Document:

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                                                                    Exhibit 10.3

                        POWER SALES AND AGENCY AGREEMENT

      THIS POWER SALES AND AGENCY AGREEMENT (this "Agreement") is entered into
as of this 24th day of March, 2000 by and between NRG Power Marketing Inc., a
Delaware corporation ("Power Marketing") and Louisiana Generating LLC, a
Delaware limited liability company (the "Owner") (each individually a "Party,"
or collectively the "Parties").

                                    RECITALS

      WHEREAS, Owner is a party to a Fifth Amended and Restated Asset Purchase
and Reorganization Agreement (the "Asset Sale Agreement") dated September 21,
1999, with Ralph R. Mabey, as Chapter 11 Trustee of Cajun Electric Power
Cooperative, Inc. ("Cajun"), pursuant to which Owner is to acquire two electric
generation facilities (commonly referred to as "Big Cajun I" and "Big Cajun
II"), with a total generating capacity of approximately 1700 MWs, located in New
Roads, Louisiana, along with certain other specified assets; and

      WHEREAS, upon the closing of the Cajun acquisition pursuant to the Asset
Sale Agreement, Owner will (i) enter into certain forms of power supply
agreements with the eleven former Cajun electricity membership cooperatives, and
(ii) assume Cajun's power supply obligations under two long-term power sales
agreements with Southwestern Electric Power Company, one agreement with South
Mississippi Electric Power Association, and one agreement with Municipal Energy
Agency of Mississippi (hereinafter, all agreements in this recital are referred
to as the "Power Supply Contracts"); and

      WHEREAS, Owner wishes to retain the services of Power Marketing as its
agent, to (i) manage, market and sell its Excess Station Power (including any
Deficit Station Power necessary to meet the obligations of Owner under the Power
Supply Contracts), (ii) manage, procure and provide, as the case may be, the
requirements of Owner for Fuel, and (iii) market, sell and purchase, as the case
may be, the Emission Credits generated by or necessary for the conduct of the
business of Owner; and

      WHEREAS, Power Marketing desires to (i) manage, market and sell all of
Owner's Excess Station Power (including any Deficit Station Power necessary to
meet the obligations of Owner under the Power Supply Contracts), (ii) manage,
procure and provide Owner's requirements for Fuel, and (iii) market, sell and

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purchase, as the case may be, the Emission Credits generated in or necessary for
the conduct of Owner's business.

      NOW THEREFORE, in consideration of the premises and the covenants,
conditions, and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties hereto hereby agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

      Whenever used in this Agreement with initial capitalization, the following
terms shall have the meanings specified or referred to in this Article I.

"Affiliate" means, with respect to any person or entity, (i) each entity that
such person or entity Controls, (ii) each person or entity that Controls such
person or entity, and (iii) each entity that is under common Control with such
person or entity.

"Agreement" shall have the meaning provided in the introductory paragraph
hereof.

"All-in Fuel Cost" means, for any period, the actual cost incurred, on a
first-in-first-out basis, by Power Marketing for Fuel supplied by Power
Marketing to the Owner during such period, including the spot or contract price
paid therefor by Power Marketing, all costs of transportation and delivery of
such Fuel, and all taxes paid or payable by Power Marketing in association
therewith.

"Ancillary Services" means any or all of the following: (i) 10 minute spinning
reserve, (ii) 10 minute non-spinning reserve, (iii) operating reserves, (iv)
automatic generation control, (v) voltage support, and (vi) black start
services.

"Big Cajun I" means Big Cajun I, Units 1 and 2, both of which are 110 MW natural
gas-fired electric generating facilities located in New Roads, Louisiana.

"Big Cajun II" means Big Cajun II, Units 1 and 2, which are 575 MW coal-fired
electric generating units, and Big Cajun II, Unit 3, which is a 575 MW
coal-fired electric generating unit of which Owner owns a 58% undivided
interest. Big Cajun II is located in New Roads, Louisiana.

"Business Day" means any day other than a Saturday, a Sunday, or a holiday on
which national banking associations in Minnesota or New York are not open for

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business. A Business Day shall begin at 8:00 a.m. and end at 5:00 p.m. Eastern
Standard (or Daylight) time.

"Capacity" means the aggregate installed generating capability of all of the
Units located at the Station, measured in megawatts ("MW") or kilowatts ("KW").

"Coal Supply Agreement" means that certain Coal Supply Agreement between Triton
Coal Company and Owner dated August 1, 1997.

"Control" means the possession, directly or indirectly, through one or more
intermediaries, of (i) in the case of a corporation, a majority of the
outstanding voting securities thereof; (ii) in the case of a limited liability
company, partnership, limited partnership or venture, the right to more than 50%
of the distributions therefrom (including liquidating distributions); (iii) in
the case of a trust or estate, including a business trust, a majority of the
beneficial interest therein; and (iv) in the case of any other entity, a
majority of the economic or beneficial interest therein.

"Deficit Station Power" means any Power that is required to fulfill Owner's
contractual supply obligations under the Power Supply Contracts, at any point,
that cannot otherwise be generated or supplied by generation assets owned,
leased or controlled by Owner.

"Delivery Point" means the point at which the Station is connected to Entergy
Corporation, Central Louisiana Electric Company ("CLECO"), or Southwestern
Electric Power Company ("SWEPCO") transmission systems as indicated in the
respective Interconnection Agreement or such other delivery point as Power
Marketing shall designate.

"Dispatch" means setting the level of Power output of the Station.

"Emissions Credits" means credits, in units established by applicable regulatory
authorities, resulting from the reduction of air pollutants (including NOx and
SO(2)) from an emitting source or facility, that have been certified by the
applicable regulatory authority.

"Energy" means electric energy, measured in megawatt hours ("MWh") or kilowatt
hours ("KWh"), generated and deliverable by Owner.

"Excess Station Power" means the difference between (i) the sum of Station Power
plus all Power Purchases, and (ii) the Power sold pursuant to the Power Supply
Contracts.

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"Force Majeure" means an event which (i) is not within the reasonable control of
the Party claiming Force Majeure (the "Claiming Party"), (ii) was not caused by
the acts, omissions or delays of the Claiming Party or any person over whom the
Claiming Party has control, (iii) is not an act, event or condition the risks or
consequences of which the Claiming Party has expressly agreed to assume pursuant
to this Agreement, and (iv) by the prompt exercise of due diligence, the
Claiming Party is unable to overcome or avoid or cause to be avoided. Subject to
the foregoing, Force Majeure includes, but is not restricted to acts of God,
fire, civil disturbance, labor dispute, labor or material shortage, sabotage, or
action or restraint by court order of any public or governmental authority (so
long as the Claiming Party has not applied for or assisted in the application
for, and has opposed where and to the extent reasonable, such government
action).

"Fuel" means the natural gas required to operate Big Cajun I.

"Governmental Entity" means the government of the United States, or any
political subdivision thereof, whether state or local, and any agency,
authority, instrumentality, regulatory body or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government.

"Interconnection Agreement" means any or all of the following: (i) an Electric
System Interconnection Agreement effective as of January 1, 1991 by and between
CLECO and Cajun; (ii) an Electric System Interconnection Agreement dated as of
January 1, 1998 by and between SWEPCO and Cajun; (iii) an As-Available Energy
Transmission Service Agreement dated as of May 31, 1989 by and between SWEPCO
and Cajun; (iv) a Network Integration Transmission Service Agreement dated as of
January 1, 1998 (as revised March 25, 1999) by and between Entergy Services,
Inc. ("ESI") and Cajun; (v) a Network Operating Agreement, dated as of January
1, 1998 by and between ESI and Cajun; (vi) a Non-Firm Point-to-Point
Transmission Service Agreement dated as of January 1, 1998 by and between ESI
and Cajun; (vii) a Firm Point-to-Point Transmission Service Agreement dated as
of January 1, 1998 by and between ESI and Cajun; and (viii) any replacement or
new Agreements negotiated by Owner relating to the transmission of electricity
from a Station.

"Interest Rate" means, for any date, the interest equal to the "Prime Rate" as
may be published on the first Business Day of the applicable calendar month in
The Wall Street Journal under "Money Rates."

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"Net Power Revenue" means, for any period, the gross receipts during such period
from sales by Power Marketing of Excess Station Power, reduced by (i) the cost
of any Power Purchases, (ii) the amount of any transmission or other costs
incurred by Power Marketing during such period in delivering Excess Station
Power to the point of sale, (iii) the amount of any state or federal Taxes paid
or required to be paid by Power Marketing with respect to the sale of Excess
Station Power or otherwise with respect to the performance of its obligations
hereunder, and (iv) the amount of any other costs paid by Power Marketing during
such period in connection with the sale of Excess Station Power, including an
arms-length, commercially reasonable allocation of overhead and administrative
expense.

"Net Power Cost" means, for any period, the cost during such period of purchases
by Power Marketing of Deficit Station Power, increased by (i) the amount of any
transmission or other costs incurred by Power Marketing during such period in
delivering Deficit Station Power to the point of sale, (ii) the amount of any
state or federal Taxes paid or required to be paid by Power Marketing with
respect to the purchase of Deficit Station Power or otherwise with respect to
the performance of its obligations hereunder, and (iii) the amount of any other
costs paid by Power Marketing during such period in connection with the purchase
of Deficit Station Power, including an arms-length, commercially reasonable
allocation of overhead and administrative expense.

"Power" means Capacity, Energy or Ancillary Services or any combination thereof,
as the case may be.

"Power Purchases" means any Power purchased by Power Marketing on behalf of
Owner.

"Power Supply Contracts" shall have the meaning provided in the second recital
hereof.

"Prudent Independent Power Industry Practice" means any of the practices,
methods and acts engaged in or approved by a significant portion of the
independent power industry during the relevant time period, or any of the
practices, methods and acts which, in the exercise of reasonable judgment in
light of the facts known at the time the decision was made, could have been
expected to accomplish the desired result at the lowest reasonable cost
consistent with good business practices, reliability, safety and expedition.
Prudent Independent Power Industry Practice is not intended to be limited to the
optimum practice, method or act to the exclusion of all others, but rather to be
practices, methods or acts generally accepted in the region and consistently
adhered to by Owner. Prudent Independent Power Industry Practices

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shall include, but not be limited to North American Electric Reliability Council
("NERC") Criteria & Guidelines, Southwest Power Coordinating Council ("SPCC")
Criteria & Guidelines, as they may be amended from time to time, including the
rules, guidelines and criteria of any successor organization to the foregoing
entities.

"Station" means the generating facilities acquired by Owner.

"Station Power" means the aggregate total Power generated by the Station from
time to time.

"Taxes" means any tax, charge, impost, tariff, duty or fee of any kind charged,
imposed or levied, directly or indirectly, by any Governmental Entity, including
any value-added tax, sales tax, stamp duty, gross receipts tax, property tax,
registration fee or license, but excluding any tax on income.

"Transportation Contract" means that certain Coal Transportation Agreement
between The Burlington Northern and Santa Fe Railway Company, American
Commercial Marine Service and Owner dated January 22, 1997.

 "Unit" means each of the operating electricity generating units located at the
Station.

                                   ARTICLE II
                            TRANSACTIONS AND SERVICES

2.1 Power Transactions.

      (a) Right to Excess Station Power. Power Marketing shall have the
exclusive right, as agent for Owner, to sell or trade all of the Excess Station
Power.

      (b) Right to Transact Power Purchases. Power Marketing shall have the
exclusive right, as agent for Owner, to buy or trade all Power Purchases.

      (c) Delivery of Excess Station Power. Owner shall use all commercially
reasonable efforts, in accordance with Prudent Independent Power Industry
Practice, to deliver any Excess Station Power sold by Power Marketing to the
contractually designated Delivery Point, in accordance with instruction received
from Power Marketing.

      (d) Purchase or Sale of Ancillary Services. Power Marketing shall have the
exclusive right, as agent for Owner, to purchase, sell, or trade all Ancillary
Services.

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Power Marketing, in its sole discretion, may fulfill any Ancillary Service
obligation either through (i) the use of Big Cajun I or Big Cajun II or any
other generating facility that will be owned by NRG South Central Generating LLC
("NRG South Central") or an Additional Guarantor, or (ii) acquisition from a
third party provider.

      (e) Dispatch. Power Marketing shall have the exclusive right and the
obligation to effect the Dispatch of the Station. Power Marketing shall effect
such Dispatch, as agent for Owner, through bilateral contracts and the Power
Supply Contracts, and such Dispatch shall be subject to the physical limitations
of the Station as Owner may advise Power Marketing from time to time.

      (f) Other Power Sales Agreements. Power Marketing shall assist Owner in
performing all of its obligations under the Power Supply Contacts and any other
power sale agreements to which it may be a party.

      (g) Metering. For the purposes of determining quantities of Power
delivered, metering shall be determined based upon the Delivery Points of the
relevant Interconnection Agreements.

      (h) Auxiliary Power. Power Marketing shall be responsible for negotiating
agreements for the provision of Power to the Station for auxiliary load and
Station start-up as required to support the Dispatch schedule.

2.2 Fuel Requirements.

      (a) Big Cajun I. Power Marketing shall procure for Owner all Fuel at such
time and in such amounts as are necessary to satisfy all Fuel requirements of
Big Cajun I. Owner shall notify Power Marketing on a regular basis, sufficiently
in advance of the need therefore, of the anticipated Fuel requirements. All Fuel
shall be contracted for by Power Marketing as agent for Owner.

      (b) Big Cajun II. Power Marketing shall provide oversight and advice to
Owner on an "as requested" basis regarding the Coal Supply Agreement and the
Transportation Contract. In addition, at the request of Owner, Power Marketing
will assist in the procurement of new or additional coal supply or
transportation arrangements, should circumstances necessitate such assistance.

2.3 Emissions Credits.

      (a) Big Cajun I. Owner shall make available and transfer to Power
Marketing, as its exclusive agent, all Emissions Credits owned, earned or
acquired

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by Owner that are in excess of the amount of Emission Credits required to
operate Big Cajun I at its scheduled capacity. Power Marketing shall procure for
Owner all Emissions Credits, in excess of those generated by Owner, that are
required by Owner to operate Big Cajun I at its scheduled capacity.

      (b) Big Cajun II. Pursuant to the terms of Owner's Coal Supply Agreement
for Big Cajun II, the coal supplier is obligated to procure SO(2) allowances for
the first 5 years of the contract (the "Initial Term") to the extent Owner's
SO(2) emissions from Big Cajun II exceed 43,804 tons per calendar year. If,
however, SO(2) emissions are less than 43,804 tons in any calendar year during
the Initial Term, then Owner must convey to the coal supplier two-thirds the
number of allowances less than 43,804 ton allotment. During the Initial Term,
Power Marketing shall assume all responsibilities of Owner under the Coal Supply
Agreement regarding SO(2) emission for the benefit of Owner. To the extent
available, Power Marketing shall use commercially reasonable efforts to maximize
the value of any excess SO(2) allowances available to Owner under the Coal
Supply Agreement. The responsibilities of Power Marketing regarding SO(2)
emission allowances upon completion of the Initial Term shall be agreed upon by
Power Marketing and Owner on or before three (3) months prior to completion of
the Initial Term. With respect to Emissions Credits (other than SO(2)), the
obligations of Power Marketing regarding Big Cajun II shall be the same as the
obligations set forth in Section 2.3(a) applicable to Big Cajun I.

2.4 Load Management; Risk Management and Hedging.

      (a) Load Management. Power Marketing shall assist Owner in fulfilling
Owner's load management obligations set forth in the Power Supply Contracts.
Power Marketing shall assume primary responsibility for these obligations. Owner
shall notify Power Marketing of any pending material changes in Owner's load in
a timely manner.

      (b) Risk Management and Hedging. Power Marketing shall implement
appropriate risk management practices and develop a hedging strategy for the
benefit of Owner, subject to the provisions of Section 7.1 of this Agreement.

