10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended March 31, 2003

OR

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

For the transition period___________to______________

Commission File Number	Registrant, State of Incorporation, Address and Telephone Number	I.R.S. Employer Identification Number
1-2987	Niagara Mohawk Power Corporation	15-0265555
	(a New York corporation) 300 Erie Boulevard West Syracuse, New York 13202 315.474.1511

Securities registered pursuant to Section 12(b) of the Act:
(Each class is registered on the New York Stock Exchange)

Registrant	Title and Class
Niagara Mohawk Power Corporation	Preferred Stock ($100 par value-cumulative):

3.90% Series

3.60% Series

Preferred Stock ($25 par value-cumulative):

Adjustable Rate Series D

Securities registered pursuant to Section 12(g) of the Act: None

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [ X ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). YES [ ] NO [ X ]

State the aggregate market value of the common equity held by non-affiliates of the registrant: N/A

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Registrant	Title	Shares Outstanding at June 24, 2003
Niagara Mohawk Power Corporation	Common Stock, $1.00 par value	187,364,863
	(all held by Niagara Mohawk Holdings, Inc.)

NIAGARA MOHAWK POWER CORPORATION

TABLE OF CONTENTS

PART I
Item 1.	Business
Item 2.	Properties
Item 3.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
PART II
Item 5.	Market for the Registrants’ Common Equity and Related Stockholders Matters
Item 6.	Selected Consolidated Financial Data
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk
Item 8.	Financial Statements and Supplementary Data
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
Item 10.	Directors and Executive Officers of the Registrant
Item 11.	Executive Compensation
Item 12.	Security Ownership of Certain Beneficial Owners and Management
Item 13.	Certain Relationships and Related Transactions
Item 14.	Controls and Procedures
PART IV
Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K
Signatures
Certifications

FORWARD-LOOKING INFORMATION

This report and other presentations made by Niagara Mohawk Power Corporation (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 and gas industry restructuring;

(b) the impact of general economic changes in New York;

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

(i) 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, and the Merger Rate Plan in effect with the New York State Public Service Commission.

NIAGARA MOHAWK POWER CORPORATION

PART I

ITEM 1. BUSINESS

On January 31, 2002, Niagara Mohawk Holdings, Inc. (“Holdings”), parent company of Niagara Mohawk Power Corporation (the “Company”) became a wholly owned subsidiary of National Grid USA (“National Grid”). National Grid is a wholly owned subsidiary of National Grid Transco plc (“NGT”). NGT owns and operates the high voltage transmission system and natural gas distribution system in England and Wales. NGT, through National Grid, also has substantial transmission and distribution operations in the United States. The combination of the Company and National Grid more than doubled the size of NGT’s U.S. operations, with an electric customer base of approximately 3.3 million.

The Company was organized in 1937 under the laws of New York State and is engaged principally in the regulated energy delivery business in New York State. The Company provides electric service to approximately 1,500,000 electric customers in the areas of eastern, central, northern and western New York and sells, distributes, and transports natural gas to approximately 557,000 gas customers in areas of central, northern and eastern New York State.

In conjunction with the closing of the merger with National Grid a new rate plan (“Merger Rate Plan”) that had previously been approved by the PSC went into effect, superceding the Power Choice rate plan. See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Regulatory Agreements and the Restructuring of the Regulated Electric Business - Merger Rate Plan” for a detailed discussion of this rate plan.

For a discussion of events that occurred during 2003 and 2002, including the restructuring of the regulated electric utility business, other federal and state regulatory initiatives, and the Company’s efforts to address deregulation and its financial condition, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

REGULATION AND RATES

Several critical initiatives have been undertaken by various regulatory bodies and the Company that have had, and are likely to continue to have, a significant impact on the Company and the utility industry. See Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Regulatory Agreements and the Restructuring of the Regulated Electric Utility Business” and “Other Federal and State Regulatory Initiatives,” for a discussion of these initiatives.

For a discussion of the Merger Rate Plan approved by the PSC in November 2001 and the three-year gas rate settlement agreement, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, “Regulatory Agreements and the Restructuring of the Regulated Electric Utility Business.”

ELECTRIC SUPPLY PLANNING

Although the Company has exited the generation business, the Company must still arrange for electric supply through a transition period and as provider of last resort, in that the Company will provide electricity and gas to its customers who are unable or unwilling to obtain an alternative supplier. Under the Power Choice agreement, the PSC approved the Company’s plan to divest its fossil and hydro generation assets, which was a key component in its Power Choice agreement to lower average electricity prices and provide customer choice. By November 2001, the Company completed the sale of the last of its generation assets, its nuclear assets, to a subsidiary of Constellation Energy Group, Inc. (“Constellation”). In connection with the generation asset sales, the Company has entered into various agreements to purchase its power needs from the buyers of the generation assets or entered into financial swaps with the buyers that hedge the price of electricity. The Company also entered into financial swaps with certain of the parties to the Master Restructuring Agreement (“MRA”). The MRA, which occurred in 1998, terminated, restated, or amended certain Independent Power Producer (“IPP”) Purchase Power Agreements (“PPAs”). The Company continues to purchase energy from various suppliers under long-term PPAs and purchases any additional power needs on the open market through the NYISO. The NYISO commenced operations in December 1999 as a result of a FERC ruling which promotes competition by requiring public utilities owning, operating, or controlling interstate transmission facilities to file tariffs which offer others the same transmission services they provide for themselves, under comparable terms and conditions. For a discussion of the results of the power contracts and several financial agreements to hedge the price of electricity, see Part II, Item 8. Financial Statements and Supplementary Data - Note I. Commitments and Contingencies, and Note J. Derivatives and Hedging Activities.

ELECTRIC DELIVERY PLANNING

As of March 31, 2003, the Company had approximately 52,000 pole miles of transmission and distribution lines for electric delivery. Evaluation of these facilities relative to NYISO, Northeast Power Coordinating Council, and North American Electric Reliability Organization, planning criteria, security considerations, and anticipated Company internal and external demands is an ongoing process intended to maintain the reliability of electric service while minimizing the capital requirements for expansion of these facilities. The Company continually reviews the adequacy of its electric delivery facilities and establishes capital requirements to support new load growth.

GAS SUPPLY

The majority of the Company’s gas sales are for residential and commercial space heating. Consequently, the demand for natural gas by the Company’s customers is seasonal and influenced by weather factors. The Company purchases its natural gas under firm supply agreements. The natural gas purchased may be either transported or stored for later transport on a firm basis through interstate storage facilities and pipelines to the Company's system.

GAS DELIVERY

The Company sells, distributes and transports natural gas to a geographic territory that generally extends from Syracuse to Albany. The northern reaches of the system extend to Watertown and Glens Falls. Not all of the Company’s distribution areas are physically interconnected with one another by its own facilities. Presently there are 12 separate distribution zones connected to 4 interstate natural gas pipelines regulated by the FERC. Niagara Mohawk has nineteen direct connections with Dominion Transmission, Inc., two with Iroquois Gas Transmission, one with Empire State Pipeline, and one with Tennessee Gas Pipeline.

ENVIRONMENTAL MATTERS

General. Niagara Mohawk’s operations and facilities are subject to numerous federal, state and local laws and regulations relating to the environment including, among other things, requirements concerning air emissions, water discharges, site remediation, hazardous materials handling, waste disposal and employee health and safety. While the Company devotes considerable resources to environmental compliance and promoting employee health and safety, the impact of future environmental health and safety laws and regulations on the Company cannot be predicted with certainty.

In compliance with environmental statutes and consistent with its strategic philosophy, the Company performs environmental investigations and analyses and installs, as required, pollution control equipment, including, among other things, effluent monitoring instrumentation and materials storage/handling facilities designed to prevent or minimize releases of potentially harmful substances.

The Company believes it is probable that costs associated with environmental compliance will continue to be recovered through the ratemaking process. For a discussion of the circumstances regarding the Company’s continued ability to recover these types of expenditures in rates, see Part II, Item 8. Financial Statements and Supplementary Data - Note B. Rate and Regulatory Issues and Contingencies.

Clean Air Act. See Item 3. Legal Proceedings, for a discussion of the potential liability for the past operations of Huntley and Dunkirk fossil generating stations.

ISO 14001. The Company’s Investment Recovery facility Environmental Management System (“EMS”) is certified to the International Organization for Standardization (“ISO”) 14001 standard. The Company’s distribution and transmission EMS are deemed to be in conformance with the ISO 14001 standard. The NY Transmission System EMS has been integrated into the National Grid USA Transmission EMS, which is already certified to ISO 14001. The NY EMS will be audited for Certification in June 2003.

Solid/Hazardous Waste. The public utility industry typically utilizes and/or generates in its operations a broad range of hazardous and potentially hazardous wastes and by-products. The Company believes it is handling identified wastes and by-products in a manner consistent with federal, state and local requirements and has implemented an environmental audit program to identify any potential areas of concern and aid in compliance with such requirements. The Company is also currently conducting a program to investigate and remediate, as necessary to meet current environmental standards, certain properties associated with former gas manufacturing and other properties which the Company has learned may be contaminated with industrial waste, as well as investigating identified industrial waste sites as to which it may be determined that the Company has contributed. The Company has also been advised that various federal, state or local agencies believe certain properties require investigation and has prioritized the sites based on available information in order to enhance the management of investigation and remediation, if necessary. See Part II, Item 8. Financial Statements and Supplementary Data - Note I. Commitments and Contingencies, “Environmental Contingencies,” for a discussion of the sites which are Company-owned.

EMPLOYEE RELATIONS

The Company’s work force at March 31, 2003 numbered approximately 5,500, of whom approximately 82 percent were union members. It is estimated that approximately 80 percent of the Company’s total labor cost is applicable to operation and maintenance and approximately 20 percent is applicable to construction and other accounts.

SEASONALITY

There is seasonal variation in electric customer load, usually peaking in the winter and summer months. The seasonality is correlated to the colder or warmer temperature in that more electricity is used for heating or cooling during those months.

There is a seasonal variation in gas customer sales, with loads usually peaking in the winter months. The seasonality is correlated to the colder temperatures in that more gas is used for heating during those months.

Also see Part II, Item 8. Financial Statements and Supplementary Data - Note P. Quarterly Financial Data (unaudited).

ITEM 2. PROPERTIES

ELECTRIC DELIVERY PROPERTIES

As of March 31, 2003, the Company’s electric delivery transmission and distribution systems were composed of:

• 748 substations with a rated transformer capacity of approximately 22,800,000 kilo-volt-amperes
• approximately 9,400 pole miles of overhead and underground transmission lines
• approximately 35,800 conductor miles of overhead distribution lines
• about 5,800 cable miles of underground distribution cables

Only a part of the Company’s transmission and distribution lines are located on property owned by the Company. With respect to the Company’s transmission and distribution lines that are located on property not owned by the Company, the Company’s practice is to obtain right of way agreements.

The electric system of the Company is directly interconnected with other electric utility systems in New York, Massachusetts, Vermont, Pennsylvania, and the Canadian provinces of Ontario and Quebec, and indirectly interconnected with most of the electric utility systems through the Eastern Interconnection of the United States and Canada.

GAS DELIVERY

The Company distributes gas that it purchases from suppliers, and transports gas owned by others. As of March 31, 2003, the Company’s natural gas delivery system was comprised of approximately 8,400 miles of pipelines. Only a part of these natural gas pipelines and mains are located on property owned by the Company. With respect to natural gas pipelines and mains that are not located on property owned by the Company, the Company’s practice is to obtain right of way agreements.

SUBSIDIARIES

The Company has the following 100 percent owned subsidiaries:

• NM Uranium, Inc. - has an interest in a uranium mining operation in Live Oak County, Texas. The mining operation is complete and the site has been reclaimed and restored.
• NM Properties, Inc. - engages in real estate development and divestiture of property formerly owned by the Company. NM Properties, Inc. owns several subsidiaries and has interests in several joint ventures in carrying out its activities.
• NM Receivables - facilitates the sale of an undivided interest in a designated pool of customer receivables, including accrued unbilled revenues. NM Receivables, LLC is owned by the Company (over 99.99 percent) and by NM Receivables Corp. II, which is a wholly owned subsidiary of the Company. See Item 8. Financial Statements and Supplementary Data, - Note A. Summary of Significant Accounting Policies and Note I. Commitments and Contingencies.

NATIVE AMERICAN MATTERS

There are five Native American Nations with reservations located in the vicinity of the Company’s service territory and facilities. The Company has held discussions and has been involved in legal proceedings with Native American Nations involving the Company’s high voltage transmission facilities on Nation lands, provision of electric service to customers on Nation lands, and the Nations’ land claims.

In June 2000, the Company entered into a 40-year agreement with the Seneca Nation to settle issues related to approximately 50 miles of high voltage transmission and distribution facilities located on the Seneca Nation’s Cattaraugus and Allegheny Reservations. The Company has entered into federally approved Electric Service Agreements with the Onondaga, Tuscarora and Seneca-Tonawanda Nations governing the provision of electric service to customers on their lands. The Company intends to seek similar agreements with the Oneida and Mohawk Nations to supplement existing federally approved agreements. The Company’s facilities are affected by land claim litigation involving the Cayuga, Oneida, Mohawk and Seneca Nations. A court has awarded damages to the Cayuga Nation that are payable by the State of New York. The land claim matters involving the Cayuga, Oneida, Mohawk and Seneca Nations have not been completely and finally resolved, although the St. Regis Mohawk Tribe recently entered into a Memorandum of Understanding with New York State that could lead to resolution of the Mohawk’s land claims against the Company. The Company continues to monitor the land claim litigation and, where necessary, defends its interests.

MORTGAGE LIENS

Substantially all of the Company’s operating properties are subject to a mortgage lien securing its mortgage debt.

ITEM 3. LEGAL PROCEEDINGS

The Company settled material litigation in April 2003 and currently has three material proceedings pending in addition to the environmental matters described in Note I to the financial statements in Item 8.

1. Fourth Branch Associates Mechanicville: In November 1993, Fourth Branch Associates Mechanicville (“Fourth Branch”) filed an action against the Company and several of its officers and employees in New York state court. The lawsuit arose from the Company’s termination of a contract for Fourth Branch to operate and maintain a hydroelectric plant the Company owned in the town of Halfmoon, New York. Fourth Branch’s complaint also alleged claims based on the inability of Fourth Branch and the Company to agree on terms for the purchase of power from a new facility that Fourth Branch hoped to construct at the Mechanicville site. The Parties agreed to settle the case in April 2003. Under the settlement, the Company will transfer the hydroelectric plant to Fourth Branch, subject to regulatory approval, and will make lump-sum payments to Fourth Branch and its bank in an aggregate amount that is immaterial to the Company.



2. Alliance for Municipal Power v. New York State Public Service Commission: On February 17, 2003, the Alliance for Municipal Power (“AMP”) filed with the New York state court a petition for review of decisions by the New York State Public Service Commission (the “PSC”) that maintain the PSC’s established policy of using average distribution rates when calculating the exit fees that may be charged to municipalities that seek to leave the Niagara Mohawk system and establish their own municipal light departments. Changes in the methodology for the calculation of the exit fee are not likely to have a material effect on Niagara Mohawk’s financial statements. However, AMP’s petition for review also challenges the lawfulness of Niagara Mohawk’s collection of exit fees from departing municipalities, regardless of the methodology used to calculate those fees. If the court were to rule that Niagara Mohawk is not authorized to collect exit fees, and if the AMP communities proceeded with their plans to municipalize power, the Company could experience a significant shortfall of revenue. In addition, such a ruling could encourage other municipalities to consider municipalizing. The Company would seek to defer any lost revenue for eventual recovery from its remaining customers pursuant to the terms of its rate plan. Niagara Mohawk believes that it has strong defenses to AMP’s petition and is contesting the petition vigorously.



3. New York State v. Niagara Mohawk Power Corp. et al.: On January 10, 2002, New York State filed a civil action against the Company and NRG in federal district court in Buffalo, New York, for alleged violations of the federal Clean Air Act and related state environmental laws at the Dunkirk and Huntley power plants, which the Company sold in 1999 to NRG and its affiliates (collectively, “NRG”). The State alleged, among other things, that between 1982 and 1999, the Company modified the two plants 55 times without obtaining proper preconstruction permits and implementing proper pollution equipment controls. The state sought, among other relief, statutory penalties under the Clean Air Act, which could have a maximum value of $25,000 to $27,500 per day per violation.

• The Company and NRG moved to dismiss the complaint on statute of limitations and other grounds in 2002, and on March 27, 2003, the court granted the motions in part, holding that the violations of the Clean Air Act prior to November 1996 were barred by the federal five-year statute of limitations, and that related state statutory violations prior to November 1999 were barred by the state three-year statute of limitations. This eliminated the Company’s potential exposure to statutory daily penalties prior to these dates. At the same time, the court preserved the State’s non-regulatory claims against the Company and dismissed NRG from the suit.



• On April 25, 2003, the State filed a motion for leave to amend the complaint to assert new claims against both the Company and NRG for unspecified amounts. Among other things, the state is seeking to reassert daily violations of the Clean Air Act going back to 1982, the time period covered by its original complaint. On May 30, 2003, the Company filed papers in opposition to the State’s petition. Oral argument has been scheduled for July 2, 2003.
  
  
• Prior to the commencement of the enforcement action, on July 13, 2001, the Company filed a declaratory judgment action in New York State court in Syracuse against NRG seeking a ruling that NRG is responsible for the costs of pollution controls and mitigation that might result from the State’s enforcement action. As a result of NRG’s voluntary bankruptcy petition, filed in New York federal court for bankruptcy on May 14, 2003, the Company’s declaratory judgment action is stayed.
  
  

4. Niagara Mohawk Power Corp. v. Huntley Power L.L.C., Dunkirk Power L.L.C. and Oswego Harbor, L.L.C.: The Company is engaged in a collection litigation to recover bills for station service rendered to the owners of three power plants (the “Plants”), which the Company sold in 1999 to three affiliates of NRG: Huntley Power L.L.C., Dunkirk Power L.L.C. and Oswego Harbor, L.L.C. (collectively, the “Defendants”). According to the Company’s records, as of March 31, 2003, the Defendants owed the Company approximately $33 million. After suit was filed, the parties agreed to stay the litigation to permit the FERC to try to resolve the dispute.

As noted above, NRG filed a voluntary bankruptcy petition in New York federal court for bankruptcy on May 14, 2003. The Company has received approval from the bankruptcy court to move forward in its FERC proceeding. Any FERC decision would determine the Company’s ability to charge the Defendants for station service electricity post-bankruptcy, but the collection of the outstanding station service bills as of the bankruptcy filing date will be governed by the bankruptcy court proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the last quarter of the fiscal year ended March 31, 2003.

PART II

ITEM 5. MARKET FOR THE REGISTRANTS’ COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The common stock of the Company is held solely by Niagara Mohawk Holdings, Inc., and therefore indirectly by National Grid USA and National Grid Transco plc. There is no public trading market for the Company’s common stock, and the Company sold no equity securities during the period covered by this Annual Report. For information about the Company's payment of dividends and restrictions on those payments, see Item 6, Selected Financial Data, and Item 8, in the Notes to the Financial Statements.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following tables set forth selected financial information for the Company for the year ended March 31, 2003, the sixty days ended March 31, 2002, thirty days ended January 30, 2002, three months ended March 31, 2001, and each of the four years during the period ended December 31, 2001, which have been derived from the financial statements of the Company, and should be read in connection therewith.

On January 31, 2002, the Company was acquired by National Grid in a purchase business combination recorded under the “push-down” method of accounting, resulting in a new basis of accounting for the “successor” period beginning January 31, 2002. Information relating to all “predecessor” periods prior to the acquisition is presented using the Company’s historical basis of accounting. As discussed in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements, the following selected financial data for the Company may not be indicative of the Company’s future financial condition, results of operations or cash flows.

		Year Ended	60 Day Period	30 Day Period	Three months
(in 000's except		March 31,	Ended March	ended January	ended March	Year Ended December 31,
per share data)		2003	31, 2002	30, 2002	31, 2001	2001	2000	1999	1998
		(Successor)	(Successor)	(Predecessor)	(Predecessor)	(Predecessor)	(Predecessor)	(Predecessor)	(Predecessor)
Operating Revenues		$ 4,019,450	$ 689,705	$ 362,622	$ 1,179,706	$ 4,114,713	$ 3,865,949	$ 3,827,340	$ 3,826,373
Net Income (Loss)		125,871	30,646	(20,941)	34,010	19,358	(27,646)	(9,661)	(147,894)
Income (loss) from		*	*	*	*	*	*	*	(0.89)
	continuing operations per
	average common share
Total assets		12,243,759	12,101,588	**	12,037,039	11,436,554	12,270,324	12,418,508	13,835,987
Long-term debt		3,953,989	4,146,642	**	4,674,004	4,419,822	4,678,963	5,042,588	6,417,225
Mandatorily redeemable		-	-	**	53,750	50,700	53,750	61,370	68,990
	preferred stock
Dividends paid per		*	*	*	*	*	*	*	-
	common share

* All of the Company’s shares of common stock are owned by its parent company, therefore, dividend information and per share data is not relevant.

** Balance Sheet information as of the 30 day period ended January 30, 2002 is not provided.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

MERGER WITH NATIONAL GRID

On January 31, 2002, the acquisition of Holdings by National Grid was completed for a value of approximately $3.0 billion in cash and American Depositary Shares. The acquisition is being accounted for by the purchase method, the application of which, including the recognition of goodwill, is being recognized on the books of the Company, the most significant subsidiary of Holdings. The merger transaction resulted in approximately $1.2 billion of goodwill. The purchase accounting method required the Company to revalue its assets and liabilities at their fair value. This revaluation resulted in an increase to the Company’s pension and postretirement benefit liability in the amount of approximately $440 million, with a corresponding offsetting increase to a regulatory asset account. See “Merger Rate Plan”, below, for a discussion of the anticipated future results on the Company. See Item 8. Financial Statements and Supplementary Data, - Note H. Pension and Other Retirement Plans for a discussion of the Company’s pension and postretirement benefit plans.

VERO

In January 2002, the Company made a voluntary early retirement offer (“VERO”) to 302 eligible employees in targeted areas where significant workforce reductions were necessary in the combined organization, primarily corporate administrative functions such as finance, human resources, legal and information technology. Eligible employees were non-union employees in the targeted functions who will be age 55 with at least ten years of pension service by March 31, 2004. The Company sets the actual retirement dates for individuals based on operational needs. Retirement dates will conclude no later than April 1, 2004.

The number of eligible employees that accepted the VERO was 267 and most retired by June 30, 2002. Under the Merger Rate Plan, the Company is allowed to record a regulatory asset for separation and early retirement costs. The amortization of such regulatory asset is occurring over ten years, with approximately 69 percent of the amortization of the regulatory asset occurring within the first three years. On January 31, 2002, the Company recorded a regulatory asset of $53 million related to the VERO. This regulatory asset had a balance of $30 million at March 31, 2003.

REGULATORY AGREEMENTS AND THE RESTRUCTURING OF
THE REGULATED ELECTRIC UTILITY BUSINESS

Merger Rate Plan. On November 28, 2001, the PSC approved the Merger Rate Plan. This rate plan became effective on January 31, 2002, the closing of the merger. Key terms of the plan are as follows:

• Net customer savings of approximately $1 billion over the next ten years, compared with rates projected without the merger. This includes a $152 million reduction in delivery charges compared to rates approved in the Company’s Power Choice rate agreement, followed by stabilized delivery charges for ten years, subject to limited adjustments. This equals an expected reduction in the Company electricity delivery rates of more than eight percent, which results in a projected five percent decrease in overall electricity bills, including a projected commodity cost, which will continue to be borne by customers.
• Price-stabilized commodity service for residential and commercial customers for several years, giving those customers significant protection from severe fluctuations in the generation marketplace.
• Agreement to forgo the collection of approximately $850 million in nuclear-related costs that otherwise would have been collected in rates.
• Permitted recovery of and a return on the remaining MRA regulatory asset, which consists of recoverable costs to terminate or amend IPP contracts under the MRA.
• Agreement to expand the Company’s annual upstate New York economic development efforts by $12.5 million.
• The extension by 16 months of the existing multi-year gas rate settlement agreement, resulting in a freeze in natural gas delivery rates through December 2004.
• Extension of the Low Income Customer Assistance Program and introduction of a special low-income rate.
• Establishment of a Service Quality Assurance Program that calls for up to $24 million in annual penalties or more under certain conditions, if defined customer service goals are not achieved.
• The continuation of the stranded cost recovery provisions under Power Choice with slight modifications.
• The sharing with customers 50 percent of cumulative earnings in excess of an 11.75 percent return on common equity.

Although rates will be lower under the Merger Rate Plan, the Company believes cost savings from the merger should enable it to improve its operating results.

Generation Asset Sales. Federal and state mandates have encouraged the separation of generation from transmission and distribution in order to promote competition and reduce prices to customers. In accordance with these mandates, the Company has divested all of its generation plants and operates primarily in the transmission and distribution sectors. In 1999, the Company completed the sale of its coal-fired generation plants, its hydro generation plants, and its oil and gas-fired generation plant at Oswego for $860 million. In 2000, the Company completed the sale of its oil and gas-fired plant at Albany for $48 million. In January 2001, the Company completed the sale of its 25 percent interest in the Roseton Steam Station for approximately $84 million. In November 2001, the Company sold its nuclear assets to Constellation for approximately $603 million. The Company also executed PPAs with the buyers of the formerly owned fossil and hydro assets, which are designed to help the Company meet rate reduction and price cap commitments as well as expected demand as the provider of last resort. The Company also signed PPAs with Constellation to purchase energy at negotiated prices through 2011 and revenue sharing agreements for ten years thereafter. See Item 8. Financial Statements and Supplementary Data, Note B. Rate and Regulatory Issues and Contingencies, Note I. Commitments and Contingencies, and Note J. Derivatives and Hedging Activities, for a further discussion of the terms of these agreements.

Following write-offs agreed to by the Company, the PSC Order approved the sale of the nuclear assets and provided for the deferral and future recovery of the remaining nuclear stranded costs. The Company began to amortize the regulatory asset related to the loss on the sale of the nuclear assets immediately subsequent to such sale. Prior to implementation of the Merger Rate Plan, the Company had a regulatory asset of $1,074.6 million for the net loss on the sale of its nuclear generation assets. Under the Merger Rate Plan, the Company agreed to forgo collection of approximately $850 million in nuclear-related costs that otherwise would have been collected in rates. The nuclear regulatory asset that remained after such a write-off is included in the Company’s balance sheet as part of “Merger rate plan stranded costs.”

FERC Proceedings. The FERC is contemplating major changes to the regulatory structure that governs the Company’s business. Several proposals are under consideration, any of which may affect how the Company does business. The Company cannot predict which or how many of the proposals the FERC will adopt or in what form, or whether they will have a material impact on the Company’s financial position or results of operations.

Regional Transmission Organizations: The FERC has indicated that it wants regional transmission organizations ("RTOs") formed that would cover a larger geographic area than independent system operators ("ISOs"). In response to an order by the FERC, participants in the ISO New England (“ISO-NE”), the New York ISO, and the Pennsylvania-New Jersey-Maryland ISOs took part in a mediation to establish an RTO. The FERC has not yet ruled on the mediator’s report. Pending the FERC’s ruling, transmission owners, including the Company, have been working to develop an alternative RTO structure. It is not clear what structure will emerge from these negotiations or what the geographic scope will be of the RTO in which the Company participates. In August 2002, the New York and New England ISOs filed a proposal with the FERC to form an RTO but withdrew it in November 2002 after several parties, including National Grid USA, filed protests.

Standard Market Design: In July 2002, the FERC issued a formal notice of proposed rulemaking ("NOPR") on standard market design ("SMD"). The proposed rules address transmission pricing and planning, the role of merchant transmission, and other issues that would directly affect the Company. The FERC issued a White Paper on April 28, 2003 outlining a proposed wholesale power market platform that it would require in any final rules in this proceeding. The White Paper embodies FERC's response to the comments that it received in this proceeding. FERC states that it intends to issue a rule requiring that public utilities join independent entities (either an RTO or an ISO) that would be responsible for transmission service, tariff design, system operations and markets within a region. States would have a significant role in regional transmission planning, tariff design and in ensuring resource adequacy. Transmission owners that are market participants would have limited authority to manage transmission. Independent transmission companies may manage a broader set of functions.

The FERC has also proposed that it assume jurisdiction over transmission rates to retail customers. In prior orders, the FERC has held that deliveries at retail will continue to be subject to state-approved retail charges as well as the FERC-approved transmission rate, even if the delivery is made over transmission facilities. The introduction of an independent entity with its own transmission tariff would require coordination between the state and federally approved charges to avoid bypass of costs embedded in such state approved charges.

In addition, to the extent the Company wishes to pursue opportunities related to transmission projects, the FERC rulings in the SMD proceeding and other proceedings may limit the Company's ability to do so. The Company cannot predict when the FERC will issue final rules on SMD, or in what form, or if they will have a material impact on the Company’s financial position or results of operations.

On July 12, 2002, the U.S. Court of Appeals issued an order concerning Pennsylvania-New Jersey-Maryland ISO’s relationship with its transmission owners. This order was favorable precedent to the Company because it suggested that transmission owners that join ISOs still maintain significant authority to propose transmission rates and to withdraw from such ISOs. On December 19, 2002 and May14, 2003, however, the FERC issued decisions that appear to narrow this authority. On May 20, 2003, the U.S Court of Appeals issued a ruling declaring that the FERC’s December 19, 2002 order had violated the Court’s mandate. It is not clear whether the FERC’s more recent decision will stand, but the uncertainty surrounding this issue will likely affect the Company’s relationship with the NYISO and with any future RTO.

Standards of Conduct: In September 2001, the FERC initiated a NOPR regarding affiliate standards of conduct in both the electric and gas industries. In its proposed rules, the FERC proposed a broad definition of "energy affiliate," which would include the Company’s affiliate National Grid USA Service Company, Inc., as well as the Company’s electric distribution company affiliates. If the FERC were to adopt these rules as proposed, the Company would have to change the way it interacts with its so-called energy affiliates in a manner that could increase costs.

Incentive Pricing: In January 2003, the FERC proposed a pricing policy statement indicating that it may provide incentives to transmission owners to join a RTO, an independent transmission company and to invest in new facilities. The FERC has solicited comments on this statement, and the Company cannot predict what the final policy statement will say or whether it will have a material impact on the Company’s financial position or results of operations.

PSC Issues. In connection with an audit performed by PSC Staff, the Company reached a settlement with the Staff that resolves all issues associated with its pension and other postretirement benefit obligations for the period prior to the acquisition of the Company by National Grid. The settlement is subject to approval by the full New York State Public Service Commission. Among other things, the settlement covers the funding of the Company’s pension and post-retirement benefit plans. Under the settlement, the Company agreed to provide $100 million of tax-deductible funding by April 30, 2003 (which it funded in March 2003), and an additional $209 million, on a tax-deductible basis, by December 31, 2011. The Company will earn a rate of return of at least 6.60 percent on any portion of the $209 million that it funds before December 31, 2011, plus 80 percent of the amount by which the rate of return on the pension and post-retirement benefit funds exceeds 5.34 percent. This settlement resolves all PSC Staff audit issues related to the pre-acquisition period with the exception of certain gas deferrals and a Staff review of a pending Company compliance filing related to the sale of the Nine Mile Nuclear Station.

As part of the Company's ongoing reconciliation of commodity costs and revenues, the Company has identified several adjustments and included them in filings with the PSC.  Specifically, the Company has requested recovery of $36 million of commodity costs associated with the under-reconciliation of New York Power Authority (“NYPA”) hydropower revenues in its commodity adjustment clause, and is proposing to refund $24 million associated with other revenues that were not included in the commodity adjustment reconciliation. In addition, the Company has filed a modification to its tariff and a proposal to refund an additional $7 million associated with the recovery of other NYPA hydropower costs. These filings are pending before the PSC, and the Company cannot predict the outcome of the filings.

OTHER

Change of Fiscal Year. At the time of the merger with National Grid, the Company changed its fiscal year from a calendar year ending December 31 to a fiscal year ending March 31. The Company made this change in order to align its fiscal year with that of its new parent company, National Grid. The Company’s first new full fiscal year began on April 1, 2002 and ended on March 31, 2003.

CRITICAL ACCOUNTING POLICIES

There are certain critical accounting policies that 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. The following accounting policies are particularly important to the financial condition and results of operations of the Company: regulatory accounting (including the collection of purchase power costs through the commodity adjustment clause and purchased gas through the gas cost collection mechanism), goodwill accounting and derivative accounting.

Regulatory Accounting
Electric utilities are subject to certain accounting standards that are generally not applicable to other business enterprises. The Company applies the provisions of Statement of Financial Accounting Standards (“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. In 1997, the Emerging Issues Task Force of the Financial Accounting Standards Board (“FASB”) concluded that a utility that had received approval to recover stranded costs through regulated rates would be permitted to continue to apply FAS 71 to the recovery of stranded costs.

The Company has received authorization from the PSC to recover through its Competitive Transition Charges (“CTCs”) substantially all of the costs associated with its former generating business not recovered through the divestiture. The CTC is a mechanism that was established in the Company’s Power Choice agreement to recover stranded costs from customers. Additionally, FERC Order No. 888 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 the Merger Rate Plan, the Company will earn a return on all of its regulatory assets. In the event the Company determines, as a result of lower than expected revenues or higher than expected costs, or both, that its net regulatory assets are not probable of recovery, it can no longer apply the principles of SFAS No. 71 and would be required to record an after-tax, non-cash charge against income for any remaining unamortized regulatory assets and liabilities. If the Company could no longer apply SFAS No. 71, the resulting charge would be material to the Company’s reported financial condition and results of operations and adversely affect the Company’s ability to pay dividends.

Under the Merger Rate Plan, the Company’s remaining electric business (electric transmission and distribution) continues to be rate-regulated on a cost-of-service basis and, accordingly, the Company continues to apply SFAS No. 71 to these businesses. Also, the Company’s IPP contracts, including those restructured under the MRA, as well as the PPAs entered into in connection with the generation divestiture, continue to be the obligations of the regulated business.

Derivatives
The FASB issued SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”), as amended, which the Company adopted on January 1, 2001. SFAS No. 133 requires that companies identify all derivative instruments in use, record all derivatives on the balance sheet as assets or liabilities measured at fair value and adjust the fair value at each financial reporting period. Depending on the use of the derivative and its qualification as a hedge, the changes in fair value either will be recorded directly in earnings or will be deferred and matched with the settlement of the transaction being hedged. The Company’s derivatives are listed on the Consolidated Balance Sheets as “Derivative Instruments” or “Current liabilities—other.”

Upon implementation of SFAS No. 133, the Company designated several financial instruments as derivatives and qualified certain of these instruments as hedges. Those derivative instruments that did not qualify for hedge accounting were the result of regulatory rulings and therefore, the earnings impact of the adoption of SFAS No. 133 was offset by regulatory assets or liabilities as directed by SFAS No. 71. The result was no impact on earnings for the adoption of SFAS No. 133 by the Company.

Revenue Recognition
The Company bills its customers on a monthly cycle basis at approved tariffs based on energy delivered and a minimum customer service charge. Revenues are determined based on these bills plus an estimate for unbilled energy delivered between the cycle billing date and the end of the accounting period. The Company estimates unbilled revenues using the prior month’s average daily revenue for each billing cycle.

Goodwill
The company applies the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets” (FAS 142). In accordance with FAS 142, goodwill must be reviewed for impairment at least annually. The Company utilized a discounted cash flow approach incorporating its most recent business plan forecasts in the performance of the annual goodwill impairment test. The result of the annual analysis determined that no adjustment to the goodwill carrying value was required.

Pensions
The Company has recognized an additional minimum pension liability of $269 million on its balance sheet reflecting an underfunded pension obligation.  The Company would normally record a charge to other comprehensive income as an offset to this entry. However, due to the nature of its rate plan the Company has not charged other comprehensive income but has instead recorded a regulatory asset.

For further discussion of Critical Accounting Policies see Item 7A. Quantitative and Qualitative Disclosures About Market Risk, Item 8. Financial Statements and Supplementary Data, Note A. Summary of Significant Accounting Policies, Note B. Rate and Regulatory Issues and Contingencies and Note J. Derivatives and Hedging Activities.

RESULTS OF OPERATIONS

The following discussion and analysis highlights items that significantly affected the Company’s operations during the year ended March 31, 2003, the three months ended March 31, 2002 and 2001, and the twelve-month periods ended December 31, 2001 and 2000. See “Merger Rate Plan” for a further discussion of how the closing of the merger with National Grid will impact the future results of the Company. Results of operations through January 30, 2002 reflect the Power Choice rate plan and the Company’s generation assets sales. Reported earnings under Power Choice were substantially depressed as a result of the regulatory treatment of the MRA regulatory asset. Information relating to all “predecessor” periods prior to the acquisition is presented using the Company’s historical basis of accounting. It should also be read in conjunction with Item 8. Financial Statements and Supplementary Data, and other financial and statistical information appearing elsewhere in this report.

The Company now reports results on a fiscal year ending March 31, which has affected comparability to prior results. To assist in the comparability of the Company’s financial results and discussions, results of operations for the three months ended March 31, 2002 include results for the 30 day period of the predecessor and the 60 day period of the successor and are designated as “combined.” Management has based its discussion and analysis of results of operations for the three month period ending March 31, 2002 as compared to the three month period ending March 31, 2001 on the combined results of operations for the three month period ending March 31, 2002.

EARNINGS

Net income for the twelve months ended March 31, 2003 increased approximately $107 million compared to the twelve months ended December 31, 2001. This increase is primarily due to the implementation of the Merger Rate Plan, a nuclear write-off in 2001 and the sale of the Company’s generation business, which was completed in 2001. Under the Merger Rate Plan, the Company has lowered delivery rates leading to lower operating revenues. However, this has been offset by lower operating expenses as a result of merger savings, the sale of the generation business and lower interest expense due to refinancing and the continuing repayment of debt.

Net income for the three months ended March 31, 2002 was approximately $24 million lower than the three month period ended March 31, 2001. A decline in operating income due to the effect a warm winter had on the gas business and increased other operation and maintenance costs was partially offset by lower interest expense due to the repayment of debt during 2002.

Net income for the twelve months ended December 31, 2001 increased approximately $47 million compared with the twelve months ended December 31, 2000. This is primarily due to lower interest expense due to the repayment of debt during 2001. Earnings for 2001 also reflect the effects the generation asset sale namely increased purchased electricity offset by lower depreciation, property tax, labor and fuel expenses.

REVENUES

Electric revenues decreased $82 million in the twelve months ended March 31, 2003 as compared to the twelve months ended December 31, 2001. The table below details components of this fluctuation.

Change in Electric Revenue from the twelve months ended
December 31, 2001 to March 31, 2003
(In Millions)
	Retail sales		$ (1)
	Sales for resale		(61)
	Transmission wheeling		(23)
	Other		3
		Total	$ (82)
			=========

The decrease in sales for resale is primarily attributable to lower sales to the NYISO. Transmission wheeling revenue was lower primarily due to lower NYISO Transmission Congestion Contracts (“TCC”) auction revenues. Although there was almost no change in retail sales, revenues increased due to higher delivery only revenue by $88 million which were offset by lower electric rates under the Merger Rate Plan.

Electric revenues decreased $1 million in the three months ended March 31, 2002 as compared to the same period in the 2001 and increased $186 million in the calendar year 2001 as compared to the same period in 2000.

Electric revenues decreased in the three months ended March 31, 2002 as compared to the same period in 2001 primarily as a result of lower sales to ultimate customers due to the warmer weather. In addition, transmission revenues decreased $9 million primarily due to the introduction of the transmission revenue adjustment mechanism on September 1, 2002, which reduced transmission revenues by $7 million. These decreases were partially offset by an increase in distribution of energy of $19 million; higher electric rates since September 2001 of $21 million since the commodity cost reflected in rates was higher, partially offset by lower delivery rates; an increase in systems benefit charge revenue recoveries of $6 million and an increase in unbilled revenues of $6 million. In accordance with Power Choice and the Merger Rate Plan, the Company recognizes changes in accrued unbilled revenue in its results of operations. The systems benefits charge is offset in other operation and maintenance expense. The decrease in electric sales to ultimate consumers and the increase in distribution of energy reflect the growing number of customers that purchase electricity from other suppliers.

The increase in electric revenues in 2001 as compared to 2000 is primarily due to an increase in sales for resale of $118 million as a result of higher sales to the NYISO; higher overall rates since September 2001 of $37 million since the commodity cost reflected in rates was higher, partially offset by lower delivery rates; an increase in miscellaneous revenues of $27 million; an increase in transmission revenues of $11 million and an increase in the systems benefit charge revenue recoveries of $24 million.

Electric kilowatt-hour sales were approximately 38.8 billion for the twelve months ended March 31, 2003, 9.4 billion and 9.3 billion for the three months ended March 31, 2002 and the same period in 2001, respectively, and 39.9 billion in the calendar year 2001, and 36.3 billion in the calendar year 2000.

Electric deliveries for the twelve months ended March 31, 2003 as compared to the twelve months ended December 31, 2001 decreased 1.1 billion KWh. The decrease is primarily due to a decrease in sales for resale of 2.1 billion KWh as a result of lower sales to the NYISO and lower sales to commercial and industrial customers of 2.1 billion KWh offset by increased residential sales of ..6 billion KWh and an increase in delivery only of energy of 2.5 billion KWh.
Electric deliveries for the three months ended March 31, 2002 as compared to the same period in 2001 increased 0.1 billion KWh and increased 3.6 billion KWh in the calendar year 2001 as compared to the same period in 2000. The increase in the three months ended March 31, 2002 as compared to the same period in 2001 is primarily due to an increase in sales for resale of 0.7 billion KWh as a result of higher sales to the NYISO and an increase in distribution of energy of 0.2 billion KWh, partially offset by a decrease in sales to ultimate customers of 0.7 billion KWh primarily due to the milder weather.

The increase in calendar year 2001 is primarily due to an increase in sales for resale of 4.1 billion KWh as a result of higher sales to the NYISO, partially offset by a decrease in sales to ultimate customers of 0.3 billion KWh due to the milder weather in 2001 as compared to 2000.

Gas revenues decreased $13 million for the twelve-months ended March 31, 2003 compared to the twelve-months ended December 31, 2001 primarily due to a decrease in the commodity cost of purchased gas offset somewhat by an increase in delivery revenue. The primary reason for the increase in gas delivery revenue is higher rates which reflect the inclusion of the state income tax. The decrease in the cost of purchased gas is explained below under “gas purchased” expense. The table below details components of the gas revenue fluctuation.

Change in Gas Revenue from the twelve-months ended

December 31, 2001 to March 31, 2003

(In Millions)

Cost of Purchased Gas		$ (26)
Delivery Revenue		18
Other		(5)
	Total	$ (13)
		========

Gas revenues decreased $127 million in the three months ended March 31, 2002 from the comparable period in 2001 due to lower gas prices being passed through to customers and milder weather in 2002. Gas revenues increased $63 million in the calendar year 2001 primarily as a result of higher gas prices being passed through to customers in early 2001, despite overall milder weather in 2001.

The commodity cost of purchased gas has no impact on the Company’s net income because the actual commodity costs are passed through to customers on a one-to-one basis.

Gas sales for the twelve months ended March 31, 2003, excluding transportation of customer-owned gas and spot market sales, were 69 million Dth, a 5.8 percent increase from the twelve-months ended December 31, 2001. The increase was primarily due to the impacts of weather as offset by migration to delivery only service. Gas sales in the calendar year 2001, excluding transportation of customer-owned gas and spot market sales, were 64 million Dth. Gas sales in the three months ended March 31, 2002, excluding transportation of customer-owned gas and spot market sales, were 28 million Dth, a 19.6 percent decrease from the same period in 2001. The decrease was primarily due to milder weather in the three months ended March 31, 2002 as compared to the same period in 2001.

Gas sales in the calendar year 2001, excluding transportation of customer-owned gas and spot market sales, were 64 million Dth, a 9.7 percent decrease from 2000. The decrease in gas sales is primarily attributable to milder weather in 2001 as compared to 2000. Gas delivered was also negatively impacted by a decrease in transportation volumes of 14 million Dth as a result of customers purchasing less gas from other gas providers.

OPERATING EXPENSES

The Company’s electricity purchased increased $290 million for the year ended March 31, 2003 as compared to the year ended December 31, 2001, $52 million in the three months ended March 31, 2002 as compared to the same period in 2001 and $160 million in calendar year 2001 as compared to calendar year 2000, primarily as a result of the timing of the various sales of the Company’s generation assets. The Company now purchases all of its load requirement through the NYISO, or through other parties under long-term PPAs (for a discussion of the portion of the purchases that are hedged, see Item 7A. Quantitative and Qualitative Disclosure about Market Risk - “Electricity Price Risk”). Although the prices the Company must pay for electricity are higher than the fuel costs incurred when the assets were owned, the Company avoids operating costs from running these plants, including labor, fuel, real estate taxes, and depreciation.

Significantly higher natural gas prices impacted the Company’s fuel and purchased power costs during the third and fourth quarters of 2000 and in early 2001, principally because restructured contracts with IPPs began indexing to natural gas prices in July 2000. Fuel and purchased power costs were also higher in the third and fourth quarters of 2000 and in early 2001 because of an indexed contract with the new owner of the Albany generating station and an indexed contract with an IPP not part of the MRA. The Company’s continued 25 percent ownership in the Roseton generating station also increased fuel and purchased power costs in 2000. The Roseton generating station was sold in January 2001. The Albany and Roseton stations are both fueled by oil or natural gas. With respect to its exposure to the restructured contracts with the IPPs and the Albany contract, the Company takes steps to hedge against further volatility in natural gas prices, largely by purchasing New York Mercantile Exchange (“NYMEX”) gas futures contracts. On September 1, 2001, the rate plan changes under the Power Choice agreement allowed for the pass-through of most commodity-related costs to customers. This pass-through of commodity costs to customers continues under the Merger Rate Plan.

IPP purchases decreased by $17 million in the three months ended March 31, 2002 as compared to the same period in 2001, since the Company entered into an agreement with one IPP that reduced the amount of energy it had to buy from them. In the three months ended March 31, 2001, the Company paid that IPP $18 million. The Company did not make any payments to that particular IPP in the same period in 2002. IPP purchases were lower in calendar year 2001 as compared to 2000 due to a decrease in hydro IPP production as a result of a reduction in water flow because of drier weather. The change in the deferral for electricity purchased is due to the regulatory treatment of the hydro PPA as discussed in Item 8. Financial Statements and Supplementary Data - Note B. Rate and Regulatory Issues and Contingencies.

The Company had no fuel for electric generation expense in either the twelve-months ended March 31, 2003 or the three months ended March 31, 2002 because it had sold all of its generation assets in earlier periods. Fuel for electric generation decreased $37 million in calendar year 2001 as compared to 2000, primarily as a result of the timing of the various sales of the Company’s generation assets. In addition, generation from the Company’s nuclear plants was reduced due to an extended outage of one of the nuclear plants in 2001.

The Company’s gas purchased expense decreased approximately $26 million for the year ended March 31, 2003 as compared to the year ended December 31, 2001. The decrease is a result of lower gas prices in the current period partially offset by increased sales attributable to the colder winter weather conditions than in the comparable prior period. Quantities purchased and withdrawn from storage were up 5.7 million Dth. The Company’s net cost per Dth, as charged to expense, including the effects of the gas cost deferral, decreased to $5.57 in the twelve-months ended March 31, 2003 from $6.45 for the twelve-months ended December 31, 2001.

Gas purchased expense decreased $120 million in the three months ended March 31, 2002 as compared to the same period in 2001 primarily as a result of lower natural gas prices. Dth purchased and withdrawn from storage were down 0.4 million Dth. The Company’s net cost per Dth, as charged to expense, including the effects of the gas commodity cost adjustment clause, decreased to $3.97 in the three months ended March 31, 2002 from $7.53 the same period in 2001.

The Company’s gas purchased expense increased $62 million in 2001, primarily as a result of higher natural gas prices which more than offset reduced sales volumes. Dth purchased and withdrawn from storage were down 16.1 million Dth. The Company’s net cost per Dth, as charged to expense, including the effects of the gas commodity cost adjustment clause, increased to $6.45 in calendar year 2001 from $4.42 in calendar year 2000.

For a discussion of hedging of gas purchases, see Item 7A. Quantitative and Qualitative Disclosures about Market Risks – “Gas Supply Price Risk.”

Other operation and maintenance expense decreased $112 million for the year ended March 31, 2003 as compared to the year ended December 31, 2001. The decrease is primarily attributable to the sale of its generation assets, especially its nuclear generation, in that the labor, fuel, and real estate taxes for these generation assets are no longer paid for. Expense was also reduced due to lower transmission costs from fewer TCCs purchased from NYISO and merger integration savings in the current period. TCCs confer the right to collect or obligation to pay congestion charges for a single megawatt of energy transmitted between two geographic locations.

Other operation and maintenance expense for the Company had increased $27 million in the three months ended March 31, 2002 as compared to the same period in 2001, primarily as a result of increased employee welfare expense primarily due to separation costs of $7 million, increased pension and other postretirement benefits expense of $14 million, increased compensation accruals of $6 million, incremental merger related costs of approximately $11 million, incremental storm expense of $14 million and a higher systems benefit charge of $6 million. The systems benefits charge is offset in electric revenues. These increases were partially offset by lower nuclear operation expense of $36 million as a result of the sale of the nuclear assets.

Other operation and maintenance expense for the Company has increased $65 million in 2001, primarily as a result of an increase in transmission expense of $34 million in part due to TCCs purchased through the auction process conducted by the NYISO, an increase in bad debt expense of $8 million which reflects the impact of the higher natural gas prices being passed on to customers, a higher systems benefit charge of $23 million, higher compensation accruals of $13 million and higher pension expense of $19 million. The systems benefits charge and the TCC expense are both offset in electric revenues. The incremental merger related costs for 2001 were approximately $4 million. In addition, the insurance proceeds and disaster relief associated with the 1998 ice storm restoration effort was $6 million in 2001 as compared to $30 million in 2000. Offsetting these increases were lower injuries and damages expense of $12 million, lower employees welfare expense of $6 million, lower customer services system expense of $7 million, lower non-nuclear operation and maintenance expense as a result of the sale of the non-nuclear assets of $16 million and lower nuclear operation and maintenance expense, net of deferrals and amortizations, of $21 million.

In 2001, the Company recorded a non-cash write-off of $123 million before tax, which is reflected on the disallowed nuclear investment costs line item in accordance with the PSC Order approving the sale of the nuclear assets.

Amortization of stranded costs decreased $243 million for the twelve-months ended March 31, 2003 as compared to the twelve-months ended December 31, 2001, decreased by $27 million in the three months ended March 31, 2002 as compared to the same period in 2001 and increased by $18 million in 2001 and increased $12 million for 2000. The decreases are from the difference in rate plans. Under Power Choice, the MRA regulatory asset was being amortized ratably over ten years. Under the Merger Rate Plan, which began on January 31, 2002, the MRA regulatory asset and other stranded costs are being amortized unevenly over ten years, with larger amounts being amortized in the latter years. See Item 8. Financial Statements and Supplementary Data - Note B. Rate and Regulatory Issues and Contingencies - “Merger Rate Plan Stranded Costs” for a further discussion of the ratemaking treatment related to this regulatory asset.

Depreciation and amortization expense decreased approximately $94 million for the year ended March 31, 2003 as compared to the year ended December 31, 2001, decreased approximately $28 million in the three months ended March 31, 2002 as compared to the same period in 2001, and decreased by $20 million in calendar year 2001 as compared to 2000, primarily as a result of the sale of the Company’s generation assets at various times during 1999 through 2001.

Other taxes increased approximately $19 million for the year ended March 31, 2003 as compared to the year ended December 31, 2001, due to a decrease for the Gross Receipts Tax (“GRT”) Power for Jobs tax credit. In 2001, the Company amended prior years’ tax returns (1998 through 2000), thereby increasing the amount of Power for Jobs credit recorded in 2001. This increase was partially offset by a reduction in property taxes primarily resulting from the sale of the nuclear assets in November 2001.

Other taxes increased $11 million in the three months ended March 31, 2002 as compared to the same period in 2001. In the first three months ended March 31, 2001, the Company received $22 million in GRT Power for Jobs credits due to a prior year true-up to actual filed returns. GRT credits of $1.2 million were received in the same period in 2002 due to a prior year true-up. This increase was partially offset by a reduction in the GRT tax rate of $6 million and a reduction in property taxes of $4 million primarily resulting from the sale of the nuclear assets in November 2001.

Other taxes for the Company decreased in 2001 due to an increase in GRT credits ($40 million) received primarily due to an increase in the customers in the Company’s service territory that participate in New York State’s Power for Jobs program, a reduction in the GRT tax rate ($4 million) primarily as a result of the state tax law changes and a reduction in property taxes of $5 million primarily resulting from the sale of the nuclear assets in November 2001.

The Company’s income taxes increased $84 million for the twelve months ended March 31, 2003 as compared to the twelve months ended December 31, 2001. The increase is due primarily from increased book taxable income for the twelve months ended March 31, 2003 and recording of previously deferred investment tax credits related to the sale of the nuclear assets of $80 million and the recording of the tax benefit of $43 million related to the non-cash write-off of $123 million of disallowed nuclear investment costs in 2001. Income taxes increased approximately $6 million in the three months ended March 31, 2002 primarily due to higher book taxable income. The 2001 increase in income taxes of approximately $16 million is primarily due to higher book taxable income. See Item 8. Financial Statements and Supplementary Data, - Note G. Federal, State and Foreign Income Taxes, for a reconciliation of the tax computed at the statutory rate.

The Company’s other income (deductions) decrease $74 million for the twelve months ended March 31, 2003 as compared to the twelve months ended December 31, 2001. This is primarily attributable to the Company recording $80 million of previously deferred investment tax credits related to the sale of the nuclear assets in 2001.

Other income (deductions) in the three months ended March 31, 2002 decreased $4 million primarily due to carrying charges on IPP buy out contract adjustments of $2 million and, in the three months ended March 31, 2001, other income reflected the recording of a non-cash incentive related to generation asset sales of $7 million for which there was no corresponding amount in the three months ended March 31, 2002.

The Company’s other income (deductions) increased $92 million in the year ended December 31, 2001 compared to the same period in 2000. This is primarily attributable to the Company recording $80 million of previously deferred investment tax credits related to the sale of the nuclear assets in 2001.

The Company’s interest charges decreased $33 million in the twelve months ended March 31, 2003 as compared to the twelve months ended December 31, 2001, decreased $13 million in three months ended March 31, 2002 as compared to the three months ended March 31, 2001, and decreased $43 million in 2001 compared 2000, mainly due to the repayment and early repayment of debt during 1999 through March 31, 2003, and to a lesser extent, lower rates.

Preferred dividends decreased $25 million in the twelve months ended March 31, 2003 from the twelve months ended December 31, 2001 due to preferred stock redemptions, decreased $0.1 million from the three months ended March 31, 2002 as compared to the same period in 2001 due to preferred stock redemptions, decreased $0.6 million from 2000 to 2001 due to sinking fund redemptions.

EFFECTS OF CHANGING PRICES

The Company is especially sensitive to inflation because of the amount of capital it typically needs and because its prices are regulated using a rate-base methodology that reflects the historical cost of utility plant.

The Company’s consolidated financial statements are based on historical events and transactions when the purchasing power of the dollar was substantially different than now. The effects of inflation on most utilities, including the Company, are most significant in the areas of depreciation and utility plant. The Company could not replace its utility assets for the historical cost value at which they are recorded on its books. In addition, the Company would not replace these with identical assets due to technological advances and competitive and regulatory changes that have occurred. In light of these considerations, the depreciation charges in operating expenses do not reflect the cost of providing service if new facilities were installed. See “Long Term” below for a discussion of the Company’s future capital requirements.

LIQUIDITY AND CAPITAL RESOURCES

Short Term. At March 31, 2003, the Company’s principal sources of liquidity included cash and cash equivalents of $34 million and accounts receivable of $543 million. The Company has a negative working capital balance of $659 million primarily due to long-term debt due within one year of $612 million and short-term debt of $198 million. Ordinarily, construction related short-term borrowings are refunded with long-term securities on a periodic basis. This approach generally results in a working capital deficit. Working capital deficits may also be a result of the seasonal nature of the Company’s operations as well as the timing of differences between the collection of customer receivables and the payments of fuel and purchased power costs. As discussed below, the Company believes it has sufficient cash flow and borrowing capacity to fund such deficits as necessary in the near term.

The Company’s outstanding short-term debt of $198 million consists of borrowings from other National Grid USA companies through the money pool. For a further discussion of the money pool, see Item 8. Financial Statements and Supplementary Data - Note F – Bank Credit Arrangements.

Net cash from operating activities was $599 million for the Company for twelve months ended March 31, 2003 which funded its acquisition of utility plant and the retirement of certain debt obligations.

The Company’s long-term debt due within one year is $612 million at March 31, 2003. In addition, construction expenditures planned within one year are estimated to be $297 million. These capital requirements are planned to be financed primarily from internally generated funds and borrowings from other National Grid USA companies through the Money Pool or directly.

The Company’s net cash used in investing activities increased $66 million for the twelve months ended March 31, 2003 compared to the twelve months ended December 31, 2001. This increase was primarily as a result of more proceeds being received in the twelve months ended twelve months ended December 31, 2001 from such generation sales than in the twelve months ended March 31, 2003 by $104 million. This was partially offset by an increase in cash provided by other investments of $35 million.

The Company’s net cash used in financing activities decreased $8 million for the twelve months ended March 31, 2003 as compared to the twelve months ended December 31, 2001, primarily due to a decrease in the redemption of long-term debt, offset by an increase in common dividends to Holdings.

Long Term. The Company’s total capital requirements consist of amounts for its construction program, working capital needs, and maturing debt issues. Construction expenditure levels for the energy delivery business are generally consistent from year-to-year.

The following table summarizes long-term contractual cash obligations of the Company:

			Payment due in:
			Less than	1 - 3	4 - 5	After 5
($'s in Millions)			1 year	years	years	years	Total
Long-term Debt			$ 612	$ 1,073	$ 479	$ 2,401	$ 4,565
Electric purchase power commitments			619	1,020	861	1,869	4,369
Gas supply commitments			193	213	75	22	503
Derrivative swap commitments*			192	299	274	29	794
Construction expenditures**			297	N/A	N/A	N/A	297
	Total contractual cash obligations		$ 1,913	$ 2,605	$ 1,689	$ 4,321	$ 10,528
	*	- Forecasted, actual amounts could differ based on changes in market conditions
	**	- Budgeted amount in which substantial commitments have been made. Amounts
		beyond 1 year are budgetary in nature and not considered contractual obligations
		and are therefore not included.

In connection with an audit performed by PSC Staff, the Company reached a settlement with the Staff that resolves all issues associated with its pension and other postretirement benefit obligations for the period prior to the acquisition of the Company by National Grid. The settlement is subject to approval by the full New York State Public Service Commission. Among other things, the settlement covers the funding of the Company’s pension and post-retirement benefit plans. Under the settlement, the Company agreed to provide $100 million of tax-deductible funding by April 30, 2003 (which it funded in March 2003), and an additional $209 million, on a tax-deductible basis, by December 31, 2011. The Company will earn a rate of return of at least 6.60 percent on any portion of the $209 million that it funds before December 31, 2011, plus 80 percent of the amount by which the rate of return on the pension and post-retirement benefit funds exceeds 5.34 percent. This settlement resolves all PSC Staff audit issues related to the pre-acquisition period with the exception of certain gas deferrals and a Staff review of a pending Company compliance filing related to the sale of the Nine Mile Nuclear Station.

See Item 8. Financial Statements and Supplementary Data - Note I. Commitments and Contingencies, for a detailed discussion of the electric purchase power commitments and the gas supply, storage and pipeline commitments and Note J. Derivatives and Hedging Activities for a detailed discussion of IPP and fossil/hydro swaps and Note E. Long-term Debt for a detailed discussion of mandatory debt repayments.

Capital requirements are planned to be financed primarily from internally generated funds and borrowings from other National Grid USA companies through the money pool or directly. The Company also has the ability to issue first mortgage bonds to the extent that there have been maturities or early redemptions since June 30, 1998. Through March 31, 2003, the Company had $991 million in such first mortgage bond maturities and early redemptions. This is expected to increase to over $1,500 million in 2005 based on scheduled maturities.

On May 1, 2003, the Company completed the restructuring of $414 million of variable rate tax exempt bonds. The bonds are currently in the auction rate mode, which allowed the Company to terminate the $424 million of letter of credit facilities that were in place to provide liquidity support for principal and interest while the bonds were in a variable rate mode.

On May 1, 2003, the Company redeemed early $170 million of First Mortgage Bonds. In addition, on July 7, 2003, the Company plans to redeem early approximately $487 million of Senior Notes. The funds provided for these redemptions have come from available cash within the National Grid USA Money Pool, a long term note issued to National Grid USA, and borrowings from National Grid Transco, parent company of National Grid USA.

New Accounting Standards: In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations” (“FAS 143”). FAS 143 provides the accounting requirements for retirement obligations associated with tangible long-lived assets. FAS 143 is effective for fiscal years beginning after June 15, 2002. The Company has evaluated the impact of this standard on its financial position and results of operations, and the Company does not believe it has any asset retirement obligations that would have a significant impact on its results of operations, cash flows, or financial position.

In April 2003 the FASB issued SFAS No. 149 “Amendment of Statement 133 on Derivative Instruments and Hedging activities, an amendment of Statement 133” (“FAS 149”). FAS 149 amends and clarifies financial accounting and reporting for derivative instruments and is effective for contracts entered into after June 30, 2003. The Company does not expect the adoption of this statement to have a material effect on its financial position and results of operations.

In May 2003 the FASB issued SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“FAS 150”). The Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. FAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company is currently evaluating the impact of FAS 150 on its financial position and results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to various market risks because of transactions conducted in the normal course of business. The financial instruments held or issued by the Company are used for investing, financing, hedging or cost control and not for trading.

Quantitative and qualitative disclosures are discussed by market risk exposure category:

Interest Rate Risk
Commodity Price Risk
Equity Price Risk

An Exposure Management Committee (“EMC”) was set up to monitor and control efforts to manage these risks. The EMC issues and oversees the Financial Risk Management Policy (the “Policy”) that outlines the parameters within which corporate managers are to engage in, manage, and report on various areas of risk exposure. At the core of the Policy is a condition that the Company will engage in activities at risk only to the extent that those activities fall within commodities and financial markets to which it has a physical market exposure in terms and in volumes consistent with its core business of delivering electricity and natural gas. The policies of the Company may be revised as its primary markets continue to change, principally as increased competition is introduced and the role of the Company in these markets evolves.

Interest Rate Risk. The Company maintains long-term debt at fixed interest rates and other long-term debt and intercompany short-term debt at variable rates. A controlling factor on the exposure to interest rate variations is the mix of fixed to variable rate instruments maintained by Niagara Mohawk. For March 31, 2003 and 2002, adjustable rate instruments comprise 8.8 percent and 10.5 percent of total capitalization. For the same periods, adjustable rate promissory notes are 9.1 percent and 8.8 percent of total long-term debt. The proportion of adjustable instruments to total capitalization decreased because of the reduction in borrowings from the money pool. In the aggregate at March 31, 2003 and 2002 variable rate instruments do not constitute a significant portion of total capitalization and debt thus, limiting Niagara Mohawk’s exposure to interest rate fluctuations.

If interest rates increased 1 percent next fiscal year, Niagara Mohawk’s interest expense would increase by approximately $6.1 million. This figure was derived by applying a hypothetical 1 percent variance to the variable rate debt of $413.8 million plus the short-term variable borrowings of $198 million at March 31, 2003.

The interest rates on short term borrowings are tied to the published, 30 day, commercial paper rate with the interest rate associated with the amount borrowed from National Grid adjusted monthly.

Commodity Price Risk. The Company is exposed to commodity market price fluctuations in two basic areas: (1) the cost of electricity and natural gas for resale to its customers, and (2) the impact that natural gas, electricity and oil prices have on the swap contracts and one large non-MRA IPP contract. For both gas and electricity, the Company reconciles and recovers commodity costs currently in rates to its customers who purchase the commodity.

The Company takes positions in order to mitigate expected price volatility but only to the extent that quantities are based on expectations of delivery. The Company attempts to mitigate its customers’ exposure to price volatility through a program that hedges risks as appropriate. The Company does not speculate on movements in the underlying prices for these commodities. Commodity purchases are based on analyses performed in relation to expected customer deliveries for electricity and natural gas. The volume of commodities covered by hedging contracts does not exceed amounts needed for customer consumption in the normal course of business or to offset adverse price movements in the contracts being hedged.

As part of the 1998 MRA, the Company entered into restated indexed swap contracts with eight IPPs. The company also entered into financial swap agreements associated with the sales of the Huntley, Dunkirk, and Albany generating stations. The costs of these contracts are fully recovered from customers under the Company’s rate plan. See Item 8. Financial Statements and Supplementary Data - Note J. Derivatives and Hedging Activity, for a more detailed discussion of these swap contracts.

The fair value of the liability under the swap contracts is based upon the difference between projected future market prices and projected contract prices applied to the notional quantities and discounted to the present value. This liability was approximately $793.0, and $653.9 at March 31, 2003 and 2002, respectively and is recorded on the Company’s balance sheets as a “Liability for swap contracts.” The increase is primarily due to a lowering of the discount rate plus a revaluation of the contracts indicating higher forecasted contract prices. These increases were somewhat offset by normal contract settlements. The discount rate is a market-based rate representing the yield curve through the life of the contracts. Based upon the PSC’s approval of the restated contracts, including the indexed swap contracts, as part of the MRA and being provided a reasonable opportunity to recover the estimated indexed swap liability from customers, the Company has recorded a corresponding regulatory asset. The amounts of the recorded liability and regulatory asset are sensitive to changes in anticipated future market prices and changes in the indices upon which the indexed swap contract payments are based.

If the indexed contract price were to increase or decrease by 1 percent, the Company would see a $16.4 million increase or decrease in the present value of the projected over-market exposure. If the market prices were to increase or fall by 1 percent, the Company would see a $7.7 million decrease or increase in the projected over-market exposure. If the discount rate were one half percent higher or lower, the net present value of the projected over market exposure would decrease or increase by approximately $9.7 million.

The area of exposure to cash flow is in the indexing of the contract prices for the IPP indexed swaps and the Albany swap (Huntley and Dunkirk have fixed contract prices) and a non-MRA IPP where payments are based on gas prices. The contract payments under the IPP and Albany swaps and the non-MRA IPP are indexed to the costs of fuel, primarily natural gas; Albany can be oil or gas. As fuel costs rise, the payments the Company pays under those contracts increase. The current rate plan allows the pass-through of the commodity cost of power to customers; however, the Company uses certain financial instruments to limit the impact of commodity fluctuations on these payments.

The Company has taken steps to mitigate the potential impact that fuel prices would have on the payments for the IPP and Albany swaps, and a physical power contract with a non-MRA IPP. To limit this exposure, the Company purchased NYMEX gas futures contracts and entered into fixed-for-floating swaps on gas basis costs. To hedge the non-MRA IPP contract, the Company purchased NYMEX gas futures. See Item 8. Financial Statements and Supplementary Data - Note J. Derivatives and Hedging Activity for a more detailed discussion of these contracts.

Even with the regulatory recovery of the cost of these contracts, the Company believes it is prudent to hedge these payments. For the period ended March 31, 2003, gas futures were purchased to hedge approximately 100 percent of the amount needed to offset gas price changes.

At March 31, 2002, the Company did not have any open NYMEX futures or basis swaps for this purpose. At March 31, 2003, the open NYMEX futures the Company had in place to hedge the payments under these contracts had a fair value gain of $14.2 million.

Activity for the fair value of the NYMEX futures and gas basis swaps for the 12 months ended March 31, 2003, is as follows:

(in thousands of dths and dollars)	Hedges of IPP Swaps				Hedges Non-MRA IPP
	NYMEX Futures		Gas Basis Swaps		NYMEX Futures
	Dth	Fair Value	Dth	Fair Value	Dth	Fair Value
March 31, 2002 Asset / (Liability)	-	-	-	-	-	-
New Contracts	58,200.0	-	3,264.3		4,900.0
Settled during period	(37,300.0)	$ (29,732.3)	(3,264.3)	$ (218.5)	(3,200.0)	$ (2,673.0)
Mark-to-market Adjustments	-	42,889.7	-	218.5	-	3,742.7
March 31, 2003 Asset / (Liability)	20,900.0	$ 13,157.4	-	$ -	1,700.0	$ 1,069.7

Gas Supply Price Risk: The cost of natural gas sold to customers fluctuates during the year with prices historically most volatile in the winter months. The Company’s gas rate agreement includes a provision for the collection or pass back of increases or decreases in purchased gas costs. The PSC has also issued a Statement of Policy that the Company attempt to reduce the price volatility in the gas commodity portion of customers’ bills. To implement this policy, the Company uses futures, options, and swaps to hedge against gas price fluctuations. The hedging program will be consistent with the Financial Risk Management Policy.

During the reporting period, the Company attempted to hedge approximately 50 percent of its forecasted annual demand for gas through a program using in-ground storage and financial instruments. The hedging program was further refined to skew the hedging program more heavily toward the winter season (November through March). The Company uses a combination of NYMEX gas futures and a program of combination call and put options. Each NYMEX futures or option contract represents 10,000 Dth of gas. At March 31, 2003 the net open position of cash flow hedges for gas supply was a gain of $1.3 million. There were no open futures contracts or options at March 31, 2002.

The following table details the fair value activity for gas cash flow hedges for the 12 months ended March 31, 2003:

(in thousands of dths and dollars)	Hedges of Gas Supply
	NYMEX Futures		Call Options		Put Options
	Dth	Fair Value	Dth	Fair Value	Dth	Fair Value
March 31, 2002 Asset / (Liability)	-	-	-	-	-	-
New Contracts	10,790.0		12,820.0	$ 2,757.8	12,770.0	$ (2,752.6)
Settled during the period	(9,000.0)	$ (10,038.6)	(9,130.0)	-	(9,080.0)	-
Mark-to-market Adjustments		10,894.6		(1,486.5)		1,886.3
March 31, 2003 Asset / (Liability)	1,790.0	$ 856.0	3,690.0	$ 1,271.3	3,690.0	$ (866.3)

The above activity coupled with the in-ground storage hedged approximately 50 percent of the Company’s gas needs for the year. The rest of the gas needs are met through market-based purchases that are subject to price fluctuations. All prudently incurred gas supply costs are mitigated by regulatory rate recovery.

The extent to which market price movement would affect the value of the hedges would be matched by an offsetting change in the anticipated gas purchased costs for the quantity of gas hedged. Therefore, for the quantities hedged, variations in market costs would not result in any significant impact on earnings.

Electricity Price Risk: The Company meets the majority of its electric requirements through a series of long-term physical and financial contracts. There are occasions when the Company may project a short position for electricity needed to supply customers. During those periods electricity is purchased at market prices. If certain proscribed risk values are exceeded during a time when the company forecasts a short power situation, the Company may use electric swaps to lock in a price for electricity. The Company did not use electric swaps during the year ended March 31, 2003. In April 2003, the Company began utilizing NYMEX electric swap contracts to hedge electric purchases for the summer 2003. The Company continues to evaluate the use of hedging instruments to manage the cost of electricity purchased.

Equity Price Risk. With the sale of the nuclear generating stations on November 7, 2001 and the associated transfer of all decommissioning trust fund assets to the new owners, the Company eliminated its equity price risk in decommissioning funds.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

A. FINANCIAL STATEMENTS

• Reports of Independent Auditors

• Consolidated Statements of Operations, Consolidated Statements of Retained Earnings, and Consolidated Statements of Comprehensive Income (Loss) for the year ended March 31, 2003, the 60 day period ended March 31, 2002, the 30 day period ended January 30, 2002, and for the years ended December 31, 2001 and 2000.

• Consolidated Balance Sheets at March 31, 2003 and 2002

• Consolidated Statements of Cash Flows for the year ended March 31, 2003, the 60 day period ended March 31, 2002, the 30 day period ended January 30, 2002, and the years ended December 31, 2001 and 2000.

• Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT AUDITORS

To the Stockholders and Board of Directors of
Niagara Mohawk Power Corporation:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and retained earnings, of comprehensive income (loss) and of cash flows present fairly, in all material respects, the financial position of Niagara Mohawk Power Corporation and its subsidiaries at March 31, 2003 and 2002, and the results of their operations and their cash flows for the year ended March 31, 2003 and the sixty day period ended March 31, 2002 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.






/s/ PricewaterhouseCoopers LLP     
PricewaterhouseCoopers LLP




Boston, Massachusetts
May 7, 2003, except for the Legal Matters
section of Note I, as to which the date is May 30, 2003

REPORT OF INDEPENDENT AUDITORS

To the Stockholders and Board of Directors of
Niagara Mohawk Power Corporation:

In our opinion, the accompanying consolidated statements of operations and retained earnings, of comprehensive income (loss) and of cash flows present fairly, in all material respects, the results of operations and cash flows of Niagara Mohawk Power Corporation and its subsidiaries for the thirty day period ended January 30, 2002 and for each of the two years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.






/s/ PricewaterhouseCoopers LLP     
PricewaterhouseCoopers LLP



Boston, Massachusetts
May 14, 2002

NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
Consolidated Statements of Operations
(In thousands of dollars)
	For the Year	60 Day Period	30 Day Period	Three Months	For the Year Ended
	Ended March 31,	Ended March	Ended January	Ended March	December 31,
	2003	31, 2002	30, 2002	31, 2001	2001	2000
	(Successor)	(Successor)	(Predecessor)	(Predecessor)	(Predecessor)	(Predecessor)
				(Unaudited)
Operating revenues:
Electric	$ 3,310,837	$ 539,758	$ 282,931	$ 823,566	$ 3,393,212	$ 3,207,447
Gas	708,613	149,947	79,691	356,140	721,501	658,502
	4,019,450	689,705	362,622	1,179,706	4,114,713	3,865,949
Operating expenses:
Electricity purchased	1,594,221	231,721	111,444	291,053	1,304,242	1,144,117
Fuel for electric generation	-	-	-	14,317	37,162	74,340
Gas purchased	393,796	83,477	46,651	249,760	419,324	357,524
Other operation and maintenance	840,367	158,367	116,485	248,196	952,853	888,387
Disallowed nuclear investment costs (Note A)	-	-	-	-	123,000	-
Amortization of stranded costs	149,415	23,533	40,911	91,073	393,136	375,487
Depreciation and amortization	198,253	32,877	16,671	77,768	292,224	311,803
Other taxes	253,207	40,892	20,298	50,403	234,346	283,511
Income taxes	93,277	26,362	4,036	24,368	9,582	(6,201)
	3,522,536	597,229	356,496	1,046,938	3,765,869	3,428,968
Operating income	496,914	92,476	6,126	132,768	348,844	436,981
Other income (deductions)	(1,340)	777	2,349	6,631	72,896	(18,785)
Income before interest charges	495,574	93,253	8,475	139,399	421,740	418,196
Interest:
Interest on long-term debt	318,149	56,567	28,490	97,203	367,291	407,288
Other interest	51,554	6,040	926	8,186	35,091	38,554
	369,703	62,607	29,416	105,389	402,382	445,842
Net income (loss)	$ 125,871	$ 30,646	$ (20,941)	$ 34,010	$ 19,358	$ (27,646)
Consolidated Statements of Retained Earnings
(In thousands of dollars)
	For the Year	60 Day Period	30 Day Period	Three Months	For the Year Ended
	Ended March 31,	Ended March	Ended January	Ended March	December 31,
	2003	31, 2002	30, 2002	31, 2001	2001	2000
	(Successor)	(Successor)	(Predecessor)	(Predecessor)	(Predecessor)	(Predecessor)
				(Unaudited)
Retained earnings at beginning of period	$ 29,317	$ 138,492	$ 167,044	$ 215,696	$ 215,696	$ 320,911
Net income (loss)	125,871	30,646	(20,941)	34,010	19,358	(27,646)
Purchase accounting adjustment	-	(138,492)	-	-	-	-
Call premium on preferred stock	-	(1,329)	-	-	-	-
Dividends on preferred stock	(5,568)	-	(7,611)	(7,758)	(30,850)	(31,437)
Dividend to Niagara Mohawk Holdings, Inc.	(63,914)	-	-	-	(37,160)	(46,132)
Retained earnings at end of period	$ 85,706	$ 29,317	$ 138,492	$ 241,948	$ 167,044	$ 215,696
Consolidated Statements of Comprehensive Income (Loss)
(In thousands of dollars)
	For the Year	60 Day Period	30 Day Period	Three Months
	Ended March 31,	Ended March	Ended January	Ended March	For the year ended December 31,
	2003	31, 2002	30, 2002	31, 2001	2001	2000
	(Successor)	(Successor)	(Predecessor)	(Predecessor)	(Predecessor)	(Predecessor)
				(Unaudited)
Net income(loss)	$ 125,871	$ 30,646	$ (20,941)	$ 34,010	$ 19,358	$ (27,646)
Other comprehensive income(loss):
Unrealized gains (losses) on securities (net of
taxes of $758, $(92), $59, $361, $612,
$343, respectively)	(710)	126	(81)	(671)	(857)	(657)
Hedging activity (net of taxes of $(452), $(1,976),
$(800), ($1,950), $3,790,$-, respectively)	600	2,674	1,084	3,621	(5,127)	-
Additional minimum pension liability	-	-	(23,081)	267	(4,202)	(1,649)
Other comprehensive income (loss)	(110)	2,800	(22,078)	3,217	(10,186)	(2,306)
Comprehensive income(loss)	$ 125,761	$ 33,446	$ (43,019)	$ 37,227	$ 9,172	$ (29,952)

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

NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets
(In thousands of dollars)
					March 31,	March 31,
ASSETS					2003	2002
					(Successor)	(Successor)
Utility plant, at original cost:
	Electric plant				$ 5,091,435	$ 4,938,709
	Gas plant				1,402,215	1,352,258
	Common Plant				351,987	359,429
	Construction work-in-progress				143,949	180,667
			Total utility plant		6,989,586	6,831,063
	Less: Accumulated depreciation and amortization				2,342,757	2,226,493
			Net utility plant		4,646,829	4,604,570
Goodwill					1,225,742	1,230,763
Other property and investments					94,314	95,785
Current assets:
	Cash and cash equivalents				30,038	9,882
	Restricted cash				25,350	8,082
	Accounts receivable (less reserves of $100,200
		and $61,300, respectively, and includes
		receivables from associated companies of
		$227 and $1,129, respectively)			543,207	534,914
	Notes receivable				73	50,050
	Materials and supplies, at average cost:
		Gas storage			4,795	3,335
		Other			16,401	17,484
	Derivative instruments (Note A and J)				16,354	411
	Prepaid taxes				90,770	17,491
	Current deferred income taxes (Note G)				35,458	49,704
	Other				10,483	5,075
			Total current assets		772,929	696,428
Regulatory and other non-current assets:
	Regulatory assets (Note B):
		Merger rate plan stranded costs			3,213,657	3,300,885
		Swap contracts regulatory asset			793,028	653,949
		Regulatory tax asset			143,765	203,905
		Deferred environmental restoration costs			301,000	297,000
		Pension and postretirement benefit plans			713,779	540,786
		Loss on reacquired debt			48,255	40,132
		Other			242,290	189,959
			Total regulatory assets		5,455,774	5,226,616
	Long-term notes receivable				-	199,822
	Other assets				48,171	47,604
			Total regulatory and other non-current assets		5,503,945	5,474,042
				Total assets	$ 12,243,759	$ 12,101,588

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

NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets
(In thousands of dollars)
					March 31,	March 31,
CAPITALIZATION AND LIABILITIES					2003	2002
					(Successor)	(Successor)
Capitalization:
	Common stockholder's equity:
		Common stock ($1 par value)			$ 187,365	$ 187,365
			Authorized - 250,000,000 shares
			Issued and outstanding - 187,364,863 shares
		Additional paid-in capital			2,621,440	2,722,894
		Accumulated other comprehensive income			16	126
		Retained earnings			85,706	29,317
			Total common stockholder's equity		2,894,527	2,939,702
	Preferred equity (Note D):
		Cumulative preferred stock ($100 par value, optionally redeemable)			42,625	44,756
			Authorized - 3,400,000 shares
			Issued and outstanding - 426,248 and 447,555 shares, respectively
		Cumulative preferred stock ($25 par value, optionally redeemable)			55,655	55,655
			Authorized - 19,600,000 shares
			Issued and outstanding - 1,113,100 shares
	Long-term debt (Note E)				3,453,989	4,146,642
	Long-term debt to affiliates (Note E)				500,000	-
			Total capitalization		6,946,796	7,186,755
Current liabilities:
	Accounts payable (including payables to associated companies
		of $34,029 and $8,890, respectively)			375,767	239,677
	Customers' deposits				25,843	18,918
	Accrued interest				108,927	111,515
	Short-term debt to affiliates (Note F)				198,000	419,000
	Current portion of long-term debt (Note E)				611,652	544,647
	Other				111,904	96,099
		Total current liabilities			1,432,093	1,429,856
Other non-current liabilities:
	Accumulated deferred income taxes (Note G)				1,157,796	1,108,232
	Liability for swap contracts (Note A and J)				793,028	653,949
	Employee pension and other benefits (Note H)				884,204	745,393
	Other				728,842	680,403
		Total other non-current liabilities			3,563,870	3,187,977
Commitments and contingencies (Notes B and I):
	Liability for environmental remediation costs				301,000	297,000
				Total capitalization and liabilities	$ 12,243,759	$ 12,101,588

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

NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation: Niagara Mohawk Power Corporation (the “Company”) is subject to regulation by the New York State Public Service Commission (“PSC”) and the Federal Energy Regulatory Commission (“FERC”) with respect to its rates for service under a methodology that establishes prices based on the Company’s cost. The Company’s accounting policies conform to Generally Accepted Accounting Principles (“GAAP”), including the accounting principles for rate-regulated entities with respect to the Company’s transmission, distribution and gas operations (regulated business), and are in accordance with the accounting requirements and ratemaking practices of the regulatory authorities.

The Company’s consolidated financial statements include its accounts as well as those of its wholly owned subsidiaries. Inter-company balances and transactions have been eliminated.

The closing of the merger with National Grid USA (“National Grid”) and the related push down and allocation of the purchase price has had a significant effect on the reported results of the Company. The sale of the Company’s generation assets at various times during 1999 through 2001 has also affected the comparability of the financial statements.

The consolidated statements of cash flows for the Company have been presented to reflect the closings of the sales of the generation assets, such that certain individual line items are net of the effects of the sales.

Acquisition by National Grid: On January 31, 2002, the Company was acquired by National Grid for approximately $3 billion in cash and American Depository Shares in a purchase business combination recorded under the “push-down” method of accounting, resulting in a new basis of accounting for the “successor” period beginning January 31, 2002. Information relating to all “predecessor” periods prior to the acquisition is presented using the Company’s historical basis of accounting. The Company maintains its name and legal existence and remains a wholly owned subsidiary of Niagara Mohawk Holdings Inc. (“Holdings”) and, indirectly, National Grid.

Change of Fiscal Year: The Company changed its fiscal year from a calendar year ending December 31 to a fiscal year ending March 31. The Company made this change in order to align its fiscal year with that of National Grid. The Company’s first new full fiscal year began on April 1, 2002 and ended on March 31, 2003.

Goodwill: The acquisition of the Company was accounted for by the purchase method, the application of which, including the recognition of goodwill, is being recognized on the books of the Company, the most significant subsidiary of Holdings. The merger transaction resulted in approximately $1.2 billion of goodwill. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets”. The Company reviews its goodwill annually for impairment. The Company utilized a discounted cash flow approach incorporating its most recent business plan forecasts in the performance of the annual goodwill impairment test. The result of the annual analysis determined that no adjustment to the goodwill carrying value was required.

Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Utility Plant: The cost of additions to utility plant and replacements of retirement units of property are capitalized. Costs include direct material, labor, overhead and AFDC (see below). Replacement of minor items of utility plant and the cost of current repairs and maintenance are charged to expense. Whenever utility plant is retired, its original cost, together with the cost of removal, less salvage, is charged to accumulated depreciation.

Allowance for Funds Used During Construction (“AFDC”): The Company capitalizes AFDC in amounts equivalent to the cost of funds devoted to plant under construction for its regulated business. AFDC rates are determined in accordance with FERC and PSC regulations. The AFDC rates in effect at March 31, 2003 and 2002 were 1.50 percent and 8.61 percent, respectively. AFDC is segregated into its two components, borrowed funds and other funds, and is reflected in the “Interest charges” and “Other income” sections, respectively, in the Company’s Consolidated Statements of Operations. The amounts of AFDC credits were recorded as follows:

		60 Day Period	30 Day Period	Three Months
	Year Ended	Ended	Ended	Ended	Year Ended
	March 31,	March 31,	January 30,	March 31,	December 31,
	2003	2002	2002	2001	2001	2000
($'s in 000's)	(Successor)	(Successor)	(Predecessor)	(Predecessor)	(Predecessor)
				(Unaudited)
Other income	$ 187	$ 167	$ 136	$ 798	$ 2,296	$ 2,450
Interest charges	384	180	173	906	2,728	3,161

The above amounts include capitalized interest for generation of $0.8 million and $1.7 million for calendar years ending December 31, 2001 and 2000, respectively. There was no capitalized interest for generation in 2003 and 2002.

Depreciation: For accounting and regulatory purposes, the Company’s depreciation is computed on the straight-line basis using the average service lives for all other classes. The Company performs depreciation studies to determine service lives of classes of property and adjusts the depreciation rates when necessary.

The weighted average service life, in years, for each asset category is presented in the table below:

		60 Day Period	30 Day Period	Three Months
	Year Ended	Ended	Ended	Ended
	March 31,	March 31,	January 30,	March 31,		Year Ended December 31,
	2003	2002	2002	2001	2001		2000
	(Successor)	(Successor)	(Predecessor)	(Predecessor)	(Predecessor)		(Predecessor)
Asset Category				(Unaudited)
Electric	34	34	33	34	26		28
Gas	42	41	40	41	43		40
Common	17	16	16	16	17		17

Revenues: The Company bills its customers on a monthly cycle basis at approved tariffs based on energy delivered and a minimum customer service charge. Revenues are determined based on these bills plus an estimate for unbilled energy delivered between the cycle billing date and the end of the accounting period. The unbilled revenues included in accounts receivable at both March 31, 2003 and 2002 was approximately $132 million.

In accordance with the Merger Rate Plan, the Company recognizes changes in accrued unbilled electric revenues in its results of operations. Pursuant to the Company’s 2000 multi-year gas settlement (ending December 2004), changes in accrued unbilled gas revenues are deferred. At March 31, 2003 and 2002, approximately $6 and $13 million, respectively, of unbilled gas revenues remain unrecognized in results of operations. The Company cannot predict when unbilled gas revenues will be allowed to be recognized in results of operations.

On August 29, 2001, the PSC approved certain rate plan changes. The changes allowed for certain commodity-related costs to be passed through to customers beginning September 1, 2001. At the same time, a transmission revenue adjustment mechanism was implemented which reconciles actual and rate forecast transmission revenues for pass-back to or recovery from customers. The commodity adjustment clause and the transmission revenue adjustment mechanism continue to remain in effect under the Merger Rate Plan which became effective upon the closing of the merger on January 31, 2002.

The PSC approved a multi-year gas rate settlement agreement (ending December 2004) on July 19, 2000 that includes a provision for the continuation of a full gas cost collection mechanism, effective August 1, 2000. This gas cost collection mechanism was originally reinstated in an interim agreement that became effective November 1, 1999. Such gas cost collection mechanism continues under the Merger Rate Plan. The Company's gas cost collection mechanism provides for the collection or pass back of increases or decreases in purchased gas costs.

Federal and State Income Taxes: As directed by the PSC, the Company defers any amounts payable pursuant to the alternative minimum tax rules. Deferred investment tax credits are amortized over the useful life of the underlying property. Deferred investment tax credits related to the generation assets that were sold were taken into income in accordance with IRS rules. Regulated federal and state income taxes are recorded under the provisions of SFAS No. 109. Tax returns for Holdings and its U.S. subsidiaries were filed within National Grid’s consolidated federal tax returns for the periods subsequent to the closing of the merger. Under the National Grid intercompany tax allocation agreement, Holdings and its subsidiaries are allocated federal tax liability based on their separate company liabilities with adjustment for tax benefits associated with any National Grid holding company losses not attributable to acquisition indebtedness. Holdings and its New York State business subsidiaries will continue to file a combined New York State tax return.

Service Company Charges: National Grid USA Service Company, Inc., an affiliated service company operating pursuant to the provisions of Section 13 of the Public Utility Holding Company Act of 1935, has furnished services to the Company at the cost of such services since the merger with National Grid. These costs amounted to $62 million and $6 million for the year ended March 31, 2003 and the 60 day period ended March 31, 2002, respectively.

Cash and Cash Equivalents: The Company considers all highly liquid investments, purchased with an original maturity of three months or less, to be cash equivalents.

Derivatives: The Company adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, on January 1, 2001. Upon implementation, the Company designated several financial instruments as derivatives and qualified certain of these instruments as hedges. Those derivative instruments that did not qualify for hedge accounting were the result of regulatory rulings and therefore, the earnings impact of the adoption of SFAS No. 133 was offset by regulatory assets or liabilities as directed by SFAS No. 71. The result was no impact on earnings for the adoption of SFAS No. 133 by the Company. For further discussion of derivatives, see Note J. Derivatives and Hedging Activity.

Sale of Customer Receivables: The Company has established a single-purpose financing subsidiary, NM Receivables LLC (“NMR”), to purchase and resell a financial interest in a pool of the Company customer receivables. See Note I. Commitments and Contingencies for a complete description of the operations of NMR. The Company adopted SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a replacement of Financial Accounting Standards Board (“FASB”) Statement 125” in 2001. The Company’s program for selling its accounts receivable meets the requirements outlined in SFAS No. 140 for recognition and accounting as a sale transaction. As a result, the adoption of this new standard did not have an impact on the reported financial information of the Company.

Comprehensive Income (Loss): Comprehensive income (loss) is the change in the equity of a company, not including those changes that result from shareholder transactions. While the primary component of comprehensive income (loss) is reported net income or loss, the other components of comprehensive income (loss) relate to additional minimum pension liability recognition, deferred gains and losses associated with hedging activity, and unrealized gains and losses associated with certain investments held as available for sale.

Disallowed Nuclear Investment Costs: In 2001, as part of the PSC order approving the sale of the Company’s nuclear assets, the Company wrote-off $123 million of its nuclear investment.

New Accounting Standards: In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations” (“FAS 143”). FAS 143 provides the accounting requirements for retirement obligations associated with tangible long-lived assets. FAS 143 is effective for fiscal years beginning after June 15, 2002. The Company has evaluated the impact of this standard on its financial position and results of operations. Based on this evaluation the Company does not believe it has any asset retirement obligations that would have a significant impact on its results of operations, cash flows, or financial position.

In April 2003 the FASB issued SFAS No. 149 “Amendment of Statement 133 on Derivative Instruments and Hedging activities, an amendment of Statement 133” (“FAS 149”). FAS 149 amends and clarifies financial accounting and reporting for derivative instruments and is effective for contracts entered into after June 30, 2003. The Company does not expect the adoption of this statement to have a material effect on its financial position and results of operations.

In May 2003 the FASB issued SFAS No. 150 “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (“FAS 150”). The Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. FAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company is currently evaluating the impact of FAS 150 on its financial position and results of operations.

Reclassifications: Certain amounts from prior years have been reclassified on the accompanying Consolidated Financial Statements to conform to the 2003 presentation.

NOTE B – RATE AND REGULATORY ISSUES

The Company’s financial statements conform to GAAP, including the accounting principles for rate-regulated entities with respect to its regulated operations. Substantively, SFAS No. 71 “Accounting for the Effects of Certain Types of Regulation” permits a public utility, regulated on a cost-of-service basis, to defer certain costs, which would otherwise be charged to expense, when authorized to do so by the regulator. These deferred costs are known as regulatory assets, which in the case of the Company, are approximately $5.5 billion at March 31, 2003. These regulatory assets are probable of recovery under the Company’s Merger Rate Plan and Gas Multi-Year Rate and Restructuring Agreement. The Company believes that the regulated cash flows to be derived from prices it will charge for electric service in the future, including the Competitive Transition Charges (“CTCs”), and assuming no unforeseen reduction in demand or bypass of the CTC or exit fees, will be sufficient to recover the Merger Rate Plan stranded regulatory assets over the planned amortization period with a return. Under the Merger Rate Plan, the Company’s remaining electric business (electric transmission and distribution business) continues to be rate-regulated on a cost-of-service basis and, accordingly, the Company continues to apply SFAS No. 71 to these businesses. Also, the Company’s Independent Power Producer (“IPP”) contracts, and the Purchase Power Agreements (“PPAs”) entered into in connection with the generation divestiture, continue to be the obligations of the regulated business.

In the event the Company determines, as a result of lower than expected revenues and/or higher than expected costs, that its net regulatory assets are not probable of recovery, it can no longer apply the principles of SFAS No. 71 and would be required to record an after-tax, non-cash charge against income for any remaining unamortized regulatory assets and liabilities. If the Company could no longer apply SFAS No. 71, the resulting charge would be material to the Company’s reported financial condition and results of operations.

Under the Merger Rate Plan, the Company is earning a return on all of its regulatory assets.

Merger Rate Plan Stranded Costs: Under the Merger Rate Plan, a regulatory asset was established that included the costs of the Master Restructuring Agreement (“MRA”), the cost of any additional IPP contract buyouts and the deferred loss on the sale of the Company’s generation assets. The MRA represents the cost to terminate, restate or amend IPP contracts. The Company is also permitted to defer and amortize the cost of any additional IPP contract buyouts. Beginning January 31, 2002, the Merger Rate Plan stranded costs regulatory asset is being amortized unevenly over ten years with larger amounts being amortized in the latter years, consistent with projected recovery through rates.

Regulatory Tax Asset: The regulatory tax asset represents the expected future recovery from ratepayers of the tax consequences of temporary differences between the recorded book bases and the tax bases of assets and liabilities. This amount is primarily timing differences related to depreciation. These amounts are recovered and amortized as the related temporary differences reverse.

Loss on Reacquired Debt: The loss on reacquired debt regulatory asset represents the costs to redeem certain long-term debt securities, which were retired prior to maturity. These amounts are amortized as interest expense ratably over the lives of the related issues in accordance with PSC directives.

Other: Included in the other regulatory asset is the accumulation of numerous miscellaneous regulatory deferrals, income earned on gas rate sharing mechanisms, the incentive earned on the sale of the fossil and hydro generation assets and certain NYISO costs that were deferred for future recovery.

See Notes H, I, and J for a discussion of regulatory asset accounts "Pensions and postretirement benefits", Deferred environmental restoration costs", and "Swap contracts regulatory asset", respectively.

NOTE C – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

	Unrealized			Total
	Gains and	Minimum		Accumulated
(in 000's)	Losses on	Pension		Other
	Available-for-	Liability	Cash Flow	Comprehensive
	Sale Securites	Adjustment	Hedges	Income (Loss)
December 31, 2001	$ (701)	$ (11,818)	$ (5,126)	$ (17,645)
Purchase accounting adjustments	782	34,899	1,368	37,049
Other comprehensive income (loss):
Unrealized gains (losses) on securities,
net of taxes	45			45
Hedging activity, net of taxes			3,758	3,758
Change in minimum pension liability		(23,081)		(23,081)
March 31, 2002	126	-	-	126
Other comprehensive income (loss):
Unrealized gains (losses) on securities,
net of taxes	(710)			(710)
Hedging activity, net of taxes			600	600
March 31, 2003	$ (584)	$ -	$ 600	$ 16

NOTE D – PREFERRED STOCK

The Company has certain issues of non-participating preferred stock, which provide for redemption at the option of the Company, as shown in the table below. From time to time the Company repurchases shares of its preferred stock when it is approached on behalf of its shareholders.

					Redemption price
	Shares		In 000's		per share
	March 31,	March 31,	March 31,	March 31,	(Before adding
Series	2003	2002	2003	2002	accumulated dividends)
Preferred $100 par value:
3.40%	59,960	64,402	$ 5,996	$ 6,440	$103.50
3.60%	138,199	143,018	13,820	14,302	104.85
3.90%	99,817	102,138	9,982	10,214	106.00
4.10%	55,205	60,721	5,520	6,072	102.00
4.85%	37,228	40,355	3,723	4,036	102.00
5.25%	35,839	36,921	3,584	3,692	102.00
Preferred $25 par value:
Adjustable Rate -
Series D	1,113,100	1,113,100	55,655	55,655	50.00 *
			$ 98,280	$ 100,411
* Not redeemable prior to December 31, 2004.

NOTE E – LONG-TERM DEBT

Long-term debt consisted of the following:

$ in 000's
		March 31,	March 31,		March 31,	March 31,
Series	Due	2003	2002	Series	2003	2002
First Mortgage Bonds:				*Promissory Notes:
5 7/8%	2002	$ -	$ 230,000	2015	$ 100,000	$ 100,000
6 7/8%	2003	85,000	85,000	2023	69,800	69,800
7 3/8%	2003	220,000	220,000	2025	75,000	75,000
8%	2004	232,425	232,425	2026	50,000	50,000
6 5/8%	2005	110,000	110,000	2027	25,760	25,760
9 3/4%	2005	137,981	137,981	2027	93,200	93,200
7 3/4%	2006	275,000	275,000	Note Payable to
*6 5/8%	2013	45,600	45,600	National Grid USA	500,000	-
8 1/2%	2023	-	122,020	Other	8,517	20,443
7 7/8%	2024	170,257	170,257	Unamortized discount	(6,020)	(8,615)
*5.15%	2025	75,000	75,000	Total Long-Term Debt	4,565,641	4,691,289
*7.2%	2029	115,705	115,705	Less long-term debt due
Total First Mortgage				within one year	611,652	544,647
Bonds		1,466,968	1,818,988
					$ 3,953,989	$ 4,146,642
Senior Notes:
7 1/4%	2002	-	302,439
7 3/8%	2003	302,439	302,439
5 3/8%	2004	300,000	300,000
7 5/8%	2005	302,439	302,439
8 7/8%	2007	200,000	200,000
7 3/4%	2008	600,000	600,000
8 1/2%	2010	500,000	500,000
Unamortized discount
on 8 1/2% Senior Note		(22,462)	(60,604)
Total Senior Notes		$ 2,182,416	$ 2,446,713

* Tax-exempt pollution control related issues

Several series of First Mortgage Bonds and Promissory Notes were issued to secure a like amount of tax-exempt revenue bonds issued by the New York State Energy Research and Development Authority (“NYSERDA”). Approximately $414 million of such securities bear interest at a daily adjustable interest rate (with an option to convert to other rates, including a fixed interest rate which would require the Company to issue First Mortgage Bonds to secure the debt) which averaged 1.36 percent for the year ended March 31, 2003, 1.12 percent for the three months ended March 31, 2002, 2.50 percent for 2001, and 4.06 percent for 2000 and are supported by bank direct pay letters of credit. Pursuant to agreements between NYSERDA and the Company, proceeds from such issues were used for the purpose of financing the construction of certain pollution control facilities at the Company’s generation facilities or to refund outstanding tax-exempt bonds and notes (see Note F).

On May 1, 2003, the Company completed the restructuring of $414 million of variable rate tax exempt bonds. The bonds are currently in the auction rate mode, which allowed the Company to terminate the $424 million of letter of credit facilities that were in place to provide liquidity support for principal and interest while the bonds were in a variable rate mode.

The aggregate maturities of long-term debt for the five years subsequent to March 31, 2003, excluding capital leases, in millions, are approximately $612, $533, $550, $279 and $200, respectively. The current portion of capital lease obligations is reflected in the other current liabilities line item on the Consolidated Balance Sheet and was approximately $1.0 million and $3.4 million at March 31, 2003 and 2002, respectively. The non-current portion of capital lease obligations is reflected in the other regulatory and other liabilities line item on the Consolidated Balance Sheet and was approximately $6 million and $7 million at March 31, 2003 and 2002, respectively.

At March 31, 2003, the Company's long-term debt had a fair value of approximately $4.4 billion. The fair market value of the Company’s long-term debt was estimated based on the quoted prices for similar issues or on the current rates offered to the Company for debt of the same remaining maturity.

Early Extinguishment of Debt

During the year ended March 31, 2003, the three months ended March 31, 2002, and the year ended December 31, 2000, the Company defeased or redeemed approximately $122 million, $119 million, and $95 million, respectively, in long-term debt prior to its scheduled maturity.

On May 1, 2003, the Company redeemed early $170 million of First Mortgage Bonds. The funds provided for this redemption came from available cash within the National Grid USA Money Pool.

Losses resulting from the early redemption of debt are deferred and amortized as interest expense ratably over the lives of the related issues in accordance with PSC directives (see Note B).

NOTE F – BANK CREDIT ARRANGEMENTS

The Company had short-term debt outstanding of $198 million and $419 million at March 31, 2003 and 2002, respectively, from the inter-company money pool. The Company has regulatory approval from the Securities and Exchange Commission, under the Public Utility Holding Company Act of 1935, to issue up to $1 billion of short-term debt. National Grid USA and certain subsidiaries, including the Company, 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.

The Company had a senior bank facility agreement that provided the Company with $424 million for letters of credit with a three-year term. The letter of credit facility provided credit support for the Company’s adjustable rate pollution control revenue bonds issued through the New York State Energy Research and Development Authority, discussed in Note E. At March 31, 2003, the Company had no loans outstanding under the credit facility. Subsequent to March 31, 2003, the Company converted its daily adjustable rate pollution control revenue bond program to an auction rate mode on May 1, 2003 and terminated the letter of credit facility.

NOTE G – FEDERAL, STATE AND FOREIGN INCOME TAXES

Following is a summary of the components of federal and state income tax and a reconciliation between the amount of federal income tax expense reported in the Consolidated Statements of Income and the computed amount at the statutory tax rate:

		60 Day Period	30 Day Period	Three Months
	Year Ended	Ended	Ended	Ended
	March 31,	March 31,	January 30,	March 31,	Year Ended December 31,
	2003	2002	2002	2001	2001	2000
In thousands of dollars				(Unaudited)
	(Sucessor)	(Sucessor)	(Predecessor)	(Predecessor)	(Predecessor)
Components of federal, state and
foreign income taxes:
Current tax expense (benefit):
Federal	$ (34,908)	$ (1,672)	$ 10,395	$ 6,519	$ 3,637	$ 17,908
State	14,320	(6,698)	357	430	386	468
	(20,588)	(8,370)	10,752	6,949	4,023	18,376
Deferred tax expense (benefit):
Federal	111,157	24,106	(6,194)	11,108	(84,073)	(26,523)
State	(344)	10,098	(780)	(1,109)	1,178	(5,422)
	110,813	34,204	(6,974)	9,999	(82,895)	(31,945)
Total	$ 90,225	$ 25,834	$ 3,778	$ 16,948	$ (78,872)	$ (13,569)
Total income taxes in the consolidated
statements of operations:
Income taxes charged/
(credited) to operations	$ 93,277	$ 26,362	$ 4,036	$ 24,368	$ 9,582	$ (6,201)
Income taxes credited to
"Other Income (deductions)"	(3,052)	(528)	(258)	(7,420)	(88,454)	(7,368)
Total	$ 90,225	$ 25,834	$ 3,778	$ 16,948	$ (78,872)	$ (13,569)

Reconciliation between federal income taxes and the tax computed at prevailing U.S. statutory rate on income before income taxes:

			30 Day Period	Three Months
	Year Ended	60 Day Period	Ended	Ended
	March 31,	March 31,	January 30,	March 31,	Year Ended December 31,
	2003	2002	2002	2001	2001	2000
				(Unaudited)
Computed tax	$ 75,641	$ 19,768	$ (5,883)	$ 17,835	$ (20,830)	$ (14,425)
	(Successor)	(Successor)	(Predecessor)	(Predecessor)	(Predecessor)	(Predecessor)
Increase (reduction) including those attributable to
flow-through of certain tax adjustments:
Depreciation	12,183	3,202	1,493	17,112	18,620	27,366
Cost of removal	(6,730)	(1,139)	(583)	(7,682)	(6,441)	(6,936)
Allowance for funds used
during construction - (a)	642	133	47	(1,527)	(806)	(1,179)
State income taxes	20,174	2,541	1,839	(765)	1,564	(4,954)
Non-deductible Executive
compensation	(9,878)	-	9,878	-	-	-
Accrual to return adjustment	6,934	-	-	-	-	-
Goodwill Adjustments	-	-	(1,953)	-	-	-
Pension settlement amortization	-	-	-	-	-	(758)
Debt premium & mortgage
recording tax	3,196	275	51	661	664	806
Real estate taxes	(9,300)	-	-	-	(414)	(5,860)
Amortization of capital stock	-	-	40	661	548	634
Dividends exclusion - federal
income tax returns	-	(67)	(34)	(486)	(468)	(517)
Provided at other than statutory
rate	(2)	4	(2)	-	(4)	(1,186)
Supplemental Executive
Retirement trust fund	-	-	-	-	-	(446)
Settlement of IRS exams	-	-	-	-	-	(1,852)
Voluntary Early Retirement
Plan	(251)	-	-	-	11,272	-
Allocation Percentage/Annualization	-	-	-	(3,002)	-	-
Subsidiaries		(173)	(96)	(313)	(1,115)	3
Deferred investment tax credit
reversal (b)	(3,029)	(528)	(258)	(7,420)	(86,034)	(6,110)
Other	645	1,818	(761)	1,874	4,572	1,845
	14,584	6,066	9,661	(887)	(58,042)	856
Federal income taxes	$ 90,225	$ 25,834	$ 3,778	$ 16,948	$ (78,872)	$ (13,569)

(a) Includes Carrying Charges (Interest Expense) imposed by the PSC.

(b) Deferred investment tax credits of $79.7 million and $0.8 million related to the generation assets that have been sold have been taken into income in 2001 and 2000, respectively, in accordance with IRS rules.
The deferred tax liabilities (assets) were comprised of the following:

In thousands of dollars	March 31,	March 31,
	2003	2002
	(Successor)	(Successor)
Alternative minimum tax	$ 81,639	$ 96,481
Unbilled revenues	16,890	23,052
Non-utilized NOL carryforward	554,821	607,292
Liability for environmental costs	131,750	126,225
Voluntary early retirement program	199,980	249,150
Other	341,850	286,657
Total deferred tax assets	1,326,930	1,388,857
Depreciation related	(857,711)	(810,180)
Investment tax credit related	(46,075)	(49,115)
Deferred environmental restoration costs	(131,750)	(126,225)
Merger rate plan stranded costs	(1,158,204)	(1,169,525)
Merger fair value pension and OPEB adjustment	(163,890)	(188,856)
Other	(91,638)	(103,484)
Total deferred tax liabilities	(2,449,268)	(2,447,385)
Net accumulated deferred income
tax liability	$ (1,122,338)	$ (1,058,528)

In December 1998, the Company received a ruling from the IRS which provided that the amount of cash and the value of common stock that was paid by the Company to the subject terminated IPP Parties was deductible in 1998 which resulted in the Company not paying any regular federal income taxes for 1998, and further generated a substantial net operating loss for federal income tax purposes. The Company carried back a portion of the unused NOL to the years 1996 and 1997, and also for the years 1988 through 1990, which resulted in federal income tax refunds of $135 million that were received in January 1999. As a result of the merger with National Grid, the Company is now part of the consolidated tax return filing group of National Grid General Partnership (the parent company, through an intermediary entity, of National Grid). The Company anticipates that the consolidated tax filing group will be able to utilize the remaining NOL carryforward prior to its expiration in 2019. The amount of the NOL carryforward as of March 31, 2003 is $1.568 billion. National Grid’s ability to utilize the NOL carryforward generated as a result of the MRA and the utilization of alternative minimum tax credits is affected by the rules of Section 382 of the Internal Revenue Code.

NOTE H – PENSION AND OTHER RETIREMENT PLANS

The Company has a non-contributory defined benefit pension plan covering substantially all employees. The plan includes a cash balance benefit in which the participant has an account to which amounts are credited based on qualifying compensation and with interest determined annually based on the average annual 30-year Treasury bond yield. Supplemental non-qualified, non-contributory executive retirement programs provide additional defined pension benefits for certain executives. In addition, the Company provides certain contributory health care and life insurance benefits for active and retired employees and dependents.

The changes in benefit obligations, plan assets and plan funded status for these pension and other retirement plans are summarized as follows:

In thousands of dollars	Pension Benefits		Other Retirement Benefits
	March 31,	March 31,	March 31,	March 31,
	2003	2002	2003	2002
Change in benefit obligation:	(Successor)		(Successor)
Benefit obligation at April 1	$ 1,231,149	$ 1,246,620	$ 743,289	$ 651,423
Service cost	24,970	7,752	6,745	2,412
Interest cost	83,493	22,453	55,551	12,599
Benefits paid to participants	(53,049)	(49,100)	(56,753)	(11,402)
Plan amendments	12,150	-	-	15,012
Curtailments	-	-	-	-
Settlements	(172,427)	(79,165)	-	-
Actuarial (gain) loss	173,522	12,915	183,764	64,674
Dispositions	(3,148)
Special Termination Benefits	-	69,674		8,571
Benefit obligation at end of period	1,296,660	1,231,149	932,596	743,289
Change in plan assets:
Fair value of plan assets at April 1	988,535	1,076,277	276,870	268,740
Contributions	97,794	23,404	81,175	-
Net return on plan assets	(120,801)	2,500	(27,296)	8,130
Benefits paid to participants	(53,049)	(49,100)	-	-
Dispositions	(2,459)
Settlements	(172,427)	(64,546)	-	-
Fair value of plan assets at end of period	737,593	988,535	330,749	276,870
Reconciliation of accrued cost at
end of period:
Funded status	(559,067)	(242,614)	(601,847)	(466,419)
Unrecognized prior service cost	12,150	-		-
Unrecognized net (gain) loss	324,931	(9,631)	208,454	(26,729)
Net amount recognized at end of period	$ (221,986)	$ (252,245)	$ (393,393)	$ (493,148)
Amounts recognized on the consolidated
balance sheets consist of:
Employee pension and other benefits liability	$ (490,811)	$ (252,245)	$ (393,393)	$ (493,148)
Intangible asset	12,150
Regulatory asset	256,675
Net amount recognized at end of period	$ (221,986)	$ (252,245)	$ (393,393)	$ (493,148)

The Dispositions noted in the table above relate to the spin-off of the assets and liabilities in conjunction with the sale of NM Energy.

As part of the acquisition by National Grid, the Company made certain change-of-control payments under the supplemental non-qualified executive retirement program and offered a voluntary early retirement program (“VERP”) to selected employees in areas targeted for staffing reductions. These items appear in the tables as Special Termination Benefits.

At the time of the merger with National Grid, the Company revalued its assets and liabilities to their fair value in accordance with purchase accounting. This revaluation resulted in an increase to the Company’s pension and postretirement benefit plan liabilities in the amount of approximately $440 million, with a corresponding offset to a regulatory asset account, which is being amortized ratably over the ten year period beginning January 31, 2002. The costs of the change-of-control payment under the non-qualified plan were charged to expense. The following table sets forth the components and disposition of payments made in the prior period:

(in millions of dollars)
	Charged to Expense	Deferred in Merger Rate Plan Stranded Cost	Totals
Pension benefits	$ 25.7	$ 44.0	$ 69.7
Other post-retirement benefits		8.6	8.6
	$ 25.7	$ 52.6	$ 78.3

For the year ended March 31, 2003, the Company had a net settlement loss of $29.5 million relating to normal lump-sum distributions and the spin-off of the assets and liabilities related to the sale of NM Energy. For the 60 Day Period ended March 31, 2002, the Company had a net settlement gain of $16.7 million related to the sale of its nuclear assets. In 2001, the Company experienced a net curtailment/settlement loss of $31.9 million due to the employee transfers associated with the sale of the nuclear assets and change of control payments under the supplemental executive retirement plan. Of the 2001 loss, $11.2 million is recorded in the deferred loss on the sale of assets, $6.0 million is due from co-tenants for their allocation of the plant ownership and $14.7 million was charged to expense.

The non-qualified executive pension plan has no plan assets due to the nature of the plan and, therefore, has an accumulated benefit obligation in excess of plan assets of $ 9.2 million, $19.6 million and $17.3 million at March 31, 2003, 2002 and December 31, 2001, respectively.

The following table summarizes the components of the net annual benefit costs.

	In thousands of dollars
	Pension Benefits				Other Postretirement Benefits
		60 Day	30 Day			60 Day	30 Day
	Year	Period	Period		Year	Period	Period
	Ended	Ended	Ended		Ended	Ended	Ended
	March 31,	March 31,	January 30,	December 31,	March 31,	March 31,	January 30,	December 31,
	2003	2002	2002	2001	2003	2002	2002	2001
	(Successor)		(Predecessor)		(Successor)		(Predecessor)
Service cost	$ 24,970	$ 4,886	$ 2,866	$ 32,046	$6,745	$1,348	$1,064	$11,265
Interest cost	83,493	14,637	7,816	88,315	55,551	8,806	3,792	41,664
Expected return
on plan assets	(75,613)	(14,751)	(7,567)	(94,247)	(23,642)	(3,458)	(2,071)	(24,436)
Amortization of the
initial obligation	-	-	191	2,240	-	-	908	10,890
Amortization of
gains and losses	5,559	-	(174)	(1,122)	(498)	-	1,332	7,101
Amortization of prior
service costs	-	-	801	8,464	-	-	302	(7,207)
Net benefit cost before
curtailments and
settlements	38,409	4,772	3,933	35,696	38,156	6,696	5,327	39,277
Curtailment (gain) loss	-	-	-	14,063	-	-	-	3,179
Settlement (gain) loss	29,548	(16,726)	-	14,689	-	-	-	-
Special Termination Benefits		44,000	25,674	-	-	8,571	-	-
Net benefit cost (1)	$ 67,957	$ 32,046	$ 29,607	$ 64,448	$ 38,156	$ 15,267	$ 5,327	$ 42,456

(1) A portion of the benefit costs relates to construction labor, and accordingly, is allocated to construction projects.

		Pension Benefits				Other Retirement Benefits
	March 31,		March 31,	December 31,	March 31,		March 31,	December 31,
	2003		2002	2001	2003		2002	2001
Weighted average assumptions
Discount rate	6.25%		7.50%	7.25%	6.25%		7.50%	7.25%
Expected return on plan assets	8.50		8.75	9.50	8.50		8.50	9.25
Rate of compensation increase
(plus merit increases)	3.25		3.25	2.50	N/A		N/A	N/A
Health care cost trend rate:
2002	N/A		N/A	N/A	N/A		10.00	9.00
2003	N/A		N/A	N/A	10.00		9.00	8.00
2004	N/A		N/A	N/A	9.00		8.00	7.00
2005	N/A		N/A	N/A	8.00		7.00	6.00
2006	N/A		N/A	N/A	7.00		6.00	5.00
2007	N/A		N/A	N/A	6.00		5.00	5.00
2008 and Thereafter	N/A		N/A	N/A	5.00		5.00	5.00

The assumed health cost trend rates decline to five percent in 2008 and remain at that level thereafter. The assumed health cost trend rates can have a significant effect on the amounts reported for the health care plans.

A one-percentage-point change in assumed health care cost trend rates would have the following effects:

	1% Increase	1% Decrease
	(in thousands of dollars)
Effect on total of service and interest
cost components of net periodic
postretirement health care benefit cost	$ 6,894	$ (6,140)
Effect on the health care component of
the accumulated postretirement
benefit obligation	$ 91,180	$ (82,943)

Regulatory treatment of pensions and postretirement benefit plans: In addition to the regulatory assets established in connection with purchase accounting and the additional minimum pension liability discussed above, the regulatory asset account “Pension and postretirement benefit plans” includes certain other components. First, the Company is required under the Merger Rate Plan to defer the difference between pension and postretirement benefit expense and the allowance in rates for these costs. Also, the regulatory asset account includes the $52 million cost of the VERP discussed above, and a postretirement benefit phase-in deferral established in the mid-1990’s. The VERP is being amortized unevenly over the 10 years of the Merger Rate Plan with larger amounts being amortized in the earlier years. VERP amortization in fiscal 2003 was approximately $17 million. The phase-in deferral is being amortized at a rate of approximately $3 million per year.

Additional Minimum Pension Liability: Statement of Financial Accounting Standards No. 87 “Employers’ Accounting for Pensions” states that if a pension plan's accumulated benefit obligation (“ABO”) exceeds the fair value of plan assets, the employer shall recognize in the statement of financial position a liability that is at least equal to the unfunded ABO with an offsetting charge to other comprehensive income. Due to the severe downturn in the capital markets, the Company's ABO at March 31, 2003 is greater than the fair value of plan assets.  As such, the Company has recognized an additional minimum pension liability of $269 million on its balance sheet reflecting this underfunded pension obligation.  The Company would normally record a charge to other comprehensive income as an offset to this entry. However, due to the nature of its rate plan the Company has not charged other comprehensive income but has instead recorded a regulatory asset. If in the future, capital markets recover such that the fair value of plan assets is once again greater than the ABO, the additional minimum pension liability will be removed from the Company's balance sheets.

Defined Contribution Pension Plan: The Company also has a defined contribution pension plan (employee savings fund plan) that covers substantially all employees. Employer matching contributions of $8.0 million, $2.2 million and $10.0 million were expensed for the twelve months ended March 31, 2003, the three months ended March 31, 2002, and the year ended December 31, 2001 respectively.

Postemployment Benefits: The Company recognizes the obligation to provide post-employment benefits if the obligation is attributable to employees’ past services, rights to those benefits are identified in the plan documents, payment is probable and the amount of the benefits can be reasonably estimated. At March 31, 2003 and March 31, 2002, the Company’s post-employment benefit obligation is approximately $33.5 million and $23.3 million, respectively.

NOTE I – COMMITMENTS AND CONTINGENCIES

Commodity Reconciliations: As part of the Company's ongoing reconciliation of commodity costs and revenues, the Company has identified several adjustments and included them in filings with the PSC.  Specifically, the Company has requested recovery of $36 million of commodity costs associated with the under-reconciliation of New York Power Authority (“NYPA”) hydropower revenues in its commodity adjustment clause, and is proposing to refund $24 million associated with other revenues that were not included in the commodity adjustment reconciliation. In addition, the Company has filed a modification to its tariff and a proposal to refund an additional $7 million associated with the recovery of other NYPA hydropower costs. These filings are pending before the PSC, and the Company cannot predict the outcome of the filings.

Long-Term Contracts for the Purchase of Electric Power: The Company has several types of long-term contracts for the purchase of electric power. The Company’s commitments under these long-term contracts, as of March 31, 2003, excluding its commitments with New York Power Authority (“NYPA”), which are shown separately, are summarized in the table below. The Company did not enter into any new agreements in fiscal 2003. Following the table are descriptions of the different types of these long-term contracts. For a detailed discussion of the financial swap agreements that the Company has entered into as part of the MRA and the sale of its generation assets (the sale of the Huntley and Dunkirk coal-fired generation plants and the sale of the Albany oil and gas-fired generation plant) which are not included in the table below, see Note J. Derivatives and Hedging Activity.

	(In thousands of dollars)
	Estimated	Estimated		Estimated		Estimated
Fiscal Year	Fixed Costs	Variable Costs		Purchased		Purchased
Ended		Capacity,		Capacity		Energy
March 31,	Capacity	Energy and Taxes **	Total	(in MW)		(in MWh)
2004	$32,286	$516,428	$548,714	3,255		12,006,579
2005	17,397	465,687	483,084	2,033		10,834,411
2006	15,207	382,243	397,450	1,406		8,815,387
2007	15,337	389,079	404,416	1,402		9,403,215
2008	14,836	371,665	386,501	1,385		8,757,187
2009-2017	44,736	1,823,906	1,868,642	674	*	34,165,526

∗ MW value represents the average annual quantity of purchased capacity

∗∗ Does not include puts (see below)


PURPA Contracts
Under the requirements of the Public Utilities Regulatory Policies Act of 1978, as amended (“PURPA”), the Company is required to purchase power generated by IPPs, as defined therein. The Company has 104 PPAs with 112 IPP facilities, amounting to approximately 505 MW of capacity at March 31, 2003. All of this capacity amount is considered firm and excludes PPAs that provide energy only. The table above includes the estimated payments for fixed costs (capacity) and variable costs (capacity, energy and related taxes) that the Company estimates it will be obligated to make under these 104 IPP contracts, excluding the put contracts (see below) and the financial obligation under the swap contracts. The payments to the IPPs are subject to the tested capacity and availability of the facilities, scheduling and price escalation. These payments have been significantly reduced by the consummation of the MRA and additional IPP restructurings made in 1999 and 2000.

Fixed capacity costs (in the table above) relate to three contracts as follows: 1) a contract with an IPP, 2) a contract entered into along with the sale of the Oswego generation assets as discussed further below, and 3) the contract entered into along with the sale of the hydroelectric generation assets as discussed further below. With respect to the IPP contract, the Company is required to make capacity payments, including payments when the facility is not operating but available for service. The terms of this contract allow the Company to schedule energy deliveries and then pay for the energy delivered. Contracts relating to the remaining IPP facilities in service at March 31, 2003 require the Company to pay only when energy is delivered. The Company paid approximately $266 million, $90 million, $321 million, and $416 million in the year ended March 31, 2003, the three months ended March 31, 2002, and the years end December 31, 2001 and 2000 for 2,389,000 MWh, 671,000 MWh, 3,340,000 MWh, and 5,077,000 MWh, respectively, of electric power under all IPP contracts.

Fossil/Hydro Contracts
As part of the sale of the Company’s fossil and hydro generation assets, the Company entered into PPAs with the buyers of these assets for the purchase of capacity and energy. The hydro PPA calls for the purchase of all energy and capacity through September 2004 at prices that approximate forecasted future market prices. The Company anticipates that the energy and capacity to be purchased under the hydro PPA to be at quantities approximating historical generation levels, subject to the effects of water flow availability. The Oswego PPA is primarily a contract for capacity with a nominal amount of energy at prices above forecasted future market prices. The table above includes the estimated payments for variable costs and quantities (capacity and energy) associated with the PPAs that the Company estimates it will make under these contracts. The Company paid approximately $161 million in the year ended March 31, 2003, $33 million in the three months ended March 31, 2002, $109 million in 2001, and $137 million in 2000 for 3,125 MW, 2,769 MW, 2,945 MW, and 1,948 MW of capacity and 2,749,000 MWh, 677,186 MWh, 2,573,000 MWh, and 3,274,000 MWh of electric power, respectively, under these PPAs.

Nuclear Contracts

The table above includes the estimated payments for variable costs and quantities (capacity and energy) associated with the PPAs entered into with the buyers of the nuclear generation assets. As part of the agreement with Constellation to sell its nuclear generation assets, the Company entered into PPAs to purchase 90 percent of the actual hourly nuclear plant output for its percentage interest of the nuclear plants at what are currently believed to be competitive prices for approximately 8 years (Unit 1) and 10 years (Unit 2). The Company pays only for delivered output from the units. Upon the expiration of the PPA for Unit 2, there is a revenue sharing agreement whereby the Company is entitled to future payments from Constellation over a ten-year period if electric energy and capacity market prices exceed certain amounts during the ten-year sharing period. The Company would not be required to buy energy from Constellation, LLC under the revenue sharing agreement. Purchases under the nuclear PPAs began in November 2001. The Company paid approximately $269 million for 7,390,000 MWh of electric power and 985 MW of capacity in the year ended March 31, 2003, $61 million for 1,946,000 MWh of electric power and 1,086 MW of capacity in the three months ended March 31, 2002, and $38 million for 1,266,072 of electric power and 1,086 MW of capacity in 2001. There were no payments in 2000.

Put Contracts
As a part of the MRA, the Company signed agreements with eight of the IPP Parties whereby the IPP Parties have an option to sell the physical delivery of electric power to the Company at market prices. These agreements would have been in effect until the earlier of the NYISO meeting certain volume and capacity conditions for a consecutive six-month period or until June 2008. Although the volume and capacity conditions have not yet been met in all of the contracts, the Company has negotiated to terminate the requirement to purchase electric power from the eight IPP Parties with put agreements. Accordingly, there is no further obligation to purchase electric power under these contracts and information related to such contracts is not included in the table above. The Company did not pay anything in the year ended March 31, 2003 and the three months ended March 31, 2002, but paid approximately $1 million in 2001 and $46 million in 2000 for 13,844 MWh and 898,037 MWh, respectively, of electric power received as part of these put agreements.

While the PPAs for the fossil/hydro asset sales, which were entered into as an integral part of the generation sales, are above market, they are designed to help the Company meet the objectives of rate reduction and price cap commitments as well as meet expected demand as the “provider of last resort” as outlined in the Power Choice agreement.

At March 31, 2003, the Company had long-term contracts to purchase electric power from the following generation facilities owned by NYPA:

	Expiration	Purchased	Estimated	Estimated
	date of	capacity	annual	annual
Facility	contract	in MW	capacity cost	energy cost
Niagara - hydroelectric
project	2007	934	$ 31,596,000	$ 34,250,000
St. Lawrence - hydroelectric
project	2007	104	1,258,000	3,153,000
		1,038	$ 32,854,000	$ 37,403,000

The purchase capacities shown above are based on the contracts currently in effect. The estimated annual capacity costs are subject to price escalation and are exclusive of applicable energy charges. The total cost of purchases under these contracts, plus other miscellaneous NYPA purchases, was approximately, in millions, $134, $35, $141, and $144 for the year ended March 31, 2003, the three months ended March 31, 2002, and the calendar years 2001 and 2000, respectively. The Company continues to have a contract with NYPA’s Fitzpatrick nuclear facility to purchase for resale up to 46 MW of power for NYPA’s economic development customers.

In addition to the contractual commitments described above, the Company entered into a four-year contract, expiring in June 2003, that gives it the option to buy additional power at market prices from the Huntley coal-fired generation plant, now owned by a new owner. If the Company needs any additional energy to meet its load it can purchase the electricity from other IPPs, other utilities, other energy merchants or through the NYISO at market prices.

Gas Supply, Storage and Pipeline Commitments: In connection with its regulated gas business, the Company has long-term commitments with a variety of suppliers and pipelines to purchase gas commodity, provide gas storage capability and transport gas commodity on interstate gas pipelines.

The table below sets forth the Company’s estimated commitments at March 31, 2003, for the next five years, and thereafter.

Fiscal Year	(In thousands of dollars)
Ended		Gas Storage/
March 31,	Gas Supply	Pipeline
2004	$130,820	$61,562
2005	71,030	61,562
2006	71,030	9,314
2007	63,456	5,913
2008	-	5,913
2009-2013	-	22,417

With respect to firm gas supply commitments, the amounts are based upon volumes specified in the contracts giving consideration for the minimum take provisions. Commodity prices are based on New York Mercantile Exchange quotes and reservation charges, when applicable. Storage and pipeline capacity commitments’ amounts are based upon volumes specified in the contracts, and represent demand charges priced at current filed tariffs. At March 31, 2003, the Company’s firm gas supply commitments extend through October 2006, while the gas storage and transportation commitments extend through October 2012.

Sale of Customer Receivables: The Company has established a single-purpose, financing subsidiary, NM Receivables LLC (“NMR”), whose business consists of the purchase and resale of an undivided interest in a designated pool of the Company customer receivables, including accrued unbilled revenues. For receivables sold, the Company has retained collection and administrative responsibilities as agent for the purchaser. As collections reduce previously sold undivided interests, new receivables are customarily sold. NMR has its own separate creditors which, upon liquidation of NMR, will be entitled to be satisfied out of its assets prior to any value becoming available to the Company. The sale of receivables are in fee simple for a reasonably equivalent value and are not secured loans. Some receivables have been contributed in the form of a capital contribution to NMR in fee simple for reasonably equivalent value, and all receivables transferred to NMR are assets owned by NMR in fee simple and are not available to pay the Company’s creditors.

At March 31, 2003 and 2002, receivables of $25 million and $0, respectively, had been sold by NMR to a third party. The undivided interest in the designated pool of receivables is sold with limited recourse. The agreement provides for a formula based loss reserve pursuant to which additional customer receivables are assigned to the purchaser to protect against bad debts.

To the extent actual loss experience of the pool receivables exceeds the loss reserve, the purchaser absorbs the excess. Concentrations of credit risk to the purchaser with respect to accounts receivable are limited due to the Company’s large, diverse customer base within its service territory. The Company generally does not require collateral (i.e. customer deposits).

Environmental Contingencies: The public utility industry typically utilizes and/or generates in its operations a broad range of hazardous and potentially hazardous wastes and by-products. The Company believes it is handling identified wastes and by-products in a manner consistent with federal, state, and local requirements and has implemented an environmental audit program to identify any potential areas of concern and aid in compliance with such requirements. The Company is also currently conducting a program to investigate and remediate, as necessary, to meet current environmental standards, certain properties associated with former gas manufacturing and other properties which the Company has learned may be contaminated with industrial waste, as well as investigating identified industrial waste sites as to which it may be determined that the Company has contributed. The Company has also been advised that various federal, state, or local agencies believe certain properties require investigation and has prioritized the sites based on available information in order to enhance the management of investigation and remediation, if necessary.

The Company is currently aware of 117 sites with which it may be associated, including 60, which are the Company-owned. With respect to non-owned sites, the Company may be required to contribute some proportionate share of remedial costs. Although one party can, as a matter of law, be held liable for all of the remedial costs at a site, regardless of fault, in practice costs are usually allocated among Potentially Responsible Parties (“PRPs”). The Company has denied any responsibility at certain of these PRP sites and is contesting liability accordingly. At non-owned manufactured gas plant sites, the Company may bear full or partial responsibility for remedial costs.

Investigations at each of the Company-owned sites are designed to (1) determine if environmental contamination problems exist; (2) if necessary, determine the appropriate remedial actions; and (3) where appropriate, identify other parties who should bear some or all of the cost of remediation. Legal action against such other parties will be initiated where appropriate. As site investigations are completed, the Company expects to determine site-specific remedial actions and to estimate the attendant costs for restoration. However, since investigations and regulatory reviews are ongoing for most sites, the estimated cost of remedial action is subject to change.

Estimates of the cost of remediation and post-remedial monitoring are based upon a variety of factors, including identified or potential contaminants, location, size and use of the site, proximity to sensitive resources, status of regulatory investigation, and knowledge of activities at similarly situated sites. Actual expenditures are dependent upon the total cost of investigation and remediation and the ultimate determination of the Company’s share of responsibility for such costs, as well as the financial viability of other identified responsible parties since clean-up obligations are joint and several.

As a consequence of site characterizations and assessments completed to date and negotiations with other PRPs or with the appropriate environmental regulatory agency, the Company has accrued a liability in the amount of $301 million, which is reflected in the Company’s Consolidated Balance Sheets at March 31, 2003. The potential high end of the range is presently estimated at approximately $530 million.

The Company determines site liabilities through feasibility studies or engineering estimates, the Company’s estimated share of a PRP allocation, or, where no better estimate is available, the low end of a range of possible outcomes is used. In response to an October 1999 request for information, the Company informed the New York Department of Environmental Conservation (“DEC”) of 24 additional former manufactured gas plant sites that it may be associated with, including three sites that are currently owned by the Company. The Company has executed a voluntary clean-up order with the DEC for the investigation and, as required, the remediation of these additional sites. The Company has included amounts for the investigation and long term monitoring of these sites in the estimated liability. The Company is currently unable to estimate the costs to remediate these additional sites, since they primarily relate to non-owned sites that have been owned and operated by other parties, as well as by some former manufactured gas plant-related predecessor companies of the Company, and because they have not been subjected to site investigations.

The Company has recorded a regulatory asset representing the investigation, remediation and monitoring obligations to be recovered from ratepayers. The Merger Rate Plan provides for the continued application of deferral accounting for variations in spending from amounts provided in rates. As a result, the Company does not believe that site investigation and remediation costs will have a material adverse effect on its results of operations or financial condition.

Nuclear Contingencies: As of March 31, 2003, the Company has a liability of $142 million in other regulatory and other liabilities for the disposal of nuclear fuel irradiated prior to 1983. In January 1983, the Nuclear Waste Policy Act of 1982 (the “Nuclear Waste Act”) established a cost of $.001 per KWh of net generation for current disposal of nuclear fuel and provides for a determination of the Company’s liability to the U.S. Department of Energy (“DOE”) for the disposal of nuclear fuel irradiated prior to 1983. The Nuclear Waste Act also provides three payment options for liquidating such liability and the Company has elected to delay payment, with interest, until the year in which Constellation, who purchased the Company’s nuclear assets, initially plans to ship irradiated fuel to an approved DOE disposal facility. Progress in developing the DOE facility has been slow and it is anticipated that the DOE facility will not be ready to accept deliveries until at least 2010.

Plant Expenditures: The Company’s utility plant expenditures are estimated to be approximately $297 million in fiscal 2004. At March 31, 2003, substantial commitments had been made relative to future planned expenditures.

Legal matters:
Alliance for Municipal Power v. New York State Public Service Commission
On February 17, 2003, the Alliance for Municipal Power (“AMP”) filed with the New York state court a petition for review of decisions by the New York State Public Service Commission (the “PSC”) that maintain the PSC’s established policy of using average distribution rates when calculating the exit fees that may be charged to municipalities that seek to leave the Niagara Mohawk system and establish their own municipal light departments. Changes in the methodology for the calculation of the exit fee are not likely to have a material effect on Niagara Mohawk’s financial statements. However, AMP’s petition for review also challenges the lawfulness of Niagara Mohawk’s collection of exit fees from departing municipalities, regardless of the methodology used to calculate those fees. If the court were to rule that Niagara Mohawk is not authorized to collect exit fees, and if the AMP communities proceeded with their plans to municipalize power, the Company could experience a significant shortfall of revenue. In addition, such a ruling could encourage other municipalities to consider municipalizing. The Company would seek to defer any lost revenue for eventual recovery from its remaining customers pursuant to the terms of its rate plan. Niagara Mohawk believes that it has strong defenses to AMP’s petition and is contesting the petition vigorously.

New York State v. Niagara Mohawk Power Corp. et al.
On January 10, 2002, New York State filed a civil action against the Company and NRG in federal district court in Buffalo, New York, for alleged violations of the federal Clean Air Act and related state environmental laws at the Dunkirk and Huntley power plants, which the Company sold in 1999 to NRG and its affiliates (collectively, “NRG”). The State alleged, among other things, that between 1982 and 1999, the Company modified the two plants 55 times without obtaining proper preconstruction permits and implementing proper pollution equipment controls. The state sought, among other relief, statutory penalties under the Clean Air Act, which could have a maximum value of $25,000 to $27,500 per day per violation.

The Company and NRG moved to dismiss the complaint on statute of limitations and other grounds in 2002, and on March 27, 2003, the court granted the motions in part, holding that the violations of the Clean Air Act prior to November 1996 were barred by the federal five-year statute of limitations, and that related state statutory violations prior to November 1999 were barred by the state three-year statute of limitations. This eliminated the Company’s potential exposure to statutory daily penalties prior to these dates. At the same time, the court preserved the State’s non-regulatory claims against the Company and dismissed NRG from the suit.

On April 25, 2003, the State filed a motion for leave to amend the complaint to assert new claims against both the Company and NRG for unspecified amounts. Among other things, the state is seeking to reassert daily violations of the Clean Air Act going back to 1982, the time period covered by its original complaint. On May 30, 2003, the Company filed papers in opposition to the State’s petition. Oral argument has been scheduled for July 2, 2003.

Prior to the commencement of the enforcement action, on July 13, 2001, the Company filed a declaratory judgment action in New York State court in Syracuse against NRG seeking a ruling that NRG is responsible for the costs of pollution controls and mitigation that might result from the State’s enforcement action. As a result of NRG’s voluntary bankruptcy petition, filed in New York federal court for bankruptcy on May 14, 2003, the Company’s declaratory judgment action is stayed.

Niagara Mohawk Power Corp. v. Huntley Power L.L.C., Dunkirk Power L.L.C. and Oswego Harbor, L.L.C.
The Company is engaged in collections litigation to recover bills for station service rendered to the owners of three power plants (the “Plants”), which the Company sold in 1999 to three affiliates of NRG: Huntley Power L.L.C., Dunkirk Power L.L.C. and Oswego Harbor, L.L.C. (collectively, the “Defendants”). According to the Company’s records, as of March 31, 2003, the Defendants owed the Company approximately $33 million. After suit was filed, the parties agreed to stay the litigation to permit the FERC to try to resolve the dispute.

As noted above, NRG, the parent company to the Defendants, filed a voluntary bankruptcy petition in New York federal court for bankruptcy on May 14, 2003. The Company intends to seek approval from the bankruptcy court to move forward in its FERC proceeding. Any FERC decision would determine the Company’s ability to charge the Defendants for station service electricity post-bankruptcy, but the collection of the outstanding station service bills as of the bankruptcy filing date will be governed by the bankruptcy court proceedings.

NOTE J – DERIVATIVES AND HEDGING ACTIVITY

In the normal course of business, the Company is party to derivative financial instruments (derivatives) including indexed swap contracts, gas futures, call and put options, electricity swaps, and gas basis swaps that are principally used to manage commodity price risk associated with its natural gas and electric operations. These financial exposures are monitored and managed as an integral part of the Company’s overall financial risk-management policy. At the core of the policy is a condition that the Company will engage in risk management activities using commodity and financial markets only when it has a physical market exposure in terms and volumes consistent with its core business. The Company does not issue or intend to hold derivative instruments for speculative trading purposes. The Company adopted effective January 1, 2001, Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. SFAS No. 133 requires derivatives to be reported at fair value as assets and liabilities on the balance sheet.
The Company has eight indexed swap contracts, expiring in June 2008 that resulted from the Master Restructuring Agreement (“MRA”), and three swap contracts, expiring in June and September 2003, from the sale of the Company’s Huntley, Dunkirk and Albany electric generating stations. These derivatives are not designated as hedging instruments and are covered by regulatory rulings that allow the gains and losses to be recorded as regulatory assets or regulatory liabilities. As of March 31, 2003 and 2002, the Company has recorded liabilities of $793.0 million and $653.9 million for these swap contracts, respectively, and has recorded regulatory assets of equal value. The asset and liability will be amortized over the remaining term of the swaps as nominal energy quantities are settled; however, the value of the unsettled contractual quantities will vary based upon market conditions.

At March 31, 2003, Niagara Mohawk projects that it will make the following payments in connection with its swap contracts for the fiscal years 2004 through 2008 and thereafter, subject to changes in market prices and indexing provisions:

	Projected
	Payment
Year Ended	(in thousands
March 31,	of dollars)
2004	$ 191,920
2005	148,073
2006	150,785
2007	141,311
2008	132,503
Thereafter	28,860
	$ 793,452

The Company uses New York Mercantile Exchange (“NYMEX”) gas futures and gas basis swaps to hedge gas commodity components of its indexed swap contracts. There were no open basis swaps at March 31, 2003 or 2002; however basis swaps were used during the fiscal year. For the twelve months ended March 31, 2003 the basis swaps resulted in a decrease to purchased power expense of $0.2 million. At March 31, 2003, the Company recorded a deferred gain on the futures contracts of $17.3 million, offset by the balance sheet item “Derivative Instruments” for $ 14.2 million with the resulting $3.1 having settled through cash for the hedge month of April 2003. At March 31, 2002 there were no open futures contracts. For the twelve months ended March 31, 2003 settlement of NYMEX futures contracts resulted in a decrease to purchased power expense of $29.3 million.

Consistent with the Company’s commodity price risk management strategy, during the reporting periods the Company purchased NYMEX gas futures and used combination call and put options (collars) that meet the requirements for and are designated as cash flow hedging instruments in accordance with SFAS No. 133. There were no open positions in either NYMEX futures or collars at March 31, 2002. For NYMEX futures at March 31, 2003, the Company has recorded a deferred gain of $0.9 million. The deferred gain was offset by the balance sheet item “Derivative Instruments” for $0.9 million with a minimal amount having settled through “Cash” for the hedge month of April 2003. Call options at March 31, 2003 were in an asset position of $1.3 million with $1.1 million deferred in a regulatory liability and $0.2 million deferred in Accumulated Other Comprehensive Income net of deferred taxes. Put options at March 31, 2003 were in a liability position of $0.9 million with $0.9 million deferred in a regulatory asset and a nominal amount deferred in Accumulated Other Comprehensive Income net of deferred taxes. The gains and losses on the derivative that are deferred and reported in accumulated other comprehensive income will be reclassified as earnings in the periods in which earnings are impacted by the variability of the cash flows of the hedged item. For the twelve months ended March 31, 2003, a net decrease of $10.0 million was recorded to gas purchases offset by a corresponding increase in the cost of a comparable amount of gas. The actual amounts to be recorded in earnings are dependent on future changes in the contract values, the majority of these deferred amounts will be reclassified to earnings within the next 12 months. A nominal amount of the hedging instruments extend into April 2004. There were no gains or losses recorded during the year from the discontinuance of gas futures and electricity swap cash flow hedges.

In the twelve months ended March 31, 2002, fixed-for-floating swaps on electricity were utilized and resulted in a credit to purchased power of $0.4 million. None of these instruments were used during the year ended March 31, 2003. There were no open electric swaps at March 31, 2003 or 2002. In April 2003, the Company began utilizing NYMEX electric swap contracts to hedge electric purchases for the summer 2003. The Company continues to evaluate the use of hedging instruments to manage the cost of electricity purchased.

NOTE K – STOCK BASED COMPENSATION

Under Holdings’ stock compensation plans prior to the merger, stock units and stock appreciation rights (“SARs”) were granted to officers, key employees and directors. In addition, Holdings’ plans previously allowed for the grant of stock options to officers. The table below sets forth the activity under Holdings’ stock compensation plans for the years January 1, 2000 through March 31, 2003. On January 31, 2002, the acquisition of Holdings by National Grid was completed.

				Options
				Wtd. Avg.
				Exercise
	SARs*	Units	Options	Price
Outstanding at December 31, 1999	2,852,562	864,994	247,375	$ 17.76
Granted	574,500	647,049	-
Exercised	(44,700)	(478,470)	-
Forfeited	(29,500)	(29,097)	(54,000)	17.94
Outstanding at December 31, 2000	3,352,862	1,004,476	193,375	17.71
Granted	-	662,281	-
Exercised	(190,611)	(336,423)	-
Forfeited	(5,347)	(21,337)	-	-
Outstanding at December 31, 2001	3,156,904	1,308,997	193,375	17.50
Granted	-	-	-
Exercised	(1,438,545)	(1,044,997)	(102,625)
Forfeited	(2,400)	(264,000)	(90,750)	17.50
Outstanding at January 31, 2002	1,715,959	-	-	-
Conversion of Holdings' stock to ADSs	(709,817)
Exercised	(46,257)
Outstanding at March 31, 2002	959,885	-	-	-
Exercised	(207,005)
Outstanding at March 31, 2003	752,880	-	-	-
* Note: The SARs related to Holdings' stock prior to the merger and National Grid Transco
American Depositary Shares subsequent to the merger on January 31, 2002.

The Company's SARs and stock units provided for the acceleration of vesting upon the occurrence of certain events relating to a change in control, merger, sale of assets or liquidation of the Company. On January 31, 2002 outstanding Holdings SARs were converted to National Grid Transco plc (“NGT”) American Depositary Share (“ADS”) SARs. The SARs are payable in cash based on the increase in the ADS price from a specified level. As such, for these awards, compensation expense is recognized based on the value of Holdings’ stock price or NGT’s ADS price over the vesting period of the award. Upon the closing of the merger, the units were paid, and each stock option outstanding was cancelled and entitled the holder to receive an amount in cash.

Included in the Company’s results of operations for year ended March 31, 2003, the three months ended March 31, 2002, and the years ending December 31, 2001 and 2000, is approximately $3 million, $21 million, $12 million, and $11 million, respectively, related to these plans.

Since stock units and SARs are payable in cash, the accounting under APB No. 25 and SFAS No. 123 is the same. Therefore, the pro forma disclosure of information regarding net income, as required by SFAS No. 123, related only to Holdings’ outstanding stock options, the effect of which is immaterial to the financial statements for the 30 day period ended January 30, 2002, and the years ended 2001 and 2000. There were no outstanding stock options subsequent to the closing of the merger.

NOTE L – SEGMENTS

The Company’s reportable segments for the year ended March 31, 2003 are electricity-transmission, electricity-distribution, and gas. The Company is engaged principally in the business of purchase, transmission, and distribution of electricity and the purchase, distribution, sale, and transportation of natural gas in New York State. Certain information regarding the Company’s segments is set forth in the following table. General corporate expenses, property common to the various segments, and depreciation of such common property have been allocated to the segments based on labor or plant, using a percentage derived from total labor or plant dollars charged directly to certain operating expense accounts or certain plant accounts. Corporate assets consist primarily of other property and investments, cash, restricted cash, current deferred income taxes, and unamortized debt expense.

For periods prior to the year ended March 31, 2003, the segment data presented is limited to electricity (in total) and gas. Prior to the Company’s merger with National Grid, the electricity segment was managed as a single operating unit, with a single bundled rate structure. Beginning in fiscal 2003, new mechanisms were put in place to capture the separate financial information, including revenue, for electricity-transmission and electricity-distribution in the Company’s detailed accounting records to facilitate the new management approach. These mechanisms were not in place in prior periods. Additionally, prior to fiscal 2003 the Company was also engaged in the operation of electricity generation, further complicating the development of comparable segment information for the prior periods. As a result, presentation of pre-fiscal 2003 information on a basis fully comparable to the fiscal 2003 reportable segments is not possible, and any attempt to develop additional segment data would require undue time and effort in recalculating comparative amounts.

(Successor - in millions of dollars)
			Electric -	Electric -
			Transmission	Distribution	Gas	Corporate	Total
Year ended March 31, 2003
	Operating revenue		$ 248	$ 3,062	$ 709	$ -	$ 4,019
	Operating income before
		income taxes	85	437	68	-	590
	Depreciation and amortization		35	127	36	-	198
	Amortization of stranded costs		-	149	-	-	149
Goodwill
	Goodwill, at March 31, 2002		$ 304	$ 712	$ 215	$ -	$ 1,231
	Decrease in goodwill		(1)	(3)	(1)	-	(5)
	Goodwill, at March 31, 2003		$ 303	$ 709	$ 214	$ -	$ 1,226
March 31, 2003
	Total assets		$ 1,444	$ 8,780	$ 1,576	$ 444	$ 12,244

(Successor - in millions of dollars)
			Electric	Gas	Corporate	Total
60 Day Period ended March 31, 2002
	Operating revenue		$ 540	$ 150	$ -	$ 690
	Operating income before
		income taxes	95	24	-	119
	Depreciation and amortization		27	6	-	33
	Amortization of Stranded Costs		24	-	-	24
March 31, 2002
	Total assets		$ 10,271	$ 1,422	$ 409	$ 12,102
(Predecessor - in millions of dollars)
			Electric	Gas	Corporate	Total
30 Day Period ended January 30, 2002
	Operating revenue		$ 283	$ 80	$ -	$ 363
	Operating income before
		income taxes	3	7	-	10
	Depreciation and amortization		14	3	-	17
	Amortization of Stranded Costs		41	-	-	41

(Predecessor - in millions of dollars)
			Electric	Gas	Corporate	Total
Three Months Ended March 31, 2001 (Unaudited)
	Operating revenue		$ 824	$ 356	$ -	$ 1,180
	Operating income before
		income taxes	114	43	-	157
	Depreciation and amortization		69	9	-	78
	Amortization of Stranded Costs		91	-	-	91
(Predecessor - in millions of dollars)
			Electric	Gas	Corporate	Total
Year ended December 31, 2001
	Operating revenue		$ 3,393	$ 722	$ -	$ 4,115
	Operating income before
		income taxes	223	135	-	358
	Depreciation and amortization		256	36	-	292
	Amortization of Stranded Costs		393	-	-	393
(Predecessor - in millions of dollars)
			Electric	Gas	Corporate	Total
Year ended December 31, 2000
	Operating revenue		$ 3,207	$ 659	$ -	$ 3,866
	Operating income before
		income taxes	358	73	-	431
	Depreciation and amortization		276	36	-	312
	Amortization of Stranded Costs		375	-	-	375

NOTE M – RESTRICTION ON COMMON DIVIDENDS

The indenture securing the Company’s mortgage debt provides that retained earnings shall be reserved and held unavailable for the payment of dividends on common stock to the extent that expenditures for maintenance and repairs plus provisions for depreciation do not exceed 2.25 percent of depreciable property as defined therein. These provisions have never resulted in a restriction of the Company’s retained earnings.

The Company is limited by the Merger Rate Plan and under FERC and Securities and Exchange Commission (“SEC”) orders with respect to the amount of dividends it can make to Holdings.  The Company is allowed to make dividends in an amount up to the pre-merger retained earnings balance plus any earnings subsequent to the merger, together with other adjustments that are authorized under the Merger Rate Plan and other regulatory orders.

NOTE N – SUBSEQUENT EVENT

In connection with an audit performed by PSC Staff, the Company has reached a settlement with the Staff that resolves all issues associated with its pension and other postretirement benefit obligations for the period prior to the acquisition of the Company by National Grid. The settlement is subject to approval by the full New York State Public Service Commission. Among other things, the settlement covers the funding of the Company’s pension and post-retirement benefit plans. Under the settlement, the Company agreed to provide $100 million of tax-deductible funding by April 30, 2003 (which it funded in March 2003), and an additional $209 million, on a tax-deductible basis, by December 31, 2011. The Company will earn a rate of return of at least 6.60 percent on any portion of the $209 million that it funds before December 31, 2011, plus 80 percent of the amount by which the rate of return on the pension and post-retirement benefit funds exceeds 5.34 percent. This settlement resolves all PSC Staff audit issues related to the pre-acquisition period with the exception of certain gas deferrals and a Staff review of a pending Company compliance filing related to the sale of the Nine Mile Nuclear Station.

NOTE O – QUARTERLY FINANCIAL DATA (UNAUDITED)

Operating revenues, operating income, and net income (loss) by quarter from April 1, 2001 through March 31, 2003 are shown in the following table. The Company believes it has included all adjustments necessary for a fair presentation of the results of operations for the quarters. Due to the seasonal nature of the regulated utility business, the annual amounts are not generated evenly by quarter during the year. The Company’s quarterly results of operations reflect the seasonal nature of its business, with peak electric loads in summer and winter periods. Gas sales peak in the winter.

		In thousands of dollars
				Net
		Operating	Operating	Income
Quarter Ended		Revenues	Income	(Loss)
March 31,	2003(a)	$ 1,186,061	$ 133,586	$ 37,650
	2002(b)	1,052,327	98,602	9,705
December 31,	2002(a)	$ 967,807	$ 122,492	$ 37,551
	2001(c)	982,963	97,596	(1,852)
September 30,	2002(a)	$ 954,339	$ 119,264	$ 22,490
	2001(c)	1,007,839	34,736	11,848
June 30,	2002(a)	$ 911,243	$ 121,572	$ 28,180
	2001(c)	944,205	83,744	(24,648)
(a) Successor
(b) Includes both Successor and Predecessor financial data
(c) Predecessor

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

The Company has nothing to report for this item.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table lists the Company’s executive officers and directors:

Name	Age	Position
William F. Edwards	46	President and Director
John G. Cochrane	45	Chief Financial Officer
Gary R. Jesmain	55	Senior Vice President, Business Services
Clement E. Nadeau	51	Senior Vice President, Operations, and Director
Kwong O. Nuey, Jr.	55	Vice President and Director
Anthony C. Pini	50	Senior Vice President, Customer Service, and Director
Steven W.Tasker	45	Vice President
Lawrence J. Reilly	47	General Counsel of National Grid USA
Joseph T. Ash, Jr.	54	Vice President, Gas Delivery
Edward A. Capomacchio	57	Controller
Michael E. Jesanis	46	Director

Directors are elected at the annual meeting of stockholders and hold office until the next annual meeting or a special meeting in lieu thereof, and until their successors are elected and qualified. All of the directors were elected in 2002. There are no family relationships between any of the directors and executive officers listed in the table. There are no arrangements or understandings between any executive officer and any other person pursuant to which he was selected as an officer.

Mr. Edwards was elected President of the Company and Senior Vice President of National Grid USA effective January 31, 2002. Prior to that, he served as Senior Vice President and Chief Financial Officer of the Company from 1997 to 2002. He served as Senior Vice President and Chief Financial Officer of Niagara Mohawk Holdings, Inc. from 1999 to 2002. He also serves as a director of National Grid USA and Utilities Mutual Insurance Company.

Mr. Cochrane was elected Chief Financial Officer effective August 1, 2002. He has served as National Grid USA’s Chief Financial Officer since January 2001 and Senior Vice President since May 2002 and was Treasurer of National Grid USA (and its predecessor, New England Electric System) and of National Grid USA Service Company from 1998 to 2002. Mr. Cochrane was also Treasurer of Massachusetts Electric Company from 1998 to 2000 and of The Narragansett Electric Company from 1993 to 2000.

Mr. Jesmain has served as Senior Vice President, Business Services, since February 2002. From February 1996 to February 2002 he was Regional Manager, Central Region.

Mr. Nadeau was elected Senior Vice President of the Company effective January 31, 2002. Prior to that, he served as Vice President-Electric Delivery beginning in 1998.

Mr. Nuey was elected Vice President and Chief Information Officer of National Grid USA Service Company effective January 31, 2002. He was the Vice President and Controller of National Grid USA Service Company from 2000 to 2002 and the Vice President and Director of Retail Information Services of the Company from 1997-2000.

Mr. Pini was elected Senior Vice President of the Company effective January 31, 2002. Previously, he was President of NEES Communications, Inc. from 1997 to 2002 and Vice President of Retail Customer Service of National Grid USA subsidiaries from 1993 to 1997.

Mr. Tasker has served as Senior Vice President, Distribution Finance, and Treasurer since February 2002. He was Vice President and Controller from December 1998 to February 2002.

Mr. Reilly has been Secretary and General Counsel of National Grid USA since January 2001. Since 2000 he has been National Grid USA Senior Vice President, and he served as President of Massachusetts Electric Company, The Narragansett Electric Company, Nantucket Electric Company and Granite State Electric Company from 1996 to 2000.

Mr. Ash has served as Vice President, Gas Delivery, since December 1998. From January 1996 to December 1998, he was Vice President, Purchasing and Support Services.

Mr. Capomacchio was appointed Controller of the Company and Vice President and Controller of National Grid USA Service Company in January 2002. He has served as Controller of Massachusetts Electric Company, The Narragansett Electric Company, Nantucket Electric Company and Granite State Electric Company since May 2001. Mr. Capomacchio was Assistant Controller of the Service Company from 1998 to 2002.

Mr. Jesanis has served as National Grid USA’s Executive Vice President and Chief Operating Officer of since January 31, 2001. He served as Senior Vice President and Chief Financial Officer of National Grid USA’s predecessor, New England Electric System, from 1998 to 2000 and was its Treasurer from 1992 to 1998. Mr. Jesanis is also a director of National Grid USA and of Niagara Mohawk Holdings, Inc.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s executive officers and directors, and persons who own more than 10 percent of a registered class of the Company’s equity securities, to file reports with the Securities and Exchange Commission disclosing their ownership of stock in the Company and changes in such ownership. To the Company’s knowledge, based solely on written representations from reporting persons, no such reports were required to be filed during the year ended March 31, 2003.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the compensation paid or accrued for services rendered to Niagara Mohawk in fiscal year 2003, the transition period from January 1, 2002 to March 31, 2002 and the calendar years 2001 and 2000 by the president and the four most highly paid persons who were serving as executive officers on March 31, 2003 (the “Named Executive Officers”).

Name and Principal Position	Year	Annual Compensation (a)			Long-Term Compensation		All Other Compen- sation ($)(d)
		Salary($)	Bonus($)(b)	Other Annual Compen-sation ($)(c)	Awards
					Restricted Stock Award(s) ($)	Securities Underlying Options/ SARs(#)
William F. Edwards President	2003 2002 (e) 2001 2000	399,993 99,665 379,994 331,663	224,396 41,141 222,716 142,816	6,010 0 4,785 0	0 0 354,000 425,938	56,206 0 0 25,000	1,823 3,882,601 600,267 80,699
Anthony C. Pini Senior Vice President Customer Service	2003	225,000	137,925	113,562	0	31,616	642
Clement E. Nadeau Senior Vice President Operations	2003	209,997	149,098	8,882	0	29,508	807
Joseph T. Ash, Jr. Vice President Gas Delivery	2003	193,297	76,932	6,911	0	21,723	895
Steven W. Tasker Senior Vice President Distribution Finance	2003 2002 (e) 2001 2000	179,998 43,599 162,656 160,004	86,399 17,412 64,681 49,087	8,281 1,308 1,994 0	0 0 106,200 130,938	20,234 0 0 7,000	296 95 171,198 46,260

(a)	Includes deferred compensation in category and year earned.
(b)	The bonus figure represents cash bonuses and the fair market value of unrestricted securities of National Grid Transco awarded under an incentive compensation plan and cash bonuses awarded under the all-employees goals program.
(c)	Includes amounts reimbursed for the payment of taxes on certain noncash benefits and contributions to the incentive thrift plan that are not bonus contributions, including related deferred compensation plan match. For Mr. Pini, also includes amounts associated with relocation ($104,161) and a nominal miscellaneous cash award.
(d)	Includes Company contributions to life insurance.
(e)	Information is for the transition period from January 1, 2002 to March 31, 2002.

Option Grants in Last Fiscal Year

The following table shows all stock option grants to the Named Executive Officers during fiscal year 2003.

Individual Grants					Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term
	Number of Securities Underlying Option Granted (#) (a)	Percent of Options Granted to Employees in Fiscal Year (b)	Exercise of Base Price ($/Sh) (c)	Expiration Date	5% ($)	10% ($)
William F. Edwards	56,206	2.7%	$7.117	June 2012	651,587	1,037,544
Anthony C. Pini	31,616	1.5%	$7.117	June 2012	366,519	583,621
Clement E. Nadeau	29,508	1.4%	$7.117	June 2012	342,082	544,708
Joseph T. Ash, Jr.	21,723	1.0%	$7.117	June 2012	251,831	400,999
Steven W. Tasker	20,234	1.0%	$7.117	June 2012	234,570	373,513

(a)	The options are expressed in terms of ordinary shares of National Grid Transco listed on the London Stock Exchange.
(b)	This percentage is in relation to option grants made to all employees of National Grid USA and its subsidiaries.
(c)	The exercise price of $7.117 was converted from 4.815 GBP using a conversion of 1 GBP to $1.478065.

The options vest over time, subject to a performance condition. The options are exercisable only if and to the extent that NGT’s total shareholder return (as defined in the applicable plan) during the three years of the performance period is equal to or better than the median of a specific comparison group. If the performance condition is not met after the three-year period, the National Grid Transco Remuneration Committee may modify the performance condition or methodology on subsequent anniversaries of the performance period, taking into account any factor it deems relevant.

Option/SAR Exercises in Fiscal Year 2003 and Fiscal Year-End Option/SAR Values

The following table sets forth, for the Named Executive Officers, the number of shares for which stock options were exercised in fiscal year 2003, the realized value or spread (the difference between the exercise price and market value on the date of exercise) and the number and unrealized spread of the unexercised options held by each at fiscal year-end.

Name	Options Exercised (#)	Value Realized ($)	Number of Securities Underlying Unexercised Options on March 31, 2003 (#)(a)		Value of Unexercised Options on March 31, 2003 ($)(b)
			Exercisable	Unexercisable	Exercisable	Unexercisable
William F. Edwards	0	0	0	56,206	0	0
Anthony C. Pini	0	0	0	91,108	0	0
Clement E. Nadeau	0	0	0	29,508	0	0
Joseph T. Ash, Jr.	0	0	0	21,723	0	0
Steven W. Tasker	0	0	0	20,234	0	0

(a)	The first of the options were to have vested in March 2003 but did not, as the Company did not meet specified performance conditions.
(b)	At March 31, 2003, the price per ordinary share on the London Stock Exchange was lower than the exercise price for any of the Named Executive Officers’ stock options.

The following table sets forth, for the Named Executive Officers, exercises of SARs in fiscal year 2003, the realized value or spread (the difference between the exercise price and market value on the date of exercise) and the number and unrealized spread of the unexercised options and SARs held by each at fiscal year-end.

Name	SARs Exercised (#)	Value Realized ($)	Number of Securities Underlying Unexercised SARs At Fiscal Year-End (#)		Value of Unexercised SARs At FiscalYear-End ($)(a)
			Exercisable	Unexercisable	Exercisable	Unexercisable
William F. Edwards	0	0	0	0	0	0
Anthony C. Pini	0	0	0	0	0	0
Clement E. Nadeau	5,512	114,668	20,814	0	$175,352	0
Joseph T. Ash, Jr.	0	0	12,312	0	$68,982	0
Steven W. Tasker	1,759	27,212	24,567	0	$239,546	0

(a)
Calculated based on the closing price on March 31, 2003 of National Grid Transco American Depositary Receipts traded on the New York Stock Exchange ($30.75). SAR grants were made under Niagara Mohawk’s Long Term Incentive Plan which was terminated on the merger with National Grid. At that time, outstanding grants of SARs were converted to SARs over NGT American Depositary Shares using a specified exchange ratio.

Pension Plans

Depending on their company origin prior to the merger of the Company with National Grid USA, executives participate in one of two qualified pension plans: the National Grid USA Companies Final Average Pay Pension Plan (“FAPP”) or the Niagara Mohawk Pension Plan (“Basic Plan”). Both FAPP and the Basic Plan are noncontributory, tax-qualified defined benefit plans which provide all employees of the Company with a minimum retirement benefit. Pension benefits are related to compensation, subject to the maximum annual limits noted in the two pension tables below.

Under FAPP, a participant’s retirement benefit is computed using formulas based on percentages of highest average compensation computed over five consecutive years. The compensation covered by FAPP includes salary, bonus and incentive share awards.

Under the Basic Plan, a participant’s retirement benefit is based on one of two formulas depending on age and years of service on July 1, 1998: the cash balance formula, or the highest five-year average compensation. Under the cash balance formula a participant’s retirement benefit grows monthly, according to pay credits (from 4 percent to 8 percent times salary) plus interest credits. A non-represented (management) employee who was at least 45 years of age and had 10 years of service on July 1, 1998 will receive the retirement benefit resulting from the higher of the two formulas.

The Executive Supplemental Retirement Plan (“ESRP”) is a noncontributory, nonqualified defined benefit plan that provides additional retirement benefits to the named executive officers and certain other members of management who are eligible to receive either a FAPP or Basic Plan benefit and whose compensation exceeds legal limits under the applicable plan or who are otherwise selected for participation. Depending on the participant, the ESRP may provide for unreduced benefits payable as early as age 55, may enhance the qualified plan formula, may give credit for more years of service or may award benefits not otherwise payable due to limits on benefits that can be provided under the qualified plan. ESRP participants who formerly participated in the Niagara Mohawk Supplemental Executive Retirement Plan (“Niagara Mohawk SERP”) are entitled to a minimum benefit calculated based on the terms of that plan frozen as of the merger date.

Pension Plan Tables

The following tables show the maximum retirement benefit (adjusted for Social Security, if applicable) an executive officer can earn in aggregate under the applicable qualified plan (FAPP or the Basic Plan) together with the ESRP or the Niagara Mohawk SERP, as applicable. The benefit calculations are made as of March 31, 2003 and assume the officer has selected a straight life annuity commencing at age 65. Annual compensation limits of $200,000 under a tax-qualified plan will reduce the portion payable under the qualified pension plan for some highly compensated officers. The benefits listed are shown without any joint and survivor benefits. If a participant elected a 100 percent joint and survivor benefit at age 65, with a spouse of the same age, the benefit shown in the table would be reduced by approximately 16 percent.

Maximum Pension Benefit – ESRP

Five-Year Average Compensation	Years of Service
	10*	15*	20	25	30	35
$100,000	$18,922	$27,383	$35,844	$44,056	$52,267	$57,228
$150,000	$29,922	$43,383	$56,844	$69,931	$83,017	$91,228
$200,000	$40,922	$59,383	$77,844	$95,806	$113,767	$125,228
$250,000	$51,922	$75,383	$98,844	$121,681	$144,517	$159,228
$300,000	$62,922	$91,383	$119,844	$147,556	$175,267	$193,228
$350,000	$73,922	$107,383	$140,844	$173,431	$206,017	$227,228
$400,000	$84,922	$123,383	$161,844	$199,306	$236,767	$261,228
$450,000	$95,922	$139,383	$182,844	$225,181	$267,517	$295,228
$500,000	$106,922	$155,383	$203,844	$251,056	$298,267	$329,228

Maximum Pension Benefit – Niagara Mohawk SERP

Three-Year Average Annual Salary	Years of Service
	10*	15*	20	25	30	35
$150,000	$ 20,910	$33,615	$ 79,554	$ 79,554	$ 79,554	$ 79,554
250,000	28,160	45,240	139,554	139,554	139,554	139,554
350,000	28,160	45,240	199,554	199,554	199,554	199,554
450,000	28,160	45,240	259,554	259,554	259,554	259,554
550,000	28,160	45,240	319,554	319,554	319,554	319,554
650,000	28,160	45,240	379,554	379,554	379,554	379,554
750,000	28,160	45,240	439,554	439,554	439,554	439,554
850,000	28,160	45,240	499,554	499,554	499,554	499,554
900,000	28,160	45,240	529,554	529,554	529,554	529,554

*Basic Plan benefit only.

For purposes of the pension program, the Named Executive Officers had approximately the following credited years of benefit service as of March 31, 2003: Mr. Edwards, 24 years; Mr. Nadeau, 30 years; Mr. Pini, 24 years; Mr. Ash, 33 years and Mr. Tasker, 15 years. Mr. Edwards received the Niagara Mohawk SERP benefit at the merger with National Grid and is eligible to receive a pension benefit under the ESRP, to be offset by the SERP benefit already received. Mr. Nadeau and Mr. Tasker will receive the higher of the pension benefit paid under the ESRP or that paid under the Niagara Mohawk SERP. Mr. Ash is eligible for the Niagara Mohawk SERP and is not eligible for the ESRP. Mr. Pini is eligible for the ESRP and is not eligible for the Niagara Mohawk SERP.

At retirement, the Named Executive Officers and certain members of management may become eligible for post-retirement health and life insurance benefits determined based on their age and service. The executive may be required to contribute to the cost of benefits, depending on date of hire and total years of service.

Payments on a Change in Control or Termination of Employment

Mr. Edwards has an employment agreement with National Grid USA, which will remain in effect until January 31, 2005. If Mr. Edwards terminates his employment for good reason or National Grid USA terminates his employment without cause, Mr. Edwards will be entitled to a lump sum severance benefit equal to four times his base salary. He will also be entitled to employee benefit plan coverage for medical, prescription drug, dental and hospitalization benefits and payment of premiums for life insurance for the remainder of his life. His coverage under other employee benefit plans will continue for four years. In the event that the severance payments to Mr. Edwards subject him to excise tax on excess parachute payments under the Internal Revenue Code, he would be reimbursed for such excise tax (plus the income tax and excise tax payable on such reimbursement). In the event of a dispute over Mr. Edwards’s rights under the agreement, National Grid USA will pay Mr. Edwards’s reasonable legal fees with respect to the dispute unless Mr. Edwards’s claims are found to be frivolous.

As used in Mr. Edwards’s employment agreement, “good reason” generally means a materially adverse change in duties, reduction in salary or benefits or relocation by more than 50 miles, all as determined by Mr. Edwards in good faith. Termination for “cause” generally arises on willful failure to perform duties, commitment of a felony, gross neglect or willful misconduct resulting in material economic loss to National Grid USA or its subsidiaries, including the Company, or breach of certain confidentiality and non-compete provisions. “Cause” must be determined by a vote of three-fourths of National Grid USA’s Board of Directors after a meeting at which Mr. Edwards and his legal counsel are entitled to be heard.

Messrs. Ash, Nadeau and Tasker have change in control agreements with National Grid USA, which will remain in effect until January 31, 2004. If the officer terminates his employment for good reason or National Grid USA terminates the officer’s employment without cause, the officer will be entitled to a lump sum severance benefit equal to two times the officer’s base salary, plus two years of employee benefit plan coverage. “Good reason” and “cause” are defined in these agreements as they are in Mr. Edwards’s employment agreement.

Under the National Grid USA companies’ executive compensation plan, in the event of a change in control, each Named Executive Officer would receive a cash payment in an amount equal to the average annual bonus percentage for the incentive compensation plan level for the three prior years multiplied by that officer’s annualized base compensation. These payments would be made in lieu of the bonuses under these plans for the year in which the change in control occurs. In addition, provisions in the Retirees Health and Life Insurance Plan prevent changes in benefits adverse to the participants for three years following a change in control. Upon a change in control of National Grid USA, a participant in the deferred compensation plan may elect to receive a full distribution from the participant’s accounts plus the actuarial value of future benefits in relation to the insurance-related benefits under a prior plan, all less 10 percent.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table indicates the number of ordinary shares of National Grid Transco beneficially owned as of June 19, 2003 by: (a) each director of the Company; (b) each of the Named Executive Officers; and (c) all directors and executive officers of the Company as a group. Except as indicated, each such person has sole investment and voting power with respect to the shares shown as being beneficially owned by such person, based on information provided to the Company. Each person listed in this table owns less than one percent of the outstanding equity securities of National Grid Transco. Niagara Mohawk Holdings, Inc. owns all of the common stock of the Company.

Name	Number of Shares Beneficially Owned*
William F. Edwards	24,000
Clement E. Nadeau	24,300
Kwong O. Nuey, Jr.	16,445
Anthony C. Pini	16,705
Steven W.Tasker	12,820
Joseph T. Ash, Jr.	17,845
Michael E. Jesanis	34,925
All directors and officers as a group (11 persons)	229,840

*
This number is expressed in terms of ordinary shares. It includes American Depositary Receipts listed on the New York Stock Exchange, each of which represents five ordinary shares.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

ITEM 14. CONTROLS AND PROCEDURES

The Company has established and maintains disclosure controls and procedures which are designed to provide reasonable assurance that material information relating to the Company, including its consolidated subsidiaries, is made known to management by others within those entities, particularly during the period in which this annual report is being prepared. The Company has established a Disclosure Committee, which is made up of several key management employees and which reports directly to the Chief Financial Officer and Chief Executive Officer. The Disclosure Committee monitors and evaluates these disclosure controls and procedures. The Chief Financial Officer and Chief Executive Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report. Based on this evaluation, it was determined that these disclosure controls and procedures were effective in providing reasonable assurance during the period covered in this annual report. There were no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of the most recent evaluation.


PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Certain documents filed as part of the Form 10-K

(1) INDEX OF FINANCIAL STATEMENTS

• Report of Independent Auditors

• Niagara Mohawk Power Corporation Consolidated Statements of Operations, Consolidated Statements of Retained Earnings, and Consolidated Statements of Comprehensive Income (Loss) for the year ended March 31, 2003, the 60 day period ended March 31, 2002, the 30 day period ended January 30, 2002, and for the years ended December 31, 2001 and 2000.

• Niagara Mohawk Power Corporation Consolidated Balance Sheets at March 31, 2003 and 2002

• Niagara Mohawk Power Corporation Consolidated Statements of Cash Flows for the year ended March 31, 2003, the 60 day period ended March 31, 2002, the 30 day period ended January 30, 2002, and for the years ended December 31, 2001 and 2000

• Notes to Consolidated Financial Statements

(2) The following financial statement schedule of the Company for the year ended March 31, 2003, the quarter ended March 31, 2002, and the years ended December 31, 2001 and 2000 are included:

• Report of Independent Auditors on Financial Statement Schedule

• Consolidated Financial Statement Schedule:

                         II--Valuation and Qualifying Accounts and Reserves -Niagara Mohawk

The Financial Statement Schedule above should be read in conjunction with the Consolidated Financial Statements in Part II, Item 8 (Financial Statements and Supplementary Data).

Schedules other than those mentioned above are omitted because the conditions requiring their filing do not exist or because the required information is given in the financial statements, including the notes thereto.

(3) List of Exhibits:

     See Exhibit Index.

(b) Reports on Form 8-K

The Company did not file any Current Reports on Form 8-K during the last quarter of the fiscal year ended March 31, 2003.

On April 14, 2003, the Company filed a Current Report on Form 8-K containing Item 5.

REPORT OF INDEPENDENT AUDITORS
ON FINANCIAL STATEMENT SCHEDULE

To the Stockholders and Board of Directors of
Niagara Mohawk Power Corporation:


Our audits of the consolidated financial statements of Niagara Mohawk Power Corporation referred to in our report dated May 7, 2003, appearing in this Form 10-K also included an audit of the Financial Statement Schedule listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.




/s/ PricewaterhouseCoopers LLP       
PricewaterhouseCoopers LLP



Boston, Massachusetts
May 7, 2003

NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

(In thousands of dollars)

Column A	Column B	Column C	Column D	Column E
		Additions
	Balance at	Charged to		Balance
	Beginning	Costs and	Deductions	at End
Description	of Period	Expenses	(a)	of Period
Allowance for Doubtful
Accounts -Deducted from
Accounts Receivable in
the Consolidated
Balance Sheets
Year ended March 31, 2003	$ 61,301	$ 92,841	$ 53,919	$ 100,223
60 Days Ended March 31, 2002	57,498	10,503	6,700	61,301
30 Days Ended January 30, 2002	56,008	6,644	5,154	57,498
Year ended December 31, 2001	59,085	64,324	67,401	56,008
Year ended December 31, 2000	59,421	56,642	56,978	59,085

(a) Uncollectible accounts written off net of recoveries.

(In thousands of dollars)

Column A	Column B	Column C		Column D		Column E
		Additions
	Balance at	Charged to				Balance
	Beginning	Costs and				at End
Description	of Period	Expenses		Deductions		of Period (c)
Miscellaneous
Valuation Reserves (b)
Year Ended March 31, 2003	$ 9,435	$ -		$ -		$ 9,435
60 days ended March 31, 2002	9,435		-	-		9,435
30 days ended January 30, 2002	9,435	-		-		9,435
Year Ended December 31, 2001	32,380	194		23,139	(c)	9,435
Year Ended December 31, 2000	31,680	700		-		32,380

(b) The reserve in 2001 and after relates to non-rate base properties. In 1999 and 2000, the reserves related to certain materials and supplies inventory, non-rate base properties and a write-down against an investment.

(c) In 2001, Niagara Mohawk eliminated certain valuation reserves, including certain materials and supplies inventory reserve as a result of the sale of its nuclear assets in November 2001.

SIGNATURES

Pursuant to the Requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The signature of the undersigned company shall be deemed to relate only to matters having reference to such company.

NIAGARA MOHAWK POWER

CORPORATION

By: /s/ William F. Edwards                        

William F. Edwards

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on June 30, 2003 by the following persons on behalf of the registrant in the capacities indicated. The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company.

Signature	Title
/s/ William F. Edwards                              William F. Edwards	President, Chief Executive Officer and Director (Principal Executive Officer)
/s/ John G. Cochrane                                 John G. Cochrane	Chief Financial Officer (Principal Financial Officer)
/s/ Edward A. Capomacchio                               Edward A. Capomacchio	Controller (Principal Accounting Officer)
/s/ Michael E. Jesanis                                Michael E. Jesanis	Director
/s/ Clement E. Nadeau                               Clement E. Nadeau	Director
/s/ Kwong O. Nuey Jr.                               Kwong O. Nuey	Director
/s/ Anthony C. Pini                                     Anthony C. Pini	Director

CERTIFICATIONS

Certification of Principal Executive Officer

I, William F. Edwards, certify that:

1. I have reviewed this annual report on Form 10-K of Niagara Mohawk Power Corporation (the “Report”);

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-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures 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 as of a date within 90 days prior to the filing date of this Report (the “Evaluation Date”); and

c) presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this Report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 30, 2003	/s/ William F. Edwards
	William F. Edwards
	President and Chief Executive Officer

Certification of Principal Financial Officer

I, John G. Cochrane, certify that:

1. I have reviewed this annual report on Form 10-K of Niagara Mohawk Power Corporation (the “Report”);

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-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures 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 as of a date within 90 days prior to the filing date of this Report (the “Evaluation Date”); and

c) presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this Report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: June 30, 2003	/s/ John G. Cochrane
	John G. Cochrane
	Chief Financial Officer

NIAGARA MOHAWK POWER CORPORATION

EXHIBIT INDEX

Each document referred to in this Exhibit Index is incorporated by reference to the files of the Securities and Exchange Commission, unless designated with an asterisk. The cross-reference table below sets forth the registration statements and reports from which the exhibits are incorporated by reference.

Reference	Name
A	Niagara Mohawk Registration Statement No. 2-8214
B	Niagara Mohawk Registration Statement No. 2-8634
C	Central New York Power and Light Corporation Registration Statement No. 2-3414
D	Central New York Power and Light Corporation Registration Statement No. 2-5490
E	Niagara Mohawk Registration Statement No. 2-10501
F	Niagara Mohawk Registration Statement No. 2-12443
G	Niagara Mohawk Registration Statement No. 2-16193
H	Niagara Mohawk Registration Statement No. 2-26918
I	Niagara Mohawk Registration Statement No. 2-59500
J	Niagara Mohawk Registration Statement No. 2-70860
K	Niagara Mohawk Registration Statement No. 33-38093
L	Niagara Mohawk Registration Statement No. 33-47241
M	Niagara Mohawk Registration Statement No. 33-59594
N	Niagara Mohawk Registration Statement No. 33-49541
O	Niagara Mohawk Annual Report on Form 10-K for year ended December 31, 1994
P	Niagara Mohawk Annual Report on Form 10-K for year ended December 31, 1997
Q	Niagara Mohawk Annual Report on Form 10-K for year ended December 31, 1999
R	Niagara Mohawk Quarterly Report on Form 10-Q for quarter ended March 31, 1993
S	Niagara Mohawk Quarterly Report on Form 10-Q for quarter ended September 30, 1993
T	Niagara Mohawk Quarterly Report on Form 10-Q for quarter ended June 30, 1995
U	Niagara Mohawk Quarterly Report on Form 10-Q for quarter ended March 31, 1998
V	Niagara Mohawk Quarterly Report on Form 10-Q for quarter ended June 30, 1998
W	Niagara Mohawk Quarterly Report of Form 10-Q for quarter ended March 31, 1999
X	Niagara Mohawk Quarterly Report on Form 10-Q for quarter ended September 30, 2001
Y	Niagara Mohawk Current Report on Form 8-K dated July 9, 1997
Z	Niagara Mohawk Current Report on Form 8-K dated October 10, 1997
AA	Niagara Mohawk Current Report on Form 8-K dated November 30, 1999
BB	Niagara Mohawk Current Report on Form 8-K dated May 9, 2000
CC	Niagara Mohawk Current Report on Form 8-K dated September 25, 2001

In accordance with Paragraph 4(iii) of Item 601 (b) of Regulation S-K, the Company agrees to furnish to the Securities and Exchange Commission, upon request, a copy of the agreements comprising the $804 million senior bank financing that the Company completed with a bank group on June 1, 2000, and subsequently amended. The total amount of long-term debt authorized under such agreement does not exceed ten percent of the total consolidated assets of the Company and its subsidiaries.

	INCORPORATION BY REFERENCE
EXHIBIT NO.	PREVIOUS FILING	PREVIOUS EXHIBIT DESIGNATION	DESCRIPTION

3(a)(1)
O
3(a)(1)
Certificate of Consolidation of New York Power and Light Corporation, Buffalo Niagara Electric Corporation and Central New York Power Corporation, filed in the office of the New York Secretary of State, January 5, 1950

3(a)(2)
O
3(a)(2)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk, filed in the office of the New York Secretary of State, January 5, 1950

3(a)(3)
O
3(a)(3)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk pursuant to Section 36 of the Stock Corporation Law of New York, filed August 22, 1952, in the office of the New York Secretary of State

3(a)(4)
O
3(a)(4)
Certificate of Niagara Mohawk pursuant to Section 11 of the Stock Corporation Law of New York filed May 5, 1954 in the office of the New York Secretary of State

3(a)(5)
O
3(a)(5)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk pursuant to Section 36 of the Stock Corporation Law of New York, filed January 9, 1957 in the office of the New York Secretary of State

3(a)(6)
O
3(a)(6)
Certificate of Niagara Mohawk pursuant to Section 11 of the Stock Corporation Law of New York, filed May 22, 1957 in the office of the New York Secretary of State

3(a)(7)
O
3(a)(7)
Certificate of Niagara Mohawk pursuant to Section 11 of the Stock Corporation Law of New York, filed February 18, 1958 in the office of the New York Secretary of State

3(a)(8)
O
3(a)(8)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed May 5, 1965 in the office of the New York Secretary of State

3(a)(9)
O
3(a)(9)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed August 24, 1967 in the office of the New York Secretary of State

	INCORPORATION BY REFERENCE
EXHIBIT NO.	PREVIOUS FILING	PREVIOUS EXHIBIT DESIGNATION	DESCRIPTION

3(a)(10)
O
3(a)(10)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed August 19, 1968 in the office of the New York Secretary of State

3(a)(11)
O
3(a)(11)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed September 22, 1969 in the office of the New York Secretary of State

3(a)(12)
O
3(a)(12)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed May 12, 1971 in the office of the New York Secretary of State

3(a)(13)
O
3(a)(13)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed August 18, 1972 in the office of the New York Secretary of State

3(a)(14)
O
3(a)(14)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed June 26, 1973 in the office of the New York Secretary of State

3(a)(15)
O
3(a)(15)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed May 9, 1974 in the office of the New York Secretary of State

3(a)(16)
O
3(a)(16)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed March 12, 1975 in the office of the New York Secretary of State

3(a)(17)
O
3(a)(17)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed May 7, 1975 in the office of the New York Secretary of State

	INCORPORATION BY REFERENCE
EXHIBIT NO.	PREVIOUS FILING	PREVIOUS EXHIBIT DESIGNATION	DESCRIPTION

3(a)(18)
O
3(a)(18)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed August 27, 1975 in the office of the New York Secretary of State

3(a)(19)
O
3(a)(19)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed May 7, 1976 in the office of the New York Secretary of State

3(a)(20)
O
3(a)(20)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed September 28, 1976 in the office of the New York Secretary of State

3(a)(21)
O
3(a)(21)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed January 27, 1978 in the office of the New York Secretary of State

3(a)(22)
O
3(a)(22)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed May 8, 1978 in the office of the New York Secretary of State

3(a)(23)
O
3(a)(23)
Certificate of Correction of the Certificate of Amendment filed May 7, 1976 of the Certificate of Incorporation under Section 105 of the Business Corporation Law of New York, filed July 13, 1978 in the office of the New York Secretary of State

3(a)(24)
O
3(a)(24)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed July 17, 1978 in the office of the New York Secretary of State

3(a)(25)
O
3(a)(25)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed March 3, 1980 in the office of the New York Secretary of State

	INCORPORATION BY REFERENCE
EXHIBIT NO.	PREVIOUS FILING	PREVIOUS EXHIBIT DESIGNATION	DESCRIPTION

3(a)(26)
O
3(a)(26)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed March 31, 1981 in the office of the New York Secretary of State

3(a)(27)
O
3(a)(27)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed March 31, 1981 in the office of the New York Secretary of State

3(a)(28)
O
3(a)(28)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed April 22, 1981 in the office of the New York Secretary of State

3(a)(29)
O
3(a)(29)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed May 8, 1981 in the office of the New York Secretary of State

3(a)(30)
O
3(a)(30)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed April 26, 1982 in the office of the New York Secretary of State

3(a)(31)
O
3(a)(31)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed January 24, 1983 in the office of the New York Secretary of State

3(a)(32)
O
3(a)(32)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed August 3, 1983 in the office of the New York Secretary of State

3(a)(33)
O
3(a)(33)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed December 27, 1983 in the office of the New York Secretary of State

	INCORPORATION BY REFERENCE
EXHIBIT NO.	PREVIOUS FILING	PREVIOUS EXHIBIT DESIGNATION	DESCRIPTION

3(a)(34)
O
3(a)(34)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed December 27, 1983 in the office of the New York Secretary of State

3(a)(35)
O
3(a)(35)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed June 4, 1984 in the office of the New York Secretary of State

3(a)(36)
O
3(a)(36)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed August 29, 1984 in the office of the New York Secretary of State

3(a)(37)
O
3(a)(37)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed April 17, 1985 in the office of the New York Secretary of State

3(a)(38)
O
3(a)(38)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed May 3, 1985 in the office of the New York Secretary of State

3(a)(39)
O
3(a)(39)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed December 24, 1986 in the office of the New York Secretary of State

3(a)(40)
O
3(a)(40)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed June 1, 1987 in the office of the New York Secretary of State

3(a)(41)
O
3(a)(41)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed July 20, 1987 in the office of the New York Secretary of State

	INCORPORATION BY REFERENCE
EXHIBIT NO.	PREVIOUS FILING	PREVIOUS EXHIBIT DESIGNATION	DESCRIPTION

3(a)(42)
O
3(a)(42)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed May 27, 1988 in the office of the New York Secretary of State

3(a)(43)
O
3(a)(43)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed September 27, 1990 in the office of the New York Secretary of State

3(a)(44)
O
3(a)(44)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed October 18, 1991 in the office of the New York Secretary of State

3(a)(45)
O
3(a)(45)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed May 5, 1994 in the office of the New York Secretary of State

3(a)(46)
O
3(a)(46)
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed August 5, 1994 in the office of the New York Secretary of State

3(a)(47)
V
3
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed June 29, 1998 in the office of the New York Secretary of State

3(a)(48)
W
3
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed March 19, 1999 in the office of the New York Secretary of State

3(a)(49)
AA
3.1
Certificate of Amendment of Certificate of Incorporation of Niagara Mohawk under Section 805 of the Business Corporation Law of New York, filed November 29, 1999 in the office of the New York Secretary of State

	INCORPORATION BY REFERENCE
EXHIBIT NO.	PREVIOUS FILING	PREVIOUS EXHIBIT DESIGNATION	DESCRIPTION

3(b)
U
3(i)
By-Laws of Niagara Mohawk, as amended May 17, 1999

4(a)
O
4(b)
Agreement to furnish certain debt instruments

4(b)(1)
C
**
Mortgage Trust Indenture dated as of October 1, 1937 between Niagara Mohawk (formerly CNYP) and Marine Midland Bank, N.A. (formerly named The Marine Midland Trust Company of New York), as Trustee

4(b)(2)
I
2-3
Supplemental Indenture dated as of December 1, 1938, supplemental to Exhibit 4(1)

4(b)(3)
I
2-4
Supplemental Indenture dated as of April 15, 1939, supplemental to Exhibit 4(1)

4(b)(4)
I
2-5
Supplemental Indenture dated as of July 1, 1940, supplemental to Exhibit 4(1)

4(b)(5)
D
7-6
Supplemental Indenture dated as of October 1, 1944, supplemental to Exhibit 4(1)

4(b)(6)
I
2-8
Supplemental Indenture dated as of June 1, 1945, supplemental to Exhibit 4(1)

4(b)(7)
I
2-9
Supplemental Indenture dated as of August 17, 1948, supplemental to Exhibit 4(1)

4(b)(8)
A
7-9
Supplemental Indenture dated as of December 31, 1949, supplemental to Exhibit 4(1)

4(b)(9)
A
7-10
Supplemental Indenture dated as of January 1, 1950, supplemental to Exhibit 4(1)

4(b)(10)
B
7-11
Supplemental Indenture dated as of October 1, 1950, supplemental to Exhibit 4(1)

** Filed October 15, 1937 after effective date of Registration Statement No. 2-3414.

	INCORPORATION BY REFERENCE
EXHIBIT NO.	PREVIOUS FILING	PREVIOUS EXHIBIT DESIGNATION	DESCRIPTION

4(b)(11)
B
7-12
Supplemental Indenture dated as of October 19, 1950, supplemental to Exhibit 4(1)

4(b)(12)
E
4-16
Supplemental Indenture dated as of February 20, 1953, supplemental to Exhibit 4(1)

4(b)(13)
F
4-19
Supplemental Indenture dated as of April 25, 1956, supplemental to Exhibit 4(1)

4(b)(14)
G
2-23
Supplemental Indenture dated as of March 15, 1960, supplemental to Exhibit 4(1)

4(b)(15)
H
4-29
Supplemental Indenture dated as of July 15, 1967, supplemental to Exhibit 4(1)

4(b)(16)
J
4(b)(42)
Supplemental Indenture dated as of March 1, 1978, supplemental to Exhibit 4(1)

4(b)(17)
J
4(b)(46)
Supplemental Indenture dated as of June 15, 1980, supplemental to Exhibit 4(1)

4(b)(18)
K
4(b)(75)
Supplemental Indenture dated as of November 1, 1990, supplemental to Exhibit 4(1)

4(b)(19)
L
4(b)(77)
Supplemental Indenture dated as of October 1, 1991, supplemental to Exhibit 4(1)

4(b)(20)
M
4(b)(79)
Supplemental Indenture dated as of June 1, 1992, supplemental to Exhibit 4(1)

4(b)(21)
M
4(b)(81)
Supplemental Indenture dated as of August 1, 1992, supplemental to Exhibit 4(1)

4(b)(22)
R
4(b)(82)
Supplemental Indenture dated as of April 1, 1993, supplemental to Exhibit 4(1)

4(b)(23)
S
4(b)(83)
Supplemental Indenture dated as of July 1, 1993, supplemental to Exhibit 4(1)

	INCORPORATION BY REFERENCE
EXHIBIT NO.	PREVIOUS FILING	PREVIOUS EXHIBIT DESIGNATION	DESCRIPTION

4(b)(24)
O
4(86)
Supplemental Indenture dated as of July 1, 1994, supplemental to Exhibit 4(1)

4(b)(25)
T
4(87)
Supplemental Indenture dated as of May 1, 1995, supplemental to Exhibit 4(1)

4(b)(26)
N
4(a)(39)
Supplemental Indenture dated as of March 20, 1996, supplemental to Exhibit 4(1)

4(b)(27)
Q
4(b)40
Supplemental Indenture dated as of November 1, 1998, supplemental to Exhibit 4(1)

4(b)(28)
D
7-23
Agreement dated as of August 16, 1940, among CNYP, The Chase National Bank of the City of New York, as Successor Trustee, and The Marine Midland Trust Company of New York, as Trustee

4(c)
N
4(a)(41)
Form of Indenture relating to the Senior Notes dated June 30, 1998

4(d)(1)
BB
1.2
Indenture, dated as of May 12, 2000, between Niagara Mohawk Power Corporation, a New York Corporation, and The Bank of New York, a New York banking corporation, as Trustee

4(d)(2)
BB
1.3
First Supplemental Indenture, dated as of May 12, 2000, between Niagara Mohawk Power Corporation, a New York corporation, and The Bank of New York, a New York banking corporation, as Trustee

4(d)(3)
CC
1.2
Form of Second Supplemental Indenture, between Niagara Mohawk Power Corporation and The Bank of New York, as Trustee

4(e)(1)
*
Supplemental Indenture, dated as of May 1, 2003, between Niagara Mohawk Power Corporation and HSBC Bank USA, as Trustee

4(e)(2)
*
First Supplemental Participation Agreement, dated as of May 1, 2003, between New York State Energy Research and Development Authority and Niagara Mohawk Power Corporation relating to $100,000,000 Pollution Control Revenue Bonds, 1985 Series A

4(e)(3)
*
First Supplemental Participation Agreement, dated as of May 1, 2003, between New York State Energy Research and Development Authority and Niagara Mohawk Power Corporation relating to $37,500,000 Pollution Control Revenue Bonds, 1985 Series B

4(e)(4)
*
First Supplemental Participation Agreement, dated as of May 1, 2003, between New York State Energy Research and Development Authority and Niagara Mohawk Power Corporation relating to $37,500,000 Pollution Control Revenue Bonds, 1985 Series C

4(e)(5)
*
First Supplemental Participation Agreement, dated as of May 1, 2003, between New York State Energy Research and Development Authority and Niagara Mohawk Power Corporation relating to $50,000,000 Pollution Control Revenue Bonds, 1986 Series A

4(e)(6)
*
Second Supplemental Participation Agreement, dated as of May 1, 2003, between New York State Energy Research and Development Authority and Niagara Mohawk Power Corporation relating to $25,760,000 Pollution Control Revenue Bonds, 1987 Series A

4(e)(7)
*
Second Supplemental Participation Agreement, dated as of May 1, 2003, between New York State Energy Research and Development Authority and Niagara Mohawk Power Corporation relating to $93,200,000 Pollution Control Revenue Bonds, 1987 Series B

4(e)(8)
*
Second Supplemental Participation Agreement, dated as of May 1, 2003, between New York State Energy Research and Development Authority and Niagara Mohawk Power Corporation relating to $69,800,000 Pollution Control Revenue Bonds, 1988 Series A

10(a)
Y
10.28
Master Restructuring Agreement dated July 9, 1997 among Niagara Mohawk and the 16 independent power producers signatory thereto

10(b)
Z
99-9
Power Choice settlement filed with the PSC on October 10, 1997

	INCORPORATION BY REFERENCE
EXHIBIT NO.	PREVIOUS FILING	PREVIOUS EXHIBIT DESIGNATION	DESCRIPTION

10(c)
P
10-13
PSC Opinion and Order regarding approval of the Power Choice settlement agreement with PSC, issued and effective March 20, 1998

10(d)
U
10(c)
Amendments to the Master Restructuring Agreement

10(e)
Q
10-14
Independent System Operator Agreement dated December 2, 1999

10(f)
Q
10-15
Agreement between New York Independent System Operator and Transmission Owners dated December 2, 1999

10(g)
X
10-9
PSC Opinion and Order regarding approval of the sale of Nine Mile Point Nuclear Station Units No. 1 and No. 2

10(h)
X
10-10
Merger Rate Agreement reached among Niagara Mohawk, the PSC staff and other parties, filed with the PSC on October 11, 2001

21
*
Subsidiaries of the Registrant

99.1
*
Certification of CEO under Section 906 of the Sarbanes-Oxley Act of 2002

99.2
*
Certification of CFO under Section 906 of the Sarbanes-Oxley Act of 2002

* Filed herewith.

EX-4 3 exh4e1.htm

Executed in 52 Counterparts of which this is Counterpart No. _____.

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

NIAGARA MOHAWK POWER CORPORATION

to

HSBC Bank USA, as Trustee

_____________

SUPPLEMENTAL INDENTURE

Dated as of May 1, 2003

Providing for the exchange of instruments relating to the following so as to evidence the extension of the due date thereof and change in interest rate provisions thereof: Bonds of the Eighty-third Series, Bonds of the Eighty-fourth Series, and Bonds of the Eighty-fifth Series, splitting the Eighty-third Series into three series and redesignating two of such series as the Eighty-ninth and Ninetieth Series and exchanging Bonds of the Eighty-third Series for an equivalent principal amount of Bonds of the Eighty-third Series, Bonds of the Eighty-ninth Series and Bonds of the Ninetieth Series, splitting the Eighty-fourth Series into four series and redesignating three of such series as the Ninety-first Series, the Ninety-second Series and the Ninety-third Series and exchanging Bonds of the Eighty-fourth Series for an equivalent principal amount of Bonds of the Eighty-fourth Series, the Ninety-first Series, the Ninety-second Series and the Ninety-third Series and providing for the corresponding amendment and restatement of the Supplemental Indentures dated as of March 20, 1996 and June 1, 2000.

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

SUPPLEMENTAL INDENTURE, dated as of May 1, 2003, made by and between NIAGARA MOHAWK POWER CORPORATION, a corporation duly organized and existing under the laws of the State of New York, having its principal place of business (residence) at No. 300 Erie Boulevard West, Syracuse, New York (hereinafter sometimes referred to as the "Company"), party of the first part, and HSBC Bank USA (successor to Bankers Trust Company, in turn, successor to Marine Midland Bank, N.A., a national banking association and, in turn, successor to Marine Midland Bank, a corporation duly organized and existing under the laws of the State of New York, formerly named The Marine Midland Trust Company of New York, Marine Midland Grace Trust Company of New York and Marine Midland Bank – New York), a banking association duly organized and existing under the laws of the State of New York, having its principal corporate trust office at 452 Fifth Avenue, New York, New York (hereinafter sometimes referred to as the "Trustee"), as Trustee under the Mortgage Trust Indenture hereinafter mentioned, party of the second part.

WHEREAS, the Company (formerly Central New York Power Corporation) has heretofore executed and delivered to the Trustee its Mortgage Trust Indenture dated as of October 1, 1937 (hereinafter referred to as the "Original Indenture") and indentures supplemental thereto dated as of December 1, 1938, as of April 15, 1939, as of July 1, 1940, as of January 1, 1942, as of October 1, 1944, as of June 1, 1945, as of November 29, 1946, as of August 17, 1948, as of December 31, 1949, as of January 1, 1950, as of October 1, 1950, as of October 19, 1950, as of December 1, 1951, as of February 1, 1953, as of February 20, 1953, as of October 1, 1953, as of August 1, 1954, as of April 25, 1956, as of May 1, 1956, as of September 1, 1957, as of June 1, 1958, as of March 15, 1960, as of October 1, 1960, as of November 1, 1961, as of December 1, 1964, as of October 1, 1966, as of July 15, 1967, as of August 1, 1967, as of August 1, 1968, as of December 1, 1969, as of February 1, 1971, as of February 1, 1972, as of August 1, 1972, as of December 1, 1973, as of October 1, 1974, as of March 1, 1975, as of August 1, 1975, as of March 15, 1977, as of August 1, 1977, as of December 1, 1977, as of March 1, 1978, as of December 1, 1978, as of September 1, 1979, as of October 1, 1979, as of June 15, 1980, as of September 1, 1980, as of March 1, 1981, as of August 1, 1981, as of March 1, 1982, as of October 1, 1982, as of June 1, 1982, as of August 1, 1982, as of November 1, 1982, as of March 1, 1983, as of May 1, 1983, as of June 1, 1983, as of March 1, 1984, as of May 1, 1984, as of July 1, 1984, as of October 1, 1984, as of January 1, 1985, as of February 1, 1985, as of February 15, 1985, as of November 1, 1985, as of June 1, 1986, as of August 1, 1986, as of October 1, 1986, as of November 1, 1986, as of July 1, 1987, as of May 1, 1988, as of February 1, 1989, as of April 1, 1989, as of October 1, 1989, as of June 1, 1990, as of November 1, 1990, as of March 1, 1991, as of October 1, 1991, as of April 1, 1992, as of June 1, 1992, as of July 1, 1992, as of August 1, 1992, as of April 1, 1993, as of July 1, 1993, as of September 1, 1993, as of March 1, 1994, as of July 1, 1994, as of May 1, 1995, as of March 20, 1996, as of June 30, 1998 and as of June 1, 2000 (said Original Indenture, together with all instruments stated to be supplemental thereto to which the Trustee has heretofore been or shall hereafter be a party, including said enumerated Supplemental Indentures and this Supplemental Indenture, being herein referred to as the "Indenture"); capitalized terms used herein and not otherwise defined herein are used as defined in the Indenture; and

WHEREAS, the Indenture provides in Section 1 of Article Twelfth thereof that without any action or consent by, or notice to, the holders of any of the Bonds, the Company and the Trustee, from time to time and at any time, may enter into such indentures supplemental to the Original Indenture as shall be by them deemed necessary or desirable for the purpose of establishing the form, term, provisions and conditions of a particular series of Bonds, and of providing the terms and conditions of redemption of Bonds of such series, or for a retirement fund or other fund for such series, or for any other purpose not inconsistent with the terms of the Indenture and which shall not impair the security of the same; and

WHEREAS, the Indenture provides in Section 2 of Article Twelfth thereof that in addition to the power and authority given under Section 1 of Article Twelfth, any of the provisions of the Indenture may be amended, repealed or modified in the manner provided in such Section 2, provided, that no such amendment, repeal or modification shall alter or impair the obligation of the Company, which is absolute and unconditional to pay the principal and interest of any Bond outstanding under the Indenture at the time and place and at the rate prescribed therein without notice to and the consent of the holder of such Bond; and

WHEREAS, the Indenture provides in paragraph E of Section 2 of Article Twelfth thereof that, provided the holders of at least 66 2/3 per cent in aggregate principal amount of the outstanding Bonds affected by the alteration shall have consented to and approved the execution of any such supplemental indenture, no holder of any Bond shall thereafter have any right or interest to object to any of the terms or provisions therein contained, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the Company from executing the same or from taking any action pursuant to the provisions thereof; and

WHEREAS, the Indenture provides in Section 7 of Article Fourth thereof that, so long as the Company shall not be in default with respect to the performance or observance of any covenant or agreement contained in the Indenture, the Company may from time to time sign, seal and deliver to the Trustee and the Trustee, subject to the provisions of such Section 7, shall authenticate and deliver to or upon the order of the Company additional Bonds secured by the Indenture in exchange for outstanding Bonds of a like aggregate principal amount, subject to the terms and conditions set forth in such Section 7; and

WHEREAS, the New York State Energy Research and Development Authority ("NYSERDA") has heretofore issued:

(i) Pollution Control Revenue Bonds (Niagara Mohawk Power Corporation Project) due July 1, 2015, 1985 Series A (the "Prior Series 1985A NYSERDA Bonds"), pursuant to an Indenture of Trust dated as of August 15, 1985, as amended (the "Prior Series 1985A NYSERDA Indenture"), between NYSERDA and The Bank of New York (successor to Irving Trust Company), as trustee (in such capacity, the "Prior Series 1985A NYSERDA Trustee");

(ii) Pollution Control Refunding Revenue Bonds (Niagara Mohawk Power Corporation Project) due December 1, 2025, 1985 Series B (the "Prior Series 1985B NYSERDA Bonds"), pursuant to an Indenture of Trust dated as of December 1, 1985 (the "Prior Series 1985B NYSERDA Indenture"), between NYSERDA and The Bank of New York (successor to Irving Trust Company), as trustee (in such capacity, the "Prior Series 1985B NYSERDA Trustee");

(iii) Pollution Control Refunding Revenue Bonds (Niagara Mohawk Power Corporation Project) due December 1, 2025, 1985 Series C (the "Prior Series 1985C NYSERDA Bonds"), pursuant to an Indenture of Trust dated as of December 1, 1985 (the "Prior Series 1985C NYSERDA Indenture"), between NYSERDA and The Bank of New York (successor to Irving Trust Company), as trustee (in such capacity, the "Prior Series 1985C NYSERDA Trustee");

(iv) Pollution Control Revenue Bonds (Niagara Mohawk Power Corporation Project) due December 1, 2026, 1986 Series A (the "Prior Series 1986A NYSERDA Bonds"), pursuant to an Indenture of Trust dated as of December 1, 1986, as amended (the "Prior Series 1986A NYSERDA Indenture"), between NYSERDA and The Bank of New York (successor to Irving Trust Company), as trustee (in such capacity, the "Prior Series 1986A NYSERDA Trustee");

(v) Pollution Control Flexible Rate Refunding Revenue Bonds (Niagara Mohawk Power Corporation Project ) due March 1, 2027, 1987 Series A, as amended (the "Prior Series 1987A NYSERDA Bonds"), pursuant to an Indenture of Trust dated as of March 1, 1987 (the "Prior Series 1987A NYSERDA Indenture"), between NYSERDA and The Bank of New York (successor to Irving Trust Company), as trustee (in such capacity, the "Prior Series 1987A NYSERDA Trustee");

(vi) Pollution Control Flexible Rate Revenue Bonds (Niagara Mohawk Power Corporation Project) due July 1, 2027, 1987 Series B (the "Prior Series 1987B NYSERDA Bonds"), pursuant to an Indenture of Trust dated as of July 1, 1987, as amended (the "Prior Series 1987B NYSERDA Indenture"), between NYSERDA and The Bank of New York (successor to Irving Trust Company), as trustee (in such capacity, the "Prior Series 1987B NYSERDA Trustee"); and

(vii) Adjustable Rate Pollution Control Revenue Bonds (Niagara Mohawk Power Corporation Project) due December 1, 2023, 1988 Series A (the "Prior Series 1988A NYSERDA Bonds"), pursuant to an Indenture of Trust dated as of December 1, 1988, as amended (the "Prior Series 1988A NYSERDA Indenture"), between NYSERDA and The Bank of New York (successor to Irving Trust Company), as trustee (in such capacity, the "Prior Series 1988A NYSERDA Trustee");

(the Prior Series 1985A NYSERDA Bonds, the Prior Series 1985B NYSERDA Bonds, the Prior Series 1985C NYSERDA Bonds, the Prior Series 1986A NYSERDA Bonds, the Prior Series 1987A NYSERDA Bonds, the Prior Series 1987B NYSERDA Bonds and the Prior Series 1988A NYSERDA Bonds, collectively called the "Prior NYSERDA Bonds"; the Prior Series 1985A NYSERDA Indenture, the Prior Series 1985B NYSERDA Indenture, the Prior Series 1985C NYSERDA Indenture, the Prior Series 1986A NYSERDA Indenture, the Prior Series 1987A NYSERDA Indenture, the Prior Series 1987B NYSERDA Indenture and the Prior Series 1988A NYSERDA Indenture, collectively called the "Prior NYSERDA Indentures"; and the Prior Series 1985A NYSERDA Trustee, the Prior Series 1985B NYSERDA Trustee, the Prior Series 1985C NYSERDA Trustee, the Prior Series 1986A NYSERDA Trustee, the Prior Series 1987A NYSERDA Trustee, the Prior Series 1987B NYSERDA Trustee and the Prior Series 1988A NYSERDA Trustee, collectively called the "Prior NYSERDA Trustees"), and advanced to the Company the proceeds of the Prior NYSERDA Bonds for use by the Company in connection with pollution control projects of the Company; and

WHEREAS, in connection with the issuance of the Prior NYSERDA Bonds, pursuant to the several Participation Agreements, as amended, between NYSERDA and the Company dated as of August 15, 1985 with respect to the Prior Series 1985A NYSERDA Bonds, December 1, 1985 with respect to the Prior Series 1985B NYSERDA Bonds, December 1, 1985 with respect to the Prior Series 1985C NYSERDA Bonds, December 1, 1986 with respect to the Prior Series 1986A NYSERDA Bonds, March 1, 1987, with respect to the Prior Series 1987A NYSERDA Bonds, July 1, 1987 with respect to the Prior Series 1987B NYSERDA Bonds and December 1, 1988 with respect to the Prior Series 1988A NYSERDA Bonds, the Company delivered to the respective Prior NYSERDA Trustees (i) $163,000,000 in principal amount of its First Mortgage Bonds, Floating Rate Series C due June 2, 2003 (also known as the Eighty-third Series of Bonds), (ii) $213,260,000 in principal amount of its First Mortgage Bonds, Floating Rate Series D due June 2, 2003 (also known as the Eighty-fourth Series of Bonds) and (iii) $37,500,000 in principal amount of its First Mortgage Bonds, Floating Rate Series E due June 2, 2003 (also known as the Eighty-fifth Series of Bonds) (collectively, the "Prior First Mortgage Bonds"), pursuant to a Supplemental Indenture dated as of March 20, 1996 as amended by a Supplemental Indenture dated as of June 1, 2000 (as so amended, the "Prior Supplemental Indenture") between the Company and HSBC Bank USA (successor to Bankers Trust Company), as trustee, which pursuant to the Prior Supplemental Indenture were transferred to Bank One, NA, as Master Creditor Agent (the "Master Creditor Agent") under the Amended and Restated Master Creditor Agreement dated as of June 1, 2000 (as amended, supplemented or modified from time to time, the "Master Creditor Agreement"), on behalf of the lenders and issuing bank named as "Lenders" and the "Issuing Bank" in, (I) with respect to the Prior First Mortgage Bonds described in clause (i) above, the Amended and Restated Letter of Credit and Reimbursement Agreement dated as of June 1, 2000 (the "Prior Morgan Reimbursement Agreement") among the Company and the Prior LC Credit Parties named therein, including Morgan Guaranty Trust Company, as Prior LC Issuer, (II) with respect to the Prior First Mortgage Bