Prospectus Supplement (to Prospectus Dated January 7, 1999)

$ 300,000,000

Carolina Power & Light Company                                  [GRAPHIC]
                                                                  CP&L
Medium-Term Notes, Series D                                       ----

We may offer from time to time Medium-Term Notes (the "Notes"). The specific
terms of any Notes offered will be included in a pricing supplement. Unless the
pricing supplement provides otherwise, the Notes offered will have the following
general terms:

Maturity

o The Notes will mature nine months or more from the date of issue.

Interest

o   The Notes will bear interest at either a fixed or a floating rate. Floating
    rate interest will be based on one of the following:

     o CD Rate;
     o CMT Rate;
     o Commercial Paper Rate;
     o EURIBOR;
     o Federal Funds Rate;
     o LIBOR;
     o Prime Rate;
     o Treasury Rate; or
     o Any other rate specified in the applicable pricing supplement.

o   Fixed rate interest will be paid on May 15 and November 15, accruing from
    the date of issue.

o   Floating rate interest will be paid on the dates stated in the applicable
    pricing supplement.

Form; Denomination

o   The Notes will be held in global form by The Depository Trust Company,
    unless otherwise specified.

o   The Notes will have minimum denominations of $1,000 or equivalent if issued
    in a currency other than U.S. dollars.

Redemption; Repayment

o   The Notes may be either redeemed by us or repaid at your option if specified
    in the applicable pricing supplement.

           --------------------------------------------------------
Investing in the Notes involves risks. See "Foreign Currency Risks" beginning on
page S-5.
           --------------------------------------------------------
Neither the Securities and Exchange Commission (the "SEC") nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus supplement or the attached prospectus is truthful
or complete. Any representation to the contrary is a criminal offense.
           ========================================================


                                     Per Note             Total
                                    -------------------- ------------------------
                                                   
 Price to Public                               100%    $300,000,000
 Agents' Commissions                    .125%-.750%    $375,000-$2,250,000
 Proceeds to Us (Before Expenses)   99.875%-99.250%    $299,625,000-$297,750,000


Offers to purchase the Notes are being solicited from time to time by the Agents
listed below. The Agents have agreed to use their reasonable efforts to sell the
Notes. We may also sell Notes to one or more Agents as principals for resale at
varying or fixed offering prices. There is no established trading market for the
Notes, and we cannot assure you that a secondary market for the Notes will
develop.

Chase Securities Inc.
      First Union Securities, Inc.
           Goldman, Sachs & Co.
                Merrill Lynch & Co.
                      J.P. Morgan & Co.
                              Salomon Smith Barney

           --------------------------------------------------------
           The date of this prospectus supplement is June 30, 2000.

                                TABLE OF CONTENTS



            Prospectus Supplement
                                             
Summary .....................................    S-3
Foreign Currency Risks ......................    S-5
Use of Proceeds .............................    S-6
Description of The Notes ....................    S-6
United States Federal Taxation ..............    S-28
Plan of Distribution ........................    S-38
Legal Matters ...............................    S-39





                 Prospectus
                                             
About This Prospectus .......................      2
Where You Can Find More Information .........      2
Documents Incorporated By Reference .........      2
Our Company and Address .....................      3
Ratio of Earnings to Fixed Charges ..........      3
Application of Proceeds .....................      3
Description of the Securities ...............      4
Description of First Mortgage Bonds .........      4
Description of Senior Notes .................      8
Description of Debt Securities ..............     17
Global Securities ...........................     24
Plan of Distribution ........................     25
Experts .....................................     26
Legal Opinions ..............................     26


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

      In making your investment decision, you should rely only on the
information contained or incorporated by reference in this prospectus supplement
and the attached prospectus. We have not authorized anyone to provide you with
any other information. If you receive any unauthorized information, you must not
rely on it.

      We are offering to sell the Notes only in places where sales are
permitted.

      You should not assume that the information contained or incorporated by
reference in this prospectus supplement or the attached prospectus is accurate
as of any date other than its respective date.

                                       S-2

                                     SUMMARY


      The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this prospectus supplement, in the
accompanying prospectus, in the applicable pricing supplement and in the
financial statements or other documents incorporated by reference.

General Terms of the Notes

      We may offer from time to time up to U.S. $300,000,000, or the equivalent
of this amount in other currencies, of the Notes described in this prospectus
supplement. We refer to the offering of the Notes as our Medium-Term Note
Program. The following summary describes the Notes we are offering under this
program in general terms only.

     o The Notes will mature nine months or more from the date of issuance and
       will pay interest, if any, on the dates specified in the applicable
       pricing supplement.

     o The Notes will bear interest at either a fixed rate, which may be zero in
       the case of Notes issued at an original issue discount, or a floating
       rate.

     o The Notes will be issued in U.S. dollars, unless we specify otherwise in
       the applicable pricing supplement.

     o The Notes may be either redeemed by us or repaid at your option, if
       specified in the applicable pricing supplement.

     o Payments of principal and/or interest on the Notes may be linked to
       currency prices, commodity prices, single securities, baskets of
       securities or indices.

     o We may issue amortizing Notes that pay a level amount in respect of both
       interest and principal amortized over the life of the Notes.

     o The Notes will be held in global form by The Depository Trust Company,
       unless we specify otherwise in the applicable pricing supplement.

     o The Notes will not be listed on any securities exchange, unless we
       specify otherwise in the applicable pricing supplement.

Forms of Securities

      The securities that we offer under our Medium-Term Note Program will be
issued in fully registered form and will be represented by a global security
registered in the name of a nominee of The Depository Trust Company, New York,
New York ("DTC"), as Depository under the Indenture, unless the applicable
pricing supplement specifies that the securities will be represented by
certificates issued in definitive form. For information on DTC's book-entry
system, see "Description of the Notes -- Form, Denomination and Registration --
Book-Entry Note" below.

                                       S-3

Carolina Power & Light Company ("CP&L")

      We are primarily engaged in the generation, transmission, distribution and
sale of electricity in portions of North Carolina and South Carolina. We also
provide natural gas distribution and service in portions of North Carolina
through a wholly-owned subsidiary.

Recent Developments

      On June 19, 1999, we completed a restructuring of CP&L so that it became a
wholly-owned subsidiary of CP&L Energy, Inc., a newly formed holding company.
The holders of our common stock became the holders of the outstanding common
stock of CP&L Energy, through a one-for-one share exchange. Our outstanding
indebtedness, including the Notes offered by this prospectus supplement and the
accompanying prospectus, will continue as obligations of CP&L.

      On August 22, 1999, we announced an agreement whereby CP&L Energy will
acquire all of the outstanding shares of Florida Progress Corporation ("Florida
Progress") for approximately $5.3 billion in stock and cash. The Agreement was
amended on March 3, 2000 to include additional consideration consisting of
contingent value obligations related to the performance of four synthetic fuel
plants owned by Florida Progress. The transaction is expected to be completed
during the fall of 2000. Completion of the transaction is subject to the
satisfaction or waiver of customary closing conditions, including obtaining all
necessary regulatory approvals. Florida Progress is a diversified utility
holding company with assets of $6.5 billion as of March 31, 2000. It reported
operating revenues of $3,485.1 million, $3,620.3 million and $3,316.4 million in
1999, 1998, and 1997, respectively, and net income of $314.9 million, $281.7
million and $54.3 million in 1999, 1998 and 1997 respectively. Its principal
subsidiary is Florida Power Corporation, which serves 1.4 million customers in
Florida. Florida Progress' diversified operations include rail services, marine
operations and coal mining.

Summary Financial Information



                                    Three Months                                Twelve Months Ended
                                   Ended March 31,                                 December 31,
                               ----------------------- ---------------------------------------------------------------------
                                   2000        1999         1999          1998          1997          1996          1995
                               ----------- ----------- ------------- ------------- ------------- ------------- -------------
                                                                               (Dollars in Millions)
                                                                                          
Income Statement Data
  Operating Revenues .........  $ 877.1     $ 762.9     $ 3,357.6     $ 3,191.7     $ 3,036.6     $ 2,999.3     $ 3,006.6
  Net Income .................  $  86.0     $  92.2     $   382.3     $   399.2     $   388.3     $   391.3     $   372.6
Ratio of Earnings to Fixed
  Charges(a) .................     3.93x       4.40x         4.12x         4.38x         4.17x         4.12x         3.67x


- --------
(a) Ratios for the periods ending March 31, 2000 and March 31, 1999 represent
    the ratios for the twelve month periods ending on those dates.

How to Reach Us

      You may contact us at our principal executive offices at 411 Fayetteville
Street, Raleigh, North Carolina 27601-1748, telephone 919-546-6111.

                                       S-4

                             FOREIGN CURRENCY RISKS


      You should consult your financial and legal advisors as to any specific
risks entailed by an investment in Notes that are denominated or payable in, or
the payment of which is linked to the value of, foreign currency. These Notes
are not appropriate investments for investors who are not sophisticated in
foreign currency transactions.

      The information set forth in this prospectus supplement is directed to
prospective purchasers who are United States residents. We disclaim any
responsibility to advise prospective purchasers who are residents of countries
other than the United States of any matters arising under foreign law that may
affect the purchase of or holding of, or receipt of payments on, the Notes.
These persons should consult their own legal and financial advisors concerning
these matters.

Exchange Rates and Exchange Controls May Affect the Securities' Value or Return

      Securities Involving Foreign Currencies Are Subject to General Exchange
Rate and Exchange Control Risk. An investment in a Note that is denominated or
payable in, or the payment of which is linked to the value of, currencies other
than U.S. dollars entails significant risks. These risks include the possibility
of significant changes in rates of exchange between the U.S. dollar and the
relevant foreign currencies and the possibility of the imposition or
modification of exchange controls by either the U.S. or foreign governments.
These risks generally depend on economic and political events over which we have
no control.

      Exchange Rates Will Affect Your Investment. In recent years, rates of
exchange between U.S. dollars and some foreign currencies have been highly
volatile, and this volatility may continue in the future. Fluctuations in any
particular exchange rate that have occurred in the past are not necessarily
indicative, however, of fluctuations that may occur during the term of any Note.
Depreciation against the U.S. dollar of the currency in which a Note is payable
would result in a decrease in the effective yield of the Note on a U.S. dollar
basis and could result in an overall loss to you on a U.S. dollar basis. In
addition, depending on the specific terms of a currency-linked Note, changes in
exchange rates relating to any of the relevant currencies could result in a
decrease in its effective yield and in your loss of all or a substantial portion
of the value of that Note.

      We Have No Control Over Exchange Rates. Foreign exchange rates can either
float or be fixed by sovereign governments. Exchange rates of most economically
developed nations are permitted to fluctuate in value relative to the U.S.
dollar and to each other. However, from time to time governments may use a
variety of techniques, such as intervention by a country's central bank or the
imposition of regulatory controls or taxes, to influence the exchange rates of
their currencies. Governments may also issue a new currency to replace an
existing currency or alter the exchange rate or relative exchange
characteristics by a devaluation or revaluation of a currency. These
governmental actions could change or interfere with currency valuations and
currency fluctuations that would otherwise occur in response to economic forces,
as well as in response to the movement of currencies across borders. As a
consequence, these government actions could adversely affect the U.S.
dollar-equivalent yields or payouts for (a) Notes denominated or payable in
currencies other than U.S. dollars and (b) currency-linked Notes.

      We will not make any adjustment or change in the terms of the Notes in the
event that exchange rates should become fixed, or in the event of any
devaluation or revaluation or imposition of exchange or other regulatory
controls or taxes, or in the event of other developments affecting the U.S.
dollar or any applicable foreign currency. You will bear those risks.

      Some Foreign Currencies May Become Unavailable. Governments have imposed
from time to time, and may in the future impose, exchange controls that could
also affect the availability of a specified foreign currency. Even if there are
no actual exchange controls, it is possible that the applicable currency for any
Note not denominated in U.S. dollars would not be available when payments on
that Note are due.

                                       S-5

      Alternative Payment Method Used If Payment Currency Becomes Unavailable.
If a payment currency is unavailable, we would make required payments in U.S.
dollars on the basis of the market exchange rate. However, if the applicable
currency for any Note is not available because the Euro has been substituted for
that currency, we would make the payments in Euros. The mechanisms for making
payments in these alternative currencies are explained in "Description of Notes
- -- Interest and Principal Payments" below.

      We Will Provide Currency Exchange Information In Pricing Supplements. The
applicable pricing supplement will include information regarding current
applicable exchange controls, if any, and historic exchange rate information for
any Note denominated or payable in a foreign currency or requiring payments that
are related to the value of a foreign currency. That information will be
furnished only for information purposes. You should not assume that any historic
information concerning currency exchange rates will be representative of the
range of or trends in fluctuations in currency exchange rates that may occur in
the future.

Currency Conversions May Affect Payments On Some Securities

      The applicable pricing supplement may provide for (1) payments on a
non-U.S. dollar denominated Note to be made in U.S. dollars or (2) payments on a
U.S. dollar denominated Note to be made in a currency other than U.S. dollars.
In these cases The Chase Manhattan Bank in its capacity as exchange rate agent,
or a different exchange rate agent identified in the pricing supplement, will
convert the currencies. You will bear the costs of conversion through deductions
from those payments.

Exchange Rates May Affect the Value Of a New York Judgment Involving Non-U.S.
Dollar Securities

      The Notes will be governed by and construed in accordance with the laws of
the State of New York. Unlike many courts in the United States outside the State
of New York, the courts in the State of New York customarily enter judgments or
decrees for money damages in the foreign currency in which Notes are
denominated. These amounts would then be converted into U.S. dollars at the rate
of exchange in effect on the date the judgment or decree is entered. You would
bear the foreign currency risk during litigation.

      Additional risks specific to particular securities issued under our
Medium-Term Note Program will be detailed in the applicable pricing supplements.


                                 USE OF PROCEEDS

      We will use the net proceeds from the sale of the Notes to reduce the
outstanding balance of our commercial paper and other short-term indebtedness,
and for general corporate purposes. On May 31, 2000, the balance of our
outstanding commercial paper and other short-term indebtedness was approximately
$724.8 million, and the weighted average portfolio yield of that balance was
5.71%.


                            DESCRIPTION OF THE NOTES

      We will issue Notes under an Indenture (For Debt Securities), dated
October 28, 1999 (as amended, modified or supplemented from time to time, the
"Indenture"), between us and The Chase Manhattan Bank, as trustee (the
"Trustee"), selected portions of which we have summarized below. The summary is
not complete. The Indenture has been filed as an exhibit to the Registration
Statement. You should read the Indenture provisions that may be important to
you. Capitalized terms used but not defined in this prospectus supplement or in
the accompanying prospectus have the meanings given to them in the Indenture.
This description of the particular terms of the Notes supplements, and, to the
extent inconsistent therewith, replaces, the description of the general terms
and provisions of the Debt Securities and the Indenture set forth in the
accompanying prospectus under the heading "Description of Debt Securities." The
Notes are "Debt Securities" as the term is

                                       S-6

used in the accompanying prospectus. The term "Debt Securities," as used under
this caption, refers to all Debt Securities issuable from time to time under the
Indenture.

General Terms of Notes

      The Notes will constitute a single series under the Indenture, together
with any medium-term notes we issue in the future under the Indenture that we
designate as being part of that series.

Ranking

      The Notes will be senior unsecured obligations and will rank equally with
all of our other senior unsecured indebtedness from time to time outstanding, as
described in "Description of Debt Securities" in the accompanying prospectus.
The Indenture does not limit the aggregate principal amount of Debt Securities
that may be issued thereunder. Debt Securities may be issued under the Indenture
from time to time as a single series or in two or more separate series up to the
aggregate principal amount from time to time authorized for each series. We may,
from time to time, without the consent of the holders of the Notes, provide for
the issuance of Notes or other Debt Securities under the Indenture in addition
to the Notes offered by this prospectus supplement.

      The Notes will be effectively subordinate to all currently outstanding and
future first mortgage bonds and any other senior secured indebtedness of ours.
The first mortgage bond holders have a first lien on substantially all of our
assets. As of the date of this prospectus supplement, we had an aggregate
principal amount of $2,139,070,000 First Mortgage Bonds outstanding, some of
which have been issued to provide security for holders of other senior
indebtedness. The Indenture does not limit the amount of First Mortgage Bonds or
other secured senior indebtedness that we may issue.

Terms Specified in Pricing Supplements

      A pricing supplement will specify the following terms of any issuance of
the Notes to the extent applicable:

         o the specific designation of the Notes;

         o the issue price;

         o the aggregate principal amount;

         o the denominations or minimum denominations;

         o the original issue date;

         o the scheduled maturity date and any terms related to any extension of
           the maturity date;

         o whether the Notes are fixed rate Notes, floating rate Notes, Notes
           with original issue discount and/or amortizing Notes;

         o for fixed rate Notes, the rate per year at which the Notes will bear
           interest, if any, or the method of calculating that rate and the
           dates on which interest will be payable;

         o for floating rate Notes, the base rate, the index maturity, the
           spread, the spread multiplier, the initial interest rate, the
           interest reset periods, the interest payment dates, the maximum
           interest rate, the minimum interest rate and any other terms relating
           to the particular method of calculating the interest rate for the
           Notes;

                                       S-7

         o if the Notes are amortizing Notes, the amortization schedule;

         o whether the Notes may be called, or redeemed, in whole or in part, at
           our option or repaid at your option prior to the scheduled maturity
           date, and the terms of any redemption or repayment;

         o whether the Notes are currency-linked Notes and/or Notes linked to
           commodity prices, single securities, baskets of securities or
           indices;

         o if any Notes are not denominated and payable in U.S. dollars, the
           currency or currencies in which the principal, premium, if any, and
           interest, if any, will be paid, which we refer to as the "specified
           currency," along with any other terms relating to the non-U.S. dollar
           denomination, including exchange rates as against the U.S. dollar at
           selected times during the last five years and any exchange controls
           affecting that specified currency;

         o whether the Notes will be listed on any stock exchange;

         o whether the Notes will be issued in book-entry or certificated form;
           and

         o any other terms on which we will issue the Notes.

Some Definitions

      We have defined some of the terms that we use frequently in this
prospectus supplement below:

      A "business day" means any day, other than a Saturday or Sunday, which is
both (a) neither a legal holiday nor a day on which banking institutions are
authorized or required by law or regulation to close (x) in The City of New York
and (y) for Notes denominated in a specified currency other than U.S. dollars or
Euros, in the principal financial center (as defined below) of the country of
the specified currency and (b) for Notes denominated in Euros, that is also a
day on which the Trans-European Automated Real-time Gross Settlement Express
Transfer System, which is commonly referred to as "TARGET," is operating;
provided that with respect to Notes as to which LIBOR is the base rate, the day
must also be a London banking day (as defined below).

      "Euro LIBOR Notes" means LIBOR Notes for which the index currency is
Euros.

      An "interest payment date" for any Note means a date on which, under the
terms of that Note, regularly scheduled interest is payable.

      "London banking day" means any day on which dealings in deposits in the
relevant index currency are transacted in the London interbank market.

      "Principal financial center" means, as applicable: the capital city of the
country issuing the specified currency; or the capital city of the country to
which the index currency (as defined under "Base Rates -- LIBOR Notes" below)
relates; provided, however, that with respect to United States dollars,
Australian dollars, Canadian dollars, Deutsche marks, Dutch guilders, Italian
lire, Portuguese escudos, South African rand and Swiss francs, the principal
financial center shall be The City of New York, Sydney and (solely in the case
of the specified currency) Melbourne, Toronto, Frankfurt, Amsterdam, Milan,
London (solely in the case of the index currency), Johannesburg and Zurich,
respectively.

      The "record date" for any interest payment date is the date 15 calendar
days prior to that interest payment date, whether or not that date is a business
day.

                                       S-8

      "TARGET Settlement Day" means any day on which the Trans-European
Automated Real-time Gross Settlement Express Transfer System is open.

      References in this prospectus supplement to "U.S. dollars" or "U.S.$" or
"$" are to the currency of the United States of America.

Form, Denomination and Registration

      We will offer the Notes on a continuing basis and will issue Notes only in
fully registered form either as book-entry Notes or as certificated Notes.

Book-Entry Notes

      For Notes in book entry form, we will issue one or more global
certificates representing the entire issue of Notes. The Notes will be deposited
with, or on behalf of DTC. The Notes will be represented by one or more global
notes registered in the name of Cede & Co., as nominee of DTC. The interests of
beneficial owners in the global notes will be represented through financial
institutions acting on their behalf as direct or indirect participants in DTC.

      Ownership of beneficial interests in a global note will be limited to
persons who have accounts with DTC ("direct participants") or persons such as
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a direct participant, either directly or
indirectly ("indirect participants"). Ownership of beneficial interests in the
global notes will be shown on, and the transfer of these ownership interests
will be effected only through, records maintained by DTC or its nominee (with
respect to interests of direct participants) and the records of direct
participants (with respect to interests of persons other than direct
participants).

      So long as DTC, or its nominee, is the registered owner or holder of a
global note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such global note for all
purposes under the Indenture and the Notes. In addition, no beneficial owner of
an interest in a global note will be able to transfer that interest except in
accordance with DTC's applicable procedures (in addition to those under the
Indenture referred to herein).

      Payments on global notes will be made to DTC or its nominee, as the
registered owner thereof. Neither we, the Trustee nor any paying agent will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the global notes
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.

      We expect that DTC or its nominee will credit direct participants'
accounts on the payable date with payments in respect of a global note in
amounts proportionate to their respective beneficial interest in the principal
amount of such global note as shown on the records of DTC or its nominee, unless
DTC has reason to believe that it will not receive payment on the payable date.
We also expect that payments by direct participants to owners of beneficial
interests in such global note held through such participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in "street name." Such
payments will be the responsibility of such participants.

      Transfers between direct and indirect participants in DTC will be effected
in accordance with DTC rules. The laws of some states require that certain
persons take physical delivery of securities in definitive form. Consequently,
the ability to transfer beneficial interests in a global note to such persons
may be limited. Because DTC can only act on behalf of direct participants, who
in turn act on behalf of indirect participants and certain banks, the ability of
a person having a beneficial interest in a global note to pledge such interest

                                       S-9

to persons or entities that do not participate in DTC system, or otherwise take
actions in respect of such interest, may be affected by the lack of a physical
certificate of such interest.

      We believe that it is the policy of DTC that it will take any action
permitted to be taken by a holder of Notes only at the direction of one or more
direct participants to whose account interests in the global notes are credited
and only in respect of such portion of the aggregate principal amount of the
Notes as to which such direct participant or participants has or have given such
direction.