                                   ARTICLE III
                                    PAYMENTS

3.1 Payments for Excess Station Power. Power Marketing shall pay to Owner for
the amount of the Excess Station Power provided by Owner to Power Marketing the

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Net Power Revenue from the sales by Power Marketing of such power. By no later
than the twenty-fifth (25th) day of each calendar month, Power Marketing shall
deliver an estimated statement, together with the estimated payment required
pursuant to such statement, to Owner setting forth, separately with respect to
Capacity, Energy and Ancillary Services, the estimated Excess Station Power
provided by Owner pursuant to Dispatch effected by Power Marketing during the
preceding calendar month and the total amount due to Owner from Power Marketing
with respect thereto, together with any applicable supporting documentation. As
soon as possible with respect to each calendar month, and in any case no later
than ten (10) Business Days after final reconciliation of such calendar month,
Power Marketing shall deliver a true-up statement to Owner with respect to such
calendar month, which statement shall set forth, separately with respect to
Capacity, Energy and Ancillary Services, the actual Excess Station Power
provided by Owner pursuant to Dispatch effected by Power Marketing. If such
true-up statement reveals a shortfall in payment by Power Marketing with respect
to such payment, then such true-up statement shall be accompanied by payment for
such shortfall, together with interest at the Interest Rate from the date
originally due (i.e., the twenty-fifth (25th) day of the month following the
calendar month in which such Power was provided or generated by Owner) until
paid in full. If such true-up statement reveals an overpayment by Power
Marketing with respect to such payment, then Owner shall refund such overpayment
to Power Marketing no later than ten (10) Business Days following the delivery
of such true-up statement, together with interest at the Interest Rate from the
date such overpayment was originally made until repaid in full.

3.2 Payments for Deficit Station Power. Owner shall pay to Power Marketing for
the amount of the Deficit Station Power provided by Power Marketing to Owner the
Net Power Cost from the purchase by Power Marketing of such power. By no later
than the twenty-fifth (25th) day of each calendar month, Power Marketing shall
deliver an estimated statement, together with the estimated payment required
pursuant to such statement, to Owner setting forth, separately with respect to
Capacity, Energy and Ancillary Services, the estimated Deficit Station Power
procured by Power Marketing during the preceding calendar month and the total
amount due to Power Marketing from Owner with respect thereto, together with any
applicable supporting documentation. As soon as possible with respect to each
calendar month, and in any case no later than ten (10) Business Days after final
reconciliation of such calendar month, Power Marketing shall deliver a true-up
statement to Owner with respect to such calendar month, which statement shall
set forth, separately with respect to Capacity, Energy and Ancillary Services,
the actual Deficit Station Power provided by Power Marketing. If such true-up
statement reveals a shortfall in payment by Owner with respect to such payment,
then such true-up statement shall be accompanied by payment for such shortfall,
together with interest at the Interest Rate

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from the date originally due (i.e., the twenty-fifth (25th) day of the month
following the calendar month in which such Power was provided to Owner) until
paid in full. If such true-up statement reveals an overpayment by Owner with
respect to such payment, then Power Marketing shall refund such overpayment to
Power Marketing no later than ten (10) Business Days following the delivery of
such true-up statement, together with interest at the Interest Rate from the
date such overpayment was originally made until repaid in full.

3.3 Payments for Fuel. Power Marketing will use commercially reasonable efforts
to have all Fuel invoiced directly to Owner for payment. In the event Owner is
not invoiced directly by the Fuel supplier, Owner shall pay to Power Marketing
the All-in Fuel Cost for the Fuel procured by Power Marketing. Power Marketing
shall deliver to Owner on or before the fifteenth (15th) day of each month a
statement of the All-in Fuel Cost for Fuel supplied in the previous month that
was not invoiced directly to Owner, together with all applicable supporting
documentation. Owner shall pay to Power Marketing the amount of each such
statement on or before the last day of the month in which such statement is
delivered.

3.4 Payments for Emissions Credits. Power Marketing shall deliver to Owner on or
before the fifteenth (15th) day of each month a statement with respect to any
Emissions Credits sold or purchased by Power Marketing in the previous month,
together with any applicable supporting documentation. Power Marketing shall
remit to Owner with any such statement with respect to Emissions Credits sold by
Power Marketing for Owner the full amount then due. Owner shall pay to Power
Marketing the amount of each such statement with respect to any Emissions
Credits purchased by Power Marketing for the benefit of Owner on or before the
last day of the month in which such statement is delivered.

3.5 Fuel and Emission Credit Compensation. In consideration for the services
rendered by Power Marketing pursuant to Sections 2.2 and 2.3, Owner shall pay to
Power Marketing an amount equal to the number of manhours expended by
appropriate personnel of Power Marketing for services rendered (rounded to the
nearest quarter of an hour), multiplied by the hourly rates set forth on Exhibit
A (which rates each shall escalate on the first day of each calendar year during
the term hereof by an amount which is 3% of the rate applicable during the prior
calendar year). Power Marketing shall prepare and submit to Owner on a monthly
basis invoices covering the fees to which Power Marketing is entitled under this
Section 3.5.

3.6 Load and Risk Management Services Compensation. In consideration for the
services rendered by Power Marketing pursuant to Section 2.4, Owner shall pay to

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Power Marketing an amount equal to the number of manhours expended by
appropriate personnel of Power Marketing for services rendered (rounded to the
nearest quarter of an hour), multiplied by the hourly rates set forth on Exhibit
A (which rates each shall escalate on the first day of each calendar year during
the term hereof by an amount which is 3% of the rate applicable during the prior
calendar year). Power Marketing shall prepare and submit to Owner on a monthly
basis invoices covering the fees to which Power Marketing is entitled under this
Section 3.6.

3.7 Overdue Payments; Defaults. If any Party shall fail to make any payment
(including any estimated payment) when due, such overdue payment shall accrue
interest at the Interest Rate plus 2% from the due date to the date of payment.
In addition, if Power Marketing is the defaulting Party with respect to payments
for Excess Station Power and continues to default with respect to any payment
for thirty (30) days after notice of such default by Owner, then Owner may (i)
terminate this Agreement, or (ii) take any other such actions as are available
to it an law or equity with respect to such default. During the exercise of any
remedy, Power Marketing shall continue to be obligated to pay Owner for all
Excess Station Power not otherwise sold by Owner. In addition, Power Marketing
shall remain obligated to pay Owner for all Excess Station Power generated by
Owner pursuant to Dispatch effected by Power Marketing. Owner may exercise any
one or more of such remedies, and no such exercise shall limit Owner's rights to
exercise any other remedy.

3.8 Billing Dispute. If either Party, in good faith, disputes a statement, the
disputing Party shall immediately notify the other Party of the basis for the
dispute; provided, however, that no adjustment for any invoice or payment will
be made unless objection to the accuracy thereof was made prior to the lapse of
one (1) year from the date such amount was paid. The disputing Party shall pay
the undisputed portion of such statement no later than the due date. If any
amount withheld under dispute is ultimately determined to be due to the other
Party, it shall be paid within five (5) Business Days of such determination
along with interest accrued at the Interest Rate from the date originally due
until the date paid. Inadvertent overpayments shall be returned by Party
overpaid upon request or deducted by such Party from subsequent payments, with
interest accrued at the Interest Rate from the date originally paid until the
date paid or deducted.

                                   ARTICLE IV
                               PERFORMANCE EXCUSED

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4.1 Force Majeure. If either Party is rendered unable by an event of Force
Majeure to carry out, in whole or part, its obligations under this Agreement,
then, for only the pendency of such Force Majeure, the Party affected by the
event shall be temporarily relieved of its obligations hereunder to deliver
Power insofar as they are affected by Force Majeure but for no longer period;
provided, however, that such Party shall not be relieved of its obligation to
make payments then due or becoming due with respect to performance which
occurred prior to the event. The Party affected by an event of Force Majeure
shall provide the other Party with written notice setting forth the full details
thereof within two (2) Business Days after the occurrence of such event and
shall take all reasonable measures to mitigate or minimize the effects of such
event of Force Majeure.

4.2 Scheduled Outages. Owner shall notify Power Marketing of any scheduled
outage of any Unit. During the period of such scheduled outage and any
additional time reasonably required to complete the work for which such outage
was scheduled, Owner shall be relieved of its obligations hereunder to deliver
Power from such Unit.

                                    ARTICLE V
                     TITLE, RISK OF LOSS AND INDEMNIFICATION

5.1 Title and Risk of Loss. Title to and risk of loss related to Excess Station
Power sold by Power Marketing hereunder shall remain with Owner until delivery
to the Delivery Point. Owner warrants that it will deliver to Power Marketing
the Excess Station Power free and clear of all liens, claims and encumbrances
arising prior to the Delivery Point. Title to and risk of loss related to
Deficit Station Power procured by Power Marketing shall transfer from seller to
Owner at the Delivery Point.

