimate of the maximum average charge per unit distributed,
          together with its components, in respect of the relevant year t-1
          immediately preceding the relevant year in which the change is to take
          effect unless a statement complying with paragraph 7 in respect of
          relevant year t-l has been furnished to the Authority before the
          publication of the proposed change.

2.   [No longer used]

3.   If within three months of the commencement of any relevant year t the
     licensee has not made any such change in charges as is referred to in
     paragraph 1, the licensee shall provide the Authority with a written
     forecast of the maximum average charge per unit distributed, together with
     its components, in respect of the relevant year t.

4.   The Authority may issue directions providing that any forecast or estimate
     provided in accordance with paragraphs 1 or 3 shall be accompanied by such
     information as regards the assumptions underlying the forecast or estimate
     as may be necessary to enable the Authority to be satisfied that the
     forecast or estimate has been properly prepared on a consistent basis.

5.   Not later than six weeks after the commencement of each relevant year t,
     the licensee shall send to the Authority a statement as to:

                                       180

<PAGE>

     (a)  whether or not the provisions of Special Condition C (Restriction of
          distribution charges: adjustments) are likely to be applicable in
          consequence of the average charge per unit distributed in the
          preceding relevant year t- 1 or the two preceding relevant years t-l
          and t-2; and

     (b)  its best estimate as to the relevant correction factor K\\dt\\ to be
          applied in calculating the maximum average charge per unit distributed
          in respect of the relevant year t.

6.   [No longer used]

                                       181

<PAGE>

7.   Not later than three months after the end of a relevant year the licensee
     shall send to the Authority a statement, in respect of that relevant year,
     showing the specified items referred to in paragraph 9.

8.   The statement referred to in the preceding paragraph shall be:

     (a)  accompanied by a report from the Auditors that in their opinion (i)
          such statement fairly presents each of the specified items referred to
          in paragraph 9 in accordance with the requirements of the charge
          restriction conditions and (ii) the amounts shown in respect of each
          of those specified items are in accordance with the licensee's
          accounting records which have been maintained in respect of the
          distribution business in accordance with standard condition 42
          (Regulatory Accounts) of this licence; and

     (b)  certified by a director of the licensee on behalf of the licensee that
          to the best of his knowledge, information and belief having made all
          reasonable enquiries:

          (i)   there is no amount included in its calculations under Special
                Condition B (Restriction of distribution charges) and Schedule A
                which represents other than:

                (aa)  bona fide consideration for the provision of distribution
                      services in the course of its distribution business; or

                (bb)  an amount permitted under the charge restriction
                      conditions to be so included;

          (ii)  there is no amount included in its calculations of allowed
                security costs under Special Condition E (Allowances in respect
                of Security costs ) which represents other than an amount
                permitted under the charge restriction conditions to be so
                included;

          (iii) no service has been treated as an excluded service which was not
                properly so treated and no amount included in the revenues in
                respect thereof represents other than bona fide consideration
                for the provision of the excluded service to which it relates;

          (iv)  all amounts which should properly be taken into account for the
                purposes of the charge restriction conditions have been taken
                into account.

                                       182

<PAGE>

9.   The specified items to be contained in the statement referred to in
     paragraph 7 shall be the following:

     (c)  the regulated quantity distributed;

     (d)  the quantity distributed in each regulated distribution unit category;

     (e)  the average charge per unit distributed;

     (f)  the amount in respect of the Terms ALt and Lt in paragraph 3 of
          Special Condition B (Restriction of distribution charges) calculated
          as therein provided:

     (g)  the value of the term TAd\\t\\ in respect of the tenth relevant year
          only, together with the value of each of its component parts, as
          detailed in paragraph 4 of Special Condition B (Restriction of
          distribution charges) in the form of the licence in force on 31 March
          2000;

     (h)  the value of the term LFd\\t\\ together with the value of each of its
          component parts, as detailed in paragraph 7 of special condition B
          (Restriction of distribution charges);

     (i)  the information referred to at paragraph 8 of Special Condition E
          (Allowances in respect of Security costs );

     (j)  the statements and information referred to in paragraph A5, B2, C7, Dl
          and E10 of Schedule A.

10.  Where the Authority issues directions in accordance with paragraph 9 of
     Special Condition E (Allowances in respect of Security costs ) or
     paragraphs A6, B3, C8, D5 or E11 of Schedule A then such directions shall
     not have effect from a date earlier than the commencement of the relevant
     year to which the statement last furnished to the Authority pursuant to
     paragraph 7 prior to the issue of the directions related, unless such
     statement (or the accompanying report or certificate under paragraph 8) or
     any statement, report or certificate in respect of an earlier relevant year
     was incorrect or was misleading in any material respect.

11.  Where the Authority issues such directions as are referred to in the
     preceding paragraph the Authority may require the licensee to provide a
     revised statement in respect of such of

                                       183

<PAGE>

     the specified items as may be affected by the directions, and the licensee
     shall comply with such request.

                                       184

<PAGE>

Special Condition E: Allowances in respect of Security costs

1.   At any time during a security period, the licensee may give notice in
     writing to the Authority suspending, with effect from the date of receipt
     of the notice by the Authority, application of such of the charge
     restriction conditions as may be specified in the notice for the unexpired
     term of the security period.

2.   At any time during a security period, the Authority may (having regard to
     its duties under the Act or under the Utilities Act 2000) by means of
     directions:

     (a)  suspend or modify for the unexpired term of the security period the
          charge restriction conditions or any part or parts thereof; or

     (b)  introduce for the unexpired term of the security period new charge
          restriction conditions

     in either case, so as to make such provision as in the opinion or
     estimation of the Authority is requisite or appropriate:

     (i)  to enable the licensee to recover by means of increased charges an
          amount estimated as being equal to the licensees allowed security
          costs during such period;

     (ii) to ensure that such part of the amount referred to in sub-paragraph
          (i) above as is estimated as being equal to the allowed security costs
          incurred by the licensee as costs in its distribution business are
          recovered by means of appropriate equitable increases on the charges
          made by the licensee in its distribution business

     and the licensee shall comply with the terms of any directions so issued.

3.   At any time following a security period, the Authority may (following such
     consultation with the licensee and others as the Authority may consider
     appropriate) issue directions suspending or modifying the charge
     restriction conditions or any part or parts thereof or replacing such
     directions as may have been made during the security period and introducing
     such new charge restriction conditions as in the opinion of the Authority
     are appropriate in all the circumstances (including at the Authority's
     discretion an appropriate

                                       185

<PAGE>

     adjustment having regard to any profit gained or foregone by the licensee
     during the security period), and the licensee shall comply with any
     directions so issued.

4.   At any time within three months after the issue of directions by the
     Authority under paragraph 3, the licensee may serve on the Authority a
     disapplication request in respect of such of the charge restriction
     conditions or any part or parts thereof as are specified in the request.

5.   If within three months of the receipt by the Authority of the
     disapplication request referred to in paragraph 4, the Authority has either
     not agreed in writing to such disapplication request or has not made a
     reference to the Competition Commission under Section 12 of the Act
     relating to the modification of the charge restriction conditions, the
     licensee may deliver one months written notice to the Authority terminating
     the application of the charge restriction conditions (or any part or parts
     thereof) as were specified in the disapplication request.

6.   Subject to paragraphs 7 and 9, the licensee shall in any relevant year be
     entitled to recover an aggregate amount equal to its allowed security costs
     in that year or (insofar as not previously recovered) any previous year, by
     means of appropriate equitable increases on the charges made by the
     licensee in its distribution business.

7.   Paragraph 6 shall not apply in so far as such allowed security costs:

     (a)  were otherwise recovered by the licensee; or

     (b)  were taken into account by the Authority in setting charge restriction
          conditions by means of directions issued under paragraph 3 above.