      The Indenture provides that if:

         o DTC notifies us that it is unwilling or unable to continue as
           Depository and a successor depository is not appointed by us within
           90 days, or,

         o DTC ceases to be eligible under the Indenture and a successor
           depository is not appointed by us within 90 days, or

         o we decide to discontinue use of the system of book-entry transfers
           through the Depository or its successor, or

         o an Event of Default with respect to the Notes shall have occurred and
           be continuing and the holders of more than 50% of the aggregate
           principal amount of Notes of any series shall have determined that
           the Notes of that series will no longer be represented by a global
           note or notes,

the global notes will be exchanged for Notes in definitive form of like tenor
and of an equal aggregate principal amount, in authorized denominations. Such
definitive Notes shall be registered in such name or names as DTC shall instruct
the Trustee. It is expected that such instructions may be based upon directions
received by DTC from direct participants with respect to ownership of beneficial
interests in global notes.

      DTC has advised us as follows: DTC is a limited-purpose trust company
organized under the New York Banking Law, a "banking organization" within the
meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial
Code and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds securities that its direct participants
deposit with DTC and facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in direct participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. DTC is owned
by a number of its direct participants, including Merrill Lynch, and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. The rules applicable to DTC and its
direct and indirect participants are on file with the SEC.

      Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the global notes among direct and indirect
participants of DTC, it is under no obligation to perform or continue to perform
such procedures, and such procedures may be discontinued at any time. Neither we
nor the Trustee will have any responsibility for the performance by DTC or its
direct or indirect participants of their respective obligations under the rules
and procedures governing their operations.

      According to DTC, the foregoing information with respect to DTC has been
provided to the financial community for informational purposes only and is not
intended to serve as a representation, warranty, or contract modification of any
kind.

                                      S-10

Certificated Notes

      If we issue Notes in certificated form, the certificate will name the
investor or the investor's nominee as the owner of the Note. The person named in
the Debt Security Register will be considered the owner of the Note for all
purposes under the Indenture. For example, if we need to ask the holders of the
Notes to vote on a proposed amendment to the Notes, the person named in the Debt
Security Register will be asked to cast any vote regarding that Note. If you
have chosen to have some other entity hold a certificate for you, that entity
will be considered the owner of your Note in our records and will be entitled to
cast the vote regarding your Note. You may not exchange certificated Notes for
book-entry Notes or interests in book-entry Notes.

Denominations

      We will issue the Notes:


         o for U.S. dollar-denominated Notes, in denominations of $1,000 or any
           amount greater than $1,000 that is an integral multiple of $1,000; or

         o for Notes denominated in a specified currency other than U.S.
           dollars, in denominations of the equivalent of $1,000, rounded to an
           integral multiple of 1,000 units of the specified currency, or any
           larger integral multiple of 1,000 units of the specified currency, as
           determined by reference to the market exchange rate, as defined under
           " -- Interest and Principal Payments -- Unavailability of Foreign
           Currency" below, on the business day immediately preceding the date
           of issuance.

Interest and Principal Payments

Payments, Exchanges and Transfers

      Holders may present Notes for payment of principal, premium, if any, and
interest, if any, register the transfer of the Notes and exchange the Notes at
the agency maintained by us for that purpose. However, holders of global notes
may transfer and exchange global notes only in the manner and to the extent set
forth above under "Form, Denomination and Registration -- Book-Entry Notes." On
the date of this prospectus supplement, the agent for the payment, transfer and
exchange of the Notes is The Chase Manhattan Bank, acting through its corporate
trust office at 450 West 33rd Street, New York, New York 10001. We refer to The
Chase Manhattan Bank, acting in this capacity, as the "paying agent."

      No service charge will be made for any registration or transfer or
exchange of Notes, but we may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection with the registration of
transfer or exchange of Notes.

      Although we anticipate making payments of principal, premium, if any, and
interest, if any, on most Notes in U.S. dollars, some Notes may be payable in
foreign currencies as specified in the applicable pricing supplement. Currently,
few facilities exist in the United States to convert U.S. dollars into foreign
currencies and vice versa. In addition, most U.S. banks do not offer non-U.S.
dollar denominated checking or savings account facilities. Accordingly, unless
alternative arrangements are made, we will pay principal, premium, if any, and
interest, if any, on Notes that are payable in a foreign currency to an account
at a bank outside the United States, which, in the case of a Note payable in
Euro, will be made by credit or transfer to a Euro account specified by the
payee in a country for which the Euro is the lawful currency.

Recipients of Payments

      The paying agent will pay interest to the person in whose name the Note is
registered at the close of business on the applicable record date. However, upon
maturity, redemption or repayment, the paying agent will pay any interest due to
the person to whom it pays the principal of the Note. The paying agent will make

                                      S-11

the payment of interest on the date of maturity, redemption or repayment,
whether or not that date is an interest payment date. The paying agent will make
the initial interest payment on a Note on the first interest payment date
falling after the date of issuance, unless the date of issuance is less than 15
calendar days before an interest payment date. In that case, the paying agent
will pay interest or, in the case of an amortizing Note, principal and interest,
on the next succeeding interest payment date to the holder of record on the
record date corresponding to the succeeding interest payment date.

Book-Entry Notes

      The paying agent will make payments of principal, premium, if any, and
interest, if any, to the account of DTC, as holder of book-entry Notes, by wire
transfer of immediately available funds. We expect that DTC, upon receipt of any
payment, will immediately credit its participants' accounts in amounts
proportionate to their respective beneficial interests in the book-entry Notes
as shown on the records of DTC. We also expect that payments by DTC's
participants to owners of beneficial interests in the book-entry Notes will be
governed by standing customer instructions and customary practices and will be
the responsibility of those participants.

Certificated Notes

      Except as indicated below for payments of interest at maturity, redemption
or repayment, the paying agent will make U.S. dollar payments of interest
either:

         o by check mailed to the address of the person entitled to payment as
           shown on the Debt Security Register; or

         o for a holder of at least $10,000,000 in aggregate principal amount of
           certificated Notes having the same interest payment date, by wire
           transfer of immediately available funds, if the holder has given
           written notice providing wire transfer instructions to the paying
           agent not later than 15 calendar days prior to the applicable
           interest payment date.

U.S. dollar payments of principal, premium, if any, and interest, if any, upon
maturity, redemption or repayment on a Note will be made in immediately
available funds against presentation and surrender of the Note.

Payment Procedures for Book-Entry Notes Denominated in a Foreign Currency

      Book-entry Notes payable in a specified currency other than U.S. dollars
may provide that a beneficial owner of interests in those Notes may elect to
receive all or a portion of the payments of principal, premium, if any, or
interest, if any, in U.S. dollars. In those cases, DTC will elect to receive all
payments with respect to the beneficial owner's interest in the Notes in U.S.
dollars, unless the beneficial owner takes the following steps:

         o The beneficial owner must give complete instructions to the direct or
           indirect participant through which it holds the book-entry Notes of
           its election to receive those payments in the specified currency
           other than U.S. dollars by wire transfer to an account specified by
           the beneficial owner with a bank located outside the United States.
           In the case of a Note payable in Euro, the account must be a Euro
           account in a country for which the Euro is the lawful currency.

         o The participant must notify DTC of the beneficial owner's election on
           or prior to the third business day after the applicable record date,
           for payments of interest, and on or prior to the twelfth business day
           prior to the maturity date or any redemption or repayment date, for
           payment of principal or premium.

                                      S-12

         o DTC will notify the paying agent of the beneficial owner's election
           on or prior to the fifth business day after the applicable record
           date, for payments of interest, and on or prior to the tenth business
           day prior to the maturity date or any redemption or repayment date,
           for payment of principal or premium.

Beneficial owners should consult their participants in order to ascertain the
deadline for giving instructions to participants in order to ensure that timely
notice will be delivered to DTC.

Payment Procedures for Certificated Notes Denominated in a Foreign Currency

      For certificated Notes payable in a specified currency other than U.S.
dollars, the Notes may provide that the holder may elect to receive all or a
portion of the payments on those Notes in U.S. dollars. To do so, the holder
must send a written request to the paying agent:


         o for payments of interest, on or prior to the fifth business day after
           the applicable record date; or

         o for payments of principal, at least ten business days prior to the
           maturity date or any redemption or repayment date.

To revoke this election for all or a portion of the payments on the certificated
Notes, the holder must send written notice to the paying agent:

         o at least five business days prior to the applicable record date, for
           payment of interest; or

         o at least ten calendar days prior to the maturity date or any
           redemption or repayment date, for payments of principal.

If the holder does not elect to be paid in U.S. dollars, the paying agent will
pay the principal, premium, if any, or interest, if any, on the certificated
Notes:

         o by wire transfer of immediately available funds in the specified
           currency to the holder's account at a bank located outside the United
           States, and in the case of a Note payable in Euro, in a country for
           which the Euro is the lawful currency, if the paying agent has
           received the holder's written wire transfer instructions not less
           than 15 calendar days prior to the applicable payment date; or

         o by check payable in the specified currency mailed to the address of
           the person entitled to payment that is specified in the Debt Security
           Register, if the holder has not provided wire instructions.

However, the paying agent will only pay the principal of the certificated Notes,
any premium and interest, if any, due at maturity, or on any redemption or
repayment date, upon surrender of the certificated Notes at the office or agency
of the paying agent.

Determination of Exchange Rate for Payments in U.S. Dollars for Notes
Denominated in a Foreign Currency

      The exchange rate agent will convert the specified currency into U.S.
dollars for holders who elect to receive payments in U.S. dollars and for
beneficial owners of book-entry Notes that do not follow the procedures we have
described immediately above. The conversion will be based on the highest bid
quotation in The City of New York received by the exchange rate agent at
approximately 11:00 a.m., New York City time, on the second business day
preceding the applicable payment date from three recognized foreign exchange
dealers for the purchase by the quoting dealer:

                                      S-13

         o of the specified currency for U.S. dollars for settlement on the
           payment date;

         o in the aggregate amount of the specified currency payable to those
           holders or beneficial owners of Notes; and

         o at which the applicable dealer commits to execute a contract.

      One of the dealers providing quotations may be the exchange rate agent
unless the exchange rate agent is our affiliate. If those bid quotations are not
available, payments will be made in the specified currency. The holders or
beneficial owners of Notes will pay all currency exchange costs by deductions
from the amounts payable on the Notes.

Unavailability of Foreign Currency

      The relevant specified currency may not be available to us for making
payments of principal of, premium, if any, or interest, if any, on any Note.
This could occur due to the imposition of exchange controls or other
circumstances beyond our control or if the specified currency is no longer used
by the government of the country issuing that currency or by public institutions
within the international banking community for the settlement of transactions.
If the specified currency is unavailable, we may satisfy our obligations to
holders of the Notes by making those payments on the date of payment in U.S.
dollars on the basis of the noon dollar buying rate in The City of New York for
cable transfers of the currency or currencies in which a payment on any Note was
to be made, published by the Federal Reserve Bank of New York, which we refer to
as the "market exchange rate." If that rate of exchange is not then available or
is not published for a particular payment currency, the market exchange rate
will be based on the highest bid quotation in The City of New York received by
the exchange rate agent at approximately 11:00 a.m., New York City time, on the
second business day preceding the applicable payment date from three recognized
foreign exchange dealers for the purchase by the quoting dealer of the specified
currency for U.S. dollars for settlement on the payment date in the aggregate
amount of the specified currency payable to those holders or beneficial owners
of Notes and at which the applicable dealer commits to execute a contract.

      One of the dealers providing quotations may be the exchange rate agent
unless the exchange rate agent is our affiliate. If those bid quotations are not
available, the exchange rate agent will determine the market exchange rate at
its sole discretion.

      These provisions do not apply if a specified currency is unavailable
because it has been replaced by the Euro. If the Euro has been substituted for a
specified currency, we may at our option, or will, if required by applicable
law, without the consent of the holders of the affected Notes, pay the principal
of, premium, if any, or interest, if any, on any Note denominated in the
specified currency in Euro instead of the specified currency, in conformity with
legally applicable measures taken pursuant to, or by virtue of, the treaty
establishing the European Community, as amended by the treaty on European Union.
Any payment made in U.S. dollars or in Euro as described above where the
required payment is in an unavailable specified currency will not constitute an
event of default.

Discount Notes

      Some Notes may be considered to be issued with original issue discount,
which must be included in income for United States federal income tax purposes
at a constant yield. See "United States Federal Taxation -- Discount Notes"
below. If the principal of any Note that is considered to be issued with
original issue discount is declared to be due and payable immediately as
described under "Description of Debt Securities -- Events of Default" in the
prospectus, the amount of principal due and payable on that Note will be as
described in the applicable pricing supplement.

      See the applicable pricing supplement for any special considerations
applicable to these Notes.

                                      S-14

Fixed Rate Notes

      Each fixed rate Note will bear interest from the date of issuance at the
annual rate stated on its face until the principal is paid or made available for
payment.

How Interest is Calculated

      Interest on fixed rate Notes will be computed on the basis of a 360-day
year of twelve 30-day months.

How Interest Accrues

      Interest on fixed rate Notes will accrue from and including the most
recent interest payment date to which interest has been paid or duly provided
for, or, if no interest has been paid or duly provided for, from and including
the issue date or any other date specified in a pricing supplement on which
interest begins to accrue. Interest will accrue to but excluding the next
interest payment date, or, if earlier, the date on which the principal has been
paid or duly made available for payment, except as described below under "If a
Payment Date is Not a Business Day."

When Interest is Paid

      Payments of interest on fixed rate Notes will be made on the interest
payment dates or scheduled maturity date specified in the applicable pricing
supplement. However, if the first interest payment date is less than 15 days
after the date of issuance, interest will not be paid on the first interest
payment date, but will be paid on the second interest payment date.

Amount of Interest Payable

      Interest payments for fixed rate Notes will include accrued interest from
and including the date of issue or from and including the last date in respect
of which interest has been paid, as the case may be, to but excluding the
relevant interest payment date or date of maturity or earlier redemption or
repayment, as the case may be.

If a Payment Date is Not a Business Day

      If any scheduled interest payment date is not a business day, we will pay
interest on the next business day, but interest on that payment will not accrue
during the period from and after the scheduled interest payment date. If the
scheduled maturity date or date of redemption or repayment is not a business
day, we may pay interest and principal and premium, if any, on the next
succeeding business day, but interest on that payment will not accrue during the
period from and after the scheduled maturity date or date of redemption or
repayment.

Amortizing Notes

      A fixed rate Note may pay a level amount in respect of both interest and
principal amortized over the life of the Note. Payments of principal and
interest on amortizing Notes will be made on the interest payment dates
specified in the applicable pricing supplement, and at maturity or upon any
earlier redemption or repayment. Payments on amortizing Notes will be applied
first to interest due and payable and then to the reduction of the unpaid
principal amount. We will provide to the original purchaser, and will furnish to
subsequent holders upon request to us, a table setting forth repayment
information for each amortizing Note.

                                      S-15

Floating Rate Notes

      Each floating rate Note will mature on the date specified in the
applicable pricing supplement. Each floating rate Note will bear interest at a
floating rate determined by reference to an interest rate or interest rate
formula, which we refer to as the "base rate." The base rate may be one or more
of the following:

         o the CD rate,

         o the CMT rate,

         o the commercial paper rate,

         o EURIBOR,

         o the federal funds rate,

         o LIBOR,

         o the prime rate,

         o the Treasury rate, or

         o any other rate or interest rate formula specified in the applicable
           pricing supplement and in the floating rate Note.

Formula for Interest Rates

      The interest rate on each floating rate Note will be calculated by
reference to:


         o the specified base rate based on the index maturity,

         o plus or minus the spread, if any, and/or

         o multiplied by the spread multiplier, if any.

      For any floating rate Note, "index maturity" means the period of maturity
of the instrument or obligation from which the base rate is calculated and will
be specified in the applicable pricing supplement. The "spread" is the number of
basis points (one one-hundredth of a percentage point) specified in the
applicable pricing supplement to be added to or subtracted from the base rate
for a floating rate Note. The "spread multiplier" is the percentage specified in
the applicable pricing supplement to be applied to the base rate for a floating
rate Note.

Limitations on Interest Rate

      A  floating rate Note may also have either or both of the following
         limitations on the interest rate:

         o a maximum limitation, or ceiling, on the rate of interest which may
           accrue during any interest period, which we refer to as the "maximum
           interest rate;"

         o a minimum limitation, or floor, on the rate of interest that may
           accrue during any interest period, which we refer to as the "minimum
           interest rate."

Any applicable maximum interest rate or minimum interest rate will be set forth
in the pricing supplement.

In addition, the interest rate on a floating rate Note may not be higher than
the maximum rate permitted by New York law, as that rate may be modified by
United States law of general application. Under current New York law, the
maximum rate of interest, subject to some exceptions, for any loan in an amount
less than

                                      S-16

$250,000 is 16% and for any loan in the amount of $250,000 or more but less than
$2,500,000 is 25% per annum on a simple interest basis. These limits do not
apply to loans of $2,500,000 or more.

How Floating Interest Rates are Reset

      The interest rate in effect from the date of issue to the first interest
reset date for a floating rate Note will be the initial interest rate specified
in the applicable pricing supplement. We refer to this rate as the "initial
interest rate." The interest rate on each floating rate Note may be reset daily,
weekly, monthly, quarterly, semiannually or annually. This period is the
"interest reset period" and the first day of each interest reset period is the
"interest reset date." The "interest determination date" for any interest reset
date is the day the calculation agent will refer to when determining the new
interest rate at which a floating rate will reset, and is applicable as follows:

         o for CD rate Notes, commercial paper rate Notes, federal funds rate
           Notes, prime rate Notes and CMT rate Notes, the interest
           determination date will be the second business day prior to the
           interest reset date;

         o for EURIBOR Notes or Euro LIBOR Notes, the interest determination
           date will be the second TARGET Settlement Day, as defined under " --
           General Terms of Notes -- Some Definitions," prior to the interest
           reset date;

         o for LIBOR Notes (other than Euro LIBOR Notes), the interest
           determination date will be the second London banking day prior to the
           interest reset date, except that the interest determination date
           pertaining to an interest reset date for a LIBOR Note for which the
           index currency is pounds sterling will be the interest reset date;
           and

         o for Treasury rate Notes, the interest determination date will be the
           day of the week in which the interest reset date falls on which
           Treasury bills would normally be auctioned.

      Treasury bills are normally sold at auction on Monday of each week, unless
that day is a legal holiday, in which case the auction is normally held on the
following Tuesday, but the auction may be held on the preceding Friday. If, as
the result of a legal holiday, the auction is held on the preceding Friday, that
Friday will be the interest determination date pertaining to the interest reset
date occurring in the next succeeding week. If an auction falls on a day that is
an interest reset date, that interest reset date will be the next following
business day.

      The interest reset dates will be specified in the applicable pricing
supplement. If an interest reset date for any floating rate Note falls on a day
that is not a business day, it will be postponed to the following business day,
except that, in the case of a EURIBOR Note or a LIBOR Note, if that business day
is in the next calendar month, the interest reset date will be the immediately
preceding business day.

      In the detailed descriptions of the various base rates which follow, the
"calculation date" pertaining to an interest determination date means the
earlier of (1) the tenth calendar day after that interest determination date,
or, if that day is not a business day, the next succeeding business day, and (2)
the business day preceding the applicable interest payment date or maturity date
or, for any principal amount to be redeemed or repaid, any redemption or
repayment date.

How Interest is Calculated

      Interest on floating rate Notes will accrue from and including the most
recent interest payment date to which interest has been paid or duly provided
for, or, if no interest has been paid or duly provided for, from and including
the issue date or any other date specified in a pricing supplement on which
interest begins to accrue. Interest will accrue to but excluding the next
interest payment date or, if earlier, the date on which

                                      S-17

the principal has been paid or duly made available for payment, except as
described below under "If a Payment Date is Not a Business Day."

      Upon the request of the holder of any floating rate Note, the calculation
agent will provide the interest rate then in effect and, if determined, the
interest rate that will become effective on the next interest reset date for
that floating rate Note.

      For a floating rate Note, accrued interest will be calculated by
multiplying the principal amount of the floating rate Note by an accrued
interest factor. This accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. The interest factor for each day is computed by dividing the
interest rate applicable to that day:

         o by 360, in the case of CD rate Notes, commercial paper rate Notes,
           EURIBOR Notes, federal funds rate Notes, LIBOR Notes, except for
           LIBOR Notes denominated in pounds sterling, and prime rate Notes;

         o by 365, in the case of LIBOR Notes denominated in pounds sterling; or

         o by the actual number of days in the year, in the case of Treasury
           rate Notes and CMT rate Notes.

For these calculations, the interest rate in effect on any interest reset date
will be the applicable rate as reset on that date. The interest rate applicable
to any other day is the interest rate from the immediately preceding interest
reset date or, if none, the initial interest rate.

All percentages used in or resulting from any calculation of the rate of
interest on a floating rate Note will be rounded, if necessary, to the nearest
one hundred-thousandth of a percentage point (.0000001), with five
one-millionths of a percentage point rounded upward, (e.g., 9.876545% (or
 .09876545) would be rounded to 9.87655% (or .0987655)) and all U.S. dollar
amounts used in or resulting from these calculations on floating rate Notes will
be rounded to the nearest cent, with one-half cent rounded upward.

When Interest is Paid

      We will pay interest on floating rate Notes on the interest payment dates
specified in the applicable pricing supplement. However, if the first interest
payment date is less than 15 days after the date of issuance, interest will not
be paid on the first interest payment date, but will be paid on the second
interest payment date.

If a Payment Date is Not a Business Day

      If any scheduled interest payment date, other than the maturity date or
any earlier redemption or repayment date, for any floating rate Note falls on a
day that is not a business day, it will be postponed to the following business
day, except that, in the case of a EURIBOR Note or a LIBOR Note, if that
business day would fall in the next calendar month, the interest payment date
will be the immediately preceding business day. If the scheduled maturity date
or any earlier redemption or repayment date of a floating rate Note falls on a
day that is not a business day, the payment of principal, premium, if any, and
interest, if any, will be made on the next succeeding business day, but interest
on that payment will not accrue during the period from and after the maturity,
redemption or repayment date.

                                      S-18

Base Rates

CD Rate Notes

      CD rate Notes will bear interest at the interest rates specified in the CD
rate Notes and in the applicable pricing supplement. Those interest rates will
be based on the CD rate and any spread and/or spread multiplier and will be
subject to the minimum interest rate and the maximum interest rate, if any.

      "CD rate" means, for any interest determination date, the rate on that
date for negotiable certificates of deposit having the index maturity specified
in the applicable pricing supplement as published by the Board of Governors of
the Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates," or any successor publication of the Board of Governors of the Federal
Reserve System ("H.15(519)") under the heading "CDs (Secondary Market)."