5.2 Indemnity. Each Party shall indemnify, defend and hold harmless the other
party from any Claims arising from any act or incident occurring during the
period when control and title to Power is vested, as between the Parties as
provided in Section 5.1, in the indemnifying Party. "Claims" means all claims or
actions, threatened or filed and, whether groundless, false or fraudulent, that
directly or indirectly relate to the subject matter of an indemnity, and the
resulting losses, damages, expenses, attorneys' fees and court costs, whether
incurred by settlement or otherwise, and whether such claims or actions are
threatened or filed prior to or after the termination of this Agreement.

5.3 Duty to Mitigate. Each Party agrees that it has a duty to mitigate damages
and covenants that it will use commercially reasonable efforts to minimize any
damages it

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may incur as a result of the other Party's performance or non-performance of
this Agreement.

                                   ARTICLE VI
                    REPRESENTATIONS, WARRANTIES AND COVENANTS

6.1 Representations and Warranties. Each Party hereby represents and warrants to
the other Party that the following statements are true and correct as of the
date hereof and shall be true and correct at all times that such Party is a
Party hereto:

      (a) It is duly formed, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation or formation; to the extent
required by applicable law, it is duly qualified and in good standing in the
jurisdiction of its principal place of business, if different from its
jurisdiction of incorporation or formation; and it has full power and authority
to execute and deliver this Agreement and to perform its obligations hereunder
and thereunder, and all necessary actions by the officers, managers, members or
other applicable persons necessary for the due authorization, execution,
delivery, and performance of this Agreement by it have been duly taken.

      (b) It has duly executed and delivered this Agreement and the other
documents contemplated herein, and each constitutes a legal, valid and binding
obligation of such Party enforceable against it in accordance with the terms of
such document (except as may be limited by bankruptcy, insolvency or similar
laws of general application and by the effect of general principles of equity,
regardless of whether considered at law or in equity).

      (c) Its authorization, execution, delivery, and performance of this
Agreement does not and will not (i) conflict with, or result in a breach,
default or violation of, (A) its organizational documents, (B) any contract or
agreement to which it is a party or is otherwise subject, or (C) any law, order,
judgment, decree, writ, injunction or arbitral award to which it or any of its
properties is subject; or (ii) require any consent, approval or authorization
from, filing or registration with, or notice to, any governmental authority
(including any approvals required by the Federal Energy Regulatory Commission)
or other person, unless such requirement has already been satisfied.

      (d) It has obtained all governmental approvals (including all approvals,
authorizations or waivers from the Federal Energy Regulatory Commission)
necessary to perform its obligations hereunder.

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      (e) It is not a party to any litigation the outcome of which could
reasonably be expected to adversely affect its ability to perform its
obligations hereunder or to have a material adverse effect on its properties,
business or financial condition.

6.2 Covenants. The Parties hereby covenant and agree as follows:

      (a) Each Party will timely acquire and maintain all permits, licenses,
waivers and approvals (including approval to operate as an exempt wholesale
generator) required by any state or federal regulatory authority in order for it
to perform its obligations hereunder.

      (b) Each Party will at all times abide by all laws, rules and regulations
of any state or federal governmental authority applicable to the conduct of such
Party or the performance of its obligations hereunder.

      (c) Power Marketing will not sell Power to any of its Affiliates except in
conformity with the laws, rules and regulations of any Governmental Entity
applicable to such transactions.

                                   ARTICLE VII
                                  MISCELLANEOUS

7.1 Owner Risk Oversight. Owner shall have the right to influence the strategy
of Power Marketing with respect to (i) the purchase and sale of Energy,
Capacity, and Ancillary Services, and (ii) the overall level of risk to be
undertaken by Power Marketing on behalf of Owner. At the request of Owner, Power
Marketing shall make available for review all relevant records and documentation
supporting transactions entered into by Power Marketing on behalf of Owner.

7.2 Term of Agreement. The Term of this Agreement will begin on the date of this
Agreement and will end on December 31, 2030.

7.3 Governing Law and Jurisdiction. This Agreement and the rights and duties of
the Parties hereunder shall be governed by and construed, enforced and performed
in accordance with the laws of the State of New York without regard to any
conflict of law rules thereof (other than Section 5-1401 of the New York General
Obligations Law). Any lawsuits arising under this Agreement shall be instituted
in the federal or state courts of New York located in New York County, and each
party hereby irrevocably submits to the in personam jurisdiction of such courts.
EACH PARTY

                                       14
<PAGE>   15

HEREIN WAIVES ITS RESPECTIVE RIGHT TO A JURY TRIAL WITH RESPECT TO ANY
LITIGATION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT.

7.4 Assignment. Neither Party shall assign this Agreement or its rights
hereunder without the prior written consent of the other Party, provided,
however, either Party may, without the consent of the other Party (and without
relieving itself from liability hereunder), (i) transfer, sell, pledge, encumber
or assign this Agreement or the accounts, revenues or proceeds hereof in
connection with any financing or other financial arrangements by or for the
benefit of Owner or NRG South Central, (ii) transfer or assign this Agreement to
an Affiliate of such Party if such Affiliate's creditworthiness and technical
ability to perform hereunder is not materially different than that of such
Party, (iii) transfer or assign this Agreement to any person or entity
succeeding to all or substantially all of the assets of such Party, or (iv) in
the case of Owner, transfer or assign this Agreement to any person or entity
acquiring the Station; provided, however, that in each such case, any such
assignee (other than an assignee in a transaction referred to in clause (i)
above) shall agree in writing to be bound by the terms and conditions hereof and
such assignee's creditworthiness and technical ability to perform hereunder
shall not be materially different than that of such Party.

7.5 Notices.

If to Power Marketing:

      NOTICES AND CORRESPONDENCE:

      NRG Power Marketing Inc.
      1221 Nicollet Mall
      Minneapolis, MN 55403
      Attn: Audrey Zibelman
      Phone: (612) 373-5300
      Fax: (612) 373-5430

      INVOICES:

      NRG Power Marketing Inc.
      1221 Nicollet Mall
      Minneapolis, MN 55403
      Attn: Christine Harrell
      Phone: (612) 373-5300

                                       15
<PAGE>   16

      Fax: (612) 373-5430

      PAYMENTS BY WIRE:

      Bank: LaSalle National Bank
      Address: Chicago, IL
      ABA: 071 000 505
      Account: NRG Power Marketing LLC
      Acct. No.:

If to Owner:

      NOTICES & CORRESPONDENCE:

      Louisiana Generating LLC
      P.O. Box 15540
      Baton Rouge, LA 70895
      Attn: Alan Williams
      Phone: (225) 291-3060
      Fax: (225) 296-1746

      INVOICES:

      Louisiana Generating LLC
      P.O. Box 15540
      Baton Rouge, LA 70895
      Attn: Michael Manning
      Phone: (225) 291-3060
      Fax: (225) 296-1746

      PAYMENTS BY WIRE:

      Bank:
      Address:
      ABA:
      Account:
      Acct. No.:

7.6 General. No amendment or modification to this Agreement shall be enforceable
unless reduced to writing and executed by both Parties. This Agreement shall not
impact any rights enforceable by any third party (other than a permitted

                                       16
<PAGE>   17

successor or assignee bound to this Agreement). No waiver by a Party of any
default by the other Party shall be construed as a waiver of any other default.
Any provision declared or rendered unlawful by any applicable court of law or
regulatory agency or deemed unlawful because of a change in law will not
otherwise affect the remaining lawful obligations that arise under this
Agreement. The headings used herein are for convenience and reference purposes
only. All indemnity and audit rights hereunder shall survive the termination of
this Agreement for six (6) years. For any period over which interest shall
accrue, interest shall accrue on the first day of such period, but shall not
accrue on the last day thereof.