8.   The licensee shall following the end of each relevant year provide to the
     Authority, as being one of the specified items to be contained in the
     statement referred to at paragraph 7 of Special Condition D (Information to
     be provided to the Authority in connection with the charge restriction
     conditions), details in respect of that relevant year of:

     (a)  the amount of the licensee's allowed security costs; and

                                       186

<PAGE>

     (b)  the aggregate amounts charged under paragraph 6 on account of the
          licensee's allowed security costs; and

     (c)  the bases and calculations underlying the increases in charges made by
          the licensee in its distribution business under paragraph 6.

9.   Where the Authority is satisfied that the licensee has recovered amounts in
     excess of the allowed security costs, the Authority may issue directions
     requiring the licensee to take such steps as may be specified to reimburse
     purchasers from the distribution business (as the case may be) for the
     excess amounts charged to them, and the licensee shall comply with any
     directions so issued provided that if the excess amounts relate to allowed
     security costs paid to any authorised electricity operator, the licensee
     shall not be obliged to make any such reimbursement unless and until it has
     recovered such costs from the relevant authorised electricity operator.

10.  No amounts charged by the licensee under this Condition (whether or not
     subsequently required to be reimbursed) shall be taken into account for the
     purpose of applying the charge restriction provisions of Special Condition
     B (Restriction of distribution charges).

11.  In this Condition:

     "allowed security cost"            shall have the meaning ascribed to that
                                        term in the Fuel Security Code.

     "security period"                  means a period commencing on the date on
                                        which any direction issued by the
                                        Secretary of State under Section
                                        34(4)(b) of the Act enters into effect
                                        and terminating on the date (being not
                                        earlier than the date such direction, as
                                        varied, is revoked or expires) as the
                                        Authority, after consultation with such
                                        persons (including without limitation,
                                        licence holders liable to be principally
                                        affected) as it shall consider

                                       187

<PAGE>

                                        appropriate, may with the consent of the
                                        Secretary of State by notice to all
                                        licence holders determine after having
                                        regard to the views of such persons.

                                       188

<PAGE>

Special Condition F: Duration of charge restriction conditions

1.   The charge restriction conditions shall apply so long as this licence
     continues in force but shall cease to have effect (in whole or in part, as
     the case may be) if the licensee delivers to the Authority a disapplication
     request made in accordance with paragraph 2 and:

     (a)  the Authority agrees in writing to the disapplication request; or

     (b)  their application (in whole or in part) is terminated by notice given
          by the licensee in accordance with either paragraph 4 or paragraph 5.

2.   A disapplication request pursuant to this Condition shall (a) be in writing
     addressed to the Authority, (b) specify the charge restriction conditions
     (or any part or parts thereof) to which the request relates and (c) state
     the date from which the licensee wishes the Authority to agree that the
     specified charge restriction conditions shall cease to have effect.

3.   Save where the Authority otherwise agrees, no disapplication following
     delivery of a disapplication request pursuant to this Condition shall have
     effect earlier than that date which is the later of:

     (a)  a date being not less than 18 months after delivery of the
          disapplication request; and

     (b)  31st March 2005.

4.   If the Authority has not made a reference to the Competition Commission
     under Section 12 of the Act relating to the modification of the charge
     restriction conditions before the beginning of the period of 12 months
     which will end with the disapplication date, the licensee may deliver
     written notice to the Authority terminating the application of such of the
     charge restriction conditions (or any part or parts thereof) as are
     specified in the disapplication request with effect from the disapplication
     date or a later date.

5.   If the Competition Commission makes a report on a reference made by the
     Authority relating to the modification of the charge restriction conditions
     (or any part or parts

                                       189

<PAGE>

     thereof) specified in the disapplication request and such report does not
     include a conclusion that the cessation of such charge restriction
     conditions, in whole or in part, operates or may be expected to operate
     against the public interest, the licensee may within 30 days after the
     publication of the report by the Authority in accordance with Section 13 of
     the Act deliver to the Authority written notice terminating the application
     of such charge restriction conditions with effect from the disapplication
     date or later.

6.   A disapplication request or notice served under this Condition may be
     served in respect of a specified geographic area.

                                       190

<PAGE>

SCHEDULE A: SUPPLEMENTARY PROVISIONS OF THE CHARGE RESTRICTION CONDITIONS

Part A. Principles for Attribution

General Principles

A1.  Where for the purposes of the charge restriction conditions, a share of
     costs borne by the licensee requires to be attributed to any part of the
     market, the licensee shall make that attribution on a basis which ensures
     that no more than a fair proportion of those costs, reflecting the costs
     incurred by the licensee in supplying that part of the market, are so
     attributed.

A2.  The following paragraphs of this Part of Schedule A are without prejudice
     to paragraph Al.

Transmission connection point charges and remote transmission asset rentals

A3.  The transmission connection point charges and remote transmission asset
     rentals requiring to be attributed between the regulated quantity
     distributed and other quantities distributed shall be attributed in
     proportion to the transmission connection point and remote transmission
     asset capacity required for the purpose of distributing those quantities.

Distribution losses

A4.  Where an amount (in units) in respect of distribution losses requires to be
     calculated and attributed in respect of EHV units and units distributed by
     the licensee for the purpose of supply to premises outside the licensee's
     distribution services area, such calculation and attribution shall be made
     consistently with the principles underlying the schedule of adjustment
     factors referred to at sub-paragraph (b) of paragraph 2 of standard
     condition 4

                                       191

<PAGE>

     (Basis of Charges for Use of System and Connection to System: Requirements
     for Transparency).

Information to be provided by licensee

A5.  The licensee shall following the end of each relevant year furnish to the
     Authority, as being one of the specified items to be included in the
     statement referred to at paragraph 7 of Special Condition D (Information to
     be provided to the Authority in connection with the charge restriction
     conditions), a statement confirming that the calculation of the
     transmission connection point charges, the remote transmission asset
     rentals and of distribution losses was made in accordance with the
     provisions of this Part of Schedule A.

A6.  Where the Authority is satisfied that the basis of calculation or
     attribution (as the case may be) used by the licensee is not in conformity
     with paragraph Al, the Authority may issue directions specifying an
     alternative basis of calculation or attribution, and the basis of
     calculation or attribution by the licensee (as the case may be) shall be
     adjusted accordingly with effect from the date of issue of the directions
     or (subject to paragraph 10 of Special Condition D (Information to be
     provided to the Authority in connection with the charge restriction
     conditions)) such other date as may be specified in those directions.

                                       192

<PAGE>

Part B. EHV premises

B1.  EHV premises shall comprise:

     (a)  in relation to premises connected to the licensee's distribution
          system as at the date this licence enters into force, those premises
          specified in the list of EHV premises notified in writing to the
          Authority by the licensee within twenty-eight days after this licence
          enters into force; and

     (b)  in relation to premises connected to the licensee's distribution
          system which are either first connected or (having been previously
          connected) have had their connections materially altered following the
          date this licence enters into force, means premises connected to the
          licensee's distribution system as a voltage at or higher than 22
          kilovolts or at a sub-station with a primary voltage of 66 kilovolts
          or above

B2.  The licensee shall following the end of each relevant year furnish to the
     Authority, as being one of the specified items to be included in the
     statement referred to at paragraph 7 of Special Condition D (Information to
     be provided to the Authority in connection with the charge restriction
     conditions), a statement listing any changes in the premises falling to be
     treated as EHV premises.