      The following procedures will be followed if the CD rate cannot be
determined as described above:

         o If the above rate is not published in H.15(519) by 9:00 a.m., New
           York City time, on the calculation date, the CD rate will be the rate
           on that interest determination date set forth in the daily update of
           H.15(519), available through the worldwide website of the Board of
           Governors of the Federal Reserve System at
           http://www.bog.frb.fed.us/releases/h15/update, or such other
           recognized electronic source used for the purpose of displaying such
           rate, or any successor site or publication, which is commonly
           referred to as the "H.15 Daily Update," for the interest
           determination date for certificates of deposit having the index
           maturity specified in the applicable pricing supplement, under the
           caption "CDs (Secondary Market)."

         o If the above rate is not yet published in either H.15(519) or the
           H.15 Daily Update by 3:00 p.m., New York City time, on the
           calculation date, the calculation agent will determine the CD rate to
           be the arithmetic mean of the secondary market offered rates as of
           10:00 a.m., New York City time, on that interest determination date
           of three leading nonbank dealers in negotiable U.S. dollar
           certificates of deposit in The City of New York selected by the
           calculation agent, after consultation with us, for negotiable
           certificates of deposit of major United States money center banks of
           the highest credit standing in the market for negotiable certificates
           of deposit with a remaining maturity closest to the index maturity
           specified in the applicable pricing supplement in an amount that is
           representative for a single transaction in that market at that time.

         o If the dealers selected by the calculation agent are not quoting as
           set forth above, the CD rate will remain the CD rate for the
           immediately preceding interest reset period, or, if there was no
           interest reset period, the rate of interest payable will be the
           initial interest rate.

CMT Rate Notes

      CMT rate Notes will bear interest at the interest rates specified in the
CMT rate Notes and in the applicable pricing supplement. That interest rate will
be based on the CMT rate and any spread and/or spread multiplier and will be
subject to the minimum interest rate and the maximum interest rate, if any.

      The "CMT rate" means, for any interest determination date, the rate
displayed on the Designated CMT Telerate Page, as defined below, under the
caption " . . . Treasury Constant Maturities . . . Federal Reserve Board Release
H.15. . . Mondays Approximately 3:45 p.m.," under the column for the Designated
CMT Maturity Index, as defined below, for:

         o the rate on that interest determination date, if the Designated CMT
           Telerate Page is 7051; and

                                      S-19

         o the week or the month, as applicable, ended immediately preceding the
           week in which the related interest determination date occurs, if the
           Designated CMT Telerate Page is 7052.

      The following procedures will be followed if the CMT rate cannot be
determined as described above:

         o If that rate is no longer displayed on the relevant page, or if not
           displayed by 3:00 p.m., New York City time, on the related
           calculation date, then the CMT rate will be the Treasury Constant
           Maturity rate for the Designated CMT Maturity Index as published in
           the relevant H.15(519).

         o If the rate described in the immediately preceding sentence is no
           longer published, or if not published by 3:00 p.m., New York City
           time, on the related calculation date, then the CMT rate will be the
           Treasury Constant Maturity rate for the Designated CMT Maturity Index
           or other United States Treasury rate for the Designated CMT Maturity
           Index on the interest determination date as may then be published by
           either the Board of Governors of the Federal Reserve System or the
           United States Department of the Treasury that the calculation agent
           determines to be comparable to the rate formerly displayed on the
           Designated CMT Telerate Page and published in the relevant H.15(519).

         o If the information described in the immediately preceding sentence is
           not provided by 3:00 p.m., New York City time, on the related
           calculation date, then the calculation agent will determine the CMT
           rate to be a yield to maturity, based on the arithmetic mean of the
           secondary market bid side prices as of approximately 3:30 p.m., New
           York City time, on the interest determination date, reported,
           according to their written records, by three leading primary United
           States government securities dealers, which we refer to as a
           "reference dealer," in The City of New York, which may include an
           agent or other affiliates of ours, selected by the calculation agent
           as described in the following sentence. The calculation agent will
           select five reference dealers, after consultation with us, and will
           eliminate the highest quotation or, in the event of equality, one of
           the highest, and the lowest quotation or, in the event of equality,
           one of the lowest, for the most recently issued direct noncallable
           fixed rate obligations of the United States, which are commonly
           referred to as "Treasury Notes," with an original maturity of
           approximately the Designated CMT Maturity Index and a remaining term
           to maturity of not less than that Designated CMT Maturity Index minus
           one year. If two Treasury Notes with an original maturity as
           described above have remaining terms to maturity equally close to the
           Designated CMT Maturity Index, the quotes for the Treasury Note with
           the shorter remaining term to maturity will be used.

         o If the calculation agent cannot obtain three Treasury Notes
           quotations as described in the immediately preceding sentence, the
           calculation agent will determine the CMT rate to be a yield to
           maturity based on the arithmetic mean of the secondary market bid
           side prices as of approximately 3:30 p.m., New York City time, on the
           interest determination date of three reference dealers in The City of
           New York, selected using the same method described in the immediately
           preceding sentence, for Treasury Notes with an original maturity
           equal to the number of years closest to but not less than the
           Designated CMT Maturity Index and a remaining term to maturity
           closest to the Designated CMT Maturity Index and in an amount of at
           least $100,000,000.

         o If three or four (and not five) of the reference dealers are quoting
           as described above, then the CMT rate will be based on the arithmetic
           mean of the bid prices obtained and neither the highest nor the
           lowest of those quotes will be eliminated.

         o If fewer than three reference dealers selected by the calculation
           agent are quoting as described above, the CMT rate will be the CMT
           rate for the immediately preceding interest reset period, or, if
           there was no interest reset period, the rate of interest payable will
           be the initial interest rate.

                                      S-20

      "Designated CMT Telerate Page" means the display on Bridge Telerate, Inc.,
or any successor service, on the page designated in the applicable pricing
supplement or any other page as may replace that page on that service for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519). If
no page is specified in the applicable pricing supplement, the Designated CMT
Telerate Page will be 7052, for the most recent week.

      "Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities, which is either 1, 2, 3, 5, 7, 10, 20 or 30 years,
specified in an applicable pricing supplement for which the CMT rate will be
calculated.

Commercial Paper Rate Notes

      Commercial paper rate Notes will bear interest at the interest rates
specified in the commercial paper rate Notes and in the applicable pricing
supplement. Those interest rates will be based on the commercial paper rate and
any spread and/or spread multiplier and will be subject to the minimum interest
rate and the maximum interest rate, if any.

      The "commercial paper rate" means, for any interest determination date,
the money market yield, calculated as described below, of the rate on that date
for commercial paper having the index maturity specified in the applicable
pricing supplement, as that rate is published in H.15(519), under the heading
"Commercial Paper -- Nonfinancial."

      The following procedures will be followed if the commercial paper rate
cannot be determined as described above:

         o If the above rate is not published by 9:00 a.m., New York City time,
           on the calculation date, then the commercial paper rate will be the
           money market yield of the rate on that interest determination date
           for commercial paper of the index maturity specified in the
           applicable pricing supplement as published in the H.15 Daily Update
           under the heading "Commercial Paper -- Nonfinancial."

         o If by 3:00 p.m., New York City time, on that calculation date the
           rate is not yet published in either H.15(519) or the H.15 Daily
           Update, then the calculation agent will determine the commercial
           paper rate to be the money market yield of the arithmetic mean of the
           offered rates as of 11:00 a.m., New York City time, on that interest
           determination date of three leading dealers of commercial paper in
           The City of New York selected by the calculation agent, after
           consultation with us, for commercial paper of the index maturity
           specified in the applicable pricing supplement, placed for an
           industrial issuer whose bond rating is "AA," or the equivalent, from
           a nationally recognized statistical rating organization.

         o If the dealers selected by the calculation agent are not quoting as
           mentioned above, the commercial paper rate for that interest
           determination date will remain the commercial paper rate for the
           immediately preceding interest reset period, or, if there was no
           interest reset period, the rate of interest payable will be the
           initial interest rate.

      The "money market yield" will be a yield calculated in accordance with the
following formula:




                                  
                            D x 360
  money market yield =   ----------     x 100
                         360 - (D x M)


where "D" refers to the applicable per year rate for commercial paper quoted on
a bank discount basis and expressed as a decimal and "M" refers to the actual
number of days in the interest period for which interest is being calculated.

                                      S-21

EURIBOR Notes

      EURIBOR Notes will bear interest at the interest rates specified in the
EURIBOR Notes and in the applicable pricing supplement. That interest rate will
be based on EURIBOR and any spread and/or spread multiplier and will be subject
to the minimum interest rate and the maximum interest rate, if any.

      "EURIBOR" means, for any interest determination date, the rate for
deposits in Euros as sponsored, calculated and published jointly by the European
Banking Federation and ACI -- The Financial Market Association, or any company
established by the joint sponsors for purposes of compiling and publishing those
rates, for the index maturity specified in the applicable pricing supplement as
that rate appears on the display on Bridge Telerate, Inc., or any successor
service, on page 248 or any other page as may replace page 248 on that service,
which is commonly referred to as "Telerate Page 248," as of 11:00 a.m. (Brussels
time).

      The following procedures will be followed if the rate cannot be determined
as described above:

         o If the above rate does not appear, the calculation agent will request
           the principal Euro-zone office of each of four major banks in the
           Euro-zone interbank market, as selected by the calculation agent,
           after consultation with us, to provide the calculation agent with its
           offered rate for deposits in Euros, at approximately 11:00 a.m.
           (Brussels time) on the interest determination date, to prime banks in
           the Euro-zone interbank market for the index maturity specified in
           the applicable pricing supplement commencing on the applicable
           interest reset date, and in a principal amount not less than the
           equivalent of U.S. $1 million in Euro that is representative of a
           single transaction in Euro, in that market at that time. If at least
           two quotations are provided, EURIBOR will be the arithmetic mean of
           those quotations.

         o If fewer than two quotations are provided, EURIBOR will be the
           arithmetic mean of the rates quoted by four major banks in the
           Euro-zone, as selected by the calculation agent, after consultation
           with us, at approximately 11:00 a.m. (Brussels time), on the
           applicable interest reset date for loans in Euro to leading European
           banks for a period of time equivalent to the index maturity specified
           in the applicable pricing supplement commencing on that interest
           reset date in a principal amount not less than the equivalent of U.S.
           $1 million in Euro.

         o If the banks so selected by the calculation agent are not quoting as
           mentioned in the previous bullet point, the EURIBOR rate in effect
           for the applicable period will be the same as EURIBOR for the
           immediately preceding interest reset period, or, if there was no
           interest reset period, the rate of interest will be the initial
           interest rate.

      "Euro-zone" means the region comprised of member states of the European
Union that adopt the single currency in accordance with the treaty establishing
the European Community, as amended by the treaty on European Union.

Federal Funds Rate Notes

      Federal funds rate Notes will bear interest at the interest rates
specified in the federal funds rate Notes and in the applicable pricing
supplement. Those interest rates will be based on the federal funds rate and any
spread and/or spread multiplier and will be subject to the minimum interest rate
and the maximum interest rate, if any.

      The "federal funds rate" means, for any interest determination date, the
rate on that date for federal funds as published in H.15(519) under the heading
"Federal Funds (Effective)" as displayed on Bridge Telerate, Inc., or any
successor service, on page 120 or any other page as may replace the applicable
page on that service, which is commonly referred to as "Telerate Page 120."

                                      S-22

      The following procedures will be followed if the federal funds rate cannot
be determined as described above:

         o If the above rate is not published by 9:00 a.m., New York City time,
           on the calculation date, the federal funds rate will be the rate on
           that interest determination date as published in the H.15 Daily
           Update under the heading "Federal Funds/Effective Rate."

         o If that rate is not yet published in either H.15(519) or the H.15
           Daily Update by 3:00 p.m., New York City time, on the calculation
           date, the calculation agent will determine the federal funds rate to
           be the arithmetic mean of the rates for the last transaction in
           overnight federal funds by each of three leading brokers of federal
           funds transactions in The City of New York selected by the
           calculation agent, after consultation with us, prior to 9:00 a.m.,
           New York City time, on that interest determination date.

         o If the brokers selected by the calculation agent are not quoting as
           mentioned above, the federal funds rate relating to that interest
           determination date will remain the federal funds rate for the
           immediately preceding interest reset period, or, if there was no
           interest reset period, the rate of interest payable will be the
           initial interest rate.

LIBOR Notes

      LIBOR Notes will bear interest at the interest rates specified in the
LIBOR Notes and in the applicable pricing supplement. That interest rate will be
based on the London interbank offered rate, which is commonly referred to as
"LIBOR," and any spread and/or spread multiplier and will be subject to the
minimum interest rate and the maximum interest rate, if any.

      The calculation agent will determine "LIBOR" for each interest
determination date as follows:


         o As of the interest determination date, LIBOR will be either:


              o if "LIBOR Reuters" is specified in the applicable pricing
                supplement, the arithmetic mean of the offered rates for
                deposits in the index currency having the index maturity
                designated in the applicable pricing supplement, commencing on
                the second London banking day immediately following that
                interest determination date, that appear on the Designated LIBOR
                Page, as defined below, as of 11:00 a.m., London time, on that
                interest determination date, if at least two offered rates
                appear on the Designated LIBOR Page; except that if the
                specified Designated LIBOR Page, by its terms provides only for
                a single rate, that single rate will be used; or

              o if "LIBOR Telerate" is specified in the applicable pricing
                supplement, the rate for deposits in the index currency having
                the index maturity designated in the applicable pricing
                supplement, commencing on the second London banking day
                immediately following that interest determination date or, if
                pounds sterling is the index currency, commencing on that
                interest determination date, that appears on the Designated
                LIBOR Page at approximately 11:00 a.m., London time, on that
                interest determination date.

         o If fewer than the required number of offered rates appear, then the
           calculation agent will request the principal London offices of each
           of four major reference banks in the London interbank market, as
           selected by the calculation agent after consultation with us, to
           provide the calculation agent with its offered quotation for deposits
           in the index currency for the period of the index maturity specified
           in the applicable pricing supplement commencing on the second London
           banking day immediately following the interest determination date or,
           if pounds sterling is the index currency, commencing on that interest
           determination date, to prime banks in the London interbank market at
           approximately 11:00 a.m., London time, on that interest

                                      S-23

          determination date and in a principal amount that is representative of
          a single transaction in that index currency in that market at that
          time.

         o If at least two quotations are provided, LIBOR determined on that
           interest determination date will be the arithmetic mean of those
           quotations. If fewer than two quotations are provided, LIBOR will be
           determined for the applicable interest reset date as the arithmetic
           mean of the rates quoted at approximately 11:00 a.m., London time, or
           some other time specified in the applicable pricing supplement, in
           the applicable principal financial center for the country of the
           index currency on that interest reset date, by three major banks in
           that principal financial center selected by the calculation agent,
           after consultation with us, for loans in the index currency to
           leading European banks, having the index maturity specified in the
           applicable pricing supplement and in a principal amount that is
           representative of a single transaction in that index currency in that
           market at that time.

         o If the banks so selected by the calculation agent are not quoting as
           mentioned in the previous bullet point, LIBOR in effect for the
           applicable period will be the same as LIBOR for the immediately
           preceding interest reset period, or, if there was no interest reset
           period, the rate of interest payable will be the initial interest
           rate.

      The "index currency" means the currency specified in the applicable
pricing supplement as the currency for which LIBOR will be calculated, or, if
the Euro is substituted for that currency, the index currency will be the Euro.
If that currency is not specified in the applicable pricing supplement, the
index currency will be U.S. dollars.

      "Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated
in the applicable pricing supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable index currency or its designated successor, or (b) if
"LIBOR Telerate" is designated in the applicable pricing supplement, the display
on Bridge Telerate Inc., or any successor service, on the page specified in the
applicable pricing supplement, or any other page as may replace that page on
that service, for the purpose of displaying the London interbank rates of major
banks for the applicable index currency.

      If neither LIBOR Reuters nor LIBOR Telerate is specified in the applicable
pricing supplement, LIBOR for the applicable index currency will be determined
as if LIBOR Telerate were specified, and, if the U.S. dollar is the index
currency, as if Page 3750, had been specified.

Prime Rate Notes

      Prime rate Notes will bear interest at the interest rates specified in the
prime rate Notes and in the applicable pricing supplement. That interest rate
will be based on the prime rate and any spread and/or spread multiplier, and
will be subject to the minimum interest rate and the maximum interest rate, if
any.

      The "prime rate" means, for any interest determination date, the rate on
that date as published in H.15(519) under the heading "Bank Prime Loan."

      The following procedures will be followed if the prime rate cannot be
determined as described above:


         o If the rate is not published prior to 9:00 a.m., New York City time,
           on the calculation date, then the prime rate will be the rate on that
           interest determination date as published in H.15 Daily Update under
           the heading "Bank Prime Loan."

         o If the rate is not published prior to 3:00 p.m., New York City time,
           on the calculation date in either H.15(519) or the H.15 Daily Update,
           then the calculation agent will determine the prime rate to be the
           arithmetic mean of the rates of interest publicly announced by each
           bank that

                                      S-24

          appears on the Reuters Screen USPRIME 1 Page, as defined below, as
          that bank's prime rate or base lending rate as in effect for that
          interest determination date.

         o If fewer than four rates appear on the Reuters Screen USPRIME 1 Page
           for that interest determination date, the calculation agent will
           determine the prime rate to be the arithmetic mean of the prime rates
           quoted on the basis of the actual number of days in the year divided
           by 360 as of the close of business on that interest determination
           date by at least three major banks in The City of New York selected
           by the calculation agent, after consultation with us.

         o If the banks selected are not quoting as mentioned above, the prime
           rate will remain the prime rate for the immediately preceding
           interest reset period, or, if there was no interest reset period, the
           rate of interest payable will be the initial interest rate.

      "Reuters Screen USPRIME 1 Page" means the display designated as page
"USPRIME 1" on the Reuters Monitor Money Rates Service, or any successor
service, or any other page as may replace the USPRIME 1 Page on that service for
the purpose of displaying prime rates or base lending rates of major United
States banks.

Treasury Rate Notes

      Treasury rate Notes will bear interest at the interest rates specified in
the Treasury rate Notes and in the applicable pricing supplement. That interest
rate will be based on the Treasury rate and any spread and/or spread multiplier
and will be subject to the minimum interest rate and the maximum interest rate,
if any.

      "Treasury rate" means:

         o the rate from the auction held on the applicable interest
           determination date, which we refer to as the "auction," of direct
           obligations of the United States, which are commonly referred to as
           "Treasury Bills, "having the index maturity specified in the
           applicable pricing supplement as that rate appears under the caption
           "INVESTMENT RATE" on the display on Bridge Telerate, Inc., or any
           successor service, on page 56 or any other page as may replace page
           56 on that service, which we refer to as "Telerate Page 56," or page
           57 or any other page as may replace page 57 on that service, which we
           refer to as "Telerate Page 57,"

         o if the rate described in the immediately preceding bullet point is
           not published by 3:00 p.m., New York City time, on the calculation
           date, the bond equivalent yield of the rate for the applicable
           Treasury Bills as published in the H.15 Daily Update, or other
           recognized electronic source used for the purpose of displaying the
           applicable rate, under the caption "U.S. Government
           Securities/Treasury Bills/Auction High,"

         o if the rate described in the immediately preceding bullet point is
           not published by 3:00 p.m., New York City time, on the related
           calculation date, the bond equivalent yield of the auction rate of
           the applicable Treasury Bills, announced by the United States
           Department of the Treasury,

         o in the event that the rate referred to in the immediately preceding
           bullet point is not announced by the United States Department of the
           Treasury, or if the auction is not held, the bond equivalent yield of
           the rate on the applicable interest determination date of Treasury
           Bills having the index maturity specified in the applicable pricing
           supplement published in H.15(519) under the caption "U.S. Government
           Securities/Treasury Bills/Secondary Market,"

         o if the rate referred to in the immediately preceding bullet point is
           not so published by 3:00 p.m., New York City time, on the related
           calculation date, the rate on the applicable interest determination
           date of the applicable Treasury Bills as published in H.15 Daily
           Update, or other recognized electronic source used for the purpose of
           displaying the applicable rate, under the caption "U.S. Government
           Securities/Treasury Bills/Secondary Market,"

                                      S-25

         o if the rate referred to in the immediately preceding bullet point is
           not so published by 3:00 p.m., New York City time, on the related
           calculation date, the rate on the applicable interest determination
           date calculated by the calculation agent as the bond equivalent yield
           of the arithmetic mean of the secondary market bid rates, as of
           approximately 3:30 p.m., New York City time, on the applicable
           interest determination date, of three primary United States
           government securities dealers, which may include the agent or its
           affiliates, selected by the calculation agent, for the issue of
           Treasury Bills with a remaining maturity closest to the index
           maturity specified in the applicable pricing supplement, or

         o if the dealers selected by the calculation agent are not quoting as
           mentioned in the immediately preceding bullet point, the Treasury
           rate for the immediately preceding interest reset period, or, if
           there was no interest reset period, the rate of interest payable will
           be the initial interest rate.

      The "bond equivalent yield" means a yield calculated in accordance with
the following formula and expressed as a percentage:



                                     
                                D x N
  Bond Equivalent Yield =   ----------     x 100
                            360 - (D x M)


where "D" refers to the applicable per annum rate for Treasury Bills quoted on a
bank discount basis, "N" refers to 365 or 366, as the case may be, and "M"
refers to the actual number of days in the interest period for which interest is
being calculated.

Exchange Rate Agent and Calculation Agent

      The exchange rate agent and the calculation agent for the Notes will be
The Chase Manhattan Bank, unless otherwise specified in the applicable pricing
supplement.

Notes Linked to Commodity Prices, Single Securities, Baskets of Securities or
Indices

      We may issue Notes with the principal amount payable on any principal
payment date and/or the amount of interest payable on any interest payment date
determined by reference to one or more commodity prices, securities of entities
not affiliated with us, a basket of those securities or an index or indices of
those securities. These Notes may include other terms, which will be specified
in the relevant pricing supplement.

Currency-Linked Notes

      We may issue Notes with the principal amount payable on any principal
payment date and/or the amount of interest payable on any interest payment date
to be determined by reference to the value of one or more currencies as compared
to the value of one or more other currencies, which we refer to as
"currency-linked Notes." The pricing supplement will specify the following:

         o information as to the one or more currencies to which the principal
           amount payable on any principal payment date or the amount of
           interest payable on any interest payment date is linked or indexed;

         o the currency in which the face amount of the currency-linked Note is
           denominated, which we refer to as the "denominated currency;"

         o the currency in which principal on the currency-linked Note will be
           paid, which we refer to as the "payment currency;"

         o the interest rate per annum and the dates on which we will make
           interest payments;

                                      S-26

         o specific historic exchange rate information and any currency risks
           relating to the specific currencies selected; and

         o additional tax considerations, if any.

      The denominated currency and the payment currency may be the same currency
or different currencies. Interest on currency-linked Notes will be paid in the
denominated currency.

Redemption and Repurchase of Notes

Optional Redemption by CP&L

      The Notes will not be redeemable by us unless specified in the applicable
pricing supplement. If the Notes are redeemable, the pricing supplement will
indicate the terms of our option to redeem (or "call") the Notes. We will mail a
notice of redemption to each holder by first-class mail, postage prepaid, at
least 30 days and not more than 60 days prior to the date fixed for redemption,
or within the redemption notice period designated in the applicable pricing
supplement, to the address of each holder as that address appears upon the books
maintained by the paying agent and such notice will specify, among other things,
the redemption date, the amount to be redeemed and the redemption price. The
Notes, except for amortizing Notes, will not be subject to any sinking fund.

