10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2004

OR

[  ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

              For the transition period from __________ to __________

Commission File Number	Registrant, State of Incorporation Address and Telephone Number	I.R.S. Employer Identification No.
2-26651	New England Power Company (a Massachusetts corporation) 25 Research Drive Westborough, Massachusetts 01582 508.389.2000	04-1663070

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES [ X ]
NO [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

YES [  ]
NO [ X ]

The number of shares outstanding of each of the issuer’s classes of common stock, as of February 9, 2005, were as follows:

Registrant	Title	Shares Outstanding
New England Power Company	Common Stock, $20.00 par value (all held by National Grid USA)	3,619,896

NEW ENGLAND POWER COMPANY

FORM 10-Q - For the Quarter Ended December 31, 2004

			PAGE
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements
		Condensed Statements of Income
		Condensed Statements of Retained Earnings
		Condensed Statements of Comprehensive Income
		Condensed Balance Sheets
		Condensed Statements of Cash Flows
		Notes to Unaudited Condensed Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosures About Market Risk
Item 4.	Controls and Procedures
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings
Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchase of Equity Securities
Item 6.	Exhibits and Reports on Form 8-K
Signature
Exhibit Index

PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

NEW ENGLAND POWER COMPANY
Condensed Statements of Income
Periods Ended December 31
(In thousands of dollars)
(UNAUDITED)

			Three Months		Nine Months
			2004	2003	2004	2003
Operating revenue, principally from affiliates			$122,120	$117,208	$347,022	$342,071
Operating expenses:
	Purchased electric energy:
		Contract termination and nuclear unit shutdown charges	36,609	36,383	108,428	110,082
		Other	3,774	3,182	11,480	9,053
	Other operation		15,979	15,411	45,081	40,969
	Maintenance		3,939	4,469	8,538	11,027
	Amortization of stranded costs		18,004	18,051	53,005	54,156
	Depreciation and amortization		4,817	4,526	14,517	13,310
	Taxes, other than income taxes		4,135	4,218	12,931	12,998
	Income taxes		10,457	10,699	31,527	33,287
		Total operating expenses	97,714	96,939	285,507	284,882
Operating income			24,406	20,269	61,515	57,189
Other income:
	Equity in income of nuclear power companies		384	424	971	1,451
	Other income (loss), net		(1,111)	(487)	(988)	1,922
		Operating and other income	23,679	20,206	61,498	60,562
Interest:
	Interest on long-term debt		2,296	1,416	5,543	4,506
	Other interest		246	239	686	737
		Total interest	2,542	1,655	6,229	5,243
Net income			$21,137	$18,551	$55,269	$55,319

Per share data is not relevant because the Company’s common stock is wholly owned by National Grid USA.

The accompanying notes are an integral part of these financial statements.

NEW ENGLAND POWER COMPANY
Condensed Statements of Retained Earnings
Periods Ended December 31
(In thousands of dollars)
(UNAUDITED)

	Three Months		Nine Months
	2004	2003	2004	2003
Retained earnings at beginning of period	$243,413	$250,884	$209,319	$214,154
Net income	21,137	18,551	55,269	55,319
Dividends declared on cumulative preferred stock	(17)	(18)	(55)	(56)
Retained earnings at end of period	$264,533	$269,417	$264,533	$269,417

NEW ENGLAND POWER COMPANY
Condensed Statements of Comprehensive Income
Periods Ended December 31
(In thousands of dollars)
(UNAUDITED)

	Three Months			Nine Months
	2004	2003	2004		2003
Net income	$21,137	$18,551	$55,269		$55,319
Unrealized gain on securities, net of tax	77	119	64		300
Comprehensive income	$21,214	$18,670	$55,333		$55,619

Per share data is not relevant because the Company’s common stock is wholly owned by National Grid USA.

The accompanying notes are an integral part of these financial statements.

NEW ENGLAND POWER COMPANY
Condensed Balance Sheets
(In thousands of dollars)
(UNAUDITED)

			December 31, 2004	March 31, 2004
Assets
Utility plant, at original cost			$    949,504	$    878,824
	Less accumulated depreciation and amortization		249,935	240,203
			699,569	638,621
	Construction work in progress		25,426	12,852
		Net utility plant	724,995	651,473
Goodwill			338,188	338,188
Investments:
	Nuclear power companies, at equity (Note C)		17,416	18,305
	Non-utility property and other investments		12,412	11,290
		Total investments	29,828	29,595
Current assets:
	Cash and cash equivalents (including $305,600 and $229,400 with affiliates)		306,013	229,716
	Accounts receivable:
		Affiliated companies	54,475	51,131
		Others (less reserves of $153 and $153)	104,530	104,338
	Fuel, materials, and supplies, at average cost		3,149	2,054
	Prepaid and other current assets		1,269	1,370
	Deferred federal and state income taxes		120	202
	Regulatory assets – purchased power obligations		105,262	105,011
		Total current assets	574,818	493,822
Regulatory assets (Note B)			973,694	1,134,382
Additional minimum pension regulatory asset			62,454	62,454
Prepaid pension asset			48,956	47,245
Deferred charges and other assets			4,702	5,374
	Total assets		$    2,757,635	$    2,762,533

The accompanying notes are an integral part of these financial statements.

NEW ENGLAND POWER COMPANY
Condensed Balance Sheets
(In thousands of dollars)
(UNAUDITED)

			December 31, 2004	March 31, 2004
Capitalization and liabilities
Capitalization:
	Common stock, par value $20 per share, Authorized - 6,449,896 shares Outstanding – 3,619,896 shares		$    72,398	$    72,398
	Other paid-in capital		731,974	731,974
	Retained earnings		264,533	209,319
	Accumulated other comprehensive income		151	87
		Total common equity	1,069,056	1,013,778
	Cumulative preferred stock, par value $100 per share		1,112	1,274
	Long-term debt		410,302	410,297
		Total capitalization	1,480,470	1,425,349
Current liabilities:
	Accounts payable (including $39,423 and $34,814 to affiliates)		63,334	59,620
	Accrued liabilities:
		Taxes	31,972	18,337
		Interest	1,129	532
		Purchased power obligations	105,262	105,011
		Other accrued expenses	9,218	3,216
	Dividends payable		17	19
		Total current liabilities	210,932	186,735
Deferred federal and state income taxes			228,473	234,054
Unamortized investment tax credits			7,557	7,885
Additional minimum pension liability			39,952	39,952
Accrued Yankee nuclear plant costs			239,780	269,997
Purchased power obligations			220,454	293,296
Other reserves and deferred credits			330,017	305,265
Commitments and contingencies (Note C)
Total capitalization and liabilities			$    2,757,635	$    2,762,533

The accompanying notes are an integral part of these financial statements.

NEW ENGLAND POWER COMPANY
Condensed Statements of Cash Flows
Periods Ended December 31
(In thousands of dollars)
(UNAUDITED)

	Nine Months
	2004	2003
Operating activities:
Net income	$    55,269	$    55,319
Adjustments to reconcile net income to net cash provided by operating activities:
Purchased power contract buyout and stranded cost amortization	53,005	54,156
Other depreciation and amortization	14,517	13,310
Deferred income tax(tax benefit) and investment tax credits, net	(3,907)	(17,394)
Allowance for funds used during construction	(613)	(607)
Changes in assets and liabilities:
Increase in accounts receivable, net	(3,536)	(28,664)
Decrease in regulatory assets	101,381	121,557
Increase in prepaid and other current assets	(355)	(2,682)
Increase (decrease) in accounts payable	3,714	(11,129)
Decrease in purchased power contract obligations	(72,591)	(90,034)
Increase (decrease) in other current liabilities	14,829	(13,596)
Decrease in other non-current liabilities	(43,993)	(18,703)
Other, net	6,823	14,953
Net cash provided by operating activities	$    124,543	$    76,486
Investing activities:
Plant expenditures	$    (48,027)	$    (30,093)
Proceeds from sale of generation assets	-	13,977
Other investing activities	-	82
Net cash used in investing activities	$    (48,027)	$    (16,034)
Financing activities:
Dividends paid on preferred stock	$          (57)	$          (56)
Preferred stock buyback	(162)	(21)
Net cash used in financing activities	$        (219)	$          (77)
Net increase in cash and cash equivalents	$      76,297	$    60,375
Cash and cash equivalents at beginning of period	229,716	247,678
Cash and cash equivalents at end of period	$    306,013	$    308,053
Supplemental disclosures of cash flow information:
Interest paid	$      4,566	$      4,061
Federal and state income taxes paid	$    26,601	$    64,496
Dividends received from investments at equity	$      2,812	$      5,776

The accompanying notes are an integral part of these financial statements.

NEW ENGLAND POWER COMPANY
Notes to Unaudited Condensed Financial Statements

NOTE A — SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: New England Power Company (the Company or NEP), in the opinion of management, has included all adjustments (which include normal recurring adjustments) necessary for a fair statement of the financial position and results of operations for the interim periods presented. The March 31, 2004 condensed balance sheet data included in this quarterly report on Form 10-Q was derived from audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2004. As such, the March 31, 2004 balance sheet included in this Form 10-Q is considered unaudited as it does not include all the footnote disclosures contained in the Company’s Form 10-K. These financial statements and the notes thereto should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2004.

The company is a wholly owned subsidiary of National Grid USA and, indirectly, National Grid Transco plc.

Reclassifications: Certain amounts from prior years have been reclassified in the accompanying financial statements to conform to the current year presentation.

NOTE B — RATE AND REGULATORY ISSUES

The Company’s financial statements conform to generally accepted accounting principles in the USA (GAAP), including the accounting principles for rate regulated entities with respect to its regulated operations. Because electricity rates have historically been based on a utility's costs, electric utilities are subject to certain accounting standards that are not applicable to other business enterprises in general. The Company applies the provisions of SFAS No. 71, “Accounting for the Effects of Certain Types of Regulation” (FAS 71), which requires regulated entities, in appropriate circumstances, to establish regulatory assets or liabilities, and thereby defer the income statement impact of certain charges or revenues because they are expected to be collected or refunded through future customer billings.

The Company has received authorization from the Federal Energy Regulatory Commission (FERC) to recover through contract termination charges (CTCs) substantially all of the costs associated with its former generating business not recovered through the divestiture of the generation assets. Additionally, FERC enables transmission companies to recover their specific costs of providing transmission service. Therefore, substantially all of the Company’s business, including the recovery of its stranded costs, remains under cost-based rate regulation.

Under settlement agreements approved by the appropriate commissions, the Company is permitted to recover costs associated with its former generating investments (nuclear and nonnuclear) and related contractual commitments that were not recovered through the sale of those investments (stranded costs). Stranded costs are recovered from the Company’s wholesale customers with whom it has settlement agreements through a CTC which the affiliated former wholesale customers in turn recover through delivery charges to distribution customers. The Company earns a return on equity (ROE) of approximately 9.7 percent on stranded cost recovery. Most stranded costs will be fully recovered through CTCs by the end of 2010. The Company’s stranded cost obligation related to the above-market cost of purchased power contracts and nuclear decommissioning costs are recovered through the CTC as such costs are actually incurred. The Company, under certain settlement agreements, earns incentives based on successful mitigation of its stranded costs and these incentives supplement the Company’s ROE.

As a result of applying FAS 71, the Company has recorded net regulatory assets for the costs that are recoverable from customers through CTCs. At December 31, 2004 and March 31, 2004 this amounted to approximately $1.0 billion and $1.1 billion, respectively, including $0.5 billion and $0.6 billion, respectively, related to the above-market costs of purchased power contracts, $0.3 billion and $0.3 billion, respectively, related to accrued nuclear plant costs, and $0.2 billion and $0.2 billion, respectively, related to other net regulatory assets.

In conjunction with the divestiture of its generating business, the Company transferred its entitlement to power procured under several long-term contracts (the Contracts) to USGen New England, Inc. (USGen), Constellation Power Source, Inc. and TransCanada Power Marketing Ltd. (collectively the Buyers). The Buyers agreed to fulfill the Company’s performance and payment obligations under the Contracts. At the same time the Company agreed to pay the Buyers a fixed amount monthly for the above-market cost of the Contracts. These fixed payments by the Company average approximately $106 million annually through December 2007 decreasing to approximately $12 million for 2008 then decreasing to approximately $3 million annually from 2009 to 2014. The net present value of these fixed monthly payments is recorded as a liability with an equal amount recorded in regulatory assets representing the future collection of the liability from ratepayers. At December 31, 2004 and March 31, 2004, the net present value of the liability for the fixed monthly payment was approximately $326 million and $398 million, respectively.

USGen had previously filed for bankruptcy protection on July 8, 2003. The Company reached a settlement with USGen regarding various matters, which was approved by the bankruptcy court on December 22, 2004. Under the settlement, on April 1, 2005, the Company will resume the performance and payment obligations under the Contracts that were transferred to USGen. At December 31, 2004, the Company’s regulatory asset corresponding to the above-market portion of the Contracts with USGen was approximately $269 million. Resumption of the performance payment obligations will not materially affect the results of operations, as the Company will recover the above-market cost of the Contracts from customers through the CTC. Any payments from USGen relating to these obligations will be credited to customers through the CTC.

The settlement between the Company and USGen also resolved the Company’s claims with respect to the Hydro Quebec transmission line agreements (HQ Contracts), under which USGen was obligated to reimburse the Company for monthly costs of approximately $1 million. As of April 2, 2004, the Company resumed performance and payment under the HQ Contracts. The Company’s resumption of performance and payment obligations will not affect the results of operations, as the Company will be able to recover any remaining costs of the HQ Contracts from its customers through the CTC. Any payments from USGen relating to the HQ Contracts will be credited to customers through the CTC.

NOTE C — COMMITMENTS AND CONTINGENCIES

Decommissioning Nuclear Units: The Company has minority interests in three nuclear generating companies: Yankee Atomic Electric Company, Connecticut Yankee Atomic Power Company, and Maine Yankee Atomic Power Company (together, the Yankees). These ownership interests are accounted for by the equity method. The Yankees own nuclear generating units that have been permanently retired and are conducting decommissioning operations. These three units are as follows:

	The Company’s Investment as of December 31, 2004			Future Estimated Billings to the Company
Unit	%	$(millions)	Date Retired	$(millions)
Yankee Atomic	34.5	0.3	Feb 1992	45
Connecticut Yankee	19.5	8.5	Dec 1996	122
Maine Yankee	24.0	8.6	Aug 1997	73

With respect to each of these units, NEP has recorded a liability and a regulatory asset reflecting the estimated future decommissioning billings from the companies. In a 1993 decision, the FERC allowed Yankee Atomic to recover its undepreciated investment in the plant, including a return on that investment, as well as unfunded nuclear decommissioning costs and other costs. Maine Yankee and Connecticut Yankee recover their prudently incurred costs, including a return, in accordance with settlement agreements approved by the FERC in May 1999 and July 2000, respectively. The Company’s share of the decommissioning costs is accounted for in "Purchased electric energy" on the income statement.

Future estimated billings from the Yankees are based upon decommissioning cost estimates. These estimates include the projected costs of decontaminating the units as required by the Nuclear Regulatory Commission (NRC), dismantling the units, spent fuel storage, security, and liability and property insurance, as well as other costs. The decommissioning costs that are actually incurred by the Yankees may exceed the estimated amounts, perhaps substantially. The future estimated billings listed in the table above include increases that the Yankees made to their cost estimates beginning in the third quarter of fiscal 2003 and continuing through fiscal 2004 to reflect projected future increases in security and insurance costs and other expenses. NEP’s share of these increases is approximately $162 million. Under settlement agreements, NEP is permitted to recover prudently incurred decommissioning costs through CTCs.

Decommissioning Collections: Each of the Yankees has established a trust fund, or escrow fund, to meet the projected costs of decommissioning. In order to collect the costs of decommissioning from their purchasers (including NEP), the Yankees are required to file rate cases periodically with FERC. The rate filings present the Yankees’ estimates of future decommissioning costs for FERC approval. Yankee Atomic ceased decommissioning collections in June 2000. Subsequently, it filed for a rate increase, and received final approval from the FERC on October 2, 2003, and it resumed making decommissioning collections. Maine Yankee filed a rate case on October 20, 2003 and received final approval from the FERC on September 16, 2004. Connecticut Yankee filed a rate case with the FERC on July 1, 2004, seeking a rate increase of approximately $76 million per year through 2010, of which NEP’s share would be approximately $15 million per year. NEP’s share of the rate increase sought by Connecticut Yankee is included in the $162 million increase for all of the Yankees mentioned above.

Connecticut Yankee Rate Filing: The Connecticut Department of Public Utility Control and the Connecticut Office of Consumer Counsel (together, the Department) intervened at FERC requesting that FERC reject Connecticut Yankee’s rate filing, or in the alternative, disallow a portion of the requested rate increase on the ground that certain of the costs were imprudently incurred. Bechtel Power Corporation and three New England states have also intervened, asserting that certain of these costs are imprudent and should be disallowed. FERC allowed Connecticut Yankee’s new rates effective February 1, 2005, subject to refund. Hearings on the rate filing are scheduled to begin in June 2005.

On June 10, 2004, before Connecticut Yankee filed its rate case with the FERC, the Department filed a petition with the FERC asking the FERC to determine that if it should find that any of Connecticut Yankee’s decommissioning costs were not prudently incurred, the purchasers may not recover these costs in rates that are ultimately charged to distribution customers. In an order dated August 30, 2004, FERC denied the Department’s petition on the grounds that it has no jurisdiction over retail rates and that only prudently incurred costs are recoverable under wholesale power contracts. The Department and Bechtel have filed motions for clarification and rehearing.

Bechtel Power Corporation Dispute: On June 13, 2003, Connecticut Yankee terminated its firm fixed price contract with Bechtel Power Corporation, its decommissioning operations contractor, alleging various defaults of Bechtel’s obligations. Bechtel has filed a lawsuit in Connecticut Superior Court against Connecticut Yankee alleging breach of contract and other claims, seeking compensatory and punitive damages. Connecticut Yankee has filed a counterclaim against Bechtel seeking damages, including the recovery of a performance bond supplied by Bechtel’s surety, and has stated that it intends to defend vigorously against Bechtel’s claims.  Following the contract termination, Connecticut Yankee commenced self-performance of the decommissioning work. As part of its transition into self-performance, Connecticut Yankee updated its decommissioning cost estimate and filed a rate case as described above. The rate case reflects the impact of Bechtel’s termination and projects a substantial increase in cost and delay in the estimated completion date.

DOE Dispute: The Nuclear Waste Policy Act of 1982 establishes that the federal government, through the Department of Energy (DOE), is responsible for the disposal of spent nuclear fuel. In a lawsuit brought against the DOE by numerous utilities and state regulatory commissions, the U.S. Court of Appeals for the District of Columbia Circuit ruled in 1997 that the DOE was obligated to begin disposing of utilities’ spent nuclear fuel by January 1998. The DOE failed to meet this deadline. Many owners of nuclear power plants, including the Yankees, filed claims for money damages in the U.S. Court of Federal Claims for the costs associated with the DOE’s failure to begin to take fuel in 1998. In October 1998 the court held that the DOE is liable for such failure. The Yankees have filed a further action against the DOE to determine the level of damages, which is now pending. As an interim measure until the DOE meets its contractual obligations to dispose of the spent fuel, the Yankees have constructed independent spent fuel storage installations located at the plant sites.

Hazardous Waste: The Federal Comprehensive Environmental Response, Compensation and Liability Act, more commonly known as the "Superfund" law, imposes strict, joint and several liability, regardless of fault, for the costs to remediate property contaminated with hazardous substances. A number of states, including Massachusetts, have enacted similar laws.

The electric utility industry typically utilizes and/or generates in its operations a range of potentially hazardous products and by-products. The Company currently has in place an internal environmental audit program and an external waste disposal vendor audit and qualification program intended to enhance compliance with existing federal, state, and local requirements regarding the handling of potentially hazardous products and by-products.

The Company has been named as a potentially responsible party (PRP) by either the United States Environmental Protection Agency or the Massachusetts Department of Environmental Protection for several sites at which hazardous waste is alleged to have been disposed. Private parties have also contacted or initiated legal proceedings against the Company regarding hazardous waste cleanup. The Company is currently aware of other possible hazardous waste sites, and may in the future become aware of additional sites, that it may be held responsible for remediating. Some of these sites relate to the disposal of ash from fossil fuel generating plants formerly owned by the Company. Predicting the potential costs to investigate and remediate hazardous waste sites continues to be difficult. There are also significant uncertainties as to the portion, if any, of the investigation and remediation costs of any particular hazardous waste site that may ultimately be borne by the Company. The Company has recovered amounts from certain insurers, and, where appropriate, intends to seek recovery from other insurers and from other PRPs, but it is uncertain whether, and to what extent, such efforts will be successful. The Company is currently recovering certain environmental cleanup costs in rates. The Company believes that hazardous waste liabilities for all sites of which it is aware are not material to its financial position.

Town of Norwood Dispute: NEP continues to be engaged in litigation in judicial and administrative forums with the Town of Norwood, Massachusetts. From 1983 until 1998, NEP was the wholesale power supplier for Norwood. In April 1998, Norwood began taking power from another supplier, although its contract term with NEP ran to 2008. Pursuant to a tariff amendment approved by the FERC in May 1998, NEP has been assessing Norwood a CTC. Through December 31, 2004, the charges assessed Norwood but not paid amount to approximately $72.3 million. Norwood made a payment of approximately $20 million in July 2004. The litigation with Norwood is continuing and is as follows:

State Collection Action: NEP filed a collection action in Massachusetts Superior Court (Worcester County) to collect the CTC, which Norwood had refused to pay.  In March 2001, the Superior Court ruled that Norwood has breached the agreement by not paying the CTC charge, and ordered Norwood to make regular and substantial payments to an escrow account. Norwood unsuccessfully appealed the order to the Massachusetts Appeals Court, and the Massachusetts Supreme Judicial Court denied Norwood’s petition for further appellate review.  On June 1, 2004, the Supreme Court denied Norwood’s petition for certiorari.

On December 17, 2003, the Superior Court entered judgment for NEP for approximately $40.6 million, which included interest to that date, and which the Company subsequently moved to increase by approximately $2.7 million, to adjust for computational errors.  Norwood then moved to void the judgment, or stay its enforcement pending completion of the FERC proceeding described below, or both. On June 9, 2004, the Massachusetts Superior Court granted NEP’s motion to increase the judgment and denied Norwood’s motion to void the judgment or stay it pending Norwood’s Section 206 Proceeding at FERC. Norwood asked the Superior Court to reconsider its grant of NEP’s motion, and the Superior Court denied this request on December 22, 2004. Norwood has appealed the judgment and the denial of its motion for consideration to the Massachusetts Appeals Court.   

FERC 206 Proceeding: In December 2002, Norwood filed a challenge to the CTC rate with the FERC under Section 206 of the Federal Power Act. Under this Section, the FERC has the power to grant prospective relief only. In an order dated July 2, 2003, the FERC set down for hearing Norwood’s challenge to the factors used to calculate the CTC rate for Norwood, and set a refund effective date of February 21, 2003, which empowers the FERC to direct NEP to adjust Norwood’s liability for unpaid charges billed after that date in the event that Norwood’s challenge is successful. On June 9, 2004, the FERC administrative law judge issued an initial decision recommending that FERC revise the CTC formula to reduce the CTC amount that was previously calculated under the formula which the FERC accepted and approved in 1998. On July 9, 2004, NEP filed a brief objecting to this initial decision, arguing that no reduction is appropriate. Norwood and the FERC staff have also challenged the initial decision, arguing that the reduction is not enough. The challenges are now under consideration by FERC.

Federal Court Antitrust Claim: In 1997, Norwood filed a lawsuit in the U.S. District Court for the District of Massachusetts challenging NEP’s proposed divestiture of its generating facilities. Following the District Court’s dismissal of all of Norwood’s claims, the U.S. Court of Appeals for the First Circuit reinstated Norwood’s claim that the sale to USGen New England, Inc. violated Section 7 of the Clayton Act on the ground that USGen had acquired market power. The First Circuit characterized the claim as weak because FERC had found no anticompetitive consequences from the sale, and invited the District Court to address whether the FERC’s decision precluded further litigation. USGen’s bankruptcy filing on July 2, 2003 resulted in an automatic stay of this case. In December 2004, the bankruptcy court approved the sale to third parties of the generating facilities that USGen acquired from NEP, which sales were completed or are expected to be completed in early 2005.

Millstone 3 Prudence Challenge: In November 1999, NEP agreed with Northeast Utilities (NU) to settle certain claims. As part of the agreement, NU agreed to include NEP’s 16.2 percent ownership interest in Millstone Unit 3 in an auction of NU’s share of the unit. Upon the closing of the sale, NEP was to receive a fixed amount, regardless of the actual sale price. In March 2001, the Millstone units were sold, including NEP’s interest, for $1.3 billion. In accordance with the settlement, NEP was paid approximately $25 million for its interest in the unit (plus reimbursement of pre-paid amounts), from which NEP paid approximately $6.2 million to increase the decommissioning trust fund.

In the past, regulatory authorities from Rhode Island, New Hampshire and Massachusetts expressed an intent to challenge the reasonableness of the settlement agreement on various grounds, taking the position that NEP would have received approximately $140 million of sale proceeds if there had been no agreement with NU. On July 16, 2004, the New Hampshire Public Utilities Commission approved a settlement which is now final. On November 18, 2004, the Attorney General of Massachusetts also agreed to a settlement with the Company that resolved the Millstone as well as other CTC issues. The settlement was approved by the Massachusetts Department of Telecommunications and Energy on December 29, 2004, and will also require the approval of FERC. In the event that Rhode Island proceeds with a challenge, the dispute will be resolved by the FERC. Management believes that the Company acted prudently, because, among other reasons, the amount it received under the settlement agreement was the highest sale price for a nuclear unit at the time the agreement was reached.

NOTE D — SEGMENTS

The Company’s reportable segments are electric transmission and electric other (primarily stranded cost recovery, see Note B – “Rate and Regulatory Issues”). The Company is engaged principally in the business of electric power transmission. Certain information regarding the Company's segments is set forth in the following table. Corporate assets consist primarily of other property and investments, cash and unamortized debt expense.

	Quarter ended December 31,
(In millions)	2004			2003
	Electric transmission	Electric other	Total	Electric transmission	Electric other	Total
Operating revenues	$        46	$        76	$        122	$        48	$        69	$      117
Operating income before income taxes	21	14	35	19	12	31
Depreciation and amortization	5	-	5	5	-	5
Amortization of stranded costs	-	18	18	-	18	18

	Nine months ended December 31,
(In millions)	2004			2003
	Electric Transmission	Electric Other	Total	Electric Transmission	Electric Other	Total
Operating revenues	$      129	$      218	$      347	$      133	$      209	$      342
Operating income before income taxes	60	33	93	57	33	90
Depreciation and amortization	15	-	15	13	-	13
Amortization of stranded costs	-	53	53	-	54	54

	Total assets at:
(In millions)	December 31, 2004	March 31, 2004
Electric transmission	$        1,180	$              1,111
Electric other	1,244	1,394
Corporate assets	334	258
Total	$        2,758	$              2,763

NOTE E – EMPLOYEE BENEFITS

As discussed in the Company’s Annual Report on Form 10-K for the year ended March 31, 2004 National Grid USA and its subsidiaries (including the Company), provide benefits to retirees in the form of pension and other postretirement benefits. The qualified defined benefit pension plans cover substantially all employees meeting certain minimum age and service requirements. Funding for the qualified defined benefit pension plans is based on actuarially determined contributions, the maximum of which is generally the amount deductible for income tax purposes and the minimum being that required by the Employee Retirement Income Security Act of 1974, as amended. The pension plans’ assets primarily consist of investments in equity and debt securities. In addition, National Grid USA and its subsidiaries (including the Company) sponsor non-qualified plans (plans that do not meet the criteria for tax benefits) that cover officers, certain other key employees, and non-employee directors. National Grid USA and its subsidiaries (including the Company) provide certain health care and life insurance benefits to retired U.S. employees and their eligible dependents. These benefits are subject to minimum age and service requirements. The health care benefits include medical coverage, dental coverage, and prescription drugs and are subject to certain limitations, such as deductibles and co-payments.

Benefit plans’ costs charged to the Company during the three and nine months ended December 31, 2004 and 2003 included the following components:

			Other Postretirement
($'s in 000's)	Pension Benefits		Benefits
For the Three Months Ended December 31,	2004	2003	2004	2003
Service cost	$         17	$           16	$               1	$             17
Interest cost	1,829	1,922	742	902
Expected return on plans' assets	(2,370)	(2,330)	(702)	(854)
Amortization of prior service cost	46	46	9	(5)
Recognized actuarial loss	673	678	131	129
Net periodic benefit cost	$        195	$         332	$            181	$          189
Special termination benefits	$           -	$       782	$                - -	$           168
Curtailment loss	$-	$         10	$	$           215

			Other Postretirement
($'s in 000's)	Pension Benefits		Benefits
For the Nine Months Ended December 31,	2004	2003	2004	2003
Service cost	$           50	$           49	$             30	$           50
Interest cost	5,488	5,766	2,536	2,706
Expected return on plans' assets	(7,110)	(6,990)	(2,504)	(2,561)
Amortization of prior service cost	138	138	(19)	(14)
Recognized actuarial loss	2,018	2,033	728	387
Net periodic benefit cost	$         584	$        996	$            771	$           568
Special termination benefits	$            -	$        963	$               - -	$         195
Curtailment loss	$              -	$          10	$               - -	$         215

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING INFORMATION

This report and other presentations made by New England Power Company (the Company) contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Throughout this report, forward-looking statements can be identified by the words or phrases “will likely result”, “are expected to”, “will continue”, “is anticipated”, “estimated”, “projected”, “believe”, “hopes” or similar expressions. Although the Company believes that, in making any such statements, its expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to differ materially from those projected. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to:

(a) the impact of further electric industry restructuring;

(b) the impact of general economic changes;

(c) federal and state regulatory developments and changes in law, which may have a substantial adverse impact on revenues or on the value of the Company’s assets;

(d) federal regulatory developments concerning regional transmission organizations;

(e) changes in accounting rules and interpretations, which may have an adverse impact on the Company’s statements of financial position and reported earnings;

(f) timing and adequacy of rate relief;

(g) adverse changes in electric load;

(h) acts of terrorism;

(i) climatic changes or unexpected changes in weather patterns; and

(j) failure to recover costs currently deferred under the provisions Statement of Financial Accounting Standards No. 71, “Accounting for the Effects of Certain Types of Regulations”, as amended.

CRITICAL ACCOUNTING POLICIES

Certain critical accounting policies are based on assumptions and conditions that, if changed, could have a material effect on the financial condition, results of operations and liquidity of the Company. See the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2004, Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - “Critical Accounting Policies” for a detailed discussion of these policies.

RESULTS OF OPERATIONS

EARNINGS

Net income for the quarter ended December 31, 2004, increased approximately $3 million compared with the same period in 2003. Net income for the nine months ended December 31, 2004 was unchanged compared with the same period in 2003. The increase for the quarter was due primarily to stranded investment recovery and transmission revenue true-up adjustments, and an increase in transmission earnings as investment in transmission plant increases. Offsetting these increases for the nine months were decreased mitigation incentives, reduced revenues from the Town of Norwood (see Note C), and a declining stranded investment base resulting in reduced returns.

REVENUES

The Company has two primary sources of revenue: transmission and stranded investment recovery. Transmission revenues are based on a formula rate that recovers the Company’s actual costs plus a return on investment. Stranded investment recovery revenues are in the form of a Contract Termination Charge (CTC), which is billed to former all-requirements customers of the Company in connection with the Company’s divestiture of its electric generation investments.

Operating revenue increased $5 million for the quarter and nine months ended December 31, 2004, compared to the same periods in 2003, reflecting higher expense associated with the resumption of the HQ Contracts (see Note B), increased recovery of other expenses, and CTC and transmission revenue true-up adjustments recorded during the quarter. The nine month period was also affected by lower revenues from the Town of Norwood.

OPERATING EXPENSES

Purchased power expense increased $1 million for the quarter and nine months ended December 31, 2004, compared with the same periods in 2003 reflecting increased nuclear decommissioning costs. The nine month increase was partially offset by reductions in purchased power obligation payments.

Operation and maintenance expense for the quarter ended December 31, 2004, remained relatively unchanged and increased approximately $2 million for the nine months then ended, compared with the same periods in 2003. The primary reason for the nine month increase was the resumption of support payments under the HQ contracts, offset by decreased transmission maintenance costs. The increase in expense for the quarter was also offset by a decrease in employee benefit charges from the Company’s shared services affiliate.

NON OPERATING EXPENSES

Interest charges increased $1 million for the three and nine months ended December 31, 2004, as compared to the same periods in the prior year. The increase in interest charges is attributable to higher interest rates on long term debt in fiscal 2005.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2004 the Company’s principal sources of liquidity included cash and cash equivalents of approximately $306 million and accounts receivable of $159 million. The Company has a positive working capital balance of approximately $364 million.

Net cash flows provided by operating activities increased approximately $48 million for the nine months ended December 31, 2004 compared with the same period in 2003. Cash improved from operating results due to the collection of a receivable in the amount of $20 million from the Town of Norwood in fiscal year 2005 and a purchased power buyout of $13 million in fiscal year 2004. In addition, the change in other current liabilities of $28 million was primarily a result of a reduction in income taxes paid of $38 million in fiscal year 2005 compared with fiscal year 2004, offset by a decrease in accrued taxes of $14 million.

Net cash flows used in investing activities for the nine months ended December 31, 2004, increased approximately $32 million compared with the same period in 2003, due to increased plant expenditures.

At December 31, 2004, the Company had no short-term debt outstanding. The Company has regulatory approval to issue up to $375 million of short-term debt. National Grid USA and certain subsidiaries, including the Company, with regulatory approval, operate a money pool to more effectively utilize cash resources and to reduce outside short-term borrowings. Short-term borrowing needs are met first by available funds of the money pool participants. Borrowing companies pay interest at a rate designed to approximate the cost of outside short-term borrowings. Companies that invest in the pool share the interest earned on a basis proportionate to their average monthly investment in the money pool. Funds may be withdrawn from or repaid to the pool at any time without prior notice.

At December 31, 2004, the Company had credit and standby bond purchase facilities with banks totaling $440 million which are available to provide liquidity support for $410 million of the Company’s long-term bonds, and for other corporate purposes. There were no borrowings under these facilities at December 31, 2004. Fees are paid on the facilities in lieu of compensating balances.

Utility plant expenditures: Cash expenditures for the Company for utility plant totaled approximately $48 million for nine months ended December 31, 2004, and were primarily transmission-related. The funds necessary for utility plant expenditures during the period were primarily provided by internal funds.

OTHER REGULATORY MATTERS

New England RTO and Rate Filing: FERC issued two orders in 2004 that approved the establishment of a New England regional transmission organization, resolved certain issues concerning the proposed return on equity for New England transmission owners, including NEP, that will take effect as of the start of the RTO, and set other return issues for hearing. On January 3, 2005, a number of parties, including NEP, filed appeals from those order with the US Court of Appeals for the District of Columbia Circuit.

On December 30, 2004, New England transmission owners including NEP and the Independent System Operator New England (ISO-NE) provided notice to FERC that they intend to proceed with a February 1, 2005 operations date for the RTO. Effective on the RTO operations date, NEP’s transmission rates reflect a proposed base return on equity of 12.8%, subject to refund, plus the additional 0.5% incentive return on regional network service (RNS) rates that FERC approved in March 2004. Approximately 70% of the Company’s transmission costs are recovered through RNS rates. An additional 1.0% incentive adder is also applicable to new RNS transmission investment, subject to refund.

NEP and the other transmission owners continue to participate in FERC proceedings to determine the base return on equity and to resolve issues concerning the 1% incentive. In December and January, intervenors and the FERC Staff submitted revised testimony, arguing for a base ROE in the range of 8.0% to 10.6%. They would also substantially limit the application of the 1% ROE adder for new investment. Transmission owners including NEP filed additional testimony in January supporting an 11.5% base ROE. Hearings on these issues began before a FERC administrative law judge on January 25, 2005. An initial decision is expected later this year.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk: The Company’s major financial market risk exposure is changing interest rates. Changing interest rates will affect interest paid on variable rate debt. At December 31, 2004, the Company’s tax exempt variable rate long-term debt had a carrying value of approximately $410 million. While the ultimate maturity dates of the underlying loan agreements range from 2015 through 2022, this debt is issued in tax exempt commercial paper mode. The various components that comprise this debt are issued for periods ranging from one day to 270 days, and are remarketed through remarketing agents at the conclusion of each period. The weighted average variable interest rate for the quarter and nine months ended December 31, 2004, were approximately 1.84% and 1.43%, respectively.

ITEM 4. CONTROLS AND PROCEDURES

The Company has carried out an evaluation under the supervision and with the participation of its management, including the Chief Financial Officer and President, of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on and as of that evaluation, it was determined that these disclosure controls and procedures are effective in providing reasonable assurance that the information required to be disclosed in reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported as and when required.

No change in internal control over financial reporting occurred during the fiscal quarter ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Millstone 3 Prudence Challenge: As described in the Company’s 10-K for the fiscal year ended March 31, 2004 and its 10-Qs for the quarters ended June 30 and September 30, 2004, in the past, regulatory authorities from Rhode Island, New Hampshire and Massachusetts expressed an intent to challenge the reasonableness of the Company’s settlement agreement with Northeast Utilities, under which NEP received a fixed amount when the Millstone units were sold in 2001. As disclosed in more detail in the September 2004 10-Q, the New Hampshire Public Utilities Commission approved a settlement which is now final. On November 18, 2004, the Attorney General of Massachusetts also agreed to a settlement with NEP that resolved the Millstone issues and other CTC issues. The settlement was approved by the Massachusetts Department of Telecommunications and Energy on December 29, 2004 and will require the approval of FERC.

ITEM 2.
CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

Issuer Purchases of Equity Securities – Preferred Stock

Period	(a) Total Number of Shares Purchased	(b) Average Price Paid per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Programs	(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
October 1-31, 2004
November 1-30, 2004	1,617(i)	$100	-0-	11,117
December 1-31, 2004
Total

(i) Open-market transaction. From time to time the Company repurchases shares of its preferred stock when it is approached on behalf of its stockholders.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)	Exhibits
	The exhibit index is incorporated herein by reference.
(b)	Reports on Form 8-K
	The Company filed current reports on Form 8-K on the following dates and disclosing the following matters under Item 1.01:
	(i) December 14, 2004: The settlement of certain matters with USGen New England, Inc., including the termination of the Amended and Restated PPA Transfer Agreement dated October 29, 1997, as amended by a First Amendment dated October 10, 2001, both listed as Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2004.
	(ii) February 3, 2005: The entry into a Termination Agreement and Release dated as of January 31, 2005 with USGen New England, Inc., providing for the termination of the PSA Performance Support Agreement (Taunton Municipal Light Plant) dated as of August 5, 1997, listed as Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2004.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 10-Q for the quarter ended December 31, 2004 to be signed on its behalf by the undersigned thereunto duly authorized.

	NEW ENGLAND POWER COMPANY
Date: February 11, 2005	By	/s/ Edward A. Capomacchio Edward A. Capomacchio Authorized Officer and Controller and Principal Accounting Officer

EXHIBIT INDEX

Exhibit Number	Description
10.1	Settlement Agreement and Release dated as of December 9, 2004, among USGen New England, Inc., New England Power Company et al.
10.2	Termination Agreement and Release dated as of January 31, 2005, between New England Power Company and USGen New England, Inc.
10.3	Settlement Agreement and Release dated as of January 31, 2005, among New England Power Company, USGen New England, Inc. and Taunton Municipal Lighting Plant
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a)
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a)
32	Section 1350 Certifications

EX-10

Exhibit 10.1

SETTLEMENT AGREEMENT AND RELEASE

This Settlement Agreement and Release (together with all schedules hereto, this “Agreement”), entered into as of December 9, 2004, is by and among USGen New England, Inc. (“USGenNE” or the “Debtor”) and New England Power Company (“NEP”), The Narragansett Electric Company (“Narragansett”), the Massachusetts Electric Company ("MECO"), the Nantucket Electric Company ("NECO"), Granite State Electric Company ("GSEC"), National Grid USA Service Company, Inc. ("NGUSASC"), National Grid USA for purposes of Sections 4, 5, 6, 7 and 8 of this Agreement ("NGUSA") and affiliated companies (collectively, “National Grid” or the “National Grid Companies”). USGenNE and National Grid shall herein sometimes be referred to separately as “Party” or collectively as “Parties.”

WHEREAS, in 1997, NEP agreed to sell, and USGenNE agreed to purchase, inter alia, substantially all of NEP’s non-nuclear generating assets (fossil and hydroelectric generating stations) with certain related liabilities and obligations, a portfolio of power contracts with independent power producers, and supply obligations. The transaction was consummated on September 1, 1998 pursuant to the Asset Purchase Agreement, dated as of August 5, 1997, by and among NEP, Narragansett and USGen Acquisition Corporation (now known as USGenNE), as amended from time to time (the “NEP Asset Purchase Agreement”), and ancillary agreements, as amended and/or entered into from time to time between and/or among the Parties or some of them (collectively, the “NEP Agreements”).

WHEREAS, on July 8, 2003 (the “Petition Date”), USGenNE filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Maryland, Greenbelt Division (the “Bankruptcy Court”), Case No. 03-30465 (PM) (the “USGenNE Case”).

WHEREAS, on September 5, 2003, USGenNE filed a motion pursuant to Section 365 of the Bankruptcy Code to reject the Quebec Interconnection Transfer Agreement, dated as of September 1, 1998, by and between NEP and USGenNE (“QITA”) and the Parties entered into a Stipulation and Consent Order which provided, inter alia, for the rejection of the QITA and the reservation of rights by NEP to file a claim arising as a result of the rejection and the Debtor’s reservation of rights to object thereto.

WHEREAS, on September 7, 2004, the Debtor filed a motion seeking (i) authorization to enter into the Fossil Asset Purchase and Sale Agreement dated as of September 3, 2004 among USGenNE, USG Services Company LLC, First Massachusetts Land Company, LLC, and Dominion Energy New England, Inc. (the “Fossil APA”) and to sell its fossil fuel facilities and related assets and to assign to the buyer thereof the Second Amended and Restated Wholesale Standard Offer Service Agreement, dated September 1, 1998, between Narragansett and USGenNE, as amended by Amendment No. 1 dated December 23, 1999 (the “NWSOSA”), the First Amended and Restated Agreement for Temporary Implementation and Administration of Wholesale Standard Offer Service Agreements, effective as of March 1, 2003 and executed as of July 2, 2003, between USGenNE, Massachusetts Electric Company, Nantucket Electric Company and Narragansett to be amended in accordance with Section 3d (the “Temporary Implementation Agreement”), and the PSA Performance Support Agreement, dated as of August 5, 1997, between NEP and USGenNE (Massachusetts Government Land Bank) (the “Mass PSA”, and together with the NWSOSA, and the Temporary Implementation Agreement, the “Proposed Assigned Fossil Agreements”) and (ii) Bankruptcy Court approval of notice and bidding procedures with respect to the sale of the fossil assets under Section 363 of the Bankruptcy Code (the “Fossil Sale Motion”).

WHEREAS, on September 29, 2004, the Debtor filed a motion seeking (i) authorization to enter into the Hydro Asset Purchase and Sale Agreement dated as of September 29, 2004 among USGenNE, USG Services Company LLC, and TransCanada Hydro Northeast Inc. (the “Hydro APA”), and to sell its hydro-electric generating facilities and related assets and to assign to the buyer thereof the Lamson & Goodenow agreement, the Mayhew Steel Products, Inc. agreement and the Amended and Restated Lease Indenture, dated June 1, 1998, among Island Corporation, USGenNE and NEP (collectively, the “Proposed Assigned Hydro Agreements” and together with the Proposed Assigned Fossil Agreements, the “Proposed Assigned Agreements”) and (ii) approval of notice and bidding procedures with respect to the sale of the hydro assets pursuant to Section 363 of the Bankruptcy Code (the “Hydro Sale Motion”).

WHEREAS, on September 27, 2004, National Grid filed an objection to the Fossil Sale Motion [Docket No. 1062] and on October 19, 2004, filed an objection to the Hydro Sale Motion [Docket No. 1139]. On November 17, 2004, National Grid filed an Objection to Assignment and Cure Notice with Respect to the Fossil Sale [Docket No. 1261]. Responses to National Grid's objection to the Fossil Sale Motion were filed by USGenNE on November 11, 2004 [Docket No. 1228] and by the Official Committee of Unsecured Creditors of USGen New England, Inc. (the "Committee") on November 12, 2004 [Docket No. 1233].

WHEREAS, in connection with the Fossil Sale Motion, USGenNE and Dominion Energy New England Inc. and certain affiliated companies (“Dominion”) filed a joint application with the Federal Energy Regulatory Commission (“FERC”) pursuant to Section 203 of the Federal Power Act (“FPA”) for authorization for the sale of FERC jurisdictional facilities associated with the fossil generating assets and the transfer of the Proposed Assigned Fossil Agreements. In response thereto, on November 5, 2004, NGUSA filed a protest with the FERC [Docket No. EC05-4-000]. On October 28, 2004, the Committee filed a motion to intervene in this proceeding.

WHEREAS, in connection with the Fossil Sale Motion, Dominion filed applications with the FERC for determination that certain Dominion affiliates are Exempt Wholesale Generators (“EWG”) and in response thereto NGUSA filed Motions to Intervene Out Of Time and Protest [Docket Nos. EG05-4-000, EG05-5-000, EG05-6-000, and EG05-7-000] (the “EWG Protests”).

WHEREAS, on October 29, 2004, USGenNE and TransCanada Hydro Northeast Inc. (“TransCanada” and together with Dominion, the "Buyers"^[1]) filed a joint application with FERC under Section 203 of the FPA for authorization for the sale of FERC jurisdictional facilities associated with the hydroelectric generating assets [Docket No. EC05-12-000]. On November 23, 2004, FERC granted NGUSA's request for an extension of NGUSA's deadline to file a protest to December 13, 2004.

WHEREAS, in connection with the Hydro Sale Motion, TransCanada filed applications with the FERC for determination that TransCanada is an EWG [Docket No. EG05-20-000]. On November 23, 2004, FERC granted NGUSA's request for an extension of NGUSA's deadline to file a protest to December 13, 2004.

WHEREAS, in connection with the Hydro Sale Motion, TransCanada and USGenNE filed a joint application for authorization to transfer the licenses for the hydroelectric generating facilities [Project Nos. 1855, 1892, 1904, 2077, and 2323]. The deadline to file interventions or protests is December 13, 2004. NGUSA has not filed a response as of the date of this Agreement.

WHEREAS, on October 22, 2004, the Debtor filed with the Bankruptcy Court a motion to extend its exclusive right to file and solicit a plan of reorganization and National Grid filed an objection thereto [Docket No. 1148].

WHEREAS, NEP filed a Proof of Claim in the USGenNE Case [Claim No. 361] seeking damages in the amount of $10,899,983.23 plus contingent and unliquidated indemnity and other claims for a total asserted claim in an unknown amount and reserved the right to file an amended claim and Narragansett [Claim No. 355], MECO [Claim No. 357], NECO [Claim No. 362], GSEC [Claim No. 356], and NGUSASC [Claim No. 358] each, respectively, filed Proofs of Claim in the USGenNE Case (the NEP, Narragansett, MECO, NECO, GSEC and NGUSASC claims along with any other claims filed by any of the National Grid Companies collectively shall be referred to as the “National Grid Claim”).

WHEREAS, USGenNE and National Grid have engaged in extensive settlement negotiations regarding the resolution of all existing issues among the Parties hereto, and those discussions have resulted in this Agreement.

NOW, therefore, in consideration of the premises and the mutual covenants and agreements contained herein, and other good and valuable consideration, NEP, Narragansett, MECO, NECO, GSEC, NGUSASC, NGUSA and National Grid for itself, its affiliates, subsidiaries and for its successors and permitted assigns, and USGenNE, for itself, its successors and permitted assigns and for First Massachusetts Land Company, LLC and USGen Services Company, LLC, hereby agree as follows:

National Grid Claims in the Debtor’s Chapter 11 Case

1. As set forth below, National Grid shall have only the following claims against USGenNE: (i) the National Grid Allowed Claim including any applicable interest as set forth in Section 2 below, (ii) the National Grid Administrative Claim and (iii) the Preserved Claims as set forth in Schedule I, which Schedule I is incorporated into and made a part of this Agreement, all as defined herein below, and in consideration therefore, except as expressly provided for herein, no other claims of USGenNE and National Grid with respect to each other shall survive after the Approval Date as defined herein below.

2. The Parties stipulate and agree that National Grid has an allowed pre-petition unsecured claim against USGenNE equal to and no greater than $195 million (the “National Grid Allowed Claim”), which shall not be disallowed, reduced, or subordinated for any reason whatsoever, and is not subject to any offset or reduction for any reason, in full and final satisfaction of the National Grid Claim, including any claims arising under or in connection with the NEP Agreements including the breach, rejection or assumption and assignment of such agreements and excluding only the claims and rights listed on Schedule I attached hereto (the “Preserved Claims”). On the Approval Date (as defined in Section 15 below), National Grid’s Proofs of Claim will be deemed amended to reflect a single unsecured claim in the allowed amount of $195 million without the necessity of filing amended claims. The National Grid Allowed Claim shall be deemed to include claims National Grid may assert for damages arising from the rejection or breach of the contracts identified on Schedule II, which is attached hereto and incorporated into and made a part of this Agreement, which contracts shall be deemed rejected or breached, as applicable, as of the respective dates set forth on Schedule II (the “Schedule II Contracts”). The National Grid Allowed Claim shall not include the Preserved Claims or the National Grid Administrative Claim. The National Grid Allowed Claim shall be paid in accordance with a confirmed plan of reorganization in the USGenNE Case or as otherwise provided under the Bankruptcy Code. If the plan of reorganization in the USGenNE Case provides for payment of interest to holders of unsecured claims, then National Grid shall be entitled to receive interest on only $17 million of the National Grid Allowed Claim from April 1, 2004 to the date the National Grid Allowed Claim is paid, at the same interest rate and on the same terms as provided to other general unsecured creditors under the plan of reorganization. National Grid shall not be entitled to receive interest on the balance of the National Grid Allowed Claim.

3. a. The Parties stipulate and agree that National Grid shall have an allowed administrative claim in the amount of $10 million (“National Grid Administrative Claim”), which shall not be disallowed, reduced, or subordinated for any reason whatsoever and is not subject to any offset or reduction for any reason, in full and final satisfaction of claims asserted or that may be asserted by the National Grid Companies (other than the Preserved Claims) under the Second Amended and Restated Wholesale Standard Offer Service Agreement, dated September 1, 1998, between MECO, NECO and USGenNE (the “MWSOSA” and together with the NWSOSA, the “WSOSAs”), the NWSOSA, and the Temporary Implementation Agreement through the date of the closing of the sale of the fossil assets. Within ten (10) days after the Approval Date, USGenNE shall pay the National Grid Administrative Claim in cash to the account or accounts specified by National Grid in full and final settlement of the National Grid Administrative Claim. Other than the Preserved Claims and the National Grid Administrative Claim, National Grid shall not assert any other administrative claims against USGenNE or its estate for the period from the Petition Date to the date of this Agreement. National Grid shall have no right to receive any fees, expenses, charges, interest, or other amounts in addition to or relating to the National Grid Administrative Claim since the Parties agree that, subject to the Preserved Claims, all as set forth below, $10 million is the maximum that can be distributed to National Grid from the Debtor or its estate on account of the National Grid Administrative Claim.

b. Any and all Preserved Claims (other than Preserved Claims under items 6 and 7 of Schedule I) shall constitute administrative claims in the USGenNE Case, shall not be part of the National Grid Administrative Claim, and, to the extent allowed, shall be paid by the Debtor.

c. Nothing contained herein shall be deemed to release any claim any National Grid Company may have against the assignee of a Proposed Assigned Agreement for actions taken by the assignee from and after the respective date of assignment of the same pursuant to the closing of the sales of the fossil assets or the hydro assets, as applicable.

d. The Parties acknowledge that the Temporary Implementation Agreement expired by its terms on August 30, 2004; however, the Parties each agree that from September 1, 2004 until the sale of the fossil assets (the "TIA Term") that they have been performing and shall continue to perform the Temporary Implementation Agreement as if it were still in effect through the TIA Term and that for the TIA Term: (i) they waive their respective rights under Paragraph 4 of the Temporary Implementation Agreement to implement the WSOSAs as IBTMs (as defined in the Temporary Implementation Agreement), and (ii) neither Party shall initiate or pursue arbitration or other action against the other with respect to implementation of the WSOSAs as Percent Load Asset Ownerships and the administration and allocation of costs and obligations as specified in the Temporary Implementation Agreement. Narragansett agrees to enter into an amendment of that Temporary Implementation Agreement as it pertains to the NWSOSA for the period after the TIA Term consistent with the representations made by the National Grid Companies and Dominion before the Bankruptcy Court on November 18, 2004 in the USGenNE Case.

Resolution of Certain Proceedings

4. Not later than two business days after the date on which each of the following has occurred: (i) this Agreement has been executed by each of the signatories hereto, (ii) a representative of the Committee indicates in writing that the Committee approves or will not oppose this Agreement, and (iii) a representative of National Energy & Gas Transmission, Inc. ("NEGT"), the indirect, ultimate equity holder in USGenNE, indicates in writing that NEGT approves or will not oppose this Agreement, NGUSA and USGenNE shall jointly file with FERC a conditional notice of withdrawal of their respective protests and answers filed in FERC Docket Nos. EC05-4-000, EG05-4-000, EG05-5-000, EG05-6-000 and EG05-7-000 pursuant to which final withdrawal shall be effective as of the Approval Date.

5. National Grid further agrees that it will not protest or oppose the applications to FERC of Dominion or TransCanada with respect to their purchase of USGenNE’s fossil or hydro assets, or their request for EWG status or market-based rates with respect to such assets filed in FERC Docket Nos. EC05-4-000, EG05-4-000, EG05-5-000, EG05-6-000, EG05-7-000, EC05-12-000, EG05-20-000, ER05-34-000, ER05-35-000, ER05-36-000, ER05-37-000 or ER05-111-000.

6. Notwithstanding any other provision to the contrary, this Agreement does not abridge in any way the rights of National Grid to take any position in any judicial, bankruptcy, administrative or regulatory proceeding, including (i) to pursue interconnection agreements and/or site agreements with the Buyers of USGenNE’s assets with regard to any fossil and hydro facilities or with regard to the Bear Swamp and Fife Brook facilities (the "Bear Swamp Facilities") or (ii) to seek adequate assurances in connection with the assignment of contracts under any sale or disposition of the fossil assets or the hydro assets under the Bankruptcy Code until the Bankruptcy Court has issued an order approving such assignment or to enforce such Bankruptcy Court order; provided, however, and not limiting National Grid's rights to (i) or (ii) above, National Grid shall not protest or oppose or cause any third party to protest or oppose any filing or action by USGenNE or any other party in any regulatory, bankruptcy, administrative or judicial proceeding necessary to effectuate: (x) the sale of the fossil and hydro assets by USGenNE; (y) the assignment of the Proposed Assigned Agreements by USGenNE to Buyers of the fossil and hydro assets; or (z) the disposition by USGenNE of its FERC hydroelectric license interests in or operational responsibility for the Bear Swamp Facilities or the land underlying the Bear Swamp Facilities provided such proposed disposition of land does not interfere with any existing recorded easement of National Grid.

Continued Cooperation

7. The Parties agree to work cooperatively and in good faith with each other and each of the Buyers to facilitate an orderly and timely closing of the sales of the fossil assets and hydro assets and the transfer of the administration of agreements to the extent the Buyers and/or the Parties reasonably require and request each other’s cooperation.

8. Each of the National Grid Companies and the Debtor shall use commercially reasonable efforts to cause the Approval Date to occur.

9. Subject to the specific provisions set forth in Section 10 below, each of the National Grid Companies and the Debtor shall continue to perform and comply in all respects with (i) each of the Schedule II Contracts to which it is a party until the date on which such Contract is to be rejected as provided in Schedule II and (ii) each of the Proposed Assigned Agreements to which it is a party until the date on which such Proposed Assigned Agreement is assumed by USGenNE and assigned to the respective Buyers.

10. Without limiting the Parties' obligations in Section 9 above:

a. The Parties agree to continue to perform all of their respective obligations under the Amended and Restated Continuing Site/Interconnection Agreement (the "CSA"), dated September 1, 1998, by and between NEP and USGenNE, (the CSA includes site work orders, requests for work and equipment orders (collectively the "CSA Work Orders")) with regard to each generating facility owned, leased, or operated by USGenNE, until (i) such asset is transferred to the respective Buyers at the closings of the sales of the fossil assets or the hydro assets, as applicable; and (ii) with respect to the Bear Swamp Facilities, the earlier of (a) the date on which USGenNE no longer operates the Bear Swamp Facilities and a new operator operates the Bear Swamp Facilities, or (b) the effective date of the rejection of the CSA (as amended in accordance with Section 10b of this Agreement) and the Bear Swamp Facilities are no longer in operation. USGenNE’s liability with respect to continued performance under the CSA and the CSA Work Orders, shall be limited as provided in Schedule I.

b. The Parties agree that, within two (2) business days after the Parties execute this Agreement, they shall jointly file with FERC to amend the CSA to provide that (i) as each asset is transferred to the respective Buyers at the closings of the sales of the fossil assets or hydro assets, as applicable, the CSA shall cease to apply to such assets; (ii) with respect to the Bear Swamp Facilities, the CSA shall cease to apply the earlier of (a) the date on which USGenNE no longer operates the Bear Swamp Facilities and a new operator operates the Bear Swamp Facilities, or (b) the effective date of the rejection of the CSA and the Bear Swamp Facilities are no longer in operation; and (iii) the CSA shall terminate in its entirety at the conclusion of the later of (i) and (ii) of this Section 10b. The Parties further agree that, after the termination of the CSA in its entirety as provided in the immediately preceding sentence, they shall timely file a Notice of Cancellation or Termination of the CSA consistent with the requirements of 18 C.F.R. § 35.15 (2004).

11. a. Notwithstanding any provision contained in the Amended and Restated PPA Transfer Agreement, dated as of October 29, 1997, by and between New England Power Company and USGen New England, Inc. (the “PPATA”), any NEP Agreement or this Agreement to the contrary, National Grid may communicate with, negotiate with, agree to terms and otherwise deal with any power seller or supplier without notice to or consultation with USGenNE and without liability to USGenNE; provided that no amendments to any of the Commitments (as defined in the PPATA) may become effective until April 1, 2005. As soon as practicable after the Approval Date, but not later than December 15, 2004, USGenNE shall provide National Grid reasonable access to all documents, agreements, invoices, correspondence and other written materials in USGenNE’s possession related to or arising under the PPATA or any transactions contemplated by the PPATA. From and after the date of this Agreement until April 1, 2005, USGenNE will cooperate reasonably with National Grid and provide such assistance as National Grid may reasonably request in connection with (i) the transition of the PPATA to National Grid on or about but not later than April 1, 2005 and/or (ii) the assignment of the PPATA to a third party or parties designated by National Grid by April 1, 2005.

b. As soon as practicable after the Approval Date, but not later than December 15, 2004, USGenNE shall provide National Grid reasonable access to all documents, agreements, invoices, correspondence and other written materials in USGenNE's possession related to or arising under the Taunton PSA or the Mass PSA or any transactions contemplated by the Taunton PSA or the Mass PSA.

Release of Claims

12. Release of Claims by USGenNE. Subject to Section 14, effective as of the Approval Date, USGenNE, on behalf of itself and its successors, heirs, assigns, executors, administrators, predecessors, legal representatives, subsidiaries, divisions, associates, representatives, principals, agents, servants, employees, officers and directors; and NEGT, on behalf of itself, the entities listed on Schedule III attached to this Agreement, which Schedule III is incorporated into and made a part of this Agreement, (the "NEGT Affiliates"), and NEGT's and NEGT Affiliates' successors, heirs, assigns, executors, administrators, predecessors, legal representatives, associates, representatives, principals, agents, servants, employees, officers and directors, do hereby release, acquit and forever discharge each of the National Grid Companies, and their owners, successors, heirs, assigns, executors, administrators, predecessors, legal representatives, parents, affiliates, subsidiaries, divisions, associates, representatives, principals, agents, servants, employees, shareholders, officers and directors (collectively, the “National Grid Releasees”), of and from any and all, joint and/or several claims, charges, demands, damages, actions, causes of action, suits in equity, expenses, executions, judgments, levies, liabilities, losses, contractual or common law indemnities, subrogations, rights to contribution and attorneys' fees, whether liquidated or unliquidated, fixed, contingent, direct or indirect, of whatsoever kind or nature, whether heretofore or hereafter accruing, foreseeable or unforeseeable, or whether now known or not known to the Parties, relating to or arising out of any claims USGenNE has or may have against any of the National Grid Releasees arising prior to or on the date a confirmed plan of reorganization in the USGenNE Case becomes effective (the “Effective Date”) except for the Preserved Claims set forth on Schedule I.

13. Release of Claims by National Grid. Subject to Section 14, effective as of the Approval Date, each of National Grid, NEP, Narragansett, MECO, NECO, GSEC, NGUSASC, and NGUSA on behalf of itself and its owners, successors, heirs, assigns, executors, administrators, predecessors, legal representatives, parents, affiliates, subsidiaries, divisions, associates, representatives, principals, agents, servants, employees, shareholders, officers and directors, does hereby release, acquit and forever discharge USGenNE, and its successors, heirs, assigns, executors, administrators, predecessors, legal representatives, associates, representatives, principals, agents, servants, employees, officers and directors; and NEGT, the NEGT Affiliates and NEGT's and NEGT Affiliates' successors, heirs, assigns, executors, administrators, predecessors, legal representatives, subsidiaries, divisions, associates, representatives, principals, agents, servants, employees, offices and directors (collectively, the “USGenNE Releasees”), of and from any and all, joint and/or several claims, charges, demands, damages, actions, causes of action, suits in equity, expenses, executions, judgments, levies, liabilities, losses, contractual or common law indemnities, subrogations, rights to contribution and attorneys' fees, whether liquidated or unliquidated, fixed, contingent, direct or indirect, of whatsoever kind or nature, whether heretofore or hereafter accruing, foreseeable or unforeseeable, or whether now known or not known to the Parties, relating to or arising out of any claims the National Grid Companies or any of them have or may have against any of the USGenNE Releasees arising prior to or on the Effective Date except for the National Grid Allowed Claim, the National Grid Administrative Claim and the Preserved Claims set forth on Schedule I.

14. Notwithstanding anything to the contrary in this Agreement, nothing in Sections 12 and 13 shall be deemed to release the Parties from the obligations and duties arising under this Agreement nor prevent or affect in any manner the Parties’ rights to bring any action to enforce or interpret this Agreement.

Bankruptcy Court Approval, Proceedings and Jurisdiction; Termination

15. This Agreement is subject to approval by the Bankruptcy Court in which the USGenNE Case is pending. USGenNE shall file a Motion to Approve a Settlement Pursuant to Federal Bankruptcy Rule 9019 (the “Approval Motion”) and shall provide National Grid with a reasonable opportunity to review the motion in advance of the Debtor filing the motion with the Bankruptcy Court. The Debtor retains sole discretion with respect to the final content of the motion, provided the description of the settlement among the Parties hereto is not inconsistent with the principle terms of this Agreement. The Debtor shall file the Approval Motion within two (2) business days after the Parties execute this Agreement. The “Approval Date” shall mean (i) if any objection to the Approval Motion is filed, the date on which an order of the Bankruptcy Court approving this Agreement has become a final, non-appealable judicial order (unless National Grid waives in writing the requirement that such order be final and non-appealable, in which case the Approval Date will be the date on which the Bankruptcy Court entered the order approving the Approval Motion) or (ii) if no objection to the Approval Motion is filed, the date on which the Bankruptcy Court enters the order approving the Approval Motion.

16. Provided each of the following has occurred: (i) this Agreement has been executed by each of the signatories hereto, (ii) a representative of the Committee indicates in writing that the Committee approves or will not oppose this Agreement, and (iii) a representative of NEGT, as the indirect, ultimate equity holder in USGenNE indicates in writing that NEGT approves or will not oppose this Agreement, not later than two business days after the Approval Date (but not later than the hearing date on the Hydro Sale Motion) National Grid shall withdraw its objections to the Hydro Sale Motion in the USGenNE Case (other than objections, if any, relating to or involving the Preserved Claims).

17. The Parties agree that the Bankruptcy Court shall retain exclusive jurisdiction with respect to any disputes, implementation or enforcement of this Agreement.

18. a. Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated (or shall terminate, in the case of clause (ii) below) as follows:

(i) by either USGenNE or National Grid upon written notice to the other if any material term or provision of this Agreement is found by a final, non-appealable judicial order to be invalid or unenforceable prior to the Approval Date; or

(ii) automatically if a final non-appealable order denying the Approval Motion is entered by the Bankruptcy Court; and

in the event of any such termination, all obligations under this Agreement shall be terminated and of no further force or effect without further action by any Party hereto and without liability of any Party hereto to the others, provided that the foregoing shall not relieve any Party in breach of this Agreement at the time of such termination from liability in respect of such breach; and provided further that Section 18b and 18c shall survive such termination.

b. In the event of termination of this Agreement under Sections 18a(i) or (ii), no rights or obligations, nor any claims or defenses, of National Grid or USGenNE existing prior to the execution of this Agreement will be prejudiced, compromised, discharged or otherwise affected in any way, and all shall exist as if this Agreement had never been executed, and neither this Agreement, or any draft hereof, any communications among the Parties with respect to this Agreement or the subject matter hereof shall be admissible in evidence or in any way used, described or discussed in any proceeding in accordance with Federal Rule of Evidence 408.

c. This Agreement is not an admission of any liability but is a compromise and settlement and this Agreement shall not be treated as an admission of liability. All communications (whether oral or in writing) between and/or among the Parties, their counsel and/or their respective representatives relating to, concerning or in connection with this Agreement, or the matters covered hereby and thereby, shall be governed and protected in accordance with the Federal Rule of Evidence 408, and similar state laws, to the fullest extent permitted by law. In the event that a Party is requested pursuant to, or required by, applicable law or regulation or legal process to disclose any of the foregoing confidential material, such Party (the “Subject Party”) shall provide the other Party with prompt notice of such request or requirement in order to enable the other Party to promptly seek an appropriate protective order. In the event that no such protective order is promptly requested or, if requested, is not obtained, or the Parties waive compliance with the terms of this clause, the Subject Party agrees that it will furnish only that portion of the confidential material as required by applicable law or regulation or legal process.

Miscellaneous Provisions

19. In the event either the TransCanada sale or the Dominion sale do not close and USGenNE elects to sell its hydro or fossil assets to a party or parties other than TransCanada or Dominion, the term "Buyer" shall mean such other party or parties (the "Other Buyer") and this Agreement shall be binding on the Parties hereto with respect to such Other Buyer. The Parties acknowledge that the Bellow Falls hydro facility is the subject of a purchase option agreement with the town of Rockingham and agree that, since the option has been exercised, the term "Other Buyer" shall also include any purchaser of the Bellow Falls hydro facility.

20. This Agreement constitutes a single, integrated, written contract expressing the entirety of the agreement of the Parties relative to the subject matter hereof. No covenants, agreements, representations, or warranties of any kind whatsoever have been made by any Party to this Agreement with respect to the subject matter hereof, except as specifically set forth in this Agreement. All prior discussions, negotiations and agreements with respect to the subject matter of this Agreement have been superseded by this Agreement. No modification of the terms and provisions of this Agreement shall be made except by the execution of a written agreement by USGenNE and National Grid. The words “include” or “including” shall not be limiting, whether or not followed by the words “without limitation.” The section headings are solely for reference and are not part of this Agreement and shall not in any way affect the meaning or interpretation of this Agreement.

21. Subject to the approval of the Bankruptcy Court, each of USGenNE, NEGT, National Grid, NEP, Narragansett, MECO, NECO, GSEC, NGUSASC, NGUSA has the power and authority to enter into and perform this Agreement, and to provide the releases set forth herein, and the execution and performance of this Agreement has been duly authorized by all requisite corporate action.

22. The Parties agree that certain claims arising between the Parties are resolved pursuant to a confidential Appendix A attached hereto and incorporated into and made a part of this Agreement.

23. The Parties each agree that nothing in this Agreement is intended or shall be deemed to impact or affect any rights the Parties have against any third parties.

24. This Agreement may be executed in as many counterparts as deemed necessary and when so executed shall have the same effect as if the Parties had executed the same instrument.

25. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by facsimile or sent by reputable overnight courier service (charges prepaid) as follows:

If to USGenNE:

General Counsel

USGen New England, Inc.

7600 Wisconsin Avenue

Bethesda, Maryland 20814-6161

Ph: 301-280-6800

Fax: 301-280-6900

With copies to:

Donald K. Dankner

Winston & Strawn LLP

1400 L Street, N.W.

Washington, DC 20005-3502

Ph: 202-371-5700

Fax: 202-371-5950

Marc E. Richards

Blank Rome LLP

The Chrysler Building

405 Lexington Avenue

New York, New York 10174

Ph: 212-885-5000

Fax: 212-885-5001

If to National Grid:

Michael J. Hager

Vice President

New England Power Company

55 Bearfoot Road

Northborough, MA 01532

Ph: (508)421-7350

Fax: (508) 421-7335

With copies to:

Jonathan Guy
Swidler Berlin Shereff Friedman, LLP
3000 K Street, N.W., Suite 300
Washington, D.C. 20007
Ph: (202) 424-7500
Fax: (202)424-7643

John F. Sherman, III
Deputy General Counsel
National Grid USA
25 Research Drive
Westborough, MA 01582
Ph: (508) 389-2971
Fax: (315) 460-9117

A copy of any notice shall be sent to:

Eric Schaffer

Reed Smith LLP

435 Sixth Avenue

Pittsburgh, PA 15219

Ph: (412) 288-4202

Fax: (412) 288-3063

Notices shall be deemed to have been given hereunder when delivered personally (including by reputable overnight courier service (charges prepaid)), or upon receipt of appropriate confirmation of successful facsimile transmission with confirmation by telephone (provided that a hard copy is also sent via reputable overnight courier).

IN WITNESS WHEREOF, USGenNE, NEGT, NEP, Narragansett, MECO, NECO, GSEC, NGUSASC and NGUSA have caused this Settlement Agreement and Release to be executed in duplicate originals by their duly authorized officers as of the date first written above.

USGEN NEW ENGLAND, INC., on behalf of itself, First Massachusetts Land Company, LLC and USGen Services Company, LLC

By: /s/ James G. Utt             

Title: V.P.                                 

NEW ENGLAND POWER COMPANY

By: /s/ John F. Sherman III          

Title: Deputy General Counsel       

NARRAGANSETT ELECTRIC COMPANY

By: /s/ John F. Sherman III          

Title: Deputy General Counsel        

MASSACHUSETTS ELECTRIC COMPANY

By: /s/ John F. Sherman III          

Title: Deputy General Counsel        

NANTUCKET ELECTRIC COMPANY

By: /s/ John F. Sherman III           

Title: Deputy General Counsel        

GRANITE STATE ELECTRIC COMPANY

By: /s/ John F. Sherman III          

Title: Deputy General Counsel        

NATIONAL GRID USA SERVICE COMPANY, INC.

By: /s/ John F. Sherman III          

Title: Deputy General Counsel        

National Grid USA signs below for the purpose of indicating that it consents and agrees to Sections 4, 5, 6, 7 and 8 of the Agreement.

NATIONAL GRID USA

By: /s/ John F. Sherman III           

Title: Deputy General Counsel        

NEGT signs below for the purpose of indicating that it has no objection to the Agreement. NEGT signs below for itself and on behalf of the NEGT Affiliates for the purpose of indicating that they consent and agree to Sections 12 and 13 of the Agreement.

NATIONAL ENERGY & GAS TRANSMISSION, INC.

By: /s/ P. Christman Iribe             

Title: Executive Vice President        

______________________

^[1] "Buyers" shall also mean Other Buyer as that term is defined in Section 19 of this Agreement.

Schedule I

Preserved Claims

1. Claims for reconciliation or true-up of amounts (including billed and unbilled amounts) payable in the ordinary course of business under the PPATA, the CSA, the CSA Work Orders, the retail accounts identified on the Schedule of Retail Accounts attached hereto as Schedule IV, which Schedule IV is incorporated into and made a part of the Agreement, (the "Retail Accounts"), Proposed Assigned Agreements, the MWSOSA, and the Tariff 9 OATT (all of the foregoing defined as the “Ongoing Contracts”) — relating to performance in the periods between (a) January 1, 2004 and (b) the date each of the respective Ongoing Contracts is (i) terminated, (ii) rejected or (iii) assigned to any of the Buyers, as applicable (the “True Up Period”). The Parties agree that reconciliation of the amounts that arise with respect to each Ongoing Contract during the applicable True Up Period for such Ongoing Contract shall be completed as soon as possible but no later than the Effective Date, and any claims of either Party with respect to the Ongoing Contracts that may be asserted after such date are forever waived.

2. Claims, if any, for breach or failure to perform under the PPATA, the CSA, the CSA Work Orders, the Proposed Assigned Agreements, the MWSOSA, the Retail Accounts and the Tariff 9 OATT, respectively, from and after the date of this Agreement until the following applicable termination date:

   (i)  with respect to the PPATA, April 1, 2005,
   (ii)  with respect to each of the Proposed Assigned Agreements, until the respective date each such Proposed Assigned Agreement is assigned, as applicable;
   (iii)  with respect to provisions of the CSA governing fossil assets, the date of the closings and the sales of such assets;
   (iv)  with respect to provisions of the CSA governing hydro assets, the date of the closings and the sales of such assets;
   (v)  with respect to provisions of the CSA relating to the Bear Swamp Facilities, until the earlier of either (a) the date on which USGenNE no longer operates the Bear Swamp Facilities and a new operator operates the Bear Swamp Facilities, or (b) the effective date of the rejection of the CSA (as amended in accordance with Section 10b of this Agreement) and the Bear Swamp Facilities are no longer in operation;
   (vi)  with respect to the Retail Accounts, the Tariff 9 OATT and the CSA Work Orders, for each of the applicable fossil assets, hydro assets and/or Bear Swamp Facilities, until the date that USGenNE no longer operates each such asset or Bear Swamp Facility; the Parties agree that this Agreement provides adequate notice of termination of service under the Retail Accounts, Tariff 9 OATT and the CSA Work Orders for each such asset or Bear Swamp Facility; with respect to all other Retail Accounts, the dates of termination of service shall be in accordance with notice provided by USGenNE in accordance with the applicable retail service tariff; and
   (vii)  with respect to the MWSOSA, December 31, 2004.

3. Claims in respect of any breach of or failure to perform this Agreement.

4. USGenNE agrees to continue to pay the legal fees and related costs incurred by National Grid for work incurred until the Effective Date in connection with litigation related to alleged asbestos claims, subject to an aggregate cap of $150,000 with respect to such fees. USGenNE's agreement to make such a payment is not and shall not be deemed an admission of liability for such claims.

5. Claims for the cure amount identified in the Amended Schedule of Cure Amounts filed in the Bankruptcy Court on November 17, 2004 in connection with the Fossil Sale Motion and cure amounts, if any, agreed to between the Parties in connection with the Hydro Sale Motion.

6. Claims, if any, of National Grid against PG&E Corporation, a California corporation (the “Guarantor”), under the Guaranty made by the Guarantor dated as of August 5, 1997, which references the NEP Asset Purchase Agreement, provided such claims are limited solely to the difference, if any, between the National Grid Allowed Claim and the cash actually received by National Grid from the USGenNE estate on account of such Claim (the “National Grid Deficiency Claim”). The National Grid Companies and each of them expressly agree that they shall not institute any action at law or in equity against the Guarantor unless and until there is a National Grid Deficiency Claim The Parties acknowledge and agree that nothing in this Agreement is intended to affect the validity or enforceability of the Guarantee, or the rights, duties, obligations or defenses arising under the Guarantee except that the claim of National Grid, if any, is limited to the National Grid Deficiency Claim.

7. The claims as set forth in the Stipulation and Consent Order, dated December 10, 2004, substantially in the form attached hereto as Appendix B.

8. In the event any of the Proposed Assigned Fossil Agreements are not assigned and are rejected or breached, any claims that National Grid may have with respect to such agreements shall be deemed included in the National Grid Allowed Claim.

9. In the event any of the Proposed Assigned Hydro Agreements are not assigned and are rejected or breached, any claims that National Grid may have with respect to such agreements shall be preserved.

Schedule II

1. NEP Asset Purchase Agreement; date of breach: 7/8/03.

>2. PPATA; date of rejection: 4/1/05.



3. QITA; date of rejection: 4/2/04.



4. CSA: described in Section 10 of the Agreement.

Schedule III

The NEGT Affiliates

1. NEGT Enterprises, Inc.

f/k/a PG&E Enterprises, Inc.

2. National Energy Holdings Corporation

f/k/a PG&E National Energy Group Holdings Corporation

3. NEGT Energy Company, LLC

f/k/a PG&E Generating Company, LLC

4. National Energy Generating Company, LLC

f/k/a PG&E Generating Energy Group, LLC

Schedule IV

The Retail Accounts

Massachusetts Electric Retail Accounts
26815-11115-01	1400 Brayton Pt. Rd
50402-27000-00	Off Tunnel Road
51401-42750-00	River Rd
50477-75000-00	Sherman Dam
50477-76000-00	Deerfield #5
50477-77000-00	Bear Swamp
51477-78000-00	Fife Brook
50101-70200-01	Creamery Rd
50101-70000-01	Mowhawk Rd
50101-70100-01	Off Creamery Rd
51401-42825-01	Off River Rd
51401-42800-01	River Rd
51401-42830-01	River Rd
51700-80001-01	Lighting
51700-89990-01	Lighting
51702-04150-00	Mill Street
51702-05700-04	Main St
51702-05240-01	River Rd
50101-21480-01	Mowhawk Rd
50402-27100-01	Upper Res Bear Swamp
07111-15000-02	24 Fort Ave
07150-00200-01	India St
07177-74000-00	Salem Harbor
26815-11110-02	1400 Brayton Pt Rd
51400-80004-00	Lighting
51400-80004-01	Lighting
13210-23815-06	200 Foxboro Blvd
13210-23815-07	200 Foxboro Blvd
07111-14980-01	24 Fort Ave
07124-26810-01	24 Fort Ave
07111-15100-01	Off Fort Ave

Narragansett Electric Retail Accounts
60177-70000-00	Manchester Street
60126-16662-00	Dike St

Appendix B

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF MARYLAND

(Greenbelt Division)

* * * * * *	*	* * * * * * *
In re:	*
NATIONAL ENERGY & GAS TRANSMISSION, INC. (f/k/a PG&E NATIONAL ENERGY GROUP, INC.), et al.,	* *	Case No.: 03-30459 (PM) and 03-30461(PM) through 03-30464 (PM) and 03-30686 (PM) through 03-30687 (PM) Chapter 11
Debtors.	*	(Jointly Administered under Case No.: 03-30459 (PM))

STIPULATION AND CONSENT ORDER REGARDING CLAIM NUMBERS

495, 496, 497, 498, 499, 500, 638 AND 702 FILED IN THE DEBTORS’ CASES

This stipulation and consent order (the “Stipulation”) is entered into as of December 10, 2004 by and between: (i) National Energy & Gas Transmission, Inc. (“NEGT”) and New England Power Company (“NEP”); (ii) NEGT and Massachusetts Electric Company (“Mass Electric”); (iii) Energy Services Ventures, Inc. (“ESV”) and Mass Electric; (iv) NEP and NEGT Energy Trading - Power, L.P. (“ET Power”); (v) NEP and ESV; and (vi) NEP and NEGT Energy Trading - Gas Corporation (“ET Gas” and, collectively with ESV, ET Power, and ET Gas, the “Subsidiary Debtors”); and (vii) Niagara Mohawk Power Corporation (“NiMo” and, together with NEP and Mass Electric, the “Counterparties”) and ET Power. NEGT, the Subsidiary Debtors, and the Counterparties are referred to collectively as the “Parties.” The Parties hereby stipulate and agree to the following terms and conditions:

WHEREAS, on July 8, 2003, NEGT filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”). On May 3, 2004, the United States Bankruptcy Court for the District of Maryland (the “Bankruptcy Court”) confirmed the Modified Third Amended Plan of Reorganization for NEGT (the “NEGT Plan”). On October 29, 2004, the NEGT Plan became effective.

WHEREAS, on July 8, 2003, ET Power and ET Gas, each an indirect subsidiary of NEGT, filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code and, on July 29, ESV, an indirect subsidiary of NEGT, also filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. Each of these entities continues to operate its businesses and manage its properties and assets as a debtor in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code.

WHEREAS, on January 9, 2004, Mass Electric filed a proof of claim against ESV, designated Claim No. 495, in the amount of $416.71 plus additional amounts for contingent indemnity and other claims.

WHEREAS, on January 9, 2004, Mass Electric filed a proof of claim against NEGT, designated Claim No. 496, in the amount of $416.71 plus additional amounts for contingent indemnity and other claims.

WHEREAS, on January 9, 2004, NEP filed a proof of claim against NEGT, designated Claim No. 497, in the amount of $74,116.03 plus additional amounts for contingent indemnity and other claims.

WHEREAS, on January 9, 2004, NEP filed a proof of claim against ESV, designated Claim No. 498, in the amount of $24,848.58 plus additional amounts for contingent indemnity and other claims.

WHEREAS, on January 9, 2004, NEP filed a proof of claim against ET Power, designated Claim No. 499, in the amount of $42,816.87 plus additional amounts for contingent indemnity and other claims, which claim was subsequently amended on April 12, 2004, designated Claim No. 638, in the amount of $92,406.89 plus additional amounts for contingent indemnity and other claims.

WHEREAS, on January 9, 2004, NEP filed a proof of claim against ET Gas, designated Claim No. 500, in the amount of $42,816.87 plus additional amounts for contingent indemnity and other claims.

WHEREAS, on August 20, 2004, NiMo filed a proof of claim against ET Power, designated Claim No. 702 (collectively with Claim No. 495, Claim No. 496, Claim No. 497, Claim No. 498, Claim No. 499, Claim No. 500 and Claim No. 638, the “Claims”), in the amount of $230,839.05 plus additional amounts for contingent and other claims.

NOW, THEREFORE, in consideration of the foregoing, the Parties hereby stipulate and agree as follows:

a. Mass Electric’s claim filed against ESV, Claim No. 495, is hereby disallowed and expunged in its entirety.

b. Mass Electric’s claim filed against NEGT, Claim No. 496, is hereby disallowed and expunged in its entirety.

c. NEP’s proof of claim filed against NEGT, Claim No. 497, is hereby disallowed and expunged in its entirety.

d. NEP’s proof of claim filed against ESV, Claim No. 498, is hereby disallowed and expunged in its entirety.

e. NEP’s claim filed against ET Power, Claim No. 499, is hereby disallowed and expunged in its entirety.

f. NEP’s proof of claim filed against ET Gas, Claim No. 500, is hereby disallowed and expunged in its entirety.

g. NEP’s amended claim filed against ET Power, Claim No. 638, is hereby reduced and allowed as a general unsecured claim against ET Power in the amount of $83,996.97, which shall not be disallowed, reduced, or subordinated for any reason whatsoever, and is not subject to any offset or reduction for any reason. Claim No. 638 shall be treated in accordance with the plan of liquidation for or involving ET Power to be filed in the ET Power case.

h. NiMo’s claim filed against ET Power, Claim No. 702, is hereby disallowed and expunged in its entirety.

i. Except as set forth herein, each of the Subsidiary Debtors hereby releases, acquits and forever discharges each of the Counterparties of and from any and all, joint and/or several claims, charges, demands, damages, actions, causes of action, suits in equity, expenses, executions, judgments, levies, liabilities, losses, contractual or common law indemnities, subrogations, rights to contribution and attorneys’ fees, whether liquidated or unliquidated, fixed, contingent, direct or indirect, of whatsoever kind or nature, whether heretofore or hereafter accruing, foreseeable or unforeseeable, or whether now known or not known to the Parties, arising out of or relating to any transaction, event, circumstance, action, failure to act, or occurrence of any sort or type, whether known or unknown, which occurred, existed, was taken, permitted, or begun prior to the execution of this stipulation, including, without limitation, the subject matter of the Claims.

j. Except as set forth herein, each of the Counterparties hereby releases, acquits and forever discharges each of the Subsidiary Debtors of and from any and all, joint and/or several claims, charges, demands, damages, actions, causes of action, suits in equity, expenses, executions, judgments, levies, liabilities, losses, contractual or common law indemnities, subrogations, rights to contribution and attorneys’ fees, whether liquidated or unliquidated, fixed, contingent, direct or indirect, of whatsoever kind or nature, whether heretofore or hereafter accruing, foreseeable or unforeseeable, or whether now known or not known to the Parties, arising out of or relating to any transaction, event, circumstance, action, failure to act, or occurrence of any sort or type, whether known or unknown, which occurred, existed, was taken, permitted, or begun prior to the execution of this stipulation, including, without limitation, the Claims.

k. This stipulation shall be effective upon approval by the Bankruptcy Court.

l. Notwithstanding anything to the contrary in this stipulation, nothing in paragraphs 9 and 10 shall be deemed to release the Parties from the obligations and duties arising under this stipulation nor prevent or affect in any manner the Parties’ rights to bring any action to enforce or interpret this stipulation.

m. This stipulation constitutes the entire agreement between the Parties hereto.

n. Neither this stipulation nor any of its terms may be modified, altered, amended or waived, except in writing signed by the Parties hereto.

o. This stipulation shall be binding upon and inure to the assigns, representatives and successors of the Parties hereto.

p. The stipulation may be executed in counterparts by facsimile, each of which shall be deemed an original, and all of which when taken together shall constitute one document.

q. Each party expressly acknowledges that it has been represented by counsel or has had the opportunity to be represented by counsel of its choice. Each person signing on behalf of a party hereby expressly warrants and affirms that they have been duly appointed, and are duly authorized, to bind their respective Parties to all the terms and conditions of this stipulation, and have bound such Parties by executing this stipulation.

r. This Court shall retain jurisdiction over the Parties hereto to: (a) resolve all issues arising under this stipulation; and (b) enforce the provisions contained herein

STIPULATED AND AGREED:

NATIONAL ENERGY & GAS TRANSMISSION, INC.

By:                                                                

Name:

Title:

NEGT ENERGY TRADING - POWER, L.P.

By:                                                                

Name:

Title:

NEGT ENERGY TRADING - GAS CORPORATION

By:                                                                

Name:

Title:

ENERGY SERVICES VENTURES, INC.:

By:                                                                

Name:

Title:

NEW ENGLAND POWER COMPANY

By:                                                                

Name:

Title:

MASSACHUSETTS ELECTRIC COMPANY

By:                                                                

Name:

Title:

NIAGARA MOHAWK POWER CORPORATION

By:                                                                

Name:

Title:

EX-10 3 nep10-2.htm

Exhibit 10.2

TERMINATION AGREEMENT AND RELEASE

This Termination Agreement and Release (the “Agreement”) is entered into as of January 31, 2005, by and between New England Power Company (“NEP”) and USGen New England, Inc. (“USGenNE”). NEP and USGenNE are sometimes referred to herein individually as “Party” or collectively as “the Parties”.

WHEREAS, NEP and USGenNE are parties to a PSA Performance Support Agreement (Taunton Municipal Lighting Plant) dated as of August 5, 1997 (the “PSA”);

WHEREAS, pursuant to the PSA, USGenNE is agent to NEP in connection with a System Power Sales Agreement dated as of November 10, 1993 between NEP and Taunton Municipal Lighting Plant (“TMLP”)(the “Power Sales Agreement”);

WHEREAS, pursuant to a Settlement Agreement and Release dated as of the same date as this Agreement (the “Settlement Agreement”), NEP, USGenNE, and TMLP have agreed to terminate the Power Sales Agreement;

WHEREAS, on July 8, 2003, USGenNE filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Maryland, Greenbelt Division (the “Bankruptcy Court”), Case No. 03-30465(PM) (the “USGenNE Bankruptcy”);

WHEREAS, the Settlement Agreement is subject to approval by the Bankruptcy Court; and

WHEREAS, the Parties desire to terminate the PSA in accordance with this Agreement;

NOW, THEREFORE, in consideration of these premises, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto agree as follows:

1. Effective upon the PSA Termination Date of the Power Sales Agreement as set forth in the Settlement Agreement, the Parties agree that the PSA and the Parties’ respective rights, benefits and obligations thereunder shall be terminated. Other than as set forth in this Agreement, the Parties shall have no further rights or obligations between themselves arising under or relating in any way whatsoever to the PSA.
   
   
2. The Parties agree that the PSA shall continue in effect after approval of the Settlement Agreement by the Bankruptcy Court to the extent necessary to provide for accountings, final billing, and payments related to the Power Sales Agreement.
   
   
3. The Parties agree that they will continue to perform their obligations under the PSA until the PSA is terminated in accordance with the provisions of this Agreement.
   
   
4. Subject only to the provisions of this Agreement, USGenNE for itself and its respective officers, agents, attorneys, predecessors, directors, employees, successors, and assigns does hereby release and forever discharge NEP and its respective officers, agents, attorneys, predecessors, principals, trustees, employees, successors, and assigns of and from any and all claims, demands, attorney's fees, costs, actions and causes of action of every kind or nature, whether known or unknown, suspected or unsuspected that USGenNE now has, may in the future have, or has at any time heretofore had against NEP but only those arising under or relating to the PSA or the Power Sales Agreement.
   
   
5. Subject only to the provisions of this Agreement, NEP for itself and its respective officers, agents, attorneys, predecessors, principals, trustees, successors, assigns, and employees does hereby release and forever discharge USGenNE and its respective officers, agents, attorneys, predecessors, directors, shareholders, successors, assigns, and employees of and from any and all claims, demands, attorney's fees, costs, actions and causes of action of every kind or nature, whether known or unknown, suspected or unsuspected that USGenNE now has, may in the future have, or has at any time heretofore had against NEP but only those arising under or relating to the PSA or the Power Sales Agreement.
   
   
6. Each Party represents and warrants to the other Party that the individual executing this Agreement on such Party's behalf is fully authorized to do so and, further, that such individual is fully authorized to bind the Party on whose behalf it is executing this Agreement to the terms of all releases of claims, undertakings and obligations of that Party as set forth in this Agreement.
   
   
7. The effective day of this Agreement shall be the date set forth above.
   
   
8. The Agreement shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts.
   
   
9. This Agreement may be executed in counterparts, which together shall comprise the executed Agreement.
   
   
10. This Agreement may be modified, amended or supplemented only by a written instrument which specifically references this Agreement and is signed by all Parties.
    
    
11. Each Party has been advised by its own legal counsel and, in executing this Agreement, does not rely upon any representations, promises, or inducements made by any other Party or its representatives, with the sole exception of the premises and provisions set forth herein. The fact that a Party or counsel for a party drafted a provision or provisions of this Agreement shall not cause that provision or those provisions to be construed against the drafting Party.
    
    
12. This Agreement shall constitute the entire understanding of the Parties with respect to its subject matter. It shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns. None of the Parties shall assign its rights and obligations under this Agreement without the prior written consent of the other Parties.

[The remainder of this page intentionally left blank.]

IN WITNESS WHEREOF, the Parties' authorized representatives have duly executed this Agreement as an instrument under seal on the day and year first written above.

NEW ENGLAND POWER
COMPANY

By: /s/ John Sherman               
John F. Sherman, III
Title: Deputy General Counsel    

Date: January 28, 2005              

USGEN NEW ENGLAND, INC.


By: /s/ James G. Utt                  

Title: V.P.                                     

Date: 1/31/05                              

EX-10 4 nep10-3.htm

Exhibit 10.3

SETTLEMENT AGREEMENT AND RELEASE

This Settlement Agreement and Release (the “Agreement”) is entered into as of January 31, 2005, by and between New England Power Company (“NEP”), USGen New England, Inc. (“USGenNE”), and Taunton Municipal Lighting Plant (“TMLP”). NEP, USGenNE, and TMLP are sometimes referred to herein individually as “Party” or collectively as “the Parties”.

WHEREAS, NEP and TMLP are parties to a System Power Sales Agreement dated as of November 10, 1993 (the “PSA”);

WHEREAS USGenNE is agent to NEP in connection with the PSA;

WHEREAS, NEP filed suit against TMLP in New England Power Co. v. Taunton Municipal Lighting Plant, Civil Action No. 02-4691 BLS (Judge van Gestel) (the “Superior Court Action”);

WHEREAS TMLP has been placing sums in escrow that represent the disputed amounts under the PSA (the “Escrowed Funds”);

WHEREAS, TMLP filed counterclaims against NEP in the Superior Court Action;

WHEREAS, NEP and TMLP desire to terminate the PSA in accordance with this Agreement;

WHEREAS, NEP and TMLP wish to avoid the continued costs of litigation and to resolve all claims amicably between and among themselves; and

WHEREAS, on July 8, 2003, USGenNE filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Maryland, Greenbelt Division (the “Bankruptcy Court”), Case No. 03-30465(PM) (the “USGenNE Bankruptcy”);

NOW, THEREFORE, in consideration of these premises, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto agree as follows:

1. This Agreement is subject to approval by the Bankruptcy Court in which the USGenNE Bankruptcy is pending. USGenNE shall file a motion with the Bankruptcy Court to approve this Agreement (the “Approval Motion”) within two (2) business days after the Parties execute this Agreement. The “Approval Date” shall mean (i) if any objection to the Approval Motion is filed, the date on which an order of the Bankruptcy Court approving this Agreement has become a final, non-appealable judicial order (unless the Parties waive in writing the requirement that such order be final and non-appealable, in which case the Approval Date will be the date on which the Bankruptcy Court entered the order approving the Approval Motion) or (ii) if no objection to the Approval Motion is filed, the date on which the Bankruptcy Court enters the order approving the Approval Motion.
   
   
2. Notwithstanding anything contained in this Agreement to the contrary, this Agreement shall terminate automatically if a final non-appealable order denying the Approval Motion is entered by the Bankruptcy Court. In the event of such termination, all obligations under this Agreement shall be terminated and of no further force or effect without further action by any Party hereto and without liability of any Party hereto to the others.
   
   
3. In the event of termination of this Agreement pursuant to Section 2 hereof, no rights or obligations, nor any claims or defenses, of the Parties existing prior to the execution of this Agreement will be prejudiced, compromised, discharged or otherwise affected in any way, and shall exist as if this Agreement had never been executed, and neither this Agreement, nor any draft hereof, any communications among the Parties with respect to this Agreement nor the subject matter hereof shall be admissible in evidence or in any way used, described or discussed in any future proceeding.
   
   
4. Effective as of 11:59 p.m. on the third business day after the Approval Date, the Parties agree that the PSA and the Parties’ respective rights, benefits and obligations thereunder shall be terminated (the “PSA Termination Date”). Other than as set forth in this Agreement, the Parties shall have no further rights or obligations between and among themselves arising under or relating in any way whatsoever to the PSA; provided, however, that the PSA shall continue in effect after the Approval Date but only to the extent necessary to provide for final accountings, final billing, and payments.
   
   
5. TMLP represents that there are currently in excess of two million dollars in the Escrowed Funds and that TMLP will not disburse any of the Escrowed Funds except in accordance with this Agreement.
   
   
6. USGenNE shall promptly notify TMLP of the Approval Date. Notice shall be made by email to Kenneth Barna, Esquire at “kbarna@rubinrudman.com” and by telefacsimile and by US Mail addressed to Kenneth Barna, Rubin and Rudman LLP, 50 Rowes Wharf, Boston, MA 02110 (Fax) (617)439-9556.. Within 3 business days of the Approval Date, TMLP shall pay to USGenNE from the Escrowed Funds the sum of two million dollars (the “Termination Payment”). The Termination Payment shall be made by wire to USGenNE or by cashier’s check payable to USGen New England Inc. and delivered to Robert S. Sanoff, Foley Hoag LLP, 155 Seaport Boulevard, Boston, MA 02210. Upon payment of the Termination Payment, TMLP shall have the right to disburse the remaining Escrowed Funds in its sole discretion.
   
   
7. Contemporaneous with the execution of the Agreement, NEP and TMLP shall jointly move to stay the Superior Court Action pending resolution of the Approval Motion.
   
   
8. USGenNE, as agent to NEP, agrees that it will continue to deliver capacity, energy, and other ancillary products to TMLP as required under the PSA until the PSA is terminated in accordance with the provisions of this Agreement.
   
   
9. TMLP agrees that it will pay to USGenNE in the ordinary course the then market value for all capacity, energy, and other ancillary products it has received but not yet paid for pursuant to the PSA up until and including the PSA Termination Date. TMLP’s obligation to pay under this Section 9 of the Agreement shall be in addition to its obligation to pay the Termination Payment.
   
   
10. Subject only to the provisions of this Agreement, USGenNE and NEP for themselves and their respective officers, agents, attorneys, predecessors, directors, employees, successors, and assigns do hereby release and forever discharge TMLP and its respective officers, agents, attorneys, predecessors, principals, trustees, employees, successors, and assigns of and from any and all claims, demands, attorney's fees, costs, actions and causes of action of every kind or nature, whether known or unknown, suspected or unsuspected that USGenNE or NEP now has, may in the future have, or has at any time heretofore had against TMLP but only those arising under or relating to the PSA.
    
    
11. Subject only to the provisions of this Agreement, TMLP for itself and its respective officers, agents, attorneys, predecessors, principals, trustees, successors, assigns, and employees does hereby release and forever discharge USGenNE and NEP and their respective officers, agents, attorneys, predecessors, directors, successors, assigns, and employees of and from any and all claims, demands, attorney's fees, costs, actions and causes of action of every kind or nature, whether known or unknown, suspected or unsuspected that TMLP now has, may in the future have, or has at any time heretofore had against NEP or USGenNE but only those arising under or relating to the PSA.
    
    
12. Upon the receipt by USGenNE of the Termination Payment, NEP and TMLP shall immediately cause the Superior Court Action to be dismissed (including all claims and counterclaims), with prejudice and without attorneys’ fees or costs, by having their respective counsel execute and file the Stipulation of Dismissal with Prejudice substantially in the form attached hereto as Exhibit A.
    
    
13. The Parties acknowledge that this Agreement is given in settlement of a disputed claim and is not an admission of liability, any such liability being expressly denied by all Parties. This Agreement shall not constitute, and no action taken pursuant to this Agreement shall constitute, any admission of fact, liability, causation, responsibility or fault, or proportionate share thereof, by any of the Parties with respect to any matter referred to herein.
    
    
14. Each Party represents and warrants to the other Parties that the individual executing this Agreement on such Party's behalf is fully authorized to do so and, further, that such individual is fully authorized to bind the Party on whose behalf it is executing this Agreement to the terms of all releases of claims, undertakings and obligations of that Party as set forth in this Agreement.
    
    
15. The effective day of this Agreement shall be the date set forth above.
    
    
16. The Agreement shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts.
    
    
17. This Agreement may be executed in counterparts, which together shall comprise the executed Agreement.
    
    
18. This Agreement may be modified, amended or supplemented only by a written instrument which specifically references this Agreement and is signed by all Parties.
    
    
19. Each Party has been advised by its own legal counsel and, in executing this Agreement, does not rely upon any representations, promises, or inducements made by any other Party or its representatives, with the sole exception of the premises and provisions set forth herein. The fact that a Party or counsel for a party drafted a provision or provisions of this Agreement shall not cause that provision or those provisions to be construed against the drafting Party.
20. This Agreement shall constitute the entire understanding of the Parties with respect to its subject matter. It shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns. None of the Parties shall assign its rights and obligations under this Agreement without the prior written consent of the other Parties.

[The remainder of this page intentionally left blank.]

IN WITNESS WHEREOF, the Parties' authorized representatives have duly executed this Agreement as an instrument under seal on the day and year first written above.

NEW ENGLAND POWER COMPANY

By: /s/ John F. Sherman            
John F. Sherman, III
Title: Deputy General Counsel

Date: January 31, 2005


USGEN NEW ENGLAND, INC.

By: /s/ James G. Utt                         

Title: V.P.                                       

Date: 1/31/05                                   

TAUNTON MUNICIPAL LIGHTING PLANT

By: /s/ Joseph M. Blaine       

Title: General Manager            

Date: January 31, 2005            

EXHIBIT A

STIPULATION OF DISMISSAL WITH PREJUDICE

COMMONWEALTH OF MASSACHUSETTS

SUFFOLK COUNTY, ss.	SUPERIOR COURT DEPARTMENT OF THE TRIAL COURT
NEW ENGLAND POWER COMPANY,           PLAINTIFF, v. TAUNTON MUNICIPAL LIGHTING PLANT,            DEFENDANT.	CIVIL ACTION No. 02-4691 BLS (Judge van Gestel)

STIPULATION OF DISMISSAL WITH PREJUDICE

Pursuant to Rule 41(a)(1)(ii) of the Massachusetts Rules of Civil Procedure, the above-captioned parties hereby dismiss this action, including all claims and counterclaims, with prejudice, without costs and with all rights of appeal waived.

TAUNTON MUNICIPAL
LIGHTING PLANT

By its attorneys,

                                                                    
Alan K. Posner, BBO, #403900
Kenneth M. Barna, BBO #029680
Rubin and Rudman, LLP
50 Rowes Wharf
Boston, MA 02110
(617) 330-7000
(617) 439-9556 (fax)

Date: __________, 2005

NEW ENGLAND POWER COMPANY


By its attorneys,

                                                                    
Robert S. Sanoff, BBO #441370
Susan A. Snyder, BBO #638120
FOLEY HOAG LLP
155 Seaport Boulevard
Boston, MA 02210-2600
(617) 832-1000
(617) 832-7000 (fax)

EX-31 5 nep31-1.htm

Exhibit 31.1

Certification of Principal Executive Officer
Pursuant to Rule 13a-14(a)

I, Stephen P. Lewis, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of New England Power Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 11, 2005				/s/ Stephen P. Lewis
				Stephen P. Lewis
				President

EX-31 6 nep31-2.htm

Exhibit 31.2

Certification of Principal Financial Officer
Pursuant to Rule 13a-14(a)

I, John G. Cochrane, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of New England Power Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 11, 2005				/s/ John G. Cochrane
				John G. Cochrane
				Vice President and Chief Financial Officer

EX-32 7 nep32.htm

Exhibit 32

SECTION 1350 CERTIFICATION

In connection with the Quarterly Report of New England Power Company (the “Company”) on Form 10-Q for the quarterly period ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned certifies, to the best of his knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 11, 2005		/s/ Stephen P. Lewis
		Stephen P. Lewis
		President
Date: February 11, 2005		/s/ John G. Cochrane
		John G. Cochrane
		Vice President and Chief Financial Officer

-----END PRIVACY-ENHANCED MESSAGE-----

EX-10

Exhibit 10.2

TERMINATION AGREEMENT AND RELEASE

This Termination Agreement and Release (the “Agreement”) is entered into as of January 31, 2005, by and between New England Power Company (“NEP”) and USGen New England, Inc. (“USGenNE”). NEP and USGenNE are sometimes referred to herein individually as “Party” or collectively as “the Parties”.

WHEREAS, NEP and USGenNE are parties to a PSA Performance Support Agreement (Taunton Municipal Lighting Plant) dated as of August 5, 1997 (the “PSA”);

WHEREAS, pursuant to the PSA, USGenNE is agent to NEP in connection with a System Power Sales Agreement dated as of November 10, 1993 between NEP and Taunton Municipal Lighting Plant (“TMLP”)(the “Power Sales Agreement”);

WHEREAS, pursuant to a Settlement Agreement and Release dated as of the same date as this Agreement (the “Settlement Agreement”), NEP, USGenNE, and TMLP have agreed to terminate the Power Sales Agreement;

WHEREAS, on July 8, 2003, USGenNE filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Maryland, Greenbelt Division (the “Bankruptcy Court”), Case No. 03-30465(PM) (the “USGenNE Bankruptcy”);

WHEREAS, the Settlement Agreement is subject to approval by the Bankruptcy Court; and

WHEREAS, the Parties desire to terminate the PSA in accordance with this Agreement;

NOW, THEREFORE, in consideration of these premises, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto agree as follows:

1. Effective upon the PSA Termination Date of the Power Sales Agreement as set forth in the Settlement Agreement, the Parties agree that the PSA and the Parties’ respective rights, benefits and obligations thereunder shall be terminated. Other than as set forth in this Agreement, the Parties shall have no further rights or obligations between themselves arising under or relating in any way whatsoever to the PSA.
   
   
2. The Parties agree that the PSA shall continue in effect after approval of the Settlement Agreement by the Bankruptcy Court to the extent necessary to provide for accountings, final billing, and payments related to the Power Sales Agreement.
   
   
3. The Parties agree that they will continue to perform their obligations under the PSA until the PSA is terminated in accordance with the provisions of this Agreement.
   
   
4. Subject only to the provisions of this Agreement, USGenNE for itself and its respective officers, agents, attorneys, predecessors, directors, employees, successors, and assigns does hereby release and forever discharge NEP and its respective officers, agents, attorneys, predecessors, principals, trustees, employees, successors, and assigns of and from any and all claims, demands, attorney's fees, costs, actions and causes of action of every kind or nature, whether known or unknown, suspected or unsuspected that USGenNE now has, may in the future have, or has at any time heretofore had against NEP but only those arising under or relating to the PSA or the Power Sales Agreement.
   
   
5. Subject only to the provisions of this Agreement, NEP for itself and its respective officers, agents, attorneys, predecessors, principals, trustees, successors, assigns, and employees does hereby release and forever discharge USGenNE and its respective officers, agents, attorneys, predecessors, directors, shareholders, successors, assigns, and employees of and from any and all claims, demands, attorney's fees, costs, actions and causes of action of every kind or nature, whether known or unknown, suspected or unsuspected that USGenNE now has, may in the future have, or has at any time heretofore had against NEP but only those arising under or relating to the PSA or the Power Sales Agreement.
   
   
6. Each Party represents and warrants to the other Party that the individual executing this Agreement on such Party's behalf is fully authorized to do so and, further, that such individual is fully authorized to bind the Party on whose behalf it is executing this Agreement to the terms of all releases of claims, undertakings and obligations of that Party as set forth in this Agreement.
   
   
7. The effective day of this Agreement shall be the date set forth above.
   
   
8. The Agreement shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts.
   
   
9. This Agreement may be executed in counterparts, which together shall comprise the executed Agreement.
   
   
10. This Agreement may be modified, amended or supplemented only by a written instrument which specifically references this Agreement and is signed by all Parties.
    
    
11. Each Party has been advised by its own legal counsel and, in executing this Agreement, does not rely upon any representations, promises, or inducements made by any other Party or its representatives, with the sole exception of the premises and provisions set forth herein. The fact that a Party or counsel for a party drafted a provision or provisions of this Agreement shall not cause that provision or those provisions to be construed against the drafting Party.
    
    
12. This Agreement shall constitute the entire understanding of the Parties with respect to its subject matter. It shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns. None of the Parties shall assign its rights and obligations under this Agreement without the prior written consent of the other Parties.

[The remainder of this page intentionally left blank.]

IN WITNESS WHEREOF, the Parties' authorized representatives have duly executed this Agreement as an instrument under seal on the day and year first written above.

NEW ENGLAND POWER
COMPANY

By: /s/ John Sherman               
John F. Sherman, III
Title: Deputy General Counsel    

Date: January 28, 2005              

USGEN NEW ENGLAND, INC.


By: /s/ James G. Utt                  

Title: V.P.                                     

Date: 1/31/05                              

EX-10

Exhibit 10.3

SETTLEMENT AGREEMENT AND RELEASE

This Settlement Agreement and Release (the “Agreement”) is entered into as of January 31, 2005, by and between New England Power Company (“NEP”), USGen New England, Inc. (“USGenNE”), and Taunton Municipal Lighting Plant (“TMLP”). NEP, USGenNE, and TMLP are sometimes referred to herein individually as “Party” or collectively as “the Parties”.

WHEREAS, NEP and TMLP are parties to a System Power Sales Agreement dated as of November 10, 1993 (the “PSA”);

WHEREAS USGenNE is agent to NEP in connection with the PSA;

WHEREAS, NEP filed suit against TMLP in New England Power Co. v. Taunton Municipal Lighting Plant, Civil Action No. 02-4691 BLS (Judge van Gestel) (the “Superior Court Action”);

WHEREAS TMLP has been placing sums in escrow that represent the disputed amounts under the PSA (the “Escrowed Funds”);

WHEREAS, TMLP filed counterclaims against NEP in the Superior Court Action;

WHEREAS, NEP and TMLP desire to terminate the PSA in accordance with this Agreement;

WHEREAS, NEP and TMLP wish to avoid the continued costs of litigation and to resolve all claims amicably between and among themselves; and

WHEREAS, on July 8, 2003, USGenNE filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Maryland, Greenbelt Division (the “Bankruptcy Court”), Case No. 03-30465(PM) (the “USGenNE Bankruptcy”);

NOW, THEREFORE, in consideration of these premises, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereto agree as follows:

1. This Agreement is subject to approval by the Bankruptcy Court in which the USGenNE Bankruptcy is pending. USGenNE shall file a motion with the Bankruptcy Court to approve this Agreement (the “Approval Motion”) within two (2) business days after the Parties execute this Agreement. The “Approval Date” shall mean (i) if any objection to the Approval Motion is filed, the date on which an order of the Bankruptcy Court approving this Agreement has become a final, non-appealable judicial order (unless the Parties waive in writing the requirement that such order be final and non-appealable, in which case the Approval Date will be the date on which the Bankruptcy Court entered the order approving the Approval Motion) or (ii) if no objection to the Approval Motion is filed, the date on which the Bankruptcy Court enters the order approving the Approval Motion.
   
   
2. Notwithstanding anything contained in this Agreement to the contrary, this Agreement shall terminate automatically if a final non-appealable order denying the Approval Motion is entered by the Bankruptcy Court. In the event of such termination, all obligations under this Agreement shall be terminated and of no further force or effect without further action by any Party hereto and without liability of any Party hereto to the others.
   
   
3. In the event of termination of this Agreement pursuant to Section 2 hereof, no rights or obligations, nor any claims or defenses, of the Parties existing prior to the execution of this Agreement will be prejudiced, compromised, discharged or otherwise affected in any way, and shall exist as if this Agreement had never been executed, and neither this Agreement, nor any draft hereof, any communications among the Parties with respect to this Agreement nor the subject matter hereof shall be admissible in evidence or in any way used, described or discussed in any future proceeding.
   
   
4. Effective as of 11:59 p.m. on the third business day after the Approval Date, the Parties agree that the PSA and the Parties’ respective rights, benefits and obligations thereunder shall be terminated (the “PSA Termination Date”). Other than as set forth in this Agreement, the Parties shall have no further rights or obligations between and among themselves arising under or relating in any way whatsoever to the PSA; provided, however, that the PSA shall continue in effect after the Approval Date but only to the extent necessary to provide for final accountings, final billing, and payments.
   
   
5. TMLP represents that there are currently in excess of two million dollars in the Escrowed Funds and that TMLP will not disburse any of the Escrowed Funds except in accordance with this Agreement.
   
   
6. USGenNE shall promptly notify TMLP of the Approval Date. Notice shall be made by email to Kenneth Barna, Esquire at “kbarna@rubinrudman.com” and by telefacsimile and by US Mail addressed to Kenneth Barna, Rubin and Rudman LLP, 50 Rowes Wharf, Boston, MA 02110 (Fax) (617)439-9556.. Within 3 business days of the Approval Date, TMLP shall pay to USGenNE from the Escrowed Funds the sum of two million dollars (the “Termination Payment”). The Termination Payment shall be made by wire to USGenNE or by cashier’s check payable to USGen New England Inc. and delivered to Robert S. Sanoff, Foley Hoag LLP, 155 Seaport Boulevard, Boston, MA 02210. Upon payment of the Termination Payment, TMLP shall have the right to disburse the remaining Escrowed Funds in its sole discretion.
   
   
7. Contemporaneous with the execution of the Agreement, NEP and TMLP shall jointly move to stay the Superior Court Action pending resolution of the Approval Motion.
   
   
8. USGenNE, as agent to NEP, agrees that it will continue to deliver capacity, energy, and other ancillary products to TMLP as required under the PSA until the PSA is terminated in accordance with the provisions of this Agreement.
   
   
9. TMLP agrees that it will pay to USGenNE in the ordinary course the then market value for all capacity, energy, and other ancillary products it has received but not yet paid for pursuant to the PSA up until and including the PSA Termination Date. TMLP’s obligation to pay under this Section 9 of the Agreement shall be in addition to its obligation to pay the Termination Payment.
   
   
10. Subject only to the provisions of this Agreement, USGenNE and NEP for themselves and their respective officers, agents, attorneys, predecessors, directors, employees, successors, and assigns do hereby release and forever discharge TMLP and its respective officers, agents, attorneys, predecessors, principals, trustees, employees, successors, and assigns of and from any and all claims, demands, attorney's fees, costs, actions and causes of action of every kind or nature, whether known or unknown, suspected or unsuspected that USGenNE or NEP now has, may in the future have, or has at any time heretofore had against TMLP but only those arising under or relating to the PSA.
    
    
11. Subject only to the provisions of this Agreement, TMLP for itself and its respective officers, agents, attorneys, predecessors, principals, trustees, successors, assigns, and employees does hereby release and forever discharge USGenNE and NEP and their respective officers, agents, attorneys, predecessors, directors, successors, assigns, and employees of and from any and all claims, demands, attorney's fees, costs, actions and causes of action of every kind or nature, whether known or unknown, suspected or unsuspected that TMLP now has, may in the future have, or has at any time heretofore had against NEP or USGenNE but only those arising under or relating to the PSA.
    
    
12. Upon the receipt by USGenNE of the Termination Payment, NEP and TMLP shall immediately cause the Superior Court Action to be dismissed (including all claims and counterclaims), with prejudice and without attorneys’ fees or costs, by having their respective counsel execute and file the Stipulation of Dismissal with Prejudice substantially in the form attached hereto as Exhibit A.
    
    
13. The Parties acknowledge that this Agreement is given in settlement of a disputed claim and is not an admission of liability, any such liability being expressly denied by all Parties. This Agreement shall not constitute, and no action taken pursuant to this Agreement shall constitute, any admission of fact, liability, causation, responsibility or fault, or proportionate share thereof, by any of the Parties with respect to any matter referred to herein.
    
    
14. Each Party represents and warrants to the other Parties that the individual executing this Agreement on such Party's behalf is fully authorized to do so and, further, that such individual is fully authorized to bind the Party on whose behalf it is executing this Agreement to the terms of all releases of claims, undertakings and obligations of that Party as set forth in this Agreement.
    
    
15. The effective day of this Agreement shall be the date set forth above.
    
    
16. The Agreement shall be governed by and construed and enforced in accordance with the laws of the Commonwealth of Massachusetts.
    
    
17. This Agreement may be executed in counterparts, which together shall comprise the executed Agreement.
    
    
18. This Agreement may be modified, amended or supplemented only by a written instrument which specifically references this Agreement and is signed by all Parties.
    
    
19. Each Party has been advised by its own legal counsel and, in executing this Agreement, does not rely upon any representations, promises, or inducements made by any other Party or its representatives, with the sole exception of the premises and provisions set forth herein. The fact that a Party or counsel for a party drafted a provision or provisions of this Agreement shall not cause that provision or those provisions to be construed against the drafting Party.
20. This Agreement shall constitute the entire understanding of the Parties with respect to its subject matter. It shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns. None of the Parties shall assign its rights and obligations under this Agreement without the prior written consent of the other Parties.

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IN WITNESS WHEREOF, the Parties' authorized representatives have duly executed this Agreement as an instrument under seal on the day and year first written above.

NEW ENGLAND POWER COMPANY

By: /s/ John F. Sherman            
John F. Sherman, III
Title: Deputy General Counsel

Date: January 31, 2005


USGEN NEW ENGLAND, INC.

By: /s/ James G. Utt                         

Title: V.P.                                       

Date: 1/31/05                                   

TAUNTON MUNICIPAL LIGHTING PLANT

By: /s/ Joseph M. Blaine       

Title: General Manager            

Date: January 31, 2005            

EXHIBIT A

STIPULATION OF DISMISSAL WITH PREJUDICE

COMMONWEALTH OF MASSACHUSETTS

SUFFOLK COUNTY, ss.	SUPERIOR COURT DEPARTMENT OF THE TRIAL COURT
NEW ENGLAND POWER COMPANY,           PLAINTIFF, v. TAUNTON MUNICIPAL LIGHTING PLANT,            DEFENDANT.	CIVIL ACTION No. 02-4691 BLS (Judge van Gestel)

STIPULATION OF DISMISSAL WITH PREJUDICE

Pursuant to Rule 41(a)(1)(ii) of the Massachusetts Rules of Civil Procedure, the above-captioned parties hereby dismiss this action, including all claims and counterclaims, with prejudice, without costs and with all rights of appeal waived.

TAUNTON MUNICIPAL
LIGHTING PLANT

By its attorneys,

                                                                    
Alan K. Posner, BBO, #403900
Kenneth M. Barna, BBO #029680
Rubin and Rudman, LLP
50 Rowes Wharf
Boston, MA 02110
(617) 330-7000
(617) 439-9556 (fax)

Date: __________, 2005

NEW ENGLAND POWER COMPANY


By its attorneys,

                                                                    
Robert S. Sanoff, BBO #441370
Susan A. Snyder, BBO #638120
FOLEY HOAG LLP
155 Seaport Boulevard
Boston, MA 02210-2600
(617) 832-1000
(617) 832-7000 (fax)

EX-31

Exhibit 31.1

Certification of Principal Executive Officer
Pursuant to Rule 13a-14(a)

I, Stephen P. Lewis, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of New England Power Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 11, 2005				/s/ Stephen P. Lewis
				Stephen P. Lewis
				President

EX-31

Exhibit 31.2

Certification of Principal Financial Officer
Pursuant to Rule 13a-14(a)

I, John G. Cochrane, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of New England Power Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 11, 2005				/s/ John G. Cochrane
				John G. Cochrane
				Vice President and Chief Financial Officer

EX-32

Exhibit 32

SECTION 1350 CERTIFICATION

In connection with the Quarterly Report of New England Power Company (the “Company”) on Form 10-Q for the quarterly period ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned certifies, to the best of his knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: February 11, 2005		/s/ Stephen P. Lewis
		Stephen P. Lewis
		President
Date: February 11, 2005		/s/ John G. Cochrane
		John G. Cochrane
		Vice President and Chief Financial Officer