B3.  Where the Authority is satisfied that any premises treated by the licensee
     as EHV premises should not in conformity with sub-paragraph B1(b) above be
     so treated, the Authority may issue directions to that effect, and such
     premises shall cease to be treated as EHV premises from the date of issue
     of the directions or (subject to paragraph 10 of Special Condition D
     (Information to be provided to the Authority in connection with the charge
     restriction conditions)) such other date as may be specified in those
     directions.

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Part C. Excluded services

C1.      There may be treated as excluded services provided by the licensee in
         its distribution business such services in respect of which charges are
         made which:

         (a)    do not fall within paragraph C2 of this Part; and
         (b)    may (subject to paragraph C8) be determined by the licensee as
                falling under one of the principles set out in paragraphs C3 to
                C6 of this Part.

C2.      No service provided by the licensee as part of its distribution
         business shall be treated as an excluded service in so far as it
         consists of the provision of services remunerated under the use of
         system charges in accordance with paragraph 2 of standard condition 4
         (Basis of Charges for use of System and Connection to System) including
         (without prejudice to the foregoing):

         (i)    (subject to paragraph C3 of this Part) the transport of
                electricity;
         (ii)   the carrying out of works for the installation of electric lines
                or electrical plant (not otherwise payable in the form of
                connection charges);
         (iii)  the carrying out of works or the provision of maintenance or
                repair or other services for the purpose of enabling the
                licensee to comply with standard conditions 5, 9, 9A and 15, the
                Electricity Supply Regulations 1988 or any regulations made
                under Section 29 of the Act or any other enactment relating to
                safety or standards applicable in respect of the distribution
                business; and
         (iv)   (subject to paragraph C5 of this Part) the provision,
                installation and maintenance of any meters, switchgear or other
                electrical plant (not being part of connection charges).

C3.      The licensee may treat as being an excluded service for the purposes of
         its distribution business the transport of:

         (a)    units of electricity not consumed in the licensee's distribution
                services area
         (b)    EHV units, provided that the licensee's charges for the
                distribution of such units do not exceed the charging rates
                underlying the information as to EHV revenue and EHV units
                distributed given by the licensee to the Authority and used by
                it

                                      194

<PAGE>

                for the purposes of setting the term PUM in Special Condition B
                (Restriction of distribution charges), subject only to such
                adjustments as may be appropriate in the reasonable opinion of
                the Authority to reflect material variations between the actual
                charges made and the charging rates underlying the information
                as to EHV revenue provided to the Authority by the licensee.

C4.      Charges of the type described in paragraph 3 of standard condition 4
         (Basis of Charges for use of System and Connection to System) and
         charges in respect of the statements referred to in paragraph 5 of
         standard condition 4 (Basis of Charges for use of System and Connection
         to System), may each be treated as excluded services for the purposes
         of the distribution business.

C5.      A service provided by the licensee as part of its distribution business
         may be treated as an excluded service in so far as it consists in the
         provision of services (including metering, electric lines or electrical
         plant) for the specific benefit of any third party requesting the same
         and not made available by the licensee as a normal part of its
         distribution business remunerated by use of system charges including
         (without prejudice to the foregoing):

         (i)    special metering (including "time of day" metering) to
                facilitate energy saving programmes for the benefit of customers
                requesting the same;
         (ii)   charges for moving mains, services or meters forming part of the
                licensee's distribution system to accommodate extension,
                re-design or re-development of any premises on which the same
                are located or to which they are connected;
         (iii)  the provision of electric lines and electrical plant (a) insofar
                as the same are required for the specific purpose of enabling
                the provision of top-up or standby supplies or sales of
                electricity or (b) to provide a higher degree of security than
                is required for the purposes of complying with standard
                condition 5 (Distribution System Planning Standard and Quality
                of Service);
         (iv)   the amount by which charges for the provision of prepayment
                meters to customers exceed charges for the provision of standard
                meters for such customers, in respect of which the amount
                receivable per customer shall not exceed that used by the

                                      195

<PAGE>

                Authority in formulating PUM in Special Condition B (Restriction
                of distribution charges); and
         (v)    special metering or telemetry or data processing equipment for
                the purposes of enabling any person which is a party to the
                Balancing and Settlement Code to comply with its obligations in
                respect of metering thereunder, or for the performance by the
                licensee of any service in relation thereto.

C6.      There may be treated as an excluded service for the purposes of the
         distribution business, charges for the relocation of electric lines or
         electrical plant and the carrying out of works associated therewith
         pursuant to a statutory obligation (other than under Section 9(1) or
         Section 16 of the Act) imposed on the licensee.

Information to be provided to the Authority

C7.      The licensee shall following the end of each relevant year furnish to
         the Authority, as being one of the specified items to be included in
         the statement referred to at paragraph 7 of Special Condition D
         (Information to be provided to the Authority in connection with the
         charge restriction conditions), details specifying separately the
         nature of all services provided as part of its distribution business
         and treated as excluded services by the licensee during the course of
         such year and stating the revenues derived by the licensee in respect
         of each such service so treated.

C8.      Where the Authority is satisfied that in light of the principles set
         out in paragraphs C2 to C6 inclusive any service treated by the
         licensee as an excluded service should not be so treated, the Authority
         shall issue directions to that effect, and the service or services
         specified in the directions shall cease to be treated as excluded
         services from the date of issue of the directions or (subject to
         paragraph 10 of Special Condition D (Information to be provided to the
         Authority in connection with the charge restriction conditions)) such
         other date as may be specified in the directions.

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<PAGE>

Part D. Regulated distribution unit categories

D1       The licensee shall following the end of each relevant year furnish to
         the Authority, as being one of the specified items to be included in
         the statement referred to at paragraph 7 of Special Condition D
         (Information to be provided to the Authority in connection with the
         charge restriction conditions), details specifying separately those use
         of system charges in respect of which the licensee has during the
         course of such year treated the units distributed as falling within the
         definition of each of LV1 units and LV2 units and LV3 units
         respectively.

D2.      The definition of LVI units includes units distributed under the
         following tariffs:

         (a)    Economy 7 (day) - domestic, quarterly
         (b)    White Meter (day) - domestic, quarterly
         (c)    3E (day) - non-domestic, quarterly, Economy 7
         (d)    4E (day) - non-domestic, quarterly tariff for customers supplied
                at LV from a sub- station
         (e)    M4 (day, evening and weekend) - non-domestic quarterly time of
                day tariff for customers supplied at LV from a sub-station

D3.      The definition of LV2 units includes units distributed under the
         following tariffs:

         (a)    Economy 7 (night) - domestic, quarterly
         (b)    White Meter (night) - domestic, quarterly
         (c)    Off peak A)
         (d)    Off peak C)
         (e)    Off peak D)      Restricted hours off-peak, quarterly
         (f)    Off peak E)
         (g)    Off peak S)
         (h)    3E (night) - non-domestic, quarterly, Economy 7
         (i)    M3 (night) - non-domestic, quarterly, tariff for customers
                supplied at LV from a sub-station

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<PAGE>

         (j)    M4 (night) - non-domestic, quarterly, time of day tariff for
                customers supplied at LV from a sub-station

D4.      The definition of LV3 units includes units distributed under the
         following tariffs:

         (a)    Domestic 'S' - domestic, quarterly
         (b)    Public Lighting Misc. charges
         (c)    3S, 3T
         (d)    4S, 4T - non-domestic, quarterly
         (e)    5N, 6N, 7N
         (f)    M6,M7

D5.      Notwithstanding the provisions of paragraphs D2 to D4 above, where the
         Authority is satisfied that a tariff or tariffs in respect of which the
         licensee has treated the units distributed as falling within one of the
         categories in paragraphs D2 to D4 above should not be so treated, the
         Authority shall issue directions to that effect and the tariff or
         tariffs specified in the directions shall cease to be so treated from
         the date of issue of the directions or (subject to paragraph 10 of
         Special Condition D (Information to be provided to the Authority in
         connection with the charge restriction conditions)) such other date as
         may be specified in the directions and shall with effect from such date
         be treated in such manner as may be specified in the directions.