Repayment at Option of Holder

      Holders will not have the option to have us repay the Notes unless
specified in the applicable pricing supplement. If applicable, the pricing
supplement relating to each Note will indicate that the holder has the option to
have us repay the Note (or to "put" the Note to us) on a date or dates specified
prior to its maturity date. The repayment price will be equal to 100% of the
principal amount of the Note, together with accrued interest to the date of
repayment. For Notes issued with original issue discount, the pricing supplement
will specify the amount payable upon repayment.

      For us to repay a Note, the paying agent must receive at least 15 days but
not more than 30 days prior to the repayment date:

         o the Note with the form entitled "Option to Elect Repayment" on the
           reverse of the Note duly completed; or

         o a telegram, telex, facsimile transmission or a letter from a member
           of a national securities exchange, or the National Association of
           Securities Dealers, Inc. or a commercial bank or trust company in the
           United States setting forth the name of the holder of the Note, the
           principal amount of the Note, the principal amount of the Note to be
           repaid, the certificate number or a description of the tenor and
           terms of the Note, a statement that the option to elect repayment is
           being exercised and a guarantee that the Note to be repaid, together
           with the duly completed form entitled "Option to Elect Repayment" on
           the reverse of the Note, will be received by the paying agent not
           later than the fifth business day after the date of that telegram,
           telex, facsimile transmission or letter. However, the telegram,
           telex, facsimile transmission or letter will only be effective if
           that Note and form duly completed are received by the paying agent by
           the fifth business day after the date of that telegram, telex,
           facsimile transmission or letter.

      If applicable, we will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws or regulations in connection with
any repurchase.

      Exercise of the repayment option by the holder of a Note will be
irrevocable.

                                      S-27

      The holder may exercise the repayment option for less than the entire
principal amount of the Note but, in that event, the principal amount of the
Note remaining outstanding after repayment must be an authorized denomination.

Special Requirements for Optional Repayment of Global Notes

      If a Note is represented by a global Note, DTC or DTC's nominee will be
the holder of the Note and therefore will be the only entity that can exercise a
right to repayment. In order to ensure that DTC's nominee will timely exercise a
right to repayment of a particular Note, the beneficial owner of the Note must
instruct the broker or other direct or indirect participant through which it
holds an interest in the Note to notify DTC of its desire to exercise a right to
repayment. Different firms have different cut-off times for accepting
instructions from their customers and, accordingly, each beneficial owner should
consult the broker or other direct or indirect participant through which it
holds an interest in a Note in order to ascertain the cut-off time by which an
instruction must be given in order for timely notice to be delivered to DTC.

Open Market Purchases by CP&L

      We may purchase Notes at any price in the open market or otherwise. Notes
so purchased by us may, at our discretion, be held or resold or surrendered to
the Trustee for cancellation.


            CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

      In the opinion of our counsel, Hunton & Williams, the following summary
accurately describes the material United States federal income tax consequences
of the ownership and disposition of the Notes. This summary is based on the
Internal Revenue Code of 1986, which we refer to as the "Code," and existing and
proposed Treasury regulations, revenue rulings, administrative interpretations
and judicial decisions, all as currently in effect and all of which are subject
to change, possibly with retroactive effect. Except as specifically set forth in
this section, this summary deals only with Notes purchased by a United States
holder, as defined below, at original issuance and held as capital assets within
the meaning of Section 1221 of the Code. It does not discuss all of the tax
consequences that may be relevant to you in light of your particular
circumstances or to holders subject to special rules, such as insurance
companies, financial institutions, regulated investment companies, dealers in
securities or foreign currencies, traders in securities that elect the
mark-to-market accounting method, persons holding the Notes as part of a hedging
transaction, "straddle," conversion transaction, or other integrated
transaction, or United States holders whose functional currency, as defined in
Section 985 of the Code, is not the U.S. dollar. Persons considering the
purchase of the Notes should consult with their own tax advisors concerning the
application of the United States federal income tax laws to their particular
situations as well as any tax consequences arising under the laws of any state,
local or foreign jurisdiction.

      As used in this section, the term "United States holder" means a
beneficial owner of a Note that is for United States federal income tax purposes
(i) a citizen or resident of the United States, (ii) a corporation or
partnership (including an entity treated as a corporation or partnership for
United States federal income tax purposes) created or organized in or under the
laws of the United States, any state thereof or the District of Columbia
(unless, in the case of a partnership, Treasury regulations are adopted that
provide otherwise), (iii) an estate, the income of which is includible in gross
income for United States federal income tax purposes, regardless of its source,
(iv) a trust with respect to which a United States court is able to exercise
primary supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of the
trust (and, to the extent provided in the Treasury regulations, certain trusts
in existence on August 20, 1996, and treated as United States persons prior to
such date), or (v) any other person whose income or gain in respect of a Note is
effectively connected with the conduct of a United States trade or business.

                                      S-28

Payments of Interest on the Notes

      Interest paid on a Note generally will be taxable to a United States
holder as ordinary interest income at the time it accrues or is received, in
accordance with the United States holder's method of tax accounting. Special
rules governing the treatment of interest paid with respect to discount Notes
(as defined below), including Notes issued for an amount less than their stated
redemption price at maturity, Notes that mature one year or less from their date
of issuance and Notes that pay interest annually that are issued less than 15
calendar days before an interest payment date, are described under "Discount
Notes" below. Additional rules applicable to discount Notes that are denominated
in a specified currency other than the U.S. dollar, or that have payments of
interest or principal determined by reference to the value of one or more
currencies or currency units other than the U.S. dollar, are described under
"Foreign Currency Notes" below.

Discount Notes

      A Note that has an "issue price" that is less than its "stated redemption
price at maturity" generally will be considered to have been issued with
original issue discount for United States federal income tax purposes, which we
refer to as "OID," unless the difference is less than a specified de minimis
amount. Such Notes are referred to below as "discount Notes." The issue price of
each Note in an issue of Notes issued for cash generally will equal the first
price at which a substantial amount of those Notes is sold to the public,
ignoring sales to bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents or wholesalers. The
issue price of a Note does not change even if part of the issue is subsequently
sold at a different price. The stated redemption price at maturity of a Note is
the total of all payments required to be made under the Note other than
"qualified stated interest" payments. The term "qualified stated interest" is
defined as stated interest that is unconditionally payable in cash or property,
other than debt instruments of the issuer, at least annually at a single fixed
rate or at a qualifying variable rate. As discussed further below, qualified
stated interest generally includes, among other things, stated interest on a
"variable rate debt instrument" that is unconditionally payable at least
annually at a single qualified floating rate or a rate that is determined using
a single fixed formula that is based on objective financial or economic
information. If a Note bears interest at other than a qualifying variable rate
or has contingent interest, the Note will be treated as issued with OID. In
addition, if a Note bears interest for one or more accrual periods at a rate
below the rate applicable for the remaining term of such Note (e.g., Notes with
teaser rates or interest holidays), and if the greater of either the resulting
foregone interest on such Note or any "true" discount on such Note (i.e., the
excess of the Note's stated principal amount over its issue price) equals or
exceeds a specified de minimis amount, then the stated interest on the Note
would be treated as OID rather than qualified stated interest. The applicable
pricing supplement will state whether a particular issue of Notes will
constitute an issue of discount Notes.

      A United States holder of a discount Note is required to include qualified
stated interest on the Note in income as ordinary interest income at the time it
is received or accrued, in accordance with the holder's method of accounting. In
addition, United States holders of discount Notes that mature more than one year
from the date of issuance will be required to include OID in income for United
States federal income tax purposes as it accrues, in accordance with a constant
yield method based on a compounding of interest, before the receipt of cash
payments attributable to that income, regardless of such United States holder's
usual method of accounting. In general, the amount of OID included in income by
the initial United States holder of a discount Note is the sum of the daily
portions of OID with respect to such discount Note for each day during the
taxable year (or portion of the taxable year) during which such United States
holder held such discount Note. The "daily portion" of OID on any discount Note
is determined by allocating to each day in any accrual period a ratable portion
of the OID allocable to that accrual period. An "accrual period" may be of any
length and the accrual periods may vary in length over the term of the discount
Note, provided that each accrual period is no longer than one year and each
scheduled payment of principal or interest occurs either on the final day of an
accrual period or on the first day of an accrual period. The amount of OID
allocable to each accrual period generally is equal to the difference between
(i) the product of a discount

                                      S-29

Note's adjusted issue price at the beginning of such accrual period and its
yield to maturity (determined on the basis of compounding at the close of each
accrual period and appropriately adjusted to take into account the length of the
particular accrual period) and (ii) the amount of any qualified stated interest
payments allocable to such accrual period. The "adjusted issue price" of a
discount Note at the beginning of any accrual period is the sum of the issue
price of such discount Note plus the amount of OID allocable to all prior
accrual periods minus the amount of any prior payments on such discount Note
that were not qualified stated interest payments. Under these rules, United
States holders generally will have to include in income increasingly greater
amounts of OID in successive accrual periods.

      Under the regulations governing OID (the "OID Regulations"), floating rate
Notes and indexed Notes ("Variable Notes") are subject to special rules whereby
a Variable Note will qualify as a "variable rate debt instrument" if (i) its
issue price does not exceed the total noncontingent principal payments due under
the Variable Note by more than a specified de minimis amount and (ii) it
provides for stated interest, paid or compounded at least annually, at current
values of (a) one or more qualified floating rates, (b) a single fixed rate and
one or more qualified floating rates, (c) a single objective rate, or (d) a
single fixed rate and a single objective rate that is a qualified inverse
floating rate.

      A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
generally will not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than .65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than .65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable Note's
issue date) will be treated as a single qualified floating rate. Notwithstanding
the foregoing, a variable rate that otherwise would constitute a qualified
floating rate but which is subject to one or more restrictions such as a maximum
numerical limitation (i.e., a cap) or a minimum numerical limitation (i.e., a
floor) may, under certain circumstances, fail to be treated as a qualified
floating rate under the OID Regulations unless such cap or floor is fixed
throughout the term of the Note. An "objective rate" is a rate that is not
itself a qualified floating rate but which is determined using a single fixed
formula and that is based on objective financial or economic information. A rate
will not qualify as an objective rate if it is based on information that is
within the control of the issuer (or a related party) or that is unique to the
circumstances of the issuer (or a related party), such as dividends, profits, or
the value of the issuer's stock (although a rate does not fail to be an
objective rate merely because it is based on the credit quality of the issuer).
A "qualified inverse floating rate" is any objective rate where such rate is
equal to a fixed rate minus a qualified floating rate, as long as variations in
the rate can reasonably be expected to inversely reflect contemporaneous
variations in the qualified floating rate. The OID Regulations also provide that
if a Variable Note provides for stated interest at a fixed rate for an initial
period of one year or less followed by a variable rate that is either a
qualified floating rate or an objective rate and if the variable rate on the
Variable Note's issue date is intended to approximate the fixed rate (e.g., the
value of the variable rate on the issue date does not differ from the value of
the fixed rate by more than 25 basis points), then the fixed rate and the
variable rate together will constitute either a single qualified floating rate
or objective rate, as the case may be.

      If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term of the
Note qualifies as a "variable rate debt instrument" under the OID Regulations
and if the interest on such Note is unconditionally payable in cash or property
(other than debt instruments of the issuer) at least annually, then all stated
interest on the Note will constitute qualified stated interest and will be taxed
accordingly. Thus, a Variable Note that provides for stated interest at either a
single qualified floating rate or a single objective rate throughout the term of
the Note and that qualifies as a

                                      S-30

"variable rate debt instrument" under the OID Regulations generally will not be
treated as having been issued with OID unless the Variable Note is issued at a
"true" discount (i.e., at a price below the Note's stated principal amount) in
excess of a specified de minimis amount. The amount of qualified stated interest
and the amount of OID, if any, that accrues during an accrual period on such a
Variable Note is determined under the rules applicable to fixed rate debt
instruments by assuming that the variable rate is a fixed rate equal to (i) in
the case of a qualified floating rate or qualified inverse floating rate, the
value, as of the issue date, of the qualified floating rate or qualified inverse
floating rate, or (ii) in the case of an objective rate (other than a qualified
inverse floating rate), a fixed rate that reflects the yield that is reasonably
expected for the Variable Note. The qualified stated interest allocable to an
accrual period is increased (or decreased) if the interest actually paid during
an accrual period exceeds (or is less than) the interest assumed to be paid
during the accrual period pursuant to the foregoing rules.

      In general, any other Variable Note that qualifies as a "variable rate
debt instrument" will be converted into an "equivalent" fixed rate debt
instrument for purposes of determining the amount and accrual of OID and
qualified stated interest on the Variable Note. The OID Regulations generally
require that such a Variable Note be converted into an "equivalent" fixed rate
debt instrument by substituting any qualified floating rate or qualified inverse
floating rate provided for under the terms of the Variable Note with a fixed
rate equal to the value of the qualified floating rate or qualified inverse
floating rate, as the case may be, as of the Variable Note's issue date. Any
objective rate (other than a qualified inverse floating rate) provided for under
the terms of the Variable Note is converted into a fixed rate that reflects the
yield that is reasonably expected for the Variable Note. In the case of a
Variable Note that qualifies as a "variable rate debt instrument" and provides
for stated interest at a fixed rate in addition to either one or more qualified
floating rates or a qualified inverse floating rate, the fixed rate is initially
converted into a qualified floating rate (or a qualified inverse floating rate,
if the Variable Note provides for a qualified inverse floating rate). Under such
circumstances, the qualified floating rate or qualified inverse floating rate
that replaces the fixed rate must be such that the fair market value of the
Variable Note as of the Variable Note's issue date is approximately the same as
the fair market value of an otherwise identical debt instrument that provides
for either the qualified floating rate or qualified inverse floating rate rather
than the fixed rate. Subsequent to converting the fixed rate into either a
qualified floating rate or a qualified inverse floating rate, the Variable Note
is then converted into an "equivalent" fixed rate debt instrument in the manner
described above.

      Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of OID and qualified
stated interest, if any, are determined for the "equivalent" fixed rate debt
instrument by applying the general OID rules to the "equivalent" fixed rate debt
instrument and a United States holder of the Variable Note will account for such
OID and qualified stated interest as if the United States holder held the
"equivalent" fixed rate debt instrument. Each accrual period appropriate
adjustments will be made to the amount of qualified stated interest or OID
assumed to have been accrued or paid with respect to the "equivalent" fixed rate
debt instrument in the event that such amounts differ from the actual amount of
interest accrued or paid on the Variable Note during the accrual period.

      Unless specified in the applicable pricing supplement, Notes that bear
interest at a floating rate will be treated as "variable rate debt instruments"
under the OID Regulations and accordingly, will not be discount Notes. If a
Variable Note does not qualify as a "variable rate debt instrument" under the
OID Regulations, however, then the Variable Note would be treated as a
contingent payment debt obligation. The OID Regulations generally require a
United States holder of such an instrument to include future contingent and
noncontingent interest payments in income as such interest accrues based upon a
projected payment schedule. Moreover, in general, under the OID Regulations, any
gain recognized by a United States holder on the sale, exchange, or retirement
of a contingent payment debt instrument will be treated as ordinary income and
all or a portion of any loss realized could be treated as ordinary loss as
opposed to capital loss (depending upon the circumstances). The proper United
States federal income tax treatment of Variable Notes that are treated as
contingent payment debt obligations will be more fully described in the
applicable pricing supplement. Furthermore, any other special United States
federal income tax considerations, not otherwise discussed

                                      S-31

herein, which are applicable to any particular issue of discount Notes will be
discussed in the applicable pricing supplement.

      Notes that pay interest annually that are issued less than 15 calendar
days before an interest payment date may be treated as discount Notes. United
States holders intending to purchase those Notes should refer to the applicable
pricing supplement.

      If the amount of OID with respect to a Note is less than the specified de
minimis amount, generally 0.0025 multiplied by the product of the stated
redemption price at maturity and the number of complete years to maturity (or,
in the case of amortizing Notes, the weighted average years to maturity), the
amount of OID is treated as zero and all stated interest is treated as qualified
stated interest. United States holders of Notes with a de minimis amount of OID
will generally include this amount in income, as capital gain, as principal
payments are made on the Notes.

      Discount Notes may be redeemable prior to maturity at our option, which we
refer to as a "call option," and/or repayable prior to maturity at the option of
the holder, which we refer to as a "put option." Discount Notes containing
either or both of these features may be subject to rules that differ from the
general rules discussed above. Holders intending to purchase discount Notes with
either or both of these features should carefully examine the applicable pricing
supplement and should consult with their own tax advisors with respect to either
or both of these features since the tax consequences with respect to OID will
depend, in part, on the particular terms and the particular features of the
purchased Note.

      No payment of interest on a Note that matures one year or less from its
date of issuance will be considered qualified stated interest and accordingly
that Note will be treated as a discount Note. In general, a United States holder
who uses the cash method of tax accounting and who holds a discount Note that
matures one year or less from the date of its issuance, which we refer to as a
"short-term discount Note," is not required to accrue OID for United States
federal income tax purposes unless the holder elects to do so (but may be
required to include stated interest in income as it is received). United States
holders who report income for United States federal income tax purposes on the
accrual method and other holders, including banks and dealers in securities, are
required to accrue OID on those short-term discount Notes on a straight-line
basis, unless an election is made to accrue the OID according to a constant
yield method based on daily compounding. In the case of a United States holder
who is not required, and does not elect, to include OID in income currently, any
gain realized on the sale, exchange or retirement of a short-term discount Note
will be ordinary interest income to the extent of the OID accrued on a
straight-line basis or, if elected by the holder, under the constant yield
method through the date of sale, exchange or retirement. In addition,
non-electing United States holders who are not subject to the current inclusion
requirement may be required to defer the deduction of all or a portion of any
interest paid on indebtedness incurred to purchase short-term discount Notes
until a corresponding amount of income is realized.

      United States holders are permitted to elect to include all interest on a
Note using the constant yield method. For this purpose, interest includes stated
interest, acquisition discount, OID, de minimis OID, market discount, de minimis
market discount, and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium. Special rules apply to elections made with
respect to Notes with amortizable bond premium or market discount and United
States holders considering this election should consult their own tax advisors.
The election cannot be revoked without the approval of the Internal Revenue
Service.

Market Discount

      If a United States holder purchases a Note, other than a discount Note,
for an amount that is less than its issue price (or, with respect to a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of a discount Note, for an amount that is less than its adjusted issue price,
the United States holder will

                                      S-32

be treated as having purchased such Note at a "market discount," unless this
difference is less than a specified de minimis amount.

      Under the market discount rules, a United States holder will be required
to treat any partial principal payment or, in the case of a discount Note, any
payment that does not constitute qualified stated interest, on, or any gain
realized on the sale, exchange, retirement or other disposition of, a Note as
ordinary income to the extent of the lesser of: (i) the amount of the payment or
realized gain, or (ii) the market discount that has accrued, but that has not
previously been included in income at the time of payment or disposition.

      Market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the United
States holder elects to accrue market discount on a constant interest basis. The
Clinton Administration's budget proposal for fiscal year 2001 includes a
proposal that would require holders of Notes that use the accrual method of
accounting to include market discount in income as it accrues under a constant
yield method. The yield for purposes of accruing market discount would be
limited to the greater of (i) the original yield to maturity of the Note plus
five percentage points or (ii) the applicable federal rate at the time the
holder acquired the Note plus five percentage points. The proposal would be
effective for Notes acquired on or after the date of enactment.

      A United States holder may be required to defer the deduction of all or a
portion of the interest paid or accrued on any indebtedness incurred or
maintained to purchase or carry a Note until the maturity of the Note or its
earlier disposition, except in connection with certain nonrecognition
transactions. A United States holder may elect to include market discount in
income currently as it accrues, on either a ratable or a constant interest rate
basis, in which case the rules described above regarding the treatment as
ordinary income of gain upon the disposition of the Note and upon the receipt of
cash payments on the Note and regarding the deferral of interest deductions will
not apply. Generally, this currently included market discount is treated as
ordinary interest. The election will apply to all debt instruments acquired by
the United States holder on or after the first day of the first taxable year to
which that election applies and may be revoked only with the consent of the
Internal Revenue Service.

Premium

      A United States holder who purchases a discount Note for an amount that is
greater than its adjusted issue price, but less than or equal to the sum of all
amounts payable on the Note after the purchase date, other than payments of
qualified stated interest, will be considered to have purchased the Note at an
"acquisition premium" within the meaning of the Code. Under the acquisition
premium rules, the amount of OID which the holder must include in its gross
income with respect to the Note for any taxable year, or for the part of a
taxable year in which the United States holder holds the discount Note, will be
reduced (but not below zero) by the portion of the acquisition premium properly
allocable to the period.

      If a United States holder purchases a Note for an amount that is greater
than the sum of all amounts payable on the Note after the purchase date other
than payments of qualified stated interest, that holder will be considered to
have purchased the Note with "amortizable bond premium" equal in amount to that
excess, and may elect, in accordance with applicable Code provisions, to
amortize this premium using a constant yield method based on the applicable
compounding period over the remaining term of the Note and may offset interest
otherwise required to be included in income in respect of the Note during any
taxable year by the amortized amount of that excess for the taxable year.
However, if the Note may be optionally redeemed after the United States holder
acquires it at a price in excess of its stated redemption price at maturity,
special rules would apply that could result in a deferral of the amortization of
some bond premium until later in the term of the Note. Any election to amortize
bond premium applies to all debt instruments acquired by the United States
holder on or after the first day of the first taxable year to which the election
applies and may be revoked only with the consent of the Internal Revenue
Service.

                                      S-33

Sale, Exchange or Retirement of the Notes

      Upon the sale, exchange or retirement of a Note, a United States holder
generally will recognize taxable gain or loss equal to the difference between
the amount realized on the sale, exchange or retirement (other than amounts
representing accrued and unpaid interest) and the United States holder's
adjusted tax basis in the Note. For these purposes, the amount realized on the
sale, exchange or retirement of a Note does not include any amount attributable
to accrued interest or, in the case of a discount Note, accrued qualified stated
interest, which will be taxable as interest unless previously taken into
account. A United States holder's adjusted tax basis in a Note generally will
equal the cost of the Note to that holder, increased by the amounts of any
market discount and OID previously included in income by the holder with respect
to the Note and reduced by any amortized bond premium and any payments other
than qualified stated interested payments.

      Subject to the discussion under "Foreign Currency Notes" below, gain or
loss recognized on the sale, exchange or retirement of a Note generally will be
capital gain or loss, except to the extent of any accrued market discount or, in
the case of a short-term discount Note, any accrued OID which the United States
holder has not previously included in income, and will generally be long-term
capital gain or loss if at the time of sale, exchange or retirement the Note has
been held for more than one year. Non-corporate taxpayers are subject to reduced
maximum rates on long-term capital gains and generally are subject to tax at
ordinary income rates on short-term capital gains. The deductibility of capital
losses is subject to certain limitations. Prospective investors should consult
their own tax advisor concerning these tax law provisions.