7.7 Confidential Information. During the Term of this Agreement and for three
(3) years thereafter, neither Party shall divulge, furnish or make accessible to
anyone or use in any way any confidential or secret information of the other
Party which it has acquired or become acquainted with in the performance of its
obligations under this Agreement. Each Party acknowledges that the
above-described information constitutes a unique and valuable asset of the Party
seeking such confidential treatment, and that any disclosure or other use of
such knowledge other than for the sole benefit of such other Party would be
wrongful and would cause it irreparable harm. Both during and after the term of
this Agreement, each Party will refrain from any acts or omissions that would
reduce the value of such knowledge or information to such other Party. The
foregoing obligations of confidentiality, however, shall not apply to any
knowledge or information which (i) is now published or which subsequently
becomes generally publicly known in the form in which it was obtained from the
Party seeking such confidential treatment, other than as a direct or indirect
result of the breach of this Agreement, (ii) is disclosed to any regulatory
authority having jurisdiction over the disclosing party, (iii) is disclosed as
required by law or pursuant to legal process, or (iv) is disclosed to a lending
institution (or any agent or trustee thereof) in connection with any financing
for the benefit of Owner or NRG South Central subject to the terms of a
confidentiality agreement having provisions substantially similar to this
Agreement.

7.8 Renegotiation of Commercial Terms. The Parties acknowledge that the
commercial terms of this Agreement reflect the Affiliate relationship that
exists between Owner and Power Marketing. In the event that any portion of
Owner, its parent, NRG South Central, or NRG South Central's members (NRG
Central U.S. LLC or South Central Generation Holding LLC) is sold, transferred
or conveyed to a non-Affiliate, Owner and Power Marketing agree to renegotiate
the commercial terms of this Agreement to reflect an arms-length commercial
arrangement.

                                       17
<PAGE>   18

      IN WITNESS WHEREOF, the parties have executed this Power Sales and Agency
Agreement in multiple counterparts to be construed as one as of the date first
set forth above.

                                    NRG POWER MARKETING INC.

                                    By: /s/ Craig A. Mataczynski
                                       ------------------------------------
                                    Name:  Craig A. Mataczynski
                                    Title: President

                                    LOUISIANA GENERATING LLC

                                    By: /s/ Craig A. Mataczynski
                                       ------------------------------------
                                    Name:  Craig A. Mataczynski
                                    Title: Vice President

                                       18
<PAGE>   19

                                     ANNEX A

                             NRG Power Marking Inc.
                 2000 Standard Labor Rates for Intracompany Transactions

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Category                                Fully Loaded Standard Rate
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
<S>                                     <C>
Executive                               210.00
--------------------------------------------------------------------------------
Regional Manager                        136.00
--------------------------------------------------------------------------------
Sr. Attorney                            129.00
--------------------------------------------------------------------------------
Attorney                                100.00
--------------------------------------------------------------------------------
Exec. Dir. Energy Mktg.                 113.00
--------------------------------------------------------------------------------
Trader/Contract Administrator            86.00
--------------------------------------------------------------------------------
Hourly Scheduler                         46.00
--------------------------------------------------------------------------------
Sr. Accountant                           52.00
--------------------------------------------------------------------------------
Executive Dir. Finance/Tax              100.00
--------------------------------------------------------------------------------
Sr. Financial Analyst                    58.00
--------------------------------------------------------------------------------
Financial Analyst                        52.00
--------------------------------------------------------------------------------
Sr. Accountant                           52.00
--------------------------------------------------------------------------------
Accountant                               46.00
--------------------------------------------------------------------------------
Administrative Support                   35.00
--------------------------------------------------------------------------------
</TABLE>

                                       19<PAGE>   1

                                                                    Exhibit 10.4

                   OPERATION AND MANAGEMENT SERVICES AGREEMENT

      This OPERATION AND MANAGEMENT SERVICES AGREEMENT (this "Agreement") dated
as of March 24, 2000, is executed by Louisiana Generating LLC, a Delaware
limited liability company ("Owner"), and NRG Operating Services, Inc., a
Delaware corporation ("Supplier"; Owner and Supplier each, individually, a
"Party" and, collectively, the "Parties").

                                    RECITALS

      WHEREAS, Owner is a party to a Fifth Amended and Restated Asset Purchase
and Reorganization Agreement (the "Asset Sale Agreement"), dated September 21,
1999, with Ralph R. Mabey, as Chapter 11 Trustee of Cajun Electric Power
Cooperative, Inc. ("Cajun") pursuant to which Owner is to acquire two electric
generation facilities (commonly referred to as "Big Cajun I" and "Big Cajun
II"), with a total generating capacity of approximately 1700 MWs, located in New
Roads, Louisiana (the "Facilities")and certain other assets; and

      WHEREAS, Owner will operate and maintain the Facilities through the
employment of some or all of the Cajun employees currently working at the
Facilities; and

      WHEREAS, Owner wishes to engage Supplier to assist in Owner's operation
and maintenance of the Facilities and to monitor compliance by Owner under the
terms of that certain Joint Ownership Participation and Operating Agreement,
dated November 14, 1980, between Cajun and Entergy Corporation related to Big
Cajun II, Unit 3, as amended (the "Joint Ownership Agreement"); and

      WHEREAS, Supplier is willing to undertake such service in accordance with
the terms and conditions of this Agreement.

      NOW THEREFORE, in consideration of the mutual covenants set out herein,
the sufficiency of which is acknowledged by both Parties, the Parties hereto
hereby agree as follows:

                                       1
<PAGE>   2

                                 I. DEFINITIONS

      "Additional Agreement" means any contract, instrument of agreement, or any
amendment, modification or supplement thereto, entered into or expressly assumed
by Owner, which Owner has delivered to Supplier during the term hereof and which
may affect the operation or maintenance of the Facilities or Supplier's ability
to perform the Services or meet its other obligations set forth in this
Agreement.

      "Affiliate" means, with reference to a specified Person, any other Person
which, directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with such Person. A Person is
controlled by another Person if the second Person holds a sufficient number of
securities in the first Person to elect a majority of the directors of the first
Person.

      "Approvals and Permits" means all approvals, permits, licenses,
certificates, inspections and authorizations required by any Governmental
Authority, arising out of, incident to, or related to the operation and
maintenance of the Facilities.

      "Asset Sale Agreement" has the meaning assigned thereto in the first
recital hereto.

      "Closing Date" has the meaning ascribed thereto in Section 1.1 of the
Asset Sale Agreement.

      "Facilities" has the meaning ascribed thereto in the first recital hereto.

      "Governmental Authority" means any federal, state, or local agency or any
court having jurisdiction over any aspect of the Facilities.

      "Hazardous Materials" means any chemicals, materials, substances or items
in any form, whether solid, liquid, gaseous, semisolid, or any combination
thereof, whether waste materials, raw materials, chemicals, finished products,
byproducts, or any other materials or articles, which are listed as hazardous,
toxic or dangerous under any federal or Louisiana environmental law, including
petroleum products, asbestos, urea formaldehyde foam insulation, and
lead-containing paints or coatings.

                                       2
<PAGE>   3

      "Indemnified Party" means the Owner Indemnitee with respect to Section
8.1, and the Supplier Indemnitee with respect to Section 8.2. as the case may
be.

      "Indemnifying Party" means the Supplier with respect to Section 8.1, and
the Owner, with respect to Section 8.2, as the case may be.

      "Lender" means any Person providing financing to the Facilities or any
agent or trustee representing such Person.

      "Owner" has the meaning ascribed thereto in the introductory paragraph
hereto.

      "Person" means any corporation, trust, partnership, cooperative, limited
liability company, entity or natural person.

      "Services" means the services described in Exhibit A hereto.

      "Supplier" has the meaning ascribed thereto in the introductory paragraph
hereto.

      "Supplier's O&M Manager" means the individual(s) designated by Supplier,
and approved by Owner, responsible for managing Supplier's obligations under
this Agreement.

                           II. ENGAGEMENT OF SUPPLIER

      2.1 Engagement. Subject to all of the terms and conditions of this
Agreement, Owner hereby engages Supplier to provide the Services, and Supplier
hereby accepts such engagement to perform the Services. Supplier shall provide
all Services to Owner on an "as requested" basis in support of the day-to-day
operation and maintenance of the Facilities. Owner shall use a letter, work
order, purchase order or other official document to authorize the performance of
Services by Supplier. Such document shall state, as a minimum, the scope of
Services to be performed, schedule requirements, budget and a reference to this
Agreement. Supplier shall acknowledge requested Services in writing.

      2.2 Independent Contractor. Nothing herein contained shall be deemed to
create a partnership between Supplier (or its Affiliates) and Owner nor to

                                       3
<PAGE>   4

constitute Supplier (or its Affiliates) a member in Owner. To the contrary,
Supplier (or its Affiliates) shall act as an independent contractor in the
performance of its duties hereunder. In this regard, Supplier (or its
Affiliates) shall be responsible for all employment related costs of its
employees including, but not limited to, collection and remittance of all
employment taxes and payment of all employee benefit costs.

      2.3 Employment of Personnel. Except as caused by Supplier's own actions,
no employee of Owner located at the Facilities shall be deemed an employee of
Supplier by virtue of such individual's presence at the Facilities. Personnel
involved in the performance of the Services and who are employed by Supplier or
its Affiliate(s) shall remain employees of Supplier or its Affiliate(s), as
applicable, and shall not, for any purpose, be deemed employees of Owner or its
Affiliate(s).

                                    III. TERM

      The term of this Agreement shall commence as of the Closing Date, and
shall continue until terminated in writing by Owner or pursuant to Article IX
hereof. Termination shall be effective seven (7) days after receipt of notice of
termination by Supplier.

                              IV. SUPPLIER SERVICES

      4.1 Representations and Warranties. Supplier represents and warrants as
follows:

            (a) Supplier has the capability, experience, and means necessary to
      perform the Services contemplated by this Agreement. Supplier shall
      perform the Services using its best skill and attention. Services will be
      performed using personnel, equipment, and material qualified and suitable
      to do the work requested.

            (b) Supplier shall provide properly trained and informed personnel.
      Supplier shall be solely responsible for the acts and omissions of its
      employees, subcontractors and agents and for any other person performing
      the Services under this Agreement at the direct or indirect request of
      Supplier.

                                       4
<PAGE>   5

            (c) Supplier will perform the Services in a diligent and workmanlike
      manner in compliance with accepted professional practices. Supplier shall
      comply with all applicable federal, state, and local laws, rules,
      regulations, and ordinances and with Owner's standards and specifications.
      Supplier has in effect and will maintain in effect all permits, licenses,
      and other authorizations necessary for its performance of the Services.

            (d) Supplier will observe Owner's rules as the same are made known
      to Supplier, including without limitation those rules involving health,
      safety, the environment, and security, when working at or around any of
      the Facilities.

      4.2 Standard of Care. Supplier agrees to provide competent personnel to
provide the Services (which personnel may be employees of Supplier and/or its
Affiliates, including, without limitation, NRG Energy, Inc.). Supplier shall,
and shall cause its Affiliates to, perform the Services with reasonable
diligence and dispatch in a prudent, cost effective and efficient manner, in
accordance with all applicable laws, Approvals and Permits, regulations, codes,
industry standards and the Additional Agreements. Supplier shall not carry out
any transaction or enter into any contract or agreement on behalf of Owner or
itself with respect to any of the Services with any Affiliate of Supplier except
on terms no less favorable to Owner than would be available in a bona fide arm's
length transaction with a non-affiliated entity or person (it being hereby
agreed that the hourly rates set forth on Exhibit B hereto for manhours expended
by personnel of Supplier and its Affiliates are deemed to satisfy such
standard). In addition, any such contract or agreement between Supplier and an
Affiliate of Supplier under which the consideration payable by Supplier to its
Affiliate exceeds $100,000 in any one year shall require the advance approval of
Owner.

      4.3 Supplier's Representative. Within a reasonable time after the Closing
Date, Supplier shall identify a Supplier's representative in a written notice to
Owner who shall represent and have the authority to bind Supplier in all matters
regarding this Agreement, except as specifically limited in writing by Supplier,
delivered to Owner.

                                       5
<PAGE>   6

                          V. RESPONSIBILITIES OF OWNER

      5.1 Responsibilities of Owner. Owner shall be responsible for all matters
relating to the Facilities other than the Services (which responsibilities the
Parties acknowledge Owner may delegate to another party pursuant to an agreement
with such party). Without limiting the foregoing, Owner shall negotiate all
Additional Agreements and Owner shall make all financial decisions regarding the
Facilities.

      5.2 Owner's Representative. Within a reasonable time after the Closing
Date, Owner shall identify an Owner's representative in a written notice to
Supplier who shall represent and have the authority to bind Owner in all matters
regarding this Agreement, except as specifically limited in writing by Owner,
delivered to Supplier.

      5.3 Approvals and Permits. Owner shall be responsible for obtaining and
maintaining all Approvals and Permits necessary for the Facilities to be legally
authorized to operate other than any such Approvals and Permits required to be
obtained by Supplier (or its Affiliates) to perform the Services.

      5.4 Copies of Additional Agreements. Owner shall give Supplier copies of
all Additional Agreements and Permits and Approvals required for the performance
of Supplier's responsibilities hereunder.

                                  VI. INSURANCE

      6.1 Insurance Requirements of Supplier. Supplier shall procure and
maintain in full force and effect at all times during the period commencing no
later than the date on which Supplier has employees at the Facilities and ending
with the termination of this Agreement, insurance policies with limits and
coverage provisions in no event less than the limits and coverage provisions set
forth below and with insurance carriers authorized to do business in Louisiana
and rated A-8 or better by A.M. Best or otherwise acceptable to Owner.

      6.1.1 General Liability Insurance: Liability insurance against claims for
            bodily injury and property damage. Such insurance shall provide
            coverage for products- completed operations, blanket contractual,
            explosion, collapse and underground coverage, broad form property
            damage, personal injury insurance, independent contractors and the
            hostile fire exception to the pollution liability exclusion with a

                                       6
<PAGE>   7

            $1,000,000 minimum limit per occurrence ($2,000,000 aggregate) for
            combined bodily injury and property damage; provided that the policy
            general aggregate, if any, shall apply separately to the Facilities.
            A maximum deductible or self-insured retention of $500,000 per
            occurrence shall be allowed.

      6.1.2 Automobile Liability Insurance: Automobile liability insurance
            against claims for personal injury (including bodily injury and
            death) or property damage arising out of the use of all owned,
            leased, not-owned and hired motor vehicles including loading and
            unloading with a $1,000,000 minimum limit per occurrence for
            combined bodily injury and property damage and containing
            appropriate no-fault insurance provisions where applicable. A
            maximum deductible or self-insured retention of $500,000 per
            occurrence shall be allowed.

      6.1.3 Workers' Compensation Insurance: Workers' compensation insurance as
            required by applicable law. A maximum deductible or self-insured
            retention of $500,000 per occurrence shall be allowed.

      6.1.4 Employer's Liability Insurance: Employer's liability insurance for
            all employees of the Supplier with a $1,000,000 minimum limit per
            accident. A maximum deductible or self-insured retention of $500,000
            shall be allowed.

      6.1.5 Umbrella Excess Liability Insurance: Umbrella excess liability
            insurance of not less than $5,000,000 per occurrence and in the
            aggregate. Such coverages shall be on a per occurrence policy form
            or the AEGIS, or equivalent, claims-first-made form and over and
            above coverage provided by the policies described in Sections 6.1.1,
            6.1.2 and 6.1.4 above, whose limits shall apply toward the
            $5,000,000 limits set forth in this section. The umbrella and/or
            excess policies shall not contain endorsements which restrict
            coverages as set forth in Section 6.1.1, 6.1.2 and 6.1.4 above, and
            which are provided in the underlying policies.

All policies of liability insurance to be maintained by Supplier (other than
employer's liability insurance) shall be endorsed (a) to provide a severability
of interests for cross liability clause: (b) to name Owner and its managers,
officers, employees and agents as an additional insured; (c) to provide that the
insurance shall be primary and not excess to or contributing with any insurance

                                       7
<PAGE>   8

or self-insurance maintained by Owner, and (d) to waive subrogation against
Owner and Lenders.

      6.2 Owner Insurance Obligation. Owner shall maintain all insurances
required to be maintained by it under any Additional Agreements or Lender
financing arrangements. All such insurance shall (a) be endorsed to waive
subrogation against Supplier, and (b) not require Supplier to pay any premium
thereunder. Owner may satisfy this requirement by directing Supplier to obtain
such insurance on its behalf pursuant to Item 4 on Exhibit A.

                   VII. FEES AND EXPENSES PAYABLE TO SUPPLIER

      7.1 Supplier Compensation. In consideration for the Services rendered and
costs incurred by Supplier in performing the Services, Owner shall pay to
Supplier: (i) an amount equal to the number of manhours expended by the
Supplier's O&M Manager and other appropriate personnel of Supplier and/or its
Affiliates for activities under this Agreement (rounded to the nearest quarter
of an hour) related to current operations of the Facilities multiplied by the
hourly rates set forth on Exhibit B (which rates each shall escalate on the
first day of each calendar year during the term hereof by an amount which is 3%
of the rate applicable during the prior calendar year); (ii) all reasonable
amounts expended by Supplier for third party consultants and other costs
incurred in the performance of the Services, supported by adequate documentation
of such expenditures; (iii) transportation, travel, hotel and living expenses,
including the use of Supplier employees' personal cars at Supplier's current
standard rates; (iv) all reasonable moving, relocation, travel and living
expenses incurred in connection with the assignment of Supplier's personnel to a
location other than Supplier's permanent offices and from such location at the
conclusion of the assignment; (v) miscellaneous expenses, including but not
limited to, telegrams, telex, facsimile, telephone services, postage and similar
miscellaneous items incurred in connection with the Services, all at Supplier's
current standard rates; (vi) any fees, costs, damages, or disbursements incurred
in connection with any labor, patent, or commercial litigation or any third
party claim, suit or cause of action, arising out of or in connection with the
performance of the Services by Supplier (except disputes between Supplier and
Owner), or claims, suits or causes of action pursued on behalf of Owner by
Supplier; and (vii) any sales, use or similar taxes or fees imposed by any
federal, state, or municipal law, regulation or agency.

                                       8
<PAGE>   9

      7.2 Invoices. Supplier shall prepare and submit to Owner on a monthly
basis invoices covering the costs and fees to which Supplier is entitled under
this Article VII. Such invoices shall be accompanied by expense statements,
vouchers, or other supporting information as Owner may reasonably require. Owner
shall pay all undisputed amounts due Supplier no later than thirty (30) days
after receipt of the invoice. Any payment not made within thirty (30) days after
receipt of Supplier's invoice will bear interest from the date on which payment
was due at the rate of one percent (1%) per month. To the extent that Owner
disputes any charges included in an invoice submitted by Supplier, Owner shall
be entitled to withhold such amounts pending the resolution of the dispute;
provided that any amount due to Supplier after the resolution of such dispute
shall include interest as provided above from the date such amount was
originally due.

                              VIII. INDEMNIFICATION

      8.1 Indemnification Responsibilities of Supplier. Subject to the
limitation on liability set forth in Section 8.5 below, Supplier shall indemnify
and hold harmless Owner, its members, the Executive or Management Committee, and
the Lenders (if any) and their respective agents, employees, directors, managers
and officers (each individually and all collectively referred to in this Section
8.1 as "Owner Indemnitee") from and against any and all losses, claims, damages,
expenses, and liabilities, joint or several, to which the Owner Indemnitee
becomes subject under any federal or state law, or otherwise, relating to or
arising out of the willful misconduct or gross negligence of Supplier or its
Affiliates, or anyone directly or indirectly employed by any of them, or anyone
for whose acts any of them may be liable (such claims, damages, losses, expenses
and liabilities being each referred to in this Section 8.1 as a "Loss"). In the
event that any Loss shall be caused in part by the negligence of an Owner
Indemnitee (excluding liability without fault of an Owner Indemnitee), Supplier
indemnity shall be limited by and in proportion to the comparative degrees of
negligence of Supplier and such Owner Indemnitee.

      8.2 Indemnification Responsibilities of Owner. Subject to the limitation
on liability set forth in Section 8.5 below, Owner shall indemnify and hold
harmless Supplier and its Affiliates (if any) and their respective agents,
employees, directors, managers and officers (each individually and all
collectively referred to in this Section 8.2 as "Supplier Indemnitee") from and
against any and all losses, claims, damages, and liabilities, joint and several,
to which such Supplier Indemnitee may become subject under any applicable

                                       9
<PAGE>   10

federal or state law, or otherwise, relating to or arising out of the engagement
of Supplier pursuant to and the performance by Supplier or its Affiliates of the
Services contemplated by this Agreement (such claims, damages, losses, expenses
and liabilities being each referred to in this Section 8.2 as a "Loss"). In the
event that any Loss shall be caused in part by the negligence of a Supplier
Indemnitee (excluding liability without fault of a Supplier Indemnitee), Owner's
indemnity shall be limited by and in proportion to the comparative degrees of
negligence of Owner and such Supplier Indemnitee.

      8.3 Indemnification Term. The duty to indemnify under this Article VIII
will continue in full force and effect notwithstanding the expiration or
termination of this Agreement with respect to any claim or action based on facts
or conditions which occur prior to such termination or expiration.

      8.4 Indemnification Procedures. If either Party (the "Indemnified Party")
intends to seek indemnification under this Article VIII from the other Party
(the "Indemnifying Party") with respect to any action or claim of a third party
against the Indemnified Party, the Indemnified Party shall give the Indemnifying
Party notice of such claim or action within thirty (30) days of the commencement
of, or actual knowledge by the Indemnified Party of, such claim or action.
Failure to provide such notice shall not relieve the Indemnifying Party of its
obligations hereunder so long as the Indemnifying Party is not materially harmed
by the Indemnified Party's failure to give timely notice of the claim or action.
The Indemnifying Party shall, at its sole cost and expense, defend any such
claim or action; provided, however, that the Indemnified Party shall, at its own
cost and expense, have the right to participate in the defense of or settlement
of any such claim or action. The Indemnified Party shall not compromise or
settle any such claim or action without the prior written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld.

      8.5 Limitation of Indemnification Obligation. Notwithstanding anything
contained herein, neither Party hereto nor its members, Affiliates, directors,
officers, shareholders, employees, agents, representatives and Lenders will be
liable to the other for any special, indirect or consequential damage of such
other Party arising out of or in any way related to performance or
non-performance of any obligation hereunder. Supplier's cumulative liability
under this Agreement shall be limited to the amount of compensation paid to
Supplier hereunder, plus any costs or expenses for which Supplier has been
reimbursed by Owner pursuant to the terms hereof.

                                       10
<PAGE>   11

                         IX. EVENTS OF DEFAULT; REMEDIES

      9.1 Owner Default. Each of the following events shall constitute a default
by Owner hereunder (an "Owner Default") except to the extent excused by the
fault, action or inaction of Supplier:

      9.1.1 The failure by Owner to fulfill any of its material obligations
            hereunder following receipt of written notice thereof from Supplier,
            unless Owner shall have cured the same within thirty (30) days from
            the date of receipt of such notice, or within such longer period as
            may be reasonably required to cure such failure given the nature
            thereof, provided that the failure is curable, that Owner proceeds
            and continues with diligence to correct such failure, and that such
            longer period shall not exceed ninety (90) days from the receipt of
            such notice.

      9.1.2 The failure of Owner to make any undisputed payment due Supplier
            herein within thirty (30) days of the date such payment is due.

Upon the occurrence of an Owner Default, Supplier, in addition to any remedies
at law or in equity, may terminate this Agreement by providing written notice to
Owner. Termination shall be effective seven (7) days after receipt of notice by
Owner.

      9.2 Supplier Default. Each of the following events shall constitute
default by Supplier hereunder (a "Supplier Default") except to the extent
excused by the fault, action or inaction of Owner:

      9.2.1 The failure by Supplier to fulfill any of its material obligations
            hereunder following receipt of written notice thereof from Owner,
            unless Supplier shall have cured the same within thirty (30) days
            from the date of receipt of such notice, or within such longer
            period as may be reasonably required to cure such failure given the
            nature thereof, provided that the failure is curable, that Supplier
            proceeds and continues with diligence to correct such failure, and
            that such longer period shall not exceed ninety (90) days from the
            receipt of such notice

                                       11
<PAGE>   12

      9.2.2 The failure of Supplier to make any undisputed payment due Owner
            hereunder within thirty (30) days of the date such payment is due.