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<PAGE>

Part E. Calculation of factor in respect of distribution losses

El.      The terms AL\\t\\ and L\\t\\ which are used in paragraph 3 of Special
         Condition B (Restriction of distribution charges), shall each be
         determined, for relevant years commencing on or after the 1st April
         1995, using the consistent methodological basis set out in paragraphs
         E2 to E5 below.

Consistent methodological basis for determination of AL\\t\\ and L\\t\\

E2.      Adjusted distribution losses shall be deemed to be the difference
         between adjusted grid supply point purchases and adjusted units
         distributed.

E3.      Units metered on entry to the licensee's distribution system shall be
         adjusted to obtain adjusted grid supply point purchases by:

         (a)    excluding that number of units which is equal to the sum of:

                (i)   EHV units; and
                (ii)  units distributed by the licensee for the purpose of
                      supply to premises outside the licensee's distribution
                      services area; and
                (iii) an amount in respect of distribution losses between the
                      grid supply point and the exit point attributable to the
                      units referred to in (i) and (ii) above, as determined in
                      accordance with paragraph A4 in Part A of Schedule A; and

         (b)    including an amount (in units) to represent the effect of units
                entering the licensee's distribution system otherwise than at
                grid supply points, being the difference between the number of
                units so entering and the number of units that would have been
                required to have entered at grid supply points in their absence
                (such latter number of units being calculated consistently with
                the principles underlying the schedule of adjustment factors in
                respect of distribution losses referred to at sub-paragraph (b)
                of paragraph 2 of standard condition 4 (Basis of Charges for Use
                of System and Connection to System: Requirements for
                Transparency)).

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<PAGE>

E4.      For so long as units are metered on entry to the licensee's
         distribution system at bulk supply points instead of at grid supply
         points, such units shall be calculated by:

         (i)    applying the procedures in paragraph E3 as if all references to
                units metered at grid supply points were to units metered at
                bulk supply points; and
         (ii)   grossing-up units metered at the bulk supply points by the
                relevant grid supply point conversion factor being either:

                (a)   0.5 per cent of the units metered at the bulk supply
                      points; or
                (b)   such other factor to take account of losses occurring
                      between the grid supply points and the bulk supply points
                      as the licensee may with the prior approval of the
                      Authority determine to be appropriate.

E5.      Adjusted units distributed shall be obtained by:

                (a)   calculating all units distributed by the licensee metered
                      at exit points on leaving the licensee's distribution
                      system; and
                (b)   deducting therefrom EHV units and units distributed for
                      the purpose of supply to premises outside the licensee's
                      distribution services area; and
                (c)   adding thereto an amount equal to the units consumed on
                      the licensee's premises in the licensee's distribution
                      services area (insofar as not otherwise taken into account
                      in determining units distributed under sub-paragraph (a)
                      above).

Initial relevant loss percentage in the term AL\\t\\

E6.      The first relevant year, the initial relevant loss percentage in the
         term AL\\t\\ shall (consistently with the methodology set out in
         paragraphs E2 to E5 above) be deemed to be:

           Adjusted GSP purchase units less adjusted units distributed
                           Adjusted units distributed

         where adjusted GSP purchase units are calculated as provided in
         paragraph E7 and adjusted units distributed are calculated as provided
         in paragraph E8.

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<PAGE>

E7.      Adjusted GSP purchase units shall be calculated in accordance with the
         procedures successively described in the following sub-paragraphs:

         (a)    the actual losses in each of relevant years t-l, t-2 and t-3
                (the "historic losses") shall be calculated as the difference in
                each of those years between units purchased at entry points to
                the licensee's distribution system and units sold;
         (b)    the historic loss percentage shall be calculated as the
                proportion (expressed as a percentage) which the aggregate
                historic losses were of the aggregate units purchased at entry
                points to the licensee's distribution system, in each case over
                the three relevant years t-l to t-3;
         (c)    the total number of units sold in relevant year t-l shall be
                grossed up by the historic loss percentage ("BSP purchase
                units"); and
         (d)    the figure for BSP purchase units resulting from sub-paragraph
                (c) shall be adjusted to obtain adjusted GSP purchase units in
                accordance with the provisions of paragraphs E3 and E4 above.

E8.      Adjusted units distributed shall be calculated by applying the
         methodology of paragraph E5 in respect of those units referred to in
         sub-paragraphs (a) to (c) of paragraph E5 in relevant year t-l.

Information to be provided to the Authority

E9.      The licensee shall within three months after the entry into force of
         this licence furnish to the Authority a statement showing the initial
         relevant loss percentage and the underlying calculations.

E10.     The licensee shall, following the end of each relevant year, furnish to
         the Authority, as being one of the specified items to be included in
         the statement referred to at paragraph 7 of Special Condition D
         (Information to be provided to the Authority in connection with the
         charge restriction conditions), a statement showing adjusted
         distribution losses for that

                                      201

<PAGE>

         relevant year, accompanied by the underlying calculations and (where
         appropriate) an explanation of any changes in the basis of calculation
         or estimation thereof.

E11.     Where the Authority is satisfied that any statement or underlying
         calculation provided has not been drawn up in conformity with
         paragraphs E2 to E8 above, the Authority may issue directions, and the
         statement or underlying calculation shall be adjusted with effect from
         the date of issue of the directions or (subject to paragraph 10 of
         Special Condition D (Information to be provided to the Authority in
         connection with the charge restriction conditions)) such other date as
         may be specified in the directions.

                                      202

<PAGE>

                                   SCHEDULE 1

                                 SPECIFIED AREA

                                  Great Britain

                                      203

<PAGE>

                                   SCHEDULE 2

                                   REVOCATION

1.       The Authority may at any time revoke the licence by giving no less than
         30 days' notice (24 hours' notice, in the case of a revocation under
         sub-paragraph 1(g)) in writing to the licensee:

(a)      if the licensee agrees in writing with the Authority that the licence
         should be revoked;
(b)      if any amount payable under standard condition 3 (Payments by licensee
         to the Authority) is unpaid 30 days after it has become due and remains
         unpaid for a period of 14 days after the Authority has given the
         licensee notice that the payment is overdue - provided that no such
         notice shall be given earlier than the sixteenth day after the day on
         which the amount payable became due;
(c)      if the licensee fails:

         (i)    to comply with a final order (within the meaning of section 25
                of the Act) or with a provisional order (within the meaning of
                that section) which has been confirmed under that section and
                (in either case) such failure is not rectified to the
                satisfaction of the Authority within three months after the
                Authority has given notice in writing of such failure to the
                licensee - provided that no such notice shall be given by the
                Authority before the expiration of the period within which an
                application under section 27 of the Act could be made
                questioning the validity of the final or provisional order or
                before the proceedings relating to any such application are
                finally determined; or
         (ii)   to pay any financial penalty (within the meaning of section 27A
                of the Act) by the due date for such payment and such payment is
                not made to the Authority within three months after the
                Authority has given notice in writing of such failure to the
                licensee - provided that no such notice shall be given by the
                Authority before the expiration of the period within which an
                application under section 27E of the Act could be made
                questioning the

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<PAGE>

                validity or effect of the financial penalty or before the
                proceedings relating to any such application are finally
                determined;

(d)      if the licensee fails to comply with:

         (i)    an order made by the Secretary of State under section 56,73,74
                or 89 of the Fair Trading Act 1973; or
         (ii)   an order made by the court under section 34 of the Competition
                Act 1998.

(e)      if the licensee has not within 5 years after the date on which this
         licence comes into force, commenced the distribution of electricity to
         any of the premises within the area specified in Schedule 1 to this
         licence;

(f)      if the licensee has ceased to distribute electricity to all of the
         premises within the area specified in Schedule 1 to this licence for a
         period of 5 years;

(g)      if the licensee:

         (i)    is unable to pay its debts (within the meaning of section 123(1)
                or (2) of the Insolvency Act 1986, but subject to paragraphs 2
                and 3 of this schedule) or has any voluntary arrangement
                proposed in relation to it under section 1 of that Act or enters
                into any scheme of arrangement (other than for the purpose of
                reconstruction or amalgamation upon terms and within such period
                as may previously have been approved in writing by the
                Authority);
         (ii)   has a receiver (which expression shall include an administrative
                receiver within the meaning of section 251 of the Insolvency Act
                1986) of the whole or any material part of its assets or
                undertaking appointed;
         (iii)  has an administration order under section 8 of the Insolvency
                Act 1986 made in relation to it;
         (iv)   passes any resolution for winding-up other than a resolution
                previously approved in writing by the Authority; or
         (v)    becomes subject to an order for winding-up by a court of
                competent jurisdiction; or

(h)      if the licensee is convicted of having committed an offence under
         section 59 of the Act in making its application for the licence.

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<PAGE>

2.       For the purposes of sub-paragraph l(g)(i), section 123(1)(a) of the
         Insolvency Act 1986 shall have effect as if for "(Pounds)750" there was
         substituted "(Pounds)100,000" or such higher figure as the Authority
         may from time to time determine by notice in writing to the licensee.

3.       The licensee shall not be deemed to be unable to pay its debts for the
         purposes of sub-paragraph l(g)(i) if any such demand as is mentioned in
         section 123(1)(a) of the Insolvency Act 1986 is being contested in good
         faith by the licensee with recourse to all appropriate measures and
         procedures or if any such demand is satisfied before the expiration of
         such period as may be stated in any notice given by the Authority under
         paragraph 1.

                                      206

<PAGE>

                                   SCHEDULE 3

                           DISTRIBUTION SERVICES AREA

The distribution services area shall comprise that area which is outlined on the
attached map and shall additionally include those premises listed in List A (the
"Additional Premises") but shall not include those premises listed in List B
(the "Excluded Premises").

A:       ADDITIONAL PREMISES

         None

B:       EXCLUDED PREMISES

(a)      PART OF THE DISTRIBUTION SERVICES AREA OF NORWEB PLC

         Address                              Grid Ref:
         -------                              ---------
         Halsall Lane Pumping Station         SD 4080 0864
         Halsall Lane
         Ormskirk
         L39 3AT

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<PAGE>

                             CONSENTS AND DIRECTIONS

                                      208

<PAGE>

Direction issued under Condition 27 of the Public Electricity Supply Licence of
Manweb plc now Standard Condition 29 of this licence (01.04.92)

OUR REF          BW-92-04.14
                 [DIR/T/244]

1 April 1992

Mr M G Metcalfe
Head of Regulation
Manweb plc
Sealand Road
CHESTER
CH1 4LR

PUBLIC ELECTRICITY SUPPLY LICENCE: CONDITION 27
DISPOSAL OF RELEVANT ASSETS

The Director General of Electricity Supply ("the Director") directs that for the
purposes of Condition 27 of the Public Electricity Supply Licence (the
"Licence") issued to Manweb plc (the "Licensee") on 26 March 1990:

1.       The Licensee may dispose of a relevant asset without giving prior
         notice if:

         (i)    the relevant asset is obsolete or redundant;

         (ii)   the disposal will not constitute a disposal of a legal (rather
                than an equitable) interest until the relevant asset is obsolete
                or redundant; or

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<PAGE>

         (iii)  where the relevant asset comprises only land above or below
                which an electric line (but not electrical plant) of the
                licensee is situated, the disposal complies with paragraph 3.

2.       The consent in paragraph 1 shall not apply:

         (i)    in respect of a relevant asset if

                (a)   the value of that asset;

                (b)   the value of that asset and other related relevant assets
                      which are being or intended to be disposed of at the same
                      time; or

                (c)   the value of that asset and other relevant assets which
                      together formed a part of the Licensee's distribution
                      system and are being declared obsolete or redundant at the
                      same time or as part of the same operation,

                exceeds (Pounds)100,000 (as amended on 1 April each year by the
                percentage change in the Retail Price Index since 1 April 1990);

         (ii)   in respect of a relevant asset which is obsolete unless an
                appropriate replacement or alterative arrangement has been
                installed in the Licensee's distribution system, or is being or
                is intended to be installed in such a manner that continuity of
                the function of that system is achieved;

         (iii)  where the disposal constitutes a sale and lease back
                arrangement;

         (iv)   where the relevant asset is intended to remain in operational
                use but not under the operational control of the Licensee and
                its value exceeds (Pounds)10,000 (as amended on 1 April each
                year by the percentage change in the Retail Price Index since 1
                April 1990); or

                                      210

<PAGE>

         (v)    where the disposal would have the effect of reducing the ability
                of private electricity suppliers to compete with the Licensee by
                the use of its system.

3.       For the purposes of paragraph 1 (iii) the disposal shall be on terms
         which will permit the electric line (including any replacement thereof)
         to remain in position for as long as it forms part o the licensee's
         distribution system under a wayleave, easement or other legal estate
         which in any such case includes sufficient rights of access in favour
         of the Licensee for the purpose of inspection, maintenance, replacement
         or repair as may reasonably be necessary to enable that line to remain
         in operation as part of the Licensee's distribution system.

4.       The Licensee may without giving prior notice dispose of any relevant
         asset to a wholly owned subsidiary ("the subsidiary") (as defined in
         the Companies Act 1985 as amended or re-enacted from time to time) of
         the Licensee if the Licensee has prior to the disposal delivered to the
         Director a document duly executed by the subsidiary and the Licensee
         (in a form capable of being enforced by the Director) undertaking to
         the Director that:

         (i)    the subsidiary, in respect of the relevant asset, will comply
                with the provision of Conditions 27 and 28 of the Licence as if
                it were the Licensee; and

         (ii)   the Licensee will not cause or permit the subsidiary to cease to
                be its wholly owned subsidiary without the prior written consent
                of the Director to the disposal of the relevant asset(s) owned
                by the subsidiary.

5.       The Licensee may without giving prior notice grant to a third party an
         easement, wayleave, licence or similar right over any land or property
         in which the Licensee has a legal or beneficial interest and which is a
         relevant asset, save where the grant of such a right would have a
         material adverse effect on the Licensee's ability to use or develop the
         land for the purposes of the Licensee's Distribution Business.

                                      211

<PAGE>

6.       The Licensee may without giving prior notice dispose of any relevant
         asset to another Licensee provided that:

         (i)    the Licensee to whom disposal is made is subject to the
                provisions of licence conditions equivalent to condition 27 and
                28 of the Licence;

         (ii)   the relevant asset will become a relevant asset under those
                equivalent licence conditions upon disposal;

         (iii)  the Licensee will be able to fulfil the duties arising under or
                by virtue of the Licence after disposal of the relevant asset.

7.       The consent contained in paragraphs 1, 4, 5 and 6 relates only to
         Condition 27 and shall not apply or be deemed to apply for the purpose
         of any consent or approval which the director may or may be required to
         give in relation to a disposal under any other Condition or under the
         Act.

8.       In this direction:

                "obsolete" means no longer performs its required function either
                in an efficient manner or at all through wear and tear,
                obsolescence, damage, failure, unsafe operation or advances in
                technology and includes equipment that the Licensee has decided
                to render obsolete as a result of inspection;

                "prior notice" means a notice to the Director under paragraph 2
                of condition 27 of the Licence;

                "redundant" means no longer required or necessary in order to
                enable the Licensee to comply with its obligations under the Act
                or the Licence in relation to the Licensee's distribution system
                provided that a relevant asset shall not be

                                      212

<PAGE>

                regarded as being redundant solely because it is in the
                ownership or control of a third party;

                "value" means the estimated price that could be expected to be
                received in the market at the time of disposal;

         and other words and phrases in this Direction which are defined for the
         purposes of the Licence shall have the same meaning as in the Licence.

DR B WHARMBY
Authorised on behalf of the
Director General of Electricity Supply

                                      213

<PAGE>

Direction issued under Condition 12 of the Public Electricity Supply Licence of
Manweb plc now Standard Condition 39 of this licence (19.04.00)

 Direction given under Condition 12 of the public electricity supply licence of
                                   Manweb plc

In accordance with paragraph 7 of Condition 12 of the public electricity supply
licence held by Manweb plc (the Licensee), the Director hereby directs as
follows.

The Licensee shall, to the extent that it is not already compliant with its
obligations as at 31st March 2000, be relieved of such obligations for the
duration of this direction:

..        under paragraphs 2 to 4 of Condition 12; and
..        under paragraphs 5 and 6 of Condition 12

in each case subject to the terms and conditions set out below.

The Separation Plan

1.       The Licensee shall use all reasonable endeavours to comply with the
         terms of the Separation Plan.

2.       The Separation Plan shall be the document attached to this direction as
         Annex A, as it may be amended from time to time in accordance with
         paragraphs 7 and 8 below.

3.       Where the Separation Plan specifies a date by which an action is to be
         completed, the Licensee shall use all reasonable endeavours to complete
         the action by that date.

4.       Where the Separation Plan does not specify a date by which an action is
         to be completed, the Licensee shall use all reasonable endeavours to
         make progress towards the completion of the action as soon as is
         reasonably practicable.

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<PAGE>

5.       The Licensee shall report to the Director on its compliance with the
         terms of the Separation Plan at least once every 3 months during the
         currency of this direction.

6.       The Licensee shall review its compliance with the terms of the
         Separation Plan, together with the Director and in the light of its
         reports and of any reports of the Compliance Officer, at least once
         every 6 months during the currency of this direction.

7.       When the Licensee reviews its compliance under paragraph 6 above, or at
         any other time when there is a material change in the Licensee's
         circumstances, the Director may (giving his reasons) request that the
         Licensee review the terms of the Separation Plan with a view to its
         amendment. The Licensee shall, within 28 days of any such request,
         propose changes to the relevant part of the Plan. Any such changes
         shall require to be approved by the Director.

8.       The Licensee may at any time request the Director to approve changes to
         the Separation Plan.

Confidential Information

9.       Subject to paragraph 10 below, and save as provided for in the
         Separation Plan, the Licensee shall not engage for the purposes of the
         Distribution Business the same employees, agents, advisers, consultants
         or contractors as are engaged for the purposes of any other business of
         itself (or any affiliate or related undertaking).

10.      Paragraph 9 above shall not apply insofar as:

         (a)    in the case of agents, advisers, consultants or contractors
                engaged by the Distribution Business and also by any other
                business of the Licensee (or by any affiliate or related
                undertaking) ("the appointees"), the Licensee has used all
                reasonable endeavours to ensure that:

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                (i)   the Distribution Business does not give any cross-subsidy
                      to or receive any cross-subsidy from that other business;
                      and

                (ii)  the appointees cannot have access to confidential
                      information about the Distribution Business unless
                      effective arrangements are maintained in place which
                      prevent the use or disclosure of such information in any
                      way which would obtain a commercial advantage for any
                      other business and that such information is used only for
                      the purpose of the Distribution Business or any external
                      distribution activities of the Licensee;

                or

         (b)    in any particular case, the Licensee has obtained the prior
                written approval of the Director.

Duration and Interpretation

11.      The direction in respect of paragraph 2 to 4 of Condition 12 shall
         cease to have effect on 31 March 2002. The direction in respect of
         paragraph 5 to 6 of Condition 12 shall cease to have effect on 31 March
         2002, unless on or before that date the Licensee has demonstrated to
         the reasonable satisfaction of the Director that it is, and will
         remain, in compliance with the requirements of paragraph 7 (c) of
         Condition 12, in which event this direction shall cease to have effect
         on 31 March 2005.

12.      Words and phrases used in this direction shall, unless the contrary
         intention appears, have the same meaning as in the public electricity
         supply licence held by the Licensee.

PAM BARRETT

Authorised on behalf of the Director              19 April 2000

                                      216

<PAGE>

Direction issued under Condition 12 of the Public Electricity Supply Licence of
Manweb plc now Standard Condition 39 of this licence (19.04.00)

                            The Electricity Act 1989

                                Sections 6 and 7

 Public Electricity Supply Licences granted to Scottish Power UK plc and Manweb
                                      plc

                                    Direction

                                     of the

                     Director General of Electricity Supply

Whereas -

(1)      Scottish Power UK plc ("SP") and Manweb plc ("Manweb") are the holders
         of public electricity supply licences granted under section 6(1)(c) of
         the Electricity Act 1989 (the SP and Manweb Licences respectively).

(2)      SP and Manweb are members of the same group of companies.

(3)      Condition 9 in Part V of the SP Licence and condition 12 of the Manweb
         Licence (the "Conditions") require the Distribution Businesses of SP
         and of Manweb to have information separation and managerial and
         operational independence from other businesses of SP and of Manweb.

(4)      Paragraph (7) of each of the Conditions provides that the Director may
         issue a direction relieving each licence holder from certain of its
         obligations under the Conditions.

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<PAGE>

(5)      SP and Manweb each have requested the Director to issue a direction
         relieving them from the above mentioned obligations to the extent
         necessary for the Distribution Businesses of SP and Manweb to be
         managed and operated as a single business.

(6)      In response to the request the Director is satisfied that, having
         regard to the terms of paragraph (7) of the Conditions, he is entitled
         to issue directions in the manner hereinafter appearing.

NOW THEREFORE THE DIRECTOR ISSUES THE FOLLOWING DIRECTION -

1.       The terms "Distribution Business of SP" and "Distribution Business of
         Manweb" have the meaning given to the term "Distribution Business" in
         the SP and Manweb licences respectively.

2.       This Direction is issued for the purposes of the paragraphs numbered 7
         in both Condition 9 in Part V of the SP Licence and Condition 12 of the
         Manweb Licence.

3.       SP and Manweb are relieved of their obligations under paragraphs 1 to 6
         of Condition 9 in Part V of the SP Licence and Condition 12 of the
         Manweb Licence respectively to such extent as is necessary for the
         management and operation of the Distribution Business of SP and the
         Distribution Business of Manweb to be managed and operated as a single
         business subject to the conditions that -

         (a)    in the case of paragraph 5 and sub-paragraph 6(b) of the
                Conditions, any arrangements for the use of or access to
                premises, systems, equipment facilities, property or personnel
                by both the Distribution Businesses of SP and of Manweb:

                (i)   do not involve a cross-subsidy being given to the SP
                      Distribution Business from the Manweb Distribution
                      Business or received from the SP Distribution Business by
                      the Manweb Distribution Business;

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<PAGE>

                (ii)  obtain for the Distribution Businesses, in the most
                      efficient and economical manner possible, the use of the
                      relevant premises, systems, equipment, facilities,
                      property or personnel; and

                (iii) do not restrict, distort or prevent competition in the
                      generation or supply of electricity; and

         (b)    nothing in this Direction shall relieve either SP of Manweb from
                any obligation in respect of any Separation Plan prepared for
                the purpose of or in relation to any other Direction given
                pursuant to paragraph 7 of either of the Conditions;

4.       This Direction shall cease to have effect on the earlier of

         (a)    notification by the Director to SP and to Manweb that he is
                satisfied that there has been a material failure to comply with
                the condition set out in paragraph 3 above;

         (b)    the Conditions ceasing to have effect; or

         (c)    the expiry of 28 days from the date of service on the Director
                by either SP or Manweb of a request for the revocation of the
                Direction.

Pam Barrett

Authorised in that behalf by
the Director General of
Electricity Supply

Date 19.4.2000

                                      219

<PAGE>

Direction issued under Condition 12 of the Public Electricity Supply Licence of
Manweb plc now Standard Condition 39 of this licence (28.07.00)

                            The Electricity Act 1989

                                Sections 6 and 7

       Electricity Transmission Licence granted to Scottish Power (UK) plc

Public Electricity Supply Licences granted to Scottish Power (UK) plc and Manweb
                                      plc

                                    Direction

                                     of the

                     Director General of Electricity Supply

Whereas -

(1)      Scottish Power (UK) plc ("SP") is the holder of a transmission licence
         ("the Transmission Licence") granted under section 6(1)(b) of the
         Electricity Act 1989 ("the Act").

(2)      SP and Manweb plc ("Manweb") are the holders of public electricity
         supply licences granted under section 6(1)(c) of the Act ("the SP PES
         Licence" and "the Manweb PES Licence" respectively).

(3)      SP and Manweb are members of the same group of companies.

(4)      Condition 8 in Part IV of the Transmission Licence ("Condition 8")
         prohibits SP from disclosing confidential information.

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<PAGE>

(5)      Condition 8A in Part IV of the Transmission Licence ("Condition 8A")
         requires SP to maintain the full managerial and operational
         independence of the Transmission Business of SP from other businesses
         of SP and of its affiliates and related undertakings.

(6)      Paragraph (9) of Condition 8A provides that the Director in certain
         circumstances may issue a direction relieving SP of its obligations
         under Condition 8 and under paragraphs 1(a), 2 and 8 of Condition 8A to
         such extent and subject to such terms and conditions as he may specify
         in that direction.

(7)      Condition 9 in Part V of the SP PES Licence ("Condition 9") and
         Condition 12 of the Manweb PES Licence ("Condition 12") require the
         Distribution Businesses of SP and of Manweb to have information
         separation and managerial and operational independence from other
         businesses of SP and of Manweb.

(8)      Paragraph (7) of each of the Condition 9 and Condition 12 provides that
         the Director in certain circumstances may issue a direction relieving
         SP and Manweb from certain of their obligations under the Conditions.

(9)      SP and Manweb have requested the Director to issue directions relieving
         them from their above mentioned obligations to the extent necessary for
         the Transmission and Distribution Businesses of SP to be managed and
         operated as a single business with the Distribution Business of Manweb.

(10)     In response to the request the Director is satisfied that, having
         regard to the terms of paragraph (9) of Condition 8A and to paragraph
         (7) of each of Condition 9 and Condition 12, he is entitled to issue a
         direction in the manner hereinafter appearing.

NOW THEREFORE THE DIRECTOR ISSUES THE FOLLOWING DIRECTION -

1.       Except where the context requires otherwise, any terms used in this
         direction that are defined in Part 1 of the composite document setting
         out the generation and public

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<PAGE>

         electricity supply licences of SP and the Transmission Licence shall
         have the meaning given to them in that Part.

2.       This direction is issued for the purposes of paragraph (9) of Condition
         8A and of paragraph (7) of each of Condition 9 and Condition 12.

3.       SP is relieved of its obligations under Condition 8 and paragraphs
         1(a), 2 and 8 of Condition 8A and SP and Manweb are relieved of their
         obligations under paragraphs 1 to 6 of Condition 9 and Condition 12
         respectively to such extent as is necessary for the Transmission and
         Distribution Businesses of SP to be managed and operated as a single
         business with the Distribution Business of Manweb subject to the
         conditions that -

         (a)    any arrangements for the use of or access to premises, systems,
                equipment, facilities, property or personnel by the Transmission
                and Distribution Businesses of SP and the Distribution
                Businesses of Manweb;

                (i)   do not involve a cross-subsidy being given by any one of
                      the Transmission or Distribution Businesses of SP or the
                      Manweb Distribution Business to any other of those
                      businesses;

                (ii)  obtain for the Transmission and Distribution Businesses of
                      SP and the Manweb Distribution Business, in the most
                      efficient and economical manner possible, the use of the
                      relevant premises, systems, equipment, facilities,
                      property or personnel; and

                (iii) do not restrict, distort or prevent competition in the
                      generation or supply of electricity;

         (b)    nothing in this direction shall relieve either SP or Manweb from
                any obligation in respect of any Separation Plan prepared for
                the purpose of any of the conditions of the SP and Manweb PES
                Licences; and

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<PAGE>

         (c)    nothing in this direction shall relieve either SP or Manweb from
                any obligation imposed on them by Directive 96/92/EC.

4.       This direction shall cease to have effect on the earlier of -

         (a)    notification by the Director to SP and to Manweb that he is
                satisfied that there has been a material failure to comply with
                the condition set out in paragraph 3 above;

         (b)    Condition 8, Condition 8A, Condition 9 or Condition 12 ceasing
                to have effect; or

         (c)    the expiry of 28 days from the date of service on the Director
                by either SP or Manweb of a request for the revocation of the
                direction.

The Official Seal of the Director General
of Electricity Supply hereunto affixed is
authenticated by

Charles Coulthard

Authorised in that behalf by the Director
General of Electricity Supply

Date 28 July 2000

                                      223

<PAGE>

Consent issued under Standard Condition 47 of this licence (01.10.01)

To Manweb plc
Manweb House
Chester Business Park
Wrexham Road
Chester
CH4 9RF

Consent under Distribution Standard Licence Condition 47

1.       This consent is issued by the Gas and Electricity Markets Authority
         ("the Authority") to the Licensee under paragraph 1 of the above
         condition ("the Condition").

2.       The Authority hereby consents to the Licensee being a party to a group
         registration scheme with HM Customs & Excise for value added tax
         ("VAT") purposes, subject to the following condition, namely that
         throughout the period during which such registration subsists, the
         Licensee shall have the benefit of a legally enforceable undertaking
         and indemnity from the controlling member of the VAT group in respect
         of which the registration has been made whereby the Licensee is kept
         indemnified from any liability to VAT (including interest, penalties
         and costs) which does not arise out of the authorised business of the
         Licensee under the Licence but which is claimed against the Licensee as
         a result of such group registration.

3.       This consent shall have effect on and from the date specified below. It
         shall remain in effect until the Authority shall withdraw it or replace
         it by a further consent made under the Condition.

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<PAGE>

4.       Words and expressions used in this consent have the meaning attributed
         to them in the said Standard Licence Conditions.

Dated:   1 October 2001

Signed

John Neilson
Duly authorised in that behalf by the Authority

                                      225

<PAGE>

General Consent issued under Standard Condition 29 of this licence (01.10.01)

THE ELECTRICITY ACT 1989 (AS AMENDED)

ELECTRICITY DISTRIBUTION LICENCES

GENERAL CONSENT ISSUED PURSUANT TO STANDARD LICENCE CONDITION 29
(DISPOSAL OF RELEVANT ASSETS) OF THE ELECTRICITY DISTRIBUTION LICENCE

This direction is issued by the Gas and Electricity Markets Authority ("the
Authority") under paragraph 3(a)(i) of Condition 29 (Disposal of relevant
assets) in the standard licence conditions of the electricity distribution
licences granted or treated as granted under section 6(1)(c) of the Electricity
Act 1989 (as amended) ("the Act").

The provisions of this direction are applicable to, and available for, every
holder ("the licensee") of such an electricity distribution licence ("the
licence"). The direction takes effect on and from the date specified below.

The Authority hereby directs that the licensee may enter into an agreement or
arrangement whereby operational control of a relevant asset or relevant assets
ceases to be under the sole management of the licensee without giving prior
notice in any case where the agreement or arrangement (for these purposes called
"the transaction") complies in all respect with the terms set out below:

1.       The transaction shall be consistent with all applicable conditions
         contained in the licence.

2.       Any other consent or clearance required under statute or under the
         licence in respect of the transaction shall have been obtained.

                                      226

<PAGE>

3.       The transaction shall provide for the supply of a service or the
         provision of a resource which relates to a relevant asset or relevant
         assets by a counter-party ("the resource provider") on behalf of the
         licensee.

4.       The resource provider shall be and remain an affiliate of the licensee
         but shall not be a holding company of the licensee.

5.       The transaction shall be effected by contract made between the licensee
         and the resource provider; such contract shall be binding and
         enforceable both in Great Britain and in any other jurisdiction in
         which the resource provider has its principal place of business; and
         the contract shall contain provisions to the following effect:

         (a)    no force majeure or equivalent provision in the contract shall
                excuse any failure on the part of the licensee, or the resource
                provider acting on its behalf, to comply with the licensee's
                statutory or licence obligations unless (and to the extent that)
                the event or circumstance in question would have excused the
                licensee under the Act or the licence if it had itself performed
                the service or provided the resource;

         (b)    responsibility for performance of all obligations to which the
                contract relates shall be clearly specified, subject to the
                overriding requirement that the licensee remains ultimately
                responsible for all statutory and licence obligations applicable
                to the licensee's business;

         (c)    the resource provider shall covenant with the licensee to
                refrain from any action which would then be likely to cause the
                licensee to breach any of its licence or statutory obligations;

         (d)    the resource provider shall disclose to the licensee the basis
                or bases of all charges for services provided or supplies made
                pursuant to the contract, together with sufficient information
                and analysis to support the basis for the calculation of the

                                      227

<PAGE>

                total sum payable by the licensee; and the resource provider
                shall not raise any objection to, or seek to prevent, disclosure
                of such information to the Authority.

         (e)    the licensee shall be free, at any time after the fifth
                anniversary of the commencement of the contract, without penalty
                and on reasonable notice, to resource any service or supply from
                an alternative source of its choosing if more favourable terms
                become available; and

         (f)    the resource provider shall be under obligation to provide to
                the licensee any information within its possession or control
                which the licensee may from time to time require in order to
                enable the licensee:

                (i)   to comply with any request by the Authority for
                      information or reports pursuant to Condition 24 (Provision
                      of Information to the Authority) of the licence (subject
                      to paragraphs 5 and 7 of that condition);

                (ii)  to assess the performance or position of the resource
                      provider or any of its subsidiaries with respect to the
                      provision of any service or supply made to the licensee;
                      or

                (iii) to monitor adherence by the resource provider to the terms
                      of the contract.

6.       (1)    The licensee shall procure from that company or other corporate
                body which is from time to time the ultimate holding company of
                the licensee and the resource provider, or from such other
                corporate body as the Authority may from time to time agree,
                acknowledgements and legally enforceable undertakings in favour
                of the licensee in the form annexed to this direction and headed
                Form A. Such acknowledgements and undertakings shall be obtained
                within seven days of the company or other corporate body in
                question ("the covenantor") becoming such ultimate holding
                company and shall remain in force for so long as the covenantor
                remains such ultimate holding company.

                                      228

<PAGE>

(2)      For the purpose of this paragraph "ultimate holding company" means the
         company or other corporate body which is the holding company of both
         the licensee and the resource provider and is not itself a subsidiary
         of another company or corporate body.

(3)      The licensee shall:

         (a)    deliver to the Authority evidence (including a copy of the
                acknowledgements and undertakings) that the licensee has
                complied with its obligation to procure acknowledgements and
                undertakings pursuant to this paragraph;

         (b)    inform the Authority immediately in writing if the directors of
                the licensee become aware that any such undertaking has ceased
                to be legally enforceable or that its terms have been breached;
                and

         (c)    comply with any direction from the Authority to enforce any such
                undertaking.

(4)      The licensee shall not, save with the consent in writing of the
         Authority, obtain or continue to obtain the service or resource in
         question from the resource provider at any time when:

         (a)    the specified acknowledgements and undertakings are not in
                place; or

         (b)    there is an unremedied breach of any undertaking; or

         (c)    the licensee is in breach of any direction issued by the
                Authority under sub-paragraph (3) of this paragraph.

                                      229

<PAGE>

7.       The consent given by this direction applies only for the purpose of the
         said Condition 29 and shall not apply or be deemed to apply for any
         other purpose.

8.       Words or phrases in this direction which are defined for the purposes
         of the licence shall have the same meaning as in the licence.

Dated 1 October 2001

Signed..................................

Richard Ramsay
duly authorised by the Authority in that behalf

                                      230

<PAGE>

ANNEXURE TO THE DIRECTION BY THE GAS AND ELECTRICITY MARKETS AUTHORITY MADE
PURSUANT TO STANDARD CONDITION 29 IN THE ELECTRICITY DISTRIBUTION LICENCE ON THE
         2001

Form A

Acknowledgements and Undertakings

Acknowledgements

The covenantor acknowledges to the licensee:

(1)      that it is in the best interest of the covenantor that the licensee
         complies with its statutory and licence obligations; and

(2)      that all matters relating to the enforcement of the licensee's rights
         under the relevant contract(s) shall be reserved to the directors of
         the licensee without regard to other interests.

Undertakings

The covenantor undertakes to the licensee:

(1)      to procure that the resource provider will:

         (a)    refrain from any action which would then be likely to cause the
                licensee to breach any of its statutory or licence obligations;

         (b)    provide the licensee with any information within its possession
                or control which the licensee may from time to time require in
                order to enable the licensee:

                                      231

<PAGE>

                -     to comply with any request by the Authority for
                      information or reports pursuant to Condition 24 (Provision
                      of Information to the Authority) of the licence (subject
                      to paragraphs 5 and 7 of that condition);

                -     to assess the performance or position of the resource
                      provider or any of its subsidiaries with respect to the
                      provision of any service or supply made to the licensee;
                      or

                -     to monitor adherence by the resource provider to the terms
                      of the contract;

         (a)    not unduly discriminate in favour of, or against, the licensee
                in the provision to it of supplies or services; and

         (b)    not take any action which would constitute disposal of, or
                relinquishment of operation control over, any asset to which
                Condition 29 of the licence applies save in accordance with the
                requirements of that condition and any consent issued by the
                Authority under it (other than to the licensee upon the expiry
                or termination of any relevant contract in accordance with its
                terms);

                (1)   to procure that any contract between the licensee and the
                      resource provider shall comply with the requirements set
                      out in the direction to which this form is annexed and
                      shall not be amended so as to cease in any way to be
                      compliant with those requirements; and

                (2)   to procure that the resource provider has and maintains
                      resources and operating capacity at a level sufficient to
                      ensure efficient performance of the contract and the
                      efficient discharge of the relevant obligations of the
                      licensee.

                                      232

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