Foreign Currency Notes

Payments of Interest in a Foreign Currency

      Cash Method. A United States holder who uses the cash method of accounting
for United States federal income tax purposes and who receives a payment of
interest on a Note (other than previously accrued OID or market discount) in a
currency other than U.S. dollars (a "Foreign Currency") will be required to
include in income the U.S. dollar value of the Foreign Currency payment
(determined on the date such payment is received) regardless of whether the
payment is in fact converted to U.S. dollars at that time, and such U.S. dollar
value will be the United States holder's tax basis in such Foreign Currency.

      Accrual Method. A United States holder who uses the accrual method of
accounting for United States federal income tax purposes, or who otherwise is
required to accrue interest prior to receipt, will be required to include in
income the U.S. dollar value of the amount of interest income (including OID or
market discount and reduced by amortizable bond premium to the extent
applicable) that has accrued and is otherwise required to be taken into account
with respect to a Note during an accrual period. The U.S. dollar value of such
accrued income will be determined by translating such income at the average rate
of exchange for the accrual period or, with respect to an accrual period that
spans two taxable years, at the average rate for the partial period within the
taxable year. A United States holder may elect, however, to translate such
accrued interest income using the rate of exchange on the last day of the
accrual period or, with respect to an accrual period that spans two taxable
years, using the rate of exchange on the last day of the taxable year. If the
last day of an accrual period is within five business days of the date of
receipt of the accrued interest, a United States holder may translate such
interest using the rate of exchange on the date of receipt. The above election
will apply to other debt obligations held by the United States holder and may
not be changed without the consent of the Internal Revenue Service. A United
States holder should consult a tax advisor before making the above election. A
United States holder will recognize exchange gain or loss (which will be treated
as ordinary income or loss) with respect to accrued interest income on the date
such income is received. The amount of ordinary income or loss recognized will
equal the difference, if any, between the U.S. dollar value of the Foreign
Currency payment received (determined on the date such payment is received) in
respect of such accrual period and the U.S. dollar value of interest income that
has accrued during such accrual period (as determined above).

                                      S-34

Purchase, Sale and Retirement of Notes

      A United States holder who purchases a Note with previously owned Foreign
Currency will recognize ordinary income or loss in an amount equal to the
difference, if any, between such United States holder's tax basis in the Foreign
Currency and the U.S. dollar fair market value of the Foreign Currency used to
purchase the Note, determined on the date of purchase.

      Except as discussed above with respect to short-term discount Notes, upon
the sale, exchange or retirement of a Note, a United States holder will
recognize taxable gain or loss equal to the difference between the amount
realized on the sale, exchange or retirement and such United States holder's
adjusted tax basis in the Note. Such gain or loss generally will be capital gain
or loss (except to the extent of any accrued market discount not previously
included in the United States holder's income) and will be long-term capital
gain or loss if at the time of sale, exchange or retirement the Note has been
held by such United States holder for more than one year. To the extent the
amount realized represents accrued but unpaid interest, however, such amounts
must be taken into account as interest income, with exchange gain or loss
computed as described in "Payments of Interest in a Foreign Currency" above. If
a United States holder receives Foreign Currency on such a sale, exchange or
retirement the amount realized will be based on the U.S. dollar value of the
Foreign Currency on the date the payment is received or the Note is disposed of
(or deemed disposed of as a result of a material change in the terms of the
Note). In the case of a Note that is denominated in Foreign Currency and is
traded on an established securities market, a cash basis United States holder
(or, upon election, an accrual basis United States holder) will determine the
U.S. dollar value of the amount realized by translating the Foreign Currency
payment at the spot rate of exchange on the settlement date of the sale. A
United States holder's adjusted tax basis in a Note will equal the cost of the
Note to such holder, increased by the amounts of any market discount or OID
previously included in income by the holder with respect to such Note and
reduced by any amortized acquisition or other premium and any principal payments
received by the holder. A United States holder's tax basis in a Note, and the
amount of any subsequent adjustments to such holder's tax basis, generally will
be the U.S. dollar value of the Foreign Currency amount paid for such Note, or
of the Foreign Currency amount of the adjustment, determined on the date of such
purchase or adjustment.

      Gain or loss realized upon the sale, exchange or retirement of a Note that
is attributable to fluctuations in currency exchange rates will be ordinary
income or loss which will not be treated as interest income or expense. Gain or
loss attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date such payment is received or the Note is disposed
of, and the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date the United States holder acquired the Note. Such
Foreign Currency gain or loss will be recognized only to the extent of the total
gain or loss realized by the United States holder on the sale, exchange or
retirement of the Note.

Original Issue Discount

      In the case of a discount Note (including a short-term discount Note), (i)
OID is determined in units of the Foreign Currency, (ii) accrued OID is
translated into U.S. dollars as described in "Payments of Interest in a Foreign
Currency -- Accrual Method" above and (iii) the amount of Foreign Currency gain
or loss on the accrued OID is determined by comparing the amount of income
received attributable to the discount (either upon payment, maturity or an
earlier disposition), as translated into U.S. dollars at the rate of exchange on
the date of such receipt, with the amount of OID accrued, as translated above.

Market Discount and Premium

      In the case of a Note with market discount, (i) market discount is
determined in units of the Foreign Currency, (ii) accrued market discount taken
into account upon the receipt of any partial principal payment or upon the sale,
exchange, retirement or other disposition of the Note (other than accrued market
discount required to be taken into account currently) is translated into U.S.
dollars at the exchange rate on such

                                      S-35

disposition date (and no part of such accrued market discount is treated as
exchange gain or loss) and (iii) accrued market discount currently includible in
income by a United States holder for any accrual period is translated into U.S.
dollars on the basis of the average exchange rate in effect during such accrual
period, and the exchange gain or loss is determined upon the receipt of any
partial principal payment or upon the sale, exchange, retirement or other
disposition of the Note in the manner described in "Payments of Interest in a
Foreign Currency -- Accrual Method" above with respect to computation of
exchange gain or loss on accrued interest.

      With respect to a Note acquired with amortizable bond premium, such
premium is determined in the relevant Foreign Currency and reduces interest
income in units of the Foreign Currency. A United States holder generally will
recognize exchange gain or loss equal to the difference between the U.S. dollar
value of the bond premium amortized with respect to a period, determined on the
date the interest attributable to such period is received, and the U.S. dollar
value of the bond premium determined on the date of the acquisition of the Note.

Notes Linked to Currencies, Commodity Prices, Single Securities, Baskets of
Securities or Indices

      The United States federal income tax consequences to a United States
holder of the ownership and disposition of Notes that have principal or interest
determined by reference to commodity prices, securities of entities unaffiliated
with us, baskets of those securities or indices will vary depending upon the
exact terms of the Notes and related factors. Prospective investors in these
Notes should carefully examine the applicable pricing supplement and should
consult their own tax advisors regarding the United States federal income tax
consequences of the holding and disposition of the Notes.

Non-United States Holders

      If a non-United States holder receives payments on the Notes that are not
effectively connected with the conduct of a United States trade or business, the
non-United States Holder will not be subject to the 30% U.S. withholding tax
that generally applies to payments of interest to non-United States persons on
registered debt issued by United States persons, as long as the non-United
States Holder (i) is not a 10% or greater shareholder of the issuer, (ii)
provides the issuer or its withholding agent with appropriate documentation of
the non-United States holder's foreign status on Internal Revenue Service Form
W-8 or successor form, (iii) is not a "controlled foreign corporation," within
the meaning of the federal income tax laws, that is related, directly or
indirectly, to the issuer, and (iv) is not a bank receiving interest on a loan
made in the ordinary course of its business. If a non-United States holder does
not meet the requirements set forth in the previous sentence, U.S. income tax
will be withheld at the rate of 30% on the gross amount of any interest payments
made on the Notes unless either (i) a lower treaty rate applies and the
non-United States holder files the required form evidencing eligibility for that
reduced rate with the issuer or its paying agent or (ii) the non-United States
holder files Internal Revenue Service Form 4224 or successor form with the
issuer or its paying agent claiming that the interest is effectively connected
with the conduct of a United States trade or business.

      The Treasury Department has issued final regulations that modify the
manner in which the issuer will comply with the withholding requirements. Those
regulations generally are effective for payments made after December 31, 2000,
subject to certain transition rules.

      If payments received by a non-United States holder with respect to the
Notes are treated as effectively connected with the conduct of a United States
trade or business, the non-United States holder generally will be subject to
federal income tax on the payments at graduated rates, in the same manner as
United States holders are taxed with respect to such payments (and also may be
subject to the 30% branch profits tax in the case of a non-United States holder
that is a corporation).

                                      S-36

      Non-United States holders generally will not be subject to United States
federal income taxation (including U.S. withholding tax) on any gain or income
realized upon the sale, exchange, retirement or other disposition of the Notes
unless (i) such gain or income is effectively connected with the non-United
States holder's conduct of a U.S. trade or business, in which case the non-U.S
Holder will be subject to the same treatment as U.S. Holders with respect to
such gain or income, or (ii) the non-United States holder is a nonresident alien
individual who was present in the United States for 183 days or more during the
taxable year and certain other tax requirements are met, in which case the
non-United States holder will incur a 30% tax on the gain.

      The Notes will not be includible in the estate of a non-United States
holder unless the individual is a direct or indirect 10% or greater shareholder
of the issuer or, at the time of such individual's death, payments in respect of
the Notes would have been effectively connected with the conduct by such
individual of a trade or business in the United States.

Backup Withholding

      Backup withholding of United States federal income tax at a rate of 31%
may apply to payments made in respect of the Notes to registered owners who are
not "exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a United States holder must be reported to the Internal
Revenue Service, unless the United States holder is an exempt recipient or
establishes an exemption. Compliance with the identification procedures
described in the preceding section would establish an exemption from backup
withholding for those non-United States holders who are not exempt recipients.

      In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-United States holder, certifies that such seller is a
non-United States holder (and certain other conditions are met). Such a sale
must also be reported by the broker to the Internal Revenue Service, unless
either (i) the broker determines that the seller is an exempt recipient or (ii)
the seller certifies its non-United States status (and certain other conditions
are met). Certification of the registered owner's non-United States status would
be made normally on Form W-8 under penalties of perjury, although in certain
cases it may be possible to submit other documentary evidence.

      Any amounts withheld under the backup withholding rules from a payment to
a beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States federal income tax provided the required
information is furnished to the Internal Revenue Service.

      As noted above, the Treasury Department has issued regulations which make
modifications to the withholding, backup withholding and information reporting
rules described above. Those regulations attempt to unify certification
requirements and modify reliance standards and generally will be effective for
payments made after December 31, 2000, subject to transition rules. Prospective
investors are urged to consult their own tax advisors regarding the new
regulations.

      The federal income tax discussion set forth above is included for general
information only and may not be applicable depending upon a holder's particular
situation. Holders should consult their own tax advisors with respect to the tax
consequences to them of the ownership and disposition of the Notes, including
the tax consequences under state, local, foreign and other tax laws and the
possible effects of changes in federal or other tax laws.

                                      S-37

                              PLAN OF DISTRIBUTION

      We are offering the Notes on a continuing basis through Chase Securities
Inc., First Union Securities, Inc., Goldman Sachs & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, J.P. Morgan Securities Inc., and Salomon Smith
Barney Inc., to which we refer individually as an "Agent" and, together, as the
"Agents." Each Agent has agreed to use reasonable efforts to solicit offers to
purchase these securities. We will have the sole right to accept offers to
purchase these securities and may reject any offer in whole or in part. Each
Agent may reject, in whole or in part, any offer it solicited to purchase
securities. We will pay an Agent, in connection with sales of these securities
resulting from a solicitation that Agent made or an offer to purchase that Agent
received, a commission ranging from .125% to .750% of the initial offering price
of the securities to be sold, depending upon the maturity of the securities. We
and the Agent will negotiate commissions for securities with a maturity of 30
years or greater at the time of sale.

      We may also sell the Notes to an Agent, as principal for its own account
at discounts to be agreed upon at the time of sale. That Agent may resell these
securities to investors and other purchasers at a fixed offering price or at
prevailing market prices, or prices related thereto at the time of resale or
otherwise, as that Agent determines and as we will specify in the applicable
pricing supplement. An Agent may offer the Notes it has purchased as principal
to other dealers. That Agent may sell the Notes to any dealer at a discount and,
unless otherwise specified in the applicable pricing supplement, the discount
allowed to any dealer will not be in excess of the discount that Agent will
receive from us. After the initial public offering of Notes that an Agent is to
resell (in the case of Notes to be resold at a fixed public offering price), the
Agent may change the public offering price, the concession and the discount.

      Each of the Agents may be deemed to be an "underwriter" within the meaning
of the Securities Act of 1933. We and the Agents have agreed to indemnify each
other against certain liabilities, including liabilities under the Securities
Act, or to contribute to payments made in respect of those liabilities. We have
also agreed to reimburse the Agents for specified expenses.

      Unless otherwise provided in the applicable pricing supplement, we do not
intend to apply for the listing of the Notes on a national securities exchange,
but have been advised by the Agents that they intend to make a market in these
securities, as applicable laws and regulations permit. The Agents are not
obligated to do so, however, and the Agents may discontinue making a market at
any time without notice. No assurance can be given as to the liquidity of any
trading market for these securities.

      In connection with the offering of the Notes, the Agents may engage in
overallotment, stabilizing transactions and syndicate covering transactions in
accordance with Regulation M under the Securities Exchange Act of 1934, as
amended. Overallotment involves sales in excess of the offering size, which
creates a short position for the Agents. Stabilizing transactions involve bids
to purchase the Notes in the open market for the purpose of pegging, fixing or
maintaining the price of the Notes. Syndicate covering transactions involve
purchases of the Notes in the open market after the distribution has been
completed in order to cover short positions. Stabilizing transactions and
syndicate covering transactions may cause the price of the Notes to be higher
than it would otherwise be in the absence of those transactions. If the Agents
engage in stabilizing or syndicate covering transactions, they may discontinue
them at any time.

      Some of the Agents or their affiliates have from time to time provided,
and may in the future provide, investment banking and general financing and
banking services to us and our affiliates. To the extent that the proceeds of
any offering of the Notes are used to repay indebtedness owed to affiliates of
the Agents, such offerings will be made pursuant to Rule 2710(c)(8) of the
Conduct Rules of the National Association of Securities Dealers, Inc.


                                      S-38

      We may from time to time offer the Notes through or sell the Notes to an
agent other than the Agents. Any such additional agent will participate in the
distribution of the Notes on the same terms as the Agents.


                                  LEGAL MATTERS

      The validity of the Notes, as well as certain other legal matters, will be
passed on for CP&L by William D. Johnson, our Senior Vice President and
Corporate Secretary, and Hunton & Williams of Raleigh, North Carolina. Certain
other legal matters will be passed on for CP&L by Nelson, Mullins, Riley &
Scarborough, L.L.P. of Columbia, South Carolina. Certain legal matters will be
passed upon for the Agents by Simpson Thacher & Bartlett of New York, New York
and Winthrop, Stimson, Putnam & Roberts of New York, New York. As of May 31,
2000, Mr. Johnson owned 14,578 shares of our common stock. Mr. Johnson is
acquiring additional shares of common stock at regular intervals as a
participant in our Stock Purchase -- Savings Plan.

                                      S-39








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                                   Prospectus

                                   [GRAPHIC]
                                      CP&L
                                      ----


                         CAROLINA POWER & LIGHT COMPANY

                                 $1,500,000,000

                              First Mortgage Bonds
                                  Senior Notes
                                 Debt Securities

      ------------------------------------------------------------------
   We will provide specific terms of these securities, and the manner in which
they are being offered, in supplements to this Prospectus. You should read this
Prospectus and any supplement carefully before you invest. We cannot sell any of
these securities unless this Prospectus is accompanied by a Prospectus
Supplement.

      ------------------------------------------------------------------
   Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

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

                    This Prospectus is dated January 7, 1999


ABOUT THIS PROSPECTUS

This Prospectus is part of a Registration Statement that we filed with the
Securities and Exchange Commission ("SEC") utilizing a "shelf" registration
process. Under this shelf process, we may sell any combination of the securities
described in this Prospectus in one or more offerings up to a total dollar
amount of $1,500,000,000. We may offer any of the following securities: First
Mortgage Bonds, Senior Notes and other Debt Securities.

This Prospectus provides you with a general description of the securities we may
offer. Each time we sell securities, we will provide a Prospectus Supplement
that will contain specific information about the terms of that offering. This
Prospectus Supplement may also add, update or change information contained in
this Prospectus. The Registration Statement we filed with the SEC includes
exhibits that provide more detail on descriptions of the matters discussed in
this Prospectus. You should read this Prospectus and the related exhibits filed
with the SEC and any Prospectus Supplement together with additional information
described under the heading WHERE YOU CAN FIND MORE INFORMATION.

WHERE YOU CAN FIND MORE
INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov or our web site at
http://www.cplc.com. You may also read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. The SEC's public reference room in Washington is located at
450 5th Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms.

DOCUMENTS INCORPORATED BY
REFERENCE

The SEC allows us to "incorporate by reference" the information we file with it,
which means that we can disclose important information to you by referring you
to those documents. The information incorporated by reference is an important
part of this Prospectus, and information that we file later with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until
we sell all of the securities being registered.


o Annual Report on Form 10-K for the year ended December 31, 1997;

o Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and
  September 30, 1998;

You may request a copy of these filings at no cost, by writing or calling us at
the following address:

        Robert F. Drennan, Jr., Manager
        Investor Relations and
        Funds Management
        Treasury Department
        Carolina Power & Light Company
        411 Fayetteville Street
        Raleigh, North Carolina 27601-1748
        Telephone: (919) 546-7474

You should rely only on the information incorporated by reference or provided in
this Prospectus or any Prospectus Supplement. We have not authorized anyone else
to provide you with different information. We are not making any offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this Prospectus or any Prospectus Supplement is accurate
as of any date other than the date on the front of those documents.

                                        2

OUR COMPANY AND ADDRESS

Our Company is a public service corporation formed under the laws of North
Carolina in 1926 and is primarily engaged in the generation, transmission,
distribution and sale of electricity in portions of North Carolina and South
Carolina. Our principal executive offices are located at 411 Fayetteville
Street, Raleigh, North Carolina 27601-1748, telephone 919-546-6111.

RATIO OF EARNINGS TO FIXED
CHARGES

The following tables set forth our historical ratio of earnings to fixed charges
for the periods indicated:





          For the Twelve Months Ended December 31
- -----------------------------------------------------------
      1997         1996       1995       1994       1993
- --------------- ---------- ---------- ---------- ----------
                                     
     4.17x      4.12x      3.67x      3.31x      3.23x




For the Twelve Months Ended September 30
- ----------------------------------------
      1998                   1997
- ---------------           ----------
                          
     4.57x                  4.11x


"Earnings" consists of income before income taxes and fixed charges. "Fixed
charges" consists of interest on indebtedness (including capitalized interest)
and a share of rental expense deemed to be representative of interest.

APPLICATION OF PROCEEDS

Unless we state otherwise in any Prospectus Supplement, we will use the net
proceeds from the sale of the offered securities:

o to finance our ongoing construction and maintenance program;

o to redeem, repurchase, repay, or retire outstanding indebtedness;

o to finance future acquisitions of other entities or their assets; and

o for other general corporate purposes.

We may temporarily invest any proceeds that are not immediately applied in U.S.
government or agency obligations, commercial paper, bank certificates of
deposit, or repurchase agreements collateralized by U.S. government or agency
obligations, or we may deposit the proceeds with banks.

                                        3

                          DESCRIPTION OF THE SECURITIES

     This Prospectus describes certain general terms of the offered securities.
When we offer to sell a particular series, we will describe the specific terms
in a Prospectus Supplement. The securities will be issued under indentures,
selected provisions of which we have summarized below. The summary is not
complete. The forms of the indentures have been filed as exhibits to the
Registration Statement, and you should read the indentures for provisions that
may be important to you. In the summaries below, we have included references to
section numbers of the applicable indentures so that you can easily locate these
provisions. Capitalized terms used in the following summaries have the meanings
specified in the applicable indentures unless otherwise defined below.


                       DESCRIPTION OF FIRST MORTGAGE BONDS

General

     We will issue the First Mortgage Bonds under a Mortgage and Deed of Trust,
dated as of May 1, 1940, with The Bank of New York (formerly Irving Trust
Company) (the "Mortgage Trustee") and Frederick G. Herbst (W.T. Cunningham,
successor), as Trustees. The Mortgage and Deed of Trust is supplemented by
supplemental Indentures. In the following discussion, we will refer to the
Mortgage and Deed of Trust and all Indentures supplemental to the Mortgage and
Deed of Trust together as the "Mortgage." We will refer to all of our bonds,
including those already issued and those to be issued under this shelf
registration process or otherwise issued in the future, as "First Mortgage
Bonds." The information we are providing you in this Prospectus concerning the
First Mortgage Bonds and the Mortgage is only a summary of the information
provided in those documents. You should consult the First Mortgage Bonds
themselves, the Mortgage and other documents for more complete information on
the First Mortgage Bonds. These documents appear as exhibits to the Registration
Statement, or will appear as exhibits to a Current Report on Form 8-K, which we
will file, and which will be incorporated by reference into this Prospectus.

     You should consult the Prospectus Supplement relating to any particular
issue of the First Mortgage Bonds for the following information:

     o the designation, series and aggregate principal amount of the First
       Mortgage Bonds;

     o the percentage of the principal amount for which we will issue and sell
       the First Mortgage Bonds;

     o the date of maturity for the First Mortgage Bonds;

     o the rate at which the First Mortgage Bonds will bear interest and the
       method of determining that rate;

     o the dates on which interest is payable;

     o the denominations in which we will authorize the First Mortgage Bonds to
       be issued, if other than $1,000 or integral multiples of $1,000;

     o whether we will offer First Mortgage Bonds in the form of global bonds
       and, if so, the name of the depositary for any global bonds;

     o redemption terms;

     o and any other specific terms.

     Unless the applicable Prospectus Supplement states otherwise, the covenants
contained in the Mortgage will not afford holders of First Mortgage Bonds
protection in the event we have a change in control.

Form and Exchanges

     Unless otherwise specified in the applicable Prospectus Supplement, we will
issue the First Mortgage Bonds as registered bonds without coupons. Holders may
exchange them, free of charge, for other First Mortgage Bonds of different
authorized denominations, in the same aggregate principal amount. Holders may
also transfer the First Mortgage Bonds free of charge except for any stamp taxes
or other governmental charges that may apply.

                                        4

Interest and Payment

     The Prospectus Supplement for any First Mortgage Bonds we issue will state
the interest rate, the method of determination of the interest rate, and the
date on which interest is payable. Unless the Prospectus Supplement states
otherwise, principal and interest will be paid at The Bank of New York in New
York City.

     We have agreed to pay interest on any overdue principal and, to the extent
enforceable under law, on any overdue installment of interest on the First
Mortgage Bonds at the rate of 6% annually. For more information, see Mortgage,
Section 78.

Redemption and Purchase of First Mortgage Bonds

     If the First Mortgage Bonds are redeemable, the redemption terms will
appear in the Prospectus Supplement. We may declare redemptions on at least
thirty (30) days notice

     o for the maintenance and replacement fund;

     o for the sinking fund if we chose to establish a sinking fund for a
       designated series of First Mortgage Bonds;

     o with certain deposited cash;

     o with the proceeds of released property; or

     o at our option, unless otherwise specified in the applicable supplemental
       Indenture and the Prospectus Supplement.

     If we have not deposited the redemption funds with the Mortgage Trustee
when we give notice of redemption, the redemption shall be subject to the
deposit of those funds on or before the redemption date. Notice of redemption
will not be effective unless the Mortgage Trustee has received the redemption
funds.

     Cash that is deposited under any Mortgage provisions may be applied to the
purchase of First Mortgage Bonds of any series, with certain exceptions.

     For more information, see Mortgage, Article X.


Maintenance and Replacement Fund

     Each year we will spend 15% of our adjusted gross operating revenues for
maintenance of and replacements for the mortgaged property and certain
automotive equipment of the Company. If we spend more for these purposes in a
given year, we may credit that amount against the 15% requirement in any
subsequent year. If a regulatory authority does not permit us to spend as much
as 15% of our adjusted gross revenues for these purposes, we will spend only the
amount permitted. We may meet the annual requirements for the maintenance and
replacement fund in any of the following ways:

     o by depositing cash with the Mortgage Trustee;

     o by certifying expenditures for maintenance and repairs;

     o by certifying gross property additions;

     o by certifying gross expenditures for certain automotive equipment; or

     o by taking credit for First Mortgage Bonds and prior lien bonds that have
       been retired.

     Cash deposited with the Trustee to meet maintenance and replacement
requirements

     o may be withdrawn on expenditures for gross property additions;

     o may be withdrawn on waiver of the right to issue First Mortgage Bonds; or

     o may be applied to the purchase or redemption of First Mortgage Bonds of
       any series we may designate.

     For further discussion, see "Redemption and Purchase of First Mortgage
Bonds" above.

     We have reserved the right to amend the Mortgage, at our sole discretion,
to eliminate the maintenance and replacement fund payments with respect to any
First Mortgage Bonds of the Twenty-third Series and any subsequently created
series, including all series offered by this Prospectus. No consent or other
action by the holders of any such First Mortgage Bonds is required. For more
information, see Mortgage, Section 38; Twenty-second Supplemental Indenture,
Section 7.

                                        5

Security

     All First Mortgage Bonds are secured by the Mortgage, which constitutes, in
the opinion of our Vice President -- Legal and Corporate Secretary, a first
mortgage lien on all our present properties. This lien is subject to:

     o leases of small portions of our property to others for uses which, in the
       opinion of our counsel, do not interfere with our business;

     o leases of certain property which we own but do not use in our electric
       utility business; and

     o certain excepted encumbrances, minor defects and irregularities.

     This lien does not cover the following property:

     o merchandise, equipment, materials or supplies held for sale, and fuel,
       oil and similar consumable materials and supplies;

     o vehicles and automobiles;

     o cash, securities, receivables and all contracts, leases and operating
       agreements that are not pledged or required to be pledged; and

     o electric energy and other products.

     The Mortgage contains provisions subjecting to the lien of the Mortgage
certain other property that is acquired after the date of the delivery of the
Mortgage. These provisions for subjecting additional property to the lien of the
Mortgage are limited in the case of consolidation, merger or sale of
substantially all of our assets. For more information, see Mortgage, Article XV.

     The Trustees will have a lien upon the mortgaged property, prior to the
First Mortgage Bonds, for the payment of their reasonable compensation and
expenses and for indemnity against certain liabilities. For more information,
see Mortgage, Section 96.

Issuance of Additional First Mortgage Bonds

     We may issue an unlimited principal amount of First Mortgage Bonds under
the Mortgage (except as described in the next paragraph). We may issue First
Mortgage Bonds of any series from time to time based on any of the following:

     o 70% of property additions after adjustments to offset retirement of
       property;

     o retirement of First Mortgage Bonds or prior lien bonds; or

     o deposit of cash.

     With certain exceptions in the case of retirement of First Mortgage Bonds
or prior lien bonds, we may issue First Mortgage Bonds only if adjusted net
earnings for 12 out of the preceding 15 months, before interest and income
taxes, is at least twice the annual interest requirements on, or at least 10% of
the principal amount of, the sum of all First Mortgage Bonds outstanding at the
time, including the additional First Mortgage Bonds we may issue under this
shelf registration process or other First Mortgage Bonds we may issue in the
future, and all indebtedness of prior or equal rank. Adjusted net earnings is
net of provision for repairs, maintenance and retirement of property equal to
the maintenance and replacement fund requirements for this period. Cash
deposited for the issuance of First Mortgage Bonds may be withdrawn to the
extent of 70% of property additions after adjustments to offset retirement of
property or retirement of First Mortgage Bonds or prior lien bonds. For further
discussion, see "Modification of the Mortgage" below.

     Property additions must consist of electric property, or property used or
useful in connection with electric property, acquired after December 31, 1939.
Property additions may not include securities, vehicles or automobiles. We have
reserved the right to amend the Mortgage, at our sole discretion, to make
available as property additions any form of space satellites, including solar
power satellites, space stations and other similar facilities. We estimate that,
as of November 30, 1998, approximately $2.9 billion of net property additions
were available for the issuance of First Mortgage Bonds. Therefore, using the
70% test described above, the available net property additions provide a basis
for issuing approximately $2.1 billion of additional First Mortgage Bonds as of
November 30, 1998.

                                        6

     The Mortgage includes restrictions on the issuance of First Mortgage Bonds
against property subject to liens and upon the increase of the amount of any
liens. For more information, see Mortgage, Sections 4-7, 20-30 and 46;
Twenty-third Supplemental Indenture, Section 5.

Dividend Restrictions

     Unless otherwise specified in the Prospectus Supplement, in the case of
First Mortgage Bonds issued under this shelf registration process, and so long
as any First Mortgage Bonds are outstanding, cash dividends and distributions on
our common stock, and purchases by us of our common stock, are restricted to
aggregate net income available for them, since December 31, 1948, plus
$3,000,000, less the amount of all preferred and common stock dividends and
distributions, and all common stock purchases, since December 31, 1948.

     No portion of our retained earnings at November 30, 1998 is restricted by
this provision. For further discussion, see "Modification of the Mortgage"
below.

Modification of the Mortgage

     Bondholders' rights may be modified with the consent of the holders of 70%
of the First Mortgage Bonds. If less than all series of the First Mortgage Bonds
are affected, the modification must also receive the consent of the holders of
70% of the First Mortgage Bonds of each series affected. We have reserved the
right to amend the Mortgage, at our sole discretion, to substitute 66 2/3% for
the percentage requirements stated above. In general, no modification of the
terms of payment of principal or interest, and no modification affecting the
lien or reducing the percentage required for modification (except as noted
above), is effective against any holder of the First Mortgage Bonds without that
holder's consent. For more information, see Mortgage, Article XVIII; Thirteenth
Supplemental Indenture, Section 5.

     We may reserve the right to amend the Mortgage, at our sole discretion, for
any of the following purposes:

     o to reduce the percentage of the holders of the First Mortgage Bonds who
       must consent to certain modifications of the Mortgage to a majority of
       the bondholders adversely affected;

     o to except from the lien of the Mortgage all property not funded or
       eligible to be funded under the Mortgage for the issuance of First
       Mortgage Bonds, the release of property or any other purpose under the
       Mortgage;

     o to ease the requirements of the net earnings test (see the first
       paragraph of the Section entitled "Issuance of Additional First Mortgage
       Bonds" above by allowing the calculation to be made for 12 months within
       the last 18, rather than the last 15, months;

     o to allow the release of property from the lien of the Mortgage at cost or
       at the value of the property at the time it became funded property;

     o to simplify the release of unfunded property from the lien of the
       Mortgage, if after the release we will have at least one dollar ($1) in
       unfunded property remaining;

     o to increase the amount of funded property that may be released or retired
       on the basis of the retirement of First Mortgage Bonds from 100% to 143%
       of the principal amount of such First Mortgage Bonds; and

     o to eliminate the requirements regarding amounts to be accrued, expended
       or appropriated for maintenance or property retirements.

     Additionally, we may choose to modify the dividend covenant applicable to a
particular series of First Mortgage Bonds. See "Dividend Restrictions" above.
The purpose for a modification of the applicable dividend covenant would be to
provide that we may declare and pay dividends in cash or property on our common
stock only out of surplus or out of net profits for the preceding fiscal year.
Dividends may not be paid out of net profits, however, if our capital has been
diminished to an extent specified in the Mortgage.

Defaults and Notice Thereof

     An "Event of Default" means, with respect to any series of First Mortgage
Bonds, any of the following:

     o default in payment of principal of such series of First Mortgage Bonds;

     o default for 30 days in payment of interest on such series of First
       Mortgage Bonds;

     o default in payment of interest on or principal of prior lien bonds
       continued beyond applicable grace periods;

                                        7

     o default for 60 days in payment installments of funds for retirement of
       First Mortgage Bonds, including the maintenance and replacement funds;

     o certain events in bankruptcy, insolvency or reorganization; and

     o default for 90 days after notice in performance of any other covenants.

     For more information, see Mortgage, Section 65.

     If the Trustees deem it to be in the interest of the holders of the First
Mortgage Bonds, they may withhold notice of default, except in payment of
principal, interest or funds for retirement of First Mortgage Bonds. For more
information, see Mortgage, Section 66; Third Supplemental Indenture, Section 15.

     If a default occurs, holders of 25% of the First Mortgage Bonds may declare
all principal and interest immediately due and payable. If the default has been
cured, however, the holders of a majority of the First Mortgage Bonds may annul
the declaration and destroy its effect. For more information, see Mortgage,
Section 67. No holder of First Mortgage Bonds may enforce the lien of the
Mortgage unless the holder has given the Trustees written notice of a default
and unless the holders of 25% of the First Mortgage Bonds have requested the
Trustees in writing to act and have offered the Trustees reasonable opportunity
to act. For more information, see Mortgage, Section 80. The Trustees are not
required to risk their funds or to incur personal liability if there is a
reasonable ground for believing that repayment to the Trustees is not reasonably
assured. For more information, see Mortgage, Section 94. Holders of a majority
of the First Mortgage Bonds may establish the time, method and place of
conducting any proceedings for any remedy available to the Trustees, or
exercising any trust or power conferred upon the Trustees. For more information,
see Mortgage, Section 71.

Evidence to be Furnished to the Mortgage Trustee Under the Mortgage

     We will demonstrate compliance with Mortgage provisions by providing
written statements from our officers or persons we select. For instance, we may
select an engineer to provide a written statement regarding the value of
property being certified or released, or an accountant regarding net earnings
certificate, or counsel regarding property titles and compliance with the
Mortgage generally. In certain major matters, applicable law requires that an
accountant or engineer must be independent. (See Section 314(d) of the Trust
Indenture Act of 1939.) We must file certificates and other papers each year and
whenever certain events occur. Additionally, we must provide evidence from time
to time demonstrating our compliance with the conditions and covenants under the
Mortgage.

Concerning the Mortgage Trustee

     In the regular course of business, we obtain short-term funds from The Bank
of New York and various other banks.


                           DESCRIPTION OF SENIOR NOTES

General

     We may issue one or more new series of Senior Notes under a Senior Note
Indenture between us and a Senior Note Trustee whom we will name. The
information we are providing you in this Prospectus concerning the Senior Note
Indenture and related documents is only a summary of the information provided in
those documents. You should consult the Senior Notes themselves, the Senior Note
Indenture, any Supplemental Senior Note Indentures and other documents for more
complete information on the Senior Notes. These documents appear as exhibits to
this Registration Statement, or will appear as exhibits to a Current Report on
Form 8-K, which we will file later, and which will be incorporated by reference
into this Prospectus.

     Until the Release Date, all of the Senior Notes will be secured by one or
more series of First Mortgage Bonds, which we will issue and deliver to the
Senior Note Trustee. For more information, see "Security" and "Release Date"
below.


ON THE RELEASE DATE, THE SENIOR NOTES

     o WILL CEASE TO BE SECURED BY FIRST MORTGAGE BONDS;

     o WILL BECOME UNSECURED OBLIGATIONS OF THE COMPANY; AND

     o WILL RANK AS EQUAL WITH OTHER UNSECURED INDEBTEDNESS OF THE COMPANY,
       INCLUDING SENIOR DEBT SECURITIES.

                                        8

     The Senior Note Indenture provides that, in addition to the Senior Notes
offered under this shelf registration process, additional Senior Notes may be
issued later, without limitation as to aggregate principal amount. Before the
Release Date, however, the amount of Senior Notes that we may issue cannot
exceed the amount of First Mortgage Bonds that we are able to issue under the
Mortgage. For more information, see "Description of First Mortgage Bonds -
Issuance of Additional First Mortgage Bonds" above.

     You should consult the Prospectus Supplement relating to any particular
issue of Senior Notes for the following information:

     o the title of the Senior Notes;

     o any limit on aggregate principal amount of the Senior Notes or the series
       of which they are a part;

     o the date on which the principal of the Senior Notes will be payable;

     o the rate, including the method of determination if applicable, at which
       the Senior Notes will bear interest, if any; and

       -- the date from which any interest will accrue;

       -- the dates on which we will pay interest; and

       -- the record date for any interest payable on any interest payment date;

     o the place where

       -- the principal of, premium, if any, and interest on the Senior Notes
          will be payable;

       -- you may register transfer of the Senior Notes;

       -- you may exchange the Senior Notes;

       -- you may serve notices and demands upon us regarding the Senior Notes;

     o the Security Registrar for the Senior Notes and whether the principal of
       the Senior Notes is payable without presentment or surrender of them;

     o the terms and conditions upon which we may elect to redeem any Senior
       Notes;

     o the terms and conditions upon which the Senior Notes must be redeemed or
       purchased due to our obligations pursuant to any sinking fund or other
       mandatory redemption provisions, or at the holder's option, including any
       applicable exceptions to notice requirements;

     o the denominations in which we may issue Senior Notes;

     o the manner in which we will determine any amounts payable on the Senior
       Notes which are to be determined with reference to an index or other fact
       or event ascertainable outside the Senior Note Indenture;

     o the currency, if other than United States currency, in which payments on
       the Senior Notes will be payable;

     o terms according to which elections can be made by us or the holder
       regarding payments on the Senior Notes in currency other than the
       currency in which the notes are stated to be payable;

     o the portion of the principal amount of the Senior Notes payable upon
       declaration of acceleration of their maturity;

     o if payments are to be made on the Senior Notes in securities or other
       property, the type and amount of the securities and other property or the
       method by which the amount shall be determined;

     o the terms applicable to any rights to convert Senior Notes into or
       exchange them for our securities or those of any other entity;

   o if we issue Senior Notes as Global Securities,

       -- any limitations on transfer or exchange rights or the right to obtain
          the registration of transfer;

       -- any limitations on the right to obtain definitive certificates for the
          Senior Notes; and

       -- any other matters incidental to the Senior Notes;

                                        9

     o whether we are issuing the Senior Notes as bearer securities;

     o any limitations on transfer or exchange of Senior Notes or the right to
       obtain registration of their transfer, and the terms and amount of any
       service charge required for registration of transfer or exchange;

     o any exceptions to the provisions governing payments due on legal
       holidays, or any variations in the definition of Business Day with
       respect to the Senior Notes;

     o any addition to the Events of Default applicable to any Senior Notes and
       any additions to our covenants for the benefit of the holders of the
       Senior Notes;

     o if we are issuing any Senior Notes prior to the Release Date, the
       designation of the series of Senior Note First Mortgage Bonds to be
       delivered to the Senior Note Trustee for security for the Senior Notes;

     o any other terms of the Senior Notes not in conflict with the provisions
       of the Senior Note Indenture; and

     o any other collateral security, assurance or guarantee for such Notes.

     For more information, see Section 301 of the Senior Note Indenture.

     Senior Notes may be sold at a substantial discount below their principal
amount. You should consult the applicable Prospectus Supplement for a
description of certain special United States federal income tax considerations
which may apply to Senior Notes sold at an original issue discount or
denominated in a currency other than dollars.

     Unless the applicable Prospectus Supplement states otherwise, the covenants
contained in the Senior Note Indenture will not afford holders of Senior Notes
protection in the event we have a change in control or are involved after the
Release Date in a highly-leveraged transaction.

Security

     Until the Release Date, described in the following section, all of the
Senior Notes will be secured by one or more series of First Mortgage Bonds,
which we will issue and deliver to the Senior Note Trustee. For more information
on the First Mortgage Bonds, see "Description of First Mortgage Bonds" above.
When we issue a series of Senior Notes prior to the Release Date, we will
simultaneously issue and deliver to the Senior Note Trustee, as security for all
of the Senior Notes, a series of Senior Note First Mortgage Bonds. These First
Mortgage Bonds will have the same stated interest rate (or interest calculated
in the same manner), interest payment dates, stated maturity and redemption
provisions, and will be in the same aggregate principal amount as the series of
Senior Notes we are issuing. For more information, see Sections 401, 402 and 403
of the Senior Note Indenture. Payments we make to the Senior Note Trustee on a
series of Senior Notes will satisfy our obligations with respect to the
corresponding payments due on the related series of Senior Note First Mortgage
Bonds.

     Each series of Senior Note First Mortgage Bonds will be a series of First
Mortgage Bonds, all of which are secured by a lien on certain property we own.
For more discussion of the lien, see "Description of First Mortgage Bonds --
Security" above. In certain circumstances prior to the Release Date, we may
reduce the aggregate principal amount of Senior Note First Mortgage Bonds held
by the Senior Note Trustee. In no event, however, may we reduce that amount to
an amount lower than the aggregate outstanding principal amount of the Senior
Notes then outstanding. For more information, see Section 409 of the Senior Note
Indenture. Following the Release Date, we will close the Mortgage and not issue
any additional First Mortgage Bonds under the Mortgage. For more information,
see Section 403 of the Senior Note Indenture.

Release Date

     ON THE RELEASE DATE, THE SENIOR NOTE FIRST MORTGAGE BONDS WILL NO LONGER
SECURE THE SENIOR NOTES, AND THE SENIOR NOTES WILL BECOME OUR UNSECURED GENERAL
OBLIGATIONS. For more information, see Section 407 of the Senior Note Indenture.
The Release Date means the date that we have repaid, redeemed or otherwise
retired all of our First Mortgage Bonds, other than the Senior Note First
Mortgage Bonds securing the Senior Notes. The Senior Note Trustee will give the
Senior Note holders notice when the Release Date occurs. See "Description of
Senior Notes--Defeasance" below for a discussion of another situation in which
outstanding Senior Notes would not be secured by Senior Note First Mortgage
Bonds.

                                       10

Form, Exchange, and Transfer

     Unless the applicable Prospectus Supplement states otherwise, we will issue
Senior Notes only in fully registered form without coupons and in denominations
of $1,000 and integral multiplies of that amount. For more information, see
Sections 201 and 302 of the Senior Note Indenture.

     Holders may present Senior Notes for exchange or for registration of
transfer, duly endorsed or accompanied by a duly executed instrument of
transfer, at the office of the Security Registrar or at the office of any
Transfer Agent we may designate. Exchanges and transfers are subject to the
terms of the Senior Note Indenture and applicable limitations for global
securities. We may designate ourselves the Security Registrar. No charge will be
made for any registration of transfer or exchange of Senior Notes, but we may
require payment of a sum sufficient to cover any tax or other governmental
charge the holder must pay in connection with the transaction. Any transfer or
exchange will become effective upon the Security Registrar or Transfer Agent, as
the case may be, being satisfied with the documents of title and identity of the
person making the request. For more information, see Section 305 of the Senior
Note Indenture.

     The applicable Prospectus Supplement will state the name of any Transfer
Agent, in addition to the Security Registrar initially designated by the Company
for any Senior Notes. We may at any time designate additional Transfer Agents or
withdraw the designation of any Transfer Agent or make a change in the office
through which any Transfer Agent acts. We must, however, maintain a Transfer
Agent in each place of payment for the Senior Notes of each series. For more
information, see Section 702 of the Senior Note Indenture.

     We will not be required to

     o issue, register the transfer of, or exchange any Senior Note or any
       Tranche of any Senior Note during a period beginning at the opening of
       business 15 days before the day of mailing of a notice of redemption of
       any Senior Note called for redemption and ending at the close of business
       on the day of mailing; or

     o register the transfer of, or exchange any Senior Note selected for
       redemption except the unredeemed portion of any Senior Note being
       partially redeemed.

     For more information, see Section 305 of the Senior Note Indenture.

Payment and Paying Agents

     Unless the applicable Prospectus Supplement states otherwise, we will pay
interest on a Senior Note on any interest payment date to the person in whose
name the Senior Note is registered at the close of business on the regular
record date for the interest payment. For more information, see Section 307 of
the Senior Note Indenture.

     Unless the applicable Prospectus Supplement provides otherwise, we will pay
principal and any premium and interest on Senior Notes at the office of the
Paying Agent whom we will designate for this purpose. Unless the applicable
Prospectus Supplement states otherwise, the corporate trust office of the Senior
Note Trustee in New York City will be designated as our sole Paying Agent for
payments with respect to Senior Notes of each series. Any other Paying Agents
initially designated by us for the Senior Notes of a particular series will be
named in the applicable Prospectus Supplement. We may at any time add or delete
Paying Agents or change the office through which any Paying Agent acts. We must,
however, maintain a Paying Agent in each place of payment for the Senior Notes
of a particular series. For more information, see Section 702 of the Senior Note
Indenture.

     All money we pay to a Paying Agent for the payment of the principal and any
premium or interest on any Senior Note which remains unclaimed at the end of two
years after payment is due will be repaid to us. After that date, the holder of
that Senior Note may look only to us for these payments. For more information,
see Section 703 of the Senior Note Indenture.

Redemption

     You should consult the applicable Prospectus Supplement for any terms
regarding optional or mandatory redemption of Senior Notes. Except for the
provisions in the applicable Prospectus Supplement regarding Senior Notes
redeemable at the holder's option, Senior Notes may be redeemed only upon notice
by mail not less than 30 nor more than 60 days prior to the redemption date.
Further, if less than all the Senior Notes of a series, or any Tranche of a
series, are to be redeemed, the Senior Notes to be redeemed will be selected by
the method provided for the particular series. In the absence of a selection
provision, the Trustee will select a fair and appropriate method of random
selection. For more information, see Sections 503 and 504 of the Senior Note
Indenture.

                                       11

     A notice of redemption we provide may state:

     o that redemption is conditioned upon receipt by the Paying Agent on or
       before the redemption date of money sufficient to pay the principal and
       any premium and interest on the Senior Notes; and

     o that if the money has not been received, the notice will be ineffective
       and we will not be required to redeem the Senior Note.

     For more information, see Section 504 of the Senior Note Indenture.


Consolidation, Merger, and Sale of Assets

     We may not consolidate with or merge into any other person, nor may we
transfer or lease substantially all of our assets and property to any person,
unless:

     o the corporation formed by the consolidation or into which we are merged,
       or the person which acquires by conveyance or transfer, or which leases,
       substantially all of our property and assets

     o is organized and validly existing under the laws of any domestic
       jurisdiction and the person;

     o expressly assumes our obligations on the Senior Notes and under the
       Senior Note Indenture; and

     o prior to the Release Date, expressly assumes our obligations under the
       Senior Note First Mortgage Bonds and under the Mortgage;

     o immediately after the transaction becomes effective, no Event of Default,
       and no event which would become an Event of Default, shall have occurred
       and be continuing; and

     o we will have delivered to the Senior Note Trustee an Officer's
       Certificate and Opinion of Counsel as provided in the Senior Note
       Indenture.

     For more information, see Section 1201 of the Senior Note Indenture.

Events of Default

     "Event of Default" under the Senior Note Indenture with respect to Senior
Notes of any series means any of the following:

     o failure to pay any interest due on the Senior Notes within 30 days;

     o failure to pay principal or premium when due on a Senior Note;

     o breach of or failure to perform any other covenant or warranty in the
       Senior Note Indenture with respect to the particular series of Senior
       Notes for 60 days (subject to extension under certain circumstances for
       another 120 days) after we receive notice from the Senior Note Trustee,
       or we and the Senior Note Trustee receive notice from the holders of at
       least 33% in principal amount of the Senior Notes of that series
       outstanding under the Senior Note Indenture according to the provisions
       of the Senior Note Indenture;

     o prior to the Release Date, the occurrence of a Default under the Mortgage
       (see "Description of the First Mortgage Bonds -- Events of Default"
       above);

     o certain events of bankruptcy, insolvency or reorganization; and

     o any other Event of Default set forth in the applicable Prospectus
       Supplement.

     For more information, see Section 901 of the Senior Note Indenture.

     An Event of Default with respect to a particular series of Senior Notes
does not necessarily constitute an Event of Default with respect to the Senior
Notes of any other series issued under the Senior Note Indenture.

     If an Event of Default with respect to a particular series of Senior Notes
occurs and is continuing, either the Senior Note Trustee or the holders of at
least 33% in principal amount of the outstanding Senior Notes of that series may
declare the principal amount of all of the Senior Notes of that series to be due
and payable immediately. If the Senior Notes of that series are discount notes
or similar Senior Notes, only the portion of the principal amount as specified
in the applicable Prospectus Supplement may be immediately due and payable. If
an Event of Default occurs and is continuing with respect to all series of
Senior Notes (including all Events of Default relating to bankruptcy, insolvency
or reorganization),

                                       12

the Senior Note Trustee or the holders of at least 33% in principal amount of
the outstanding Senior Notes of all series, considered together, may declare an
acceleration of the principal amount of all Senior Notes. In the event of an
acceleration prior to the Release Date with respect to all Senior Notes, the
Trustee will make a demand for acceleration of all amounts due under all of the
Senior Note First Mortgage Bonds, but this demand will only result in such an
acceleration if allowed by the acceleration provisions of the First Mortgage.

     At any time after a declaration of acceleration with respect to the Senior
Notes of a particular series, and before a judgment or decree for payment of the
money due has been obtained, and before the acceleration of the Senior Note
First Mortgage Bonds, the Event or Events of Default giving rise to the
declaration of acceleration will, without further action, be deemed to have been
waived, and the declaration and its consequences will be deemed to have been
rescinded and annulled, if

     o we have paid or deposited with the Senior Note Trustee a sum sufficient
       to pay

       -- all overdue interest on all Senior Notes of the particular series;

       -- the principal of and any premium on any Senior Notes of that series
          which have become due otherwise than by the declaration of
          acceleration and any interest at the rate prescribed in the Senior
          Notes;

       -- interest upon overdue interest at the rate prescribed in the Senior
          Notes, to the extent payment is lawful;

       -- all amounts due to the Senior Note Trustee under the Senior Note
          Indenture; and

     o any other Event of Default with respect to the Senior Notes of the
       particular series, other than the failure to pay the principal of the
       Senior Notes of that series which has become due solely by the
       declaration of acceleration, has been cured or waived as provided in the
       Senior Note Indenture.

     For more information, see Section 902 of the Senior Note Indenture.

     The Senior Note Indenture includes provisions as to the duties of the
Senior Note Trustee in case an Event of Default occurs and is continuing.
Consistent with these provisions, the Senior Note Trustee will be under no
obligation to exercise any of its rights or powers at the request or direction
of any of the holders, unless those holders have offered to the Senior Note
Trustee reasonable indemnity. For more information, see Section 1003 of the
Senior Note Indenture. Subject to these provisions for indemnification, the
holders of a majority in principal amount of the outstanding senior notes of any
series may direct the time, method and place of conducting any proceeding for
any remedy available to the Senior Note Trustee, or exercising any trust or
power conferred on the Senior Note Trustee, with respect to the Senior Notes of
that series. For more information, see Section 912 of the Senior Note Indenture.

     No Senior Note holder may institute any proceeding regarding the Senior
Note Indenture, or for the appointment of a receiver or a trustee, or for any
other remedy under the Senior Note Indenture unless

     o the holder has previously given to the Senior Note Trustee written notice
       of a continuing Event of Default of that particular series,

     o the holders of a majority in principal amount of the outstanding Senior
       Notes of all series with respect to which an Event of Default is
       continuing have made a written request to the Senior Note Trustee, and
       have offered reasonable indemnity to the Senior Note Trustee to institute
       the proceeding as trustee, and

     o the Senior Note Trustee has failed to institute the proceeding, and has
       not received from the holders of a majority in principal amount of the
       outstanding Senior Notes of that series a direction inconsistent with the
       request, within 60 days after notice, request and offer of reasonable
       indemnity.

     For more information, see Section 907 of the Senior Note Indenture.

     The preceding limitations do not apply, however, to a suit instituted by a
Senior Note holder for the enforcement of payment of the principal of or any
premium or interest on the Senior Note on or after the applicable due date
stated in the Senior Note. For more information, see Section 908 of the Senior
Note Indenture.

     We must furnish annually to the Senior Note Trustee a statement by an
appropriate officer as to that officer's knowledge of our compliance with all
conditions and covenants under the Senior Note Indenture. Our compliance is to
be determined without regard to any grace period or notice requirement under the
Senior Note Indenture. For more information, see Section 706 of the Senior Note
Indenture.

                                       13

Modification and Waiver

     The Company and the Senior Note Trustee, without the consent of the holders
of the Senior Notes, may enter into one or more supplemental Senior Note
Indentures for any of the following purposes:

     o to evidence the assumption by any permitted successor of our covenants in
       the Senior Note Indenture and the Senior Notes;

     o to add one or more covenants or other provisions for the benefit of the
       holders of outstanding Senior Notes or to surrender any right or power
       conferred upon us by the Senior Note Indenture;

     o to add any additional Events of Default;

     o to change or eliminate any provision of the Senior Note Indenture or add
       any new provision to it (but if this action will adversely affect the
       interests of the holders of any particular series of Senior Notes in any
       material respect, the action will become effective with respect to that
       series only when there is no Senior Note of that series remaining
       outstanding under the Senior Note Indenture);

     o to provide collateral security for the Senior Notes;

     o to establish the form or terms of Senior Notes according to the
       provisions of the Senior Note Indenture;

     o to evidence the acceptance of appointment of a successor Senior Note
       Trustee under the Senior Note Indenture with respect to one or more
       series of the Senior Notes and to add to or change any of the provisions
       of the Senior Note Indenture as necessary to provide for the
       administration of the trusts under the Senior Note Indenture by more than
       one trustee;

     o to provide for the procedures required to permit using a noncertificated
       system of registration for any Senior Notes series;

     o to change any place where

       -- the principal of and any premium and interest on any Senior Notes is
          payable,

       -- any Senior Notes may be surrendered for registration of transfer or
          exchange, or

       -- notices and demands to or upon us regarding Senior Notes and the
          Senior Note Indenture may be served; or

     o to cure any ambiguity or inconsistency (but any of these changes or
       additions will not adversely affect the interests of the holders of
       Senior Notes of any series in any material respect).

     For more information see Section 1301 of the Senior Note Indenture.

     The holders of at least a majority in aggregate principal amount of the
outstanding Senior Notes of any series may waive

     o compliance by us with certain provisions of the Senior Note Indenture
       (see Section 607 of the Senior Note Indenture); and

     o any past default under the Senior Note Indenture, except a default in the
       payment of principal, premium, or interest, and certain covenants and
       provisions of the Senior Note Indenture that cannot be modified or
       amended without consent of the holder of each outstanding Senior Note of
       the series affected (see Section 913 of the Senior Note Indenture).

     The Trust Indenture Act of 1939 may be amended after the date of the Senior
Note Indenture to require changes to the Senior Note Indenture. In this event,
the Senior Note Indenture will be deemed to have been amended so as to effect
the changes, and we and the Senior Note Trustee may, without the consent of any
holders, enter into one or more Supplemental Senior Note Indentures to evidence
or effect the amendment. For more information, see Section 1301 of the Senior
Note Indenture.

     Except as provided in this section, the consent of the holders of a
majority in aggregate principal amount of the outstanding Senior Notes,
considered as one class, is required to change in any manner the Senior Note
Indenture pursuant to one or more supplemental Senior Note Indentures. If less
than all of the series of Senior Notes outstanding are directly affected by a
proposed supplemental Senior Note Indenture, however, only the consent of the
holders of a majority in aggregate principal amount of the outstanding Senior
Notes of all series directly affected, considered as one class, will be

                                       14

required. Furthermore, if the Senior Notes of any series have been issued in
more than one Tranche and if the proposed supplemental Senior Note Indenture
directly affects the rights of the holders of one or more, but not all Tranches,
only the consent of the holders of a majority in aggregate principal amount of
the outstanding Senior Notes of all Tranches directly affected, considered as
one class, will be required. In addition, an amendment or modification

     o may not, without the consent of the holder of the Senior Note

       -- change the maturity of the principal of, or any installment of
          principal of or interest on, any Senior Note,

       -- reduce the principal amount or the rate of interest, or the amount of
          any installment of interest, or change the method of calculating the
          rate of interest,

       -- reduce any premium payable upon the redemption of the Senior Note,

       -- reduce the amount of the principal of any Senior Note originally
          issued at a discount from the stated principal amount that would be
          due and payable upon a declaration of acceleration of maturity,

       -- change the currency or other property in which a Senior Note or
          premium or interest on a Senior Note is payable,

       -- impair the right to institute suit for the enforcement of any payment
          on or after the stated maturity (or, in the case of redemption, on or
          after the redemption date) of any Senior Note; or

     o may not reduce the percentage of principal amount requirement for consent
       of the holders for any supplemental Senior Note Indenture, or for any
       waiver of compliance with any provision of or any default under the
       Senior Note Indenture, or reduce the requirements for quorum or voting,
       without the consent of the holder of each outstanding Senior Note of each
       series or Tranche effected;

     o may not prior to the Release Date

       -- impair the interest of the Senior Note Trustee in the Senior Note
          First Mortgage Bonds,

       -- reduce the principal amount of any series of Senior Note First
          Mortgage Bonds to an amount less than that of the related series of
          Senior Notes, or

       -- alter the payment provisions of the Senior Note First Mortgage Bonds
          in a manner adverse to the holders of the Senior Notes; and

     o may not modify provisions of the Senior Note Indenture relating to
       supplemental Senior Note Indentures, waivers of certain covenants and
       waivers of past defaults with respect to the Senior Notes of any series,
       or any Tranche of a series, without the consent of the holder of each
       outstanding Senior Note affected.

     A supplemental Senior Note Indenture will be deemed not to affect the
rights under the Senior Note Indenture of the holders of any series or Tranche
of the Senior Notes if the supplemental Senior Note Indenture

       -- changes or eliminates any covenant or other provision of the Senior
          Note Indenture expressly included solely for the benefit of one or
          more other particular series of Senior Notes or Tranches thereof; or

       -- modifies the rights of the holders of Senior Notes of any other series
          or Tranches with respect to any covenant or other provision.

     For more information, see Section 1302 of the Senior Note Indenture.

     If we solicit from holders of the Senior Notes any type of action, we may
at our option by board resolution fix in advance a record date for the
determination of the holders entitled to vote on the action. We shall have no
obligation, however, to do so. If we fix a record date, the action may be taken
before or after the record date, but only the holders of record at the close of
business on the record date shall be deemed to be holders for the purposes of
determining whether holders of the requisite proportion of the outstanding
Senior Notes have authorized the action. For that purpose, the outstanding
Senior Notes shall be computed as of the record date. Any holder action shall
bind every future holder of the same security and the holder of every security
issued upon the registration of transfer of or in exchange for or in lieu of the
security in respect of anything done or permitted by the Senior Note Trustee or
us in reliance on that action, whether or not notation of the action is made
upon the security. For more information, see Section 104 of the Senior Note
Indenture.

                                       15

Defeasance

     Unless the applicable Prospectus Supplement provides otherwise, any Senior
Note, or portion of the principal amount of a Senior Note, will be deemed to
have been paid for purposes of the Senior Note Indenture, and, at our election,
our entire indebtedness in respect to the Senior Note (or portion thereof) will
be deemed to have been satisfied and discharged, if we have irrevocably
deposited with the Senior Note Trustee or any Paying Agent other than us in
trust money, certain Eligible Obligations, or a combination of the two,
sufficient to pay principal of any premium and interest due and to become due on
the Senior Note or portions thereof. For more information, see Section 801 of
the Senior Note Indenture. For this purpose, unless the applicable Prospectus
Supplement provides otherwise, Eligible Obligations include direct obligations
of, or obligations unconditionally guaranteed by, the United States, entitled to
the benefit of full faith and credit of the United States, and certificates,
depositary receipts or other instruments which evidence a direct ownership
interest in these obligations or in any specific interest or principal payments
due in respect to those obligations.

Resignation of Senior Note Trustee

     The Senior Note Trustee may resign at any time by giving written notice to
us or may be removed at any time by an action of the holders of a majority in
principal amount of outstanding Senior Notes delivered to the Senior Note
Trustee and us. No resignation or removal of the Senior Note Trustee and no
appointment of a successor trustee will become effective until a successor
trustee accepts appointment in accordance with the requirements of the Senior
Note Indenture. So long as no Event of Default or event which would become an
Event of Default has occurred and is continuing, and except with respect to a
Senior Note Trustee appointed by an action of the holders, if we have delivered
to the Senior Note Trustee a resolution of our Board of Directors appointing a
successor trustee and the successor trustee has accepted the appointment in
accordance with the terms of the Senior Note Indenture, the Senior Note Trustee
will be deemed to have resigned and the successor trustee will be deemed to have
been appointed as trustee in accordance with the Senior Note Indenture. For more
information, see Section 1010 of the Senior Note Indenture.

Notices

     We will give notices to holders of Senior Notes by mail to their addresses
as they appear in the Security Register. For more information, see Section 106
of the Senior Note Indenture.

Title

     The Senior Note Trustee and its agents, and we and our agents, may treat
the person in whose name a Senior Note is registered as the absolute owner of
that Note, whether or not that Senior Note may be overdue, for the purpose of
making payment and for all other purposes. For more information, see Section 308
of the Senior Note Indenture.

Governing Law

     The Senior Note Indenture and the Senior Notes will be governed by, and
construed in accordance with, the law of the State of New York. For more
information, see Section 112 of the Senior Note Indenture.

                                       16

                         DESCRIPTION OF DEBT SECURITIES

General

     We may issue one or more new series of Debt Securities under a Debt
Security Indenture between us and a Debt Security Trustee whom we will name. The
information we are providing you in this Prospectus concerning the Debt Security
Indenture and related documents is only a summary of the information provided in
those documents. You should consult the Debt Securities themselves, the Debt
Security Indenture, any Supplemental Debt Security Indentures and other
documents for more complete information on the Debt Securities. These documents
appear as exhibits to this Registration Statement, or will appear as exhibits to
a Current Report on Form 8-K, which we will file later, and which will be
incorporated by reference into this Prospectus.

     The applicable Prospectus Supplement may state that a particular series of
Debt Securities will be subordinated obligations of the Company. In the
following discussion we will refer to any of these subordinated obligations as
the Subordinated Debt Securities. Unless the applicable Prospectus Supplement
provides otherwise, we will use separate indentures (called Subordinated Debt
Security Indentures in the following discussion) for any Subordinated Debt
Securities we may issue.

     You should consult the Prospectus Supplement relating to any particular
issue of Debt Securities for the following information:

     o the title of the Debt Securities;

     o any limit on aggregate principal amount of the Debt Securities or the
       series of which they are a part;

     o the date on which the principal of the Debt Securities will be payable;

     o the rate, including the method of determination if applicable, at which
       the Debt Securities will bear interest, if any; and

       -- the date from which any interest will accrue;

       -- the dates on which we will pay interest; and

       -- the record date for any interest payable on any interest payment date;

     o the place where

       -- the principal of, premium, if any, and interest on the Debt Securities
          will be payable;

       -- you may register transfer of the Debt Securities;

       -- you may exchange the Debt Securities;

       -- you may serve notices and demands upon us regarding the Debt
          Securities;

     o the Security Registrar for the Debt Securities and whether the principal
       of the Debt Securities is payable without presentment or surrender of
       them;

     o the terms and conditions upon which we may elect to redeem any Debt
       Securities;

     o the terms and conditions upon which the Debt Securities must be redeemed
       or purchased due to our obligations pursuant to any sinking fund or other
       mandatory redemption provisions, or at the holder's option, including any
       applicable exceptions to notice requirements;

     o the denominations in which we may issue Debt Securities;

     o the manner in which we will determine any amounts payable on the Debt
       Securities which are to be determined with reference to an index or other
       fact or event ascertainable outside the Debt Security Indenture;

     o the currency, if other than United States currency, in which payments on
       the Debt Securities will be payable;

     o terms according to which elections can be made by us or the holder
       regarding payments on the Debt Securities in currency other than the
       currency in which the Debt Securities are stated to be payable;

     o the portion of the principal amount of the Debt Securities payable upon
       declaration of acceleration of their maturity;

                                       17

     o if payments are to be made on the Debt Securities in securities or other
       property, the type and amount of the securities and other property or the
       method by which the amount shall be determined;

     o the terms applicable to any rights to convert Debt Securities into or
       exchange them for our securities or those of any other entity;

     o if we issue Debt Securities as Global Securities,

       -- any limitations on transfer or exchange rights or the right to obtain
          the registration of transfer;

       -- any limitations on the right to obtain definitive certificates for the
          Debt Securities; and

       -- any other matters incidental to the Debt Securities;

     o whether we are issuing the Debt Securities as bearer securities;

     o any limitations on transfer or exchange of Debt Securities or the right
       to obtain registration of their transfer, and the terms and amount of any
       service charge required for registration of transfer or exchange;

     o any exceptions to the provisions governing payments due on legal
       holidays, or any variations in the definition of Business Day with
       respect to the Debt Securities;

     o any addition to the Events of Default applicable to any Debt Securities
       and any additions to our covenants for the benefit of the holders of the
       Debt Securities; and

     o any other terms of the Debt Securities not in conflict with the
       provisions of the Debt Security Indenture.

     For more information, see Section 301 of the Debt Security Indenture.

     Debt Securities may be sold at a substantial discount below their principal
amount. You should consult the applicable Prospectus Supplement for a
description of certain special United States federal income tax considerations
which may apply to Debt Securities sold at an original issue discount or
denominated in a currency other than dollars.

     Unless the applicable Prospectus Supplement states otherwise, the covenants
contained in the Debt Security Indenture will not afford holders of Debt
Securities protection in the event we have a change in control or are involved
in a highly-leveraged transaction.

Subordination

     The applicable Prospectus Supplement may provide that a series of Debt
Securities will be Subordinated Debt Securities, subordinate and junior in right
of payment to all our senior Indebtedness. The indenture under which these
securities will be issued is referred to as the Subordinated Debt Security
Indenture.

     No payment of principal of (including redemption and sinking fund
payments), or any premium or interest on, the Subordinated Debt Securities may
be made if

     o any Senior Indebtedness is not paid when due,

     o any applicable grace period with respect to default in payment of Senior
       Indebtedness has ended, and the default has not been cured or waived, or

     o the maturity of any Senior Indebtedness has been accelerated because of a
       default.

     Upon any distribution of our assets to creditors upon any dissolution,
winding-up, liquidation or reorganization, whether voluntary or involuntary or
in bankruptcy, insolvency, receivership or other proceedings, all principal of,
and any premium and interest due or to become due on all senior indebtedness
must be paid in full before the holders of the Subordinated Debt Securities are
entitled to payment. For more information, see Section 1502 of the Subordinated
Debt Security Indenture. The rights of the holders of the Subordinated Debt
Securities will be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions applicable to Senior
Indebtedness until all amounts owing on the Subordinated Debt Securities are
paid in full. For more information, see Section 1504 of the Subordinated Debt
Security Indenture.

     As defined in the Subordinated Debt Security Indenture, the term "Senior
Indebtedness" means

     o obligations (other than non-recourse obligations and the indebtedness
       issued under the Subordinated Debt Security Indenture) of, or guaranteed
       or assumed by, us

                                       18

       -- for borrowed money (including both senior and subordinated
          indebtedness for borrowed money, but excluding the Subordinated Debt
          Securities); or

       -- for the payment of money relating to any lease which is capitalized on
          the consolidated balance sheet of the Company and our subsidiaries in
          accordance with generally accepted accounting principles; or

     o indebtedness evidenced by bonds, debentures, notes or other similar
       instruments.

     In the case of any such indebtedness or obligations, Senior Indebtedness
includes amendments, renewals, extensions, modifications and refundings, whether
existing as of the date of the Subordinated Debt Security Indenture or
subsequently incurred by us.

     The Subordinated Debt Security Indenture does not limit the aggregate
amount of Senior Indebtedness that we may issue.

Form, Exchange, and Transfer

     Unless the applicable Prospectus Supplement states otherwise, we will issue
Debt Securities only in fully registered form without coupons and in
denominations of $1,000 and integral multiplies of that amount. For more
information, see Sections 201 and 302 of the Debt Security Indenture.

     Holders may present Debt Securities for exchange or for registration of
transfer, duly endorsed or accompanied by a duly executed instrument of
transfer, at the office of the Security Registrar or at the office of any
Transfer Agent we may designate. Exchanges and transfers are subject to the
terms of the Debt Security Indenture and applicable limitations for global
securities. We may designate ourselves the Security Registrar. No charge will be
made for any registration of transfer or exchange of Debt Securities, but we may
require payment of a sum sufficient to cover any tax or other governmental
charge the holder must pay in connection with the transaction. Any transfer or
exchange will become effective upon the Security Registrar or Transfer Agent, as
the case may be, being satisfied with the documents of title and identity of the
person making the request. For more information, see Section 305 of the Debt
Security Indenture.

     The applicable Prospectus Supplement will state the name of any Transfer
Agent, in addition to the Security Registrar initially designated by the
Company, for any Debt Securities. We may at any time designate additional
Transfer Agents or withdraw the designation of any Transfer Agent or make a
change in the office through which any Transfer Agent acts. We must, however,
maintain a Transfer Agent in each place of payment for the Debt Securities of
each series. For more information, see Section 602 of the Debt Security
Indenture.

     We will not be required to

     o issue, register the transfer of, or exchange any Debt Securities or any
       Tranche of any Debt Securities during a period beginning at the opening
       of business 15 days before the day of mailing of a notice of redemption
       of any Debt Securities called for redemption and ending at the close of
       business on the day of mailing; or

     o register the transfer of, or exchange any Debt Securities selected for
       redemption except the unredeemed portion of any Debt Securities being
       partially redeemed.

     For more information, see Section 305 of the Debt Security Indenture.

Payment and Paying Agents

     Unless the applicable Prospectus Supplement states otherwise, we will pay
interest on a Debt Security on any interest payment date to the person in whose
name the Debt Security is registered at the close of business on the regular
record date for the interest payment. For more information, see Section 307 of
the Debt Security Indenture.

     Unless the applicable Prospectus Supplement provides otherwise, we will pay
principal and any premium and interest on Debt Securities at the office of the
Paying Agent whom we will designate for this purpose. Unless the applicable
Prospectus Supplement states otherwise, the corporate trust office of the Debt
Security Trustee in New York City will be designated as our sole Paying Agent
for payments with respect to Debt Securities of each series. Any other Paying
Agents initially designated by us for the Debt Securities of a particular series
will be named in the applicable Prospectus Supplement. We may at any time add or
delete Paying Agents or change the office through which any Paying Agent acts.
We must, however, maintain a Paying Agent in each place of payment for the Debt
Securities of a particular series. For more information, see Section 602 of the
Debt Security Indenture.

                                       19

     All money we pay to a Paying Agent for the payment of the principal and any
premium or interest on any Debt Security which remains unclaimed at the end of
two years after payment is due will be repaid to us. After that date, the holder
of that Debt Security may look only to us for these payments. For more
information, see Section 603 of the Debt Security Indenture.

Redemption

     You should consult the applicable Prospectus Supplement for any terms
regarding optional or mandatory redemption of Debt Securities. Except for the
provisions in the applicable Prospectus Supplement regarding Debt Securities
redeemable at the holder's option, Debt Securities may be redeemed only upon
notice by mail not less than 30 nor more than 60 days prior to the redemption
date. Further, if less than all the Debt Securities of a series, or any Tranche
of a series, are to be redeemed, the Debt Securities to be redeemed will be
selected by the method provided for the particular series. In the absence of a
selection provision, the Trustee will select a fair and appropriate method of
random selection. For more information, see Sections 403 and 404 of the Debt
Security Indenture.

     A notice of redemption we provide may state:

     o that redemption is conditioned upon receipt by the Paying Agent on or
       before the redemption date of money sufficient to pay the principal of
       and any premium and interest on the Debt Securities; and

     o that if the money has not been received, the notice will be ineffective
       and we will not be required to redeem the Debt Securities.

     For more information, see Section 404 of the Debt Security Indenture.

Consolidation, Merger, and Sale of Assets

     We may not consolidate with or merge into any other person, nor may we
transfer or lease substantially all of our assets and property to any person,
unless:

     o the corporation formed by the consolidation or into which we are merged,
       or the person which acquires by conveyance or transfer, or which leases,
       substantially all of our property and assets

       -- is organized and validly existing under the laws of any domestic
          jurisdiction; and

       -- expressly assumes our obligations on the Debt Securities and under the
          Debt Security Indenture.

     o immediately after the transaction becomes effective, no Event of Default,
       and no event which would become an Event of Default, shall have occurred
       and be continuing; and

     o we will have delivered to the Debt Security Trustee an Officer's
       Certificate and Opinion of Counsel as provided in the Debt Security
       Indenture.

     For more information, see Section 1101 of the Debt Security Indenture.

Events of Default

     "Event of Default" under the Debt Security Indenture with respect to Debt
Securities of any series means any of the following:

     o failure to pay any interest due on the Debt Securities within 30 days;

     o failure to pay principal or premium when due on a Debt Security;

     o breach of or failure to perform any other covenant or warranty in the
       Debt Security Indenture with respect to the particular series of Debt
       Securities for 60 days (subject to extension under certain circumstances
       for another 120 days) after we receive notice from the Debt Security
       Trustee, or we and the Debt Security Trustee receive notice from the
       holders of at least 33% in principal amount of the Debt Securities of
       that series outstanding under the Debt Security Indenture according to
       the provisions of the Debt Security Indenture;

     o certain events of bankruptcy, insolvency or reorganization; and

     o any other Event of Default set forth in the applicable Prospectus
       Supplement.

     For more information, see Section 801 of the Debt Security Indenture.

                                       20

     An Event of Default with respect to a particular series of Debt Securities
does not necessarily constitute an Event of Default with respect to the Debt
Securities of any other series issued under the Debt Security Indenture.

     If an Event of Default with respect to a particular series of Debt
Securities occurs and is continuing, either the Debt Security Trustee or the
holders of at least 33% in principal amount of the outstanding Debt Securities
of that series may declare the principal amount of all of the Debt Securities of
that series to be due and payable immediately. If the Debt Securities of that
series are discount securities or similar Debt Securities, only the portion of
the principal amount as specified in the applicable Prospectus Supplement may be
immediately due and payable. If an Event of Default occurs and is continuing
with respect to all series of Debt Securities (including all Events of Default
relating to bankruptcy, insolvency, or reorganization), the Debt Security
Trustee or the holders of at least 33% in principal amount of the outstanding
Debt Securities of all series, considered together, may declare an acceleration
of the amount payable.

     At any time after a declaration of acceleration with respect to the Debt
Securities of a particular series, and before a judgment or decree for payment
of the money due has been obtained, the Event of Default giving rise to the
declaration of acceleration will, without further action, be deemed to have been
waived, and the declaration and its consequences will be deemed to have been
rescinded and annulled, if

     o we have paid or deposited with the Debt Security Trustee a sum sufficient
       to pay

       -- all overdue interest on all Debt Securities of the particular series;

       -- the principal of and any premium on any Debt Securities of that series
          which have become due otherwise than by the declaration of
          acceleration and any interest at the rate prescribed in the Debt
          Securities;

       -- interest upon overdue interest at the rate prescribed in the Debt
          Securities, to the extent payment is lawful; and

       -- all amounts due to the Debt Security Trustee under the Debt Security
          Indenture; and

     o any other Event of Default with respect to the Debt Securities of the
       particular series, other than the failure to pay the principal of the
       Debt Securities of that series which has become due solely by the
       declaration of acceleration, has been cured or waived as provided in the
       Debt Security Indenture.

     For more information, see Section 802 of the Debt Security Indenture.

     The Debt Security Indenture includes provisions as to the duties of the
Debt Security Trustee in case an Event of Default occurs and is continuing.
Consistent with these provisions, the Debt Security Trustee will be under no
obligation to exercise any of its rights or powers at the request or direction
of any of the holders, unless those holders have offered to the Debt Security
Trustee reasonable indemnity. For more information, see Section 903 of the Debt
Security Indenture. Subject to these provisions for indemnification, the holders
of a majority in principal amount of the outstanding Debt Securities of any
series may direct the time, method and place of conducting any proceeding for
any remedy available to the Debt Security Trustee, or exercising any trust or
power conferred on the Debt Security Trustee, with respect to the Debt
Securities of that series. For more information, see Section 812 of the Debt
Security Indenture.

     No Debt Securities holder may institute any proceeding regarding the Debt
Security Indenture, or for the appointment of a receiver or a trustee, or for
any other remedy under the Debt Security Indenture unless

     o the holder has previously given to the Debt Security Trustee written
       notice of a continuing Event of Default of that particular series;

     o the holders of a majority in principal amount of the outstanding Debt
       Securities of all series with respect to which an Event of Default is
       continuing have made a written request to the Debt Security Trustee, and
       have offered reasonable indemnity to the Debt Security Trustee to
       institute the proceeding as trustee; and

     o the Debt Security Trustee has failed to institute the proceeding, and has
       not received from the holders of a majority in principal amount of the
       outstanding Debt Securities of that series a direction inconsistent with
       the request, within 60 days after notice, request and offer of reasonable
       indemnity.

     For more information, see Section 807 of the Debt Security Indenture.

     The preceding limitations do not apply, however, to a suit instituted by a
Debt Security holder for the enforcement of payment of the principal of or any
premium or interest on the Debt Securities on or after the applicable due date
stated in the Debt Securities. For more information, see Section 808 of the Debt
Security Indenture.

                                       21

     We must furnish annually to the Debt Security Trustee a statement by an
appropriate officer as to that officer's knowledge of our compliance with all
conditions and covenants under the Debt Security Indenture. Our compliance is to
be determined without regard to any grace period or notice requirement under the
Debt Security Indenture. For more information, see Section 606 of the Debt
Security Indenture.

Modification and Waiver

     We and the Debt Security Trustee, without the consent of the holders of the
Debt Securities, may enter into one or more Supplemental Debt Security
Indentures for any of the following purposes:

     o to evidence the assumption by any permitted successor of our covenants in
       the Debt Security Indenture and the Debt Securities;

     o to add one or more covenants or other provisions for the benefit of the
       holders of outstanding Debt Securities or to surrender any right or power
       conferred upon us by the Debt Security Indenture;

     o to add any additional Events of Default;

     o to change or eliminate any provision of the Debt Security Indenture or
       add any new provision to it (but if this action will adversely affect the
       interests of the holders of any particular series of Debt Securities in
       any material respect, the action will become effective with respect to
       that series only when there is no Debt Securities of that series
       remaining outstanding under the Debt Security Indenture);

     o to provide collateral security for the Debt Securities;

     o to establish the form or terms of Debt Securities according to the
       provisions of the Debt Security Indenture;

     o to evidence the acceptance of appointment of a successor Debt Security
       Trustee under the Debt Security Indenture with respect to one or more
       series of the Debt Securities and to add to or change any of the
       provisions of the Debt Security Indenture as necessary to provide for the
       administration of the trusts under the Debt Security Indenture by more
       than one trustee;

     o to provide for the procedures required to permit using a noncertificated
       system of registration for any Debt Securities series;

     o to change any place where

       -- the principal of and any premium and interest on any Debt Securities
          is payable,

       -- any Debt Securities may be surrendered for registration of transfer or
          exchange; or

       -- notices and demands to or upon us regarding Debt Securities and the
          Debt Security Indenture may be served; or

     o to cure any ambiguity or inconsistency (but only changes or additions
       that will not adversely affect the interests of the holders of Debt
       Securities of any series in any material respect).

     For more information see Section 1201 of the Debt Security Indenture.

     The holders of at least a majority in aggregate principal amount of the
outstanding Debt Securities of any series may waive

     o compliance by us with certain provisions of the Debt Security Indenture
       (see Section 607 of the Debt Security Indenture); and

     o any past default under the Debt Security Indenture, except a default in
       the payment of principal, premium, or interest, and certain covenants and
       provisions of the Debt Security Indenture that cannot be modified or
       amended without consent of the holder of each outstanding Debt Security
       of the series affected (see Section 813 of the Debt Security Indenture).

     The Trust Indenture Act of 1939 may be amended after the date of the Debt
Security Indenture to require changes to the Debt Security Indenture. In this
event, the Debt Security Indenture will be deemed to have been amended so as to
effect the changes, and we and the Debt Security Trustee may, without the
consent of any holders, enter into one or more Supplemental Debt Security
Indentures to evidence or effect the amendment. For more information, see
Section 1201 of the Debt Security Indenture.

                                       22

     Except as provided in this section, the consent of the holders of a
majority in aggregate principal amount of the outstanding Debt Securities,
considered as one class, is required to change in any manner the Debt Security
Indenture pursuant to one or more supplemental Debt Security Indentures. If less
than all of the series of Debt Securities outstanding are directly affected by a
proposed supplemental Debt Security Indenture, however, only the consent of the
holders of a majority in aggregate principal amount of the outstanding Debt
Securities of all series directly affected, considered as one class, will be
required. Furthermore, if the Debt Securities of any series have been issued in
more than one Tranche and if the proposed supplemental Debt Security Indenture
directly affects the rights of the holders of one or more, but not all,
Tranches, only the consent of the holders of a majority in aggregate principal
amount of the outstanding Debt Securities of all Tranches directly affected,
considered as one class, will be required. In addition, an amendment or
modification

     o may not, without the consent of the holder of the Debt Securities

       -- change the maturity of the principal of, or any installment of
          principal of or interest on, any Debt Securities;

       -- reduce the principal amount or the rate of interest, or the amount of
          any installment of interest, or change the method of calculating the
          rate of interest;

       -- reduce any premium payable upon the redemption of the Debt Securities;

       -- reduce the amount of the principal of any Debt Security originally
          issued at a discount from the stated principal amount that would be
          due and payable upon a declaration of acceleration of maturity;

       -- change the currency or other property in which a Debt Security or
          premium or interest on a Debt Security is payable; or

       -- impair the right to institute suit for the enforcement of any payment
          on or after the stated maturity (or in the case of redemption, on or
          after the redemption date) of any Debt Securities;

     o may not reduce the percentage of principal amount requirement for consent
       of the holders for any supplemental Debt Security Indenture, or for any
       waiver of compliance with any provision of or any default under the Debt
       Security Indenture, or reduce the requirements for quorum or voting,
       without the consent of the holder of each outstanding Debt Security of
       each series or Tranche effected; and

     o may not modify provisions of the Debt Security Indenture relating to
       supplemental Debt Security Indentures, waivers of certain covenants and
       waivers of past defaults with respect to the Debt Securities of any
       series, or any Tranche of a series, without the consent of the holder of
       each outstanding Debt Security affected.

     A supplemental Debt Security Indenture will be deemed not to affect the
rights under the Debt Security Indenture of the holders of any series or Tranche
of the Debt Securities if the supplemental Debt Security Indenture

       -- changes or eliminates any covenant or other provision of the Debt
          Security Indenture expressly included solely for the benefit of one or
          more other particular series of Debt Securities or Tranches thereof;
          or

       -- modifies the rights of the holders of Debt Securities of any other
          series or Tranches with respect to any covenant or other provision.

     For more information, see Section 1202 of the Debt Security Indenture.

     If we solicit from holders of the Debt Securities any type of action, we
may at our option by board resolution fix in advance a record date for the
determination of the holders entitled to vote on the action. We shall have no
obligation, however, to do so. If we fix a record date, the action may be taken
before or after the record date, but only the holders of record at the close of
business on the record date shall be deemed to be holders for the purposes of
determining whether holders of the requisite proportion of the outstanding Debt
Securities have authorized the action. For that purpose, the outstanding Debt
Securities shall be computed as of the record date. Any holder action shall bind
every future holder of the same security and the holder of every security issued
upon the registration of transfer of or in exchange for or in lieu of the
security in respect of anything done or permitted by the Debt Security Trustee
or us in reliance on that action, whether or not notation of the action is made
upon the security. For more information, see Section 104 of the Debt Security
Indenture.

Defeasance

     Unless the applicable Prospectus Supplement provides otherwise, any Debt
Security, or portion of the principal amount of a Debt Security, will be deemed
to have been paid for purposes of the Debt Security Indenture, and, at our

                                       23

election, our entire indebtedness in respect to the Debt Security (or portion
thereof) will be deemed to have been satisfied and discharged, if we have
irrevocably deposited with the Debt Security Trustee or any Paying Agent other
than us in trust money, certain Eligible Obligations, or a combination of the
two, sufficient to pay principal of any premium and interest due and to become
due on the Debt Securities or portions thereof. For more information, see
Section 701 of the Debt Security Indenture. For this purpose, unless the
applicable Prospectus Supplement provides otherwise, Eligible Obligations
include direct obligations of, or obligations unconditionally guaranteed by, the
United States, entitled to the benefit of full faith and credit of the United
States, and certificates, depositary receipts or other instruments which
evidence a direct ownership interest in these obligations or in any specific
interest or principal payments due in respect to those obligations.

Resignation of Debt Security Trustee

     The Debt Security Trustee may resign at any time by giving written notice
to us or may be removed at any time by an action of the holders of a majority in
principal amount of outstanding Debt Securities delivered to the Debt Security
Trustee and us. No resignation or removal of the Debt Security Trustee and no
appointment of a successor trustee will become effective until a successor
trustee accepts appointment in accordance with the requirements of the Debt
Security Indenture. So long as no Event of Default or event which would become
an Event of Default has occurred and is continuing, and except with respect to a
Debt Security Trustee appointed by an action of the holders, if we have
delivered to the Debt Security Trustee a resolution of our Board of Directors
appointing a successor trustee and the successor trustee has accepted the
appointment in accordance with the terms of the Debt Security Indenture, the
Debt Security Trustee will be deemed to have resigned and the successor trustee
will be deemed to have been appointed as trustee in accordance with the Debt
Security Indenture. For more information, see Section 910 of the Debt Security
Indenture.

Notices

     We will give notices to holders of Debt Securities by mail to their
addresses as they appear in the Security Register. For more information, see
Section 106 of the Debt Security Indenture.

Title

     The Debt Security Trustee and its agents, and we and our agents may treat
the person in whose name a Debt Security is registered as the absolute owner of
that Debt Security, whether or not that Debt Security may be overdue, for the
purpose of making payment and for all other purposes. For more information, see
Section 308 of the Debt Security Indenture.

Governing Law

     The Debt Security Indenture and the Debt Securities will be governed by,
and construed in accordance with, the law of the State of New York. For more
information, see Section 112 of the Debt Security Indenture.


                                GLOBAL SECURITIES

     We may issue some or all of the First Mortgage Bonds, Senior Notes or Debt
Securities of any series as Global Securities. We will register each Global
Security in the name of a depositary identified in the applicable Prospectus
Supplement. The Global Securities will be deposited with a depositary or nominee
or custodian for the depositary and will bear a legend regarding restrictions on
exchanges and registration of transfer as discussed below and any other matters
to be provided pursuant to the Mortgage and applicable Indenture.

     As long as the depositary or its nominee is the registered holder of a
Global Security, that person will be considered the sole owner and holder of the
Global Security and the securities represented by it for all purposes under the
securities and the Mortgage, Senior Note Indenture and Debt Security Indenture.
Except in limited circumstances, owners of a beneficial interest in a Global
Security

     o will not be entitled to have the Global Security or any securities
       represented by it registered in their names;

     o will not receive or be entitled to receive physical delivery of
       certificated securities in exchange for the Global Security; and

     o will not be considered to be the owners or holders of the Global Security
       or any securities represented by it for any purposes under the securities
       or the Mortgage, Senior Note Indenture or Debt Security Indenture.

                                       24

     We will make all payments of principal and any premium and interest on a
Global Security to the depositary or its nominee as the holder of the Global
Security. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of securities in definitive form. These laws
may impair the ability to transfer beneficial interests in a Global Security.

     Ownership of beneficial interests in a Global Security will be limited to
institutions having accounts with the depositary or its nominee, called
"participants" for purposes of this discussion, and to persons that hold
beneficial interests through participants. When a Global Security is issued, the
depositary will credit on its book entry, registration and transfer system the
principal amounts of securities represented by the Global Security to the
accounts of its participants. Ownership of beneficial interests in a Global
Security will be shown only on, and the transfer of those ownership interests
will be effected only through, records maintained by

     o the depositary, with respect to participant's interests or;

     o any participant, with respect to interests of persons held by the
       participants on their behalf.

     Payments by participants to owners of beneficial interests held through
such participants will be the responsibility of such participants. The
depositary may from time to time adopt various policies and procedures governing
payments, transfers, exchanges, and other matters relating to beneficial
interests in a Global Security. None of the following will have any
responsibility or liability for any aspect of the depositary or any
participant's records relating to, or for payments made on account of,
beneficial interest in a Global Security, or for maintaining, supervising or
reviewing any records relating to these beneficial interests:

     o the Company;

     o the Trustee under the Mortgage;

     o the Trustee under the Senior Note Indenture;

     o the Trustee under the Debt Security Indenture; or

     o any agent of each of the above.

                              PLAN OF DISTRIBUTION

   We may sell the securities in any of three ways:

     o through underwriters or dealers;

     o directly through a limited number of institutional purchasers or to a
       single purchaser; or

     o through agents.

     The applicable Prospectus Supplement will set forth the terms under which
the securities are offered, including

     o the names of any underwriters, dealers or agents;

     o the purchase price and the net proceeds to us from the sale;

     o any underwriting discounts and other items constituting underwriters
       compensation;

     o any initial public offering price; and

     o any discounts or concessions allowed, re-allowed or paid to dealers.

     We or any underwriters or dealers may change from time to time any initial
public offering price and any discounts or concessions allowed or re-allowed or
paid to dealers.

     If we use underwriters in the sale, the securities will be acquired by the
underwriters for their own account and may be resold in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of the sale. Unless the
applicable Prospectus Supplement states otherwise, the obligations of any
underwriter to purchase the securities will be subject to certain conditions,
and the underwriter will be obligated to purchase the securities, except that in
certain cases involving a default by an underwriter, less than all of the
securities may be purchased. If we sell securities through an agent, the
applicable Prospectus Supplement will state the name and

                                       25

any commission payable by us to the agent. Unless the Prospectus Supplement
states otherwise, any agent of the Company will be acting on a best efforts
basis for the period of its appointment.

     The applicable Prospectus Supplement will state whether we will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase securities at the public offering price set forth in
the Prospectus Supplement pursuant to delayed delivery contracts providing for
payment and delivery on a specified future date. These contracts will be subject
to the conditions set forth in the Prospectus Supplement. Additionally, the
Prospectus Supplement will set forth the commission payable for solicitation of
these contracts.

     Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain civil liabilities,
including liabilities under the Securities Act of 1933.

                                     EXPERTS

     The financial statements and the related financial statement schedules
incorporated in this prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1997 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.

                                 LEGAL OPINIONS

     William D. Johnson of our legal department and Hunton & Williams of
Raleigh, North Carolina, our outside counsel, will issue opinions about the
legality of the offered securities for us. Any underwriters will be advised
about other issues relating to any offering by their own legal counsel,
Winthrop, Stimson, Putnam & Roberts of New York, New York.

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