Upon the occurrence of a Supplier Default, Owner, in addition to any other
remedies at law or in equity, may terminate this Agreement by providing written
notice to Supplier. Termination shall be effective seven (7) days after receipt
of notice by Supplier.

      9.3 Remedies. In the case of an Owner Default or Supplier Default, in
addition to the right to terminate this Agreement as described above, the
non-defaulting Party shall have the right to seek any and all remedies available
hereunder, at law or in equity. Such remedies shall include the payment of
damages (other than special, punitive, indirect, or consequential damages) by
the defaulting Party. All rights and remedies of the Parties shall be
cumulative, and may, to the extent permitted by law, be exercised concurrently
or separately, and the exercise of one right or remedy shall not be deemed to be
an election of such right or remedy or to preclude or waive the exercise of any
other right or remedy.

                                   X. NOTICES

      10.1 General Requirements. All notices and other communications required
or permitted by this Agreement sent by mail shall become effective when
delivered (including by messenger or courier) or when received by facsimile,
telex, telegram or such other method of telecommunication as is capable of
creating a writing.

      10.2 Addresses of the Parties. All notices and other communications shall
be forwarded to the Parties at the following addresses, or facsimile numbers, or
at such substitute addresses or substitute facsimile numbers as a Party may
designate by written notice to the other Party in the manner specified herein:

      If to Owner: Louisiana Generating LLC
                   1221 Nicollet Mall
                   Suite 700
                   Minneapolis, MN 55403
                   Facsimile: 612-373-5392
                   Attention: Alan Williams

                                       12
<PAGE>   13

      If to Supplier:    NRG Operating Services, Inc.
                         1221 Nicollet Mall, Suite 700
                         Minneapolis, MN  55403
                         Facsimile: 612-373-5346
                         Attention: President

                         With a copy to:

                         NRG Energy Inc.
                         1221 Nicollet Mall,
                         Suite 700
                         Minneapolis, MN  55403
                         Facsimile: 612-373-5392
                         Attention: Vice President & General Counsel

                               XI. APPLICABLE LAW

This agreement shall be governed by, and construed and interpreted in
accordance with, the laws of the State of New York without regard to the
conflict of law rules thereof (other than Section 5-1401 of the New York
General Obligations Law).

                               XII. SEVERABILITY

In the event that any provision of this Agreement is held to be unenforceable
or invalid by any court of competent jurisdiction, Supplier and Owner shall
negotiate an equitable adjustment in the provisions of this Agreement with a
view toward effecting the purposes of this Agreement, and the validity and
enforceability of the remaining provisions shall not be affected thereby.

                          XIII. AMENDMENTS AND WAIVERS

This Agreement may not be amended or otherwise changed orally, and any waiver,
amendment, modification or supplement hereof must be in writing and executed by
both Parties.

                                       13

<PAGE>   14
                             XIV. ENTIRE AGREEMENT

This Agreement constitutes the entire agreement between the Parties with
respect to the subject matter hereof, and supersedes the terms and conditions
of any previous agreements or understandings.

                             XV. EFFECTIVE WAIVERS

Either Party's waiver of any breach or failure to enforce any of the terms,
covenants, conditions or other provisions of this Agreement at any time shall
not, in any way, affect, limit, modify or waive that Party's right thereafter
to enforce or compel strict compliance with every term, covenant, condition or
other provision, notwithstanding any course of dealing, course of performance,
or custom of trade.

               XVI. ASSIGNMENT; SUCCESSORS AND PERMITTED ASSIGNS

Except as hereinafter provided to the contrary, this Agreement shall not be
assignable by either Party hereto without the express written consent of the
other, which consent shall not be unreasonable withheld. Supplier hereby
consents that Owner may assign its rights under this Agreement as security for
the obligations of Owner to its Lenders (if any) and this Agreement shall
continue in full force and effect in favor of the Lenders (if any), or their
appointee or designee, as the successor to Owner. Liability of any Party
hereunder shall survive an assignment. This Agreement shall be binding upon,
and inure to the benefit of, the Parties hereto and their respective successors
and permitted assigns.

                        XVII. EXECUTION IN COUNTERPARTS

This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, and all of which, when taken together, shall constitute
one and the same Agreement.

                                       14

<PAGE>   15
                           XVIII. DISPUTE RESOLUTION

Owner and Supplier agree to negotiate in good faith in an effort to resolve any
dispute related to this Agreement that may arise between the parties. If the
dispute cannot be resolved promptly by negotiation at a senior management level,
then either party may give the other party written notice that the dispute
should be submitted to mediation. Promptly thereafter, a mutually acceptable
mediator shall be chosen by the parties, who shall share the cost of mediation
services equally. If the dispute has not been resolved by mediation within
ninety (90) days after the date of written notice requesting mediation, then
either party may initiate litigation and pursue any and all remedies at law or
at equity that such party is entitled to.

                     XIX. RENEGOTIATION OF COMMERCIAL TERMS

The parties acknowledge that the commercial terms of this Agreement reflect the
Affiliate relationship that exists between Owner and Supplier. In the event that
any portion of Owner, its parent, NRG South Central Generating LLC ("NRG South
Central"), or NRG South Central's members (NRG Central U.S. LLC or South Central
Generation Holding LLC) is sold, transferred or conveyed to a non-Affiliate,
Owner and Supplier agree to renegotiate the commercial terms of this Agreement
to reflect an arms-length commercial arrangement.

                                       15

<PAGE>   16
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement effective
as of the date and year first set forth above.

LOUISIANA GENERATING LLC

By: /s/ Craig A. Mataczynski
    ------------------------
    Craig A. Mataczynski
    Vice President

NRG OPERATING SERVICES, INC.

By: /s/  Craig A. Mataczynski
    ------------------------
    Craig A. Mataczynski
    President

<PAGE>   17
                                   EXHIBIT A

                            DESCRIPTION OF SERVICES

The Services supplied by Supplier under this Agreement shall include, but not be
limited to, the following:

1.   Performing O&M budget tracking, analysis and recommendations, and
effecting any approved adjustments.

2.   Administering the Additional Agreements.

3.   Providing annual, quarterly, and monthly budget analysis with
recommendations for improvements.

4.   If and as directed by Owner, providing property and excess liability
insurance for Owner, in the amounts and in the manner directed by Owner.

5.   Measuring training program performance for Owner operations and
maintenance personnel in an economical fashion.

6.   Reviewing safety rules, including industrial hygiene practices for the
Facilities, to ensure they are consistent with all applicable laws, Approvals
and Permits, and prudent engineering and operating practices.

7.   Reviewing operating practices and rules to ensure compliance with all
applicable environmental laws and permits.

8.   Ensuring that key component technical risk assessment is performed and
making recommendations to Owner concerning the operational reliability,
availability and maintainability of the Facilities after completion of said
assessment.

9.   Reviewing and making recommendations to Owner regarding the supply and
stock of strategic spare parts.

10.  Providing technical support as requested.

11.  Providing special support services as requested.

12.  Ensuring Owner compliance with prudent independent power industry practice
standards.

13.  Monitoring compliance by Owner with the terms and conditions of the Joint
Ownership Agreement.

                                       17
<PAGE>   18
                                   EXHIBIT B

                           HOURLY RATES FOR SERVICES

<TABLE>
<S>                                     <C>
--------------------------------------------------------------------
                                        2000
--------------------------------------------------------------------
                                        LB
--------------------------------------------------------------------
                                        Loaded
                                        Rate
--------------------------------------------------------------------
Senior Manager                          86.00
--------------------------------------------------------------------
Manager                                 77.00
--------------------------------------------------------------------
Supervisor                              52.00
--------------------------------------------------------------------
Lawyer                                  100.00
--------------------------------------------------------------------
Senior Engineer                         69.00
--------------------------------------------------------------------
Engineer                                58.00
--------------------------------------------------------------------
Specialist                              46.00
--------------------------------------------------------------------
Designer                                46.00
--------------------------------------------------------------------
Draftsman                               46.00
--------------------------------------------------------------------
Sr. Plant Technician                    46.00
--------------------------------------------------------------------
Senior Secretary                        35.00
--------------------------------------------------------------------
Secretary                               35.00
--------------------------------------------------------------------
Clerical                                35.00
--------------------------------------------------------------------

--------------------------------------------------------------------
</TABLE>

                                       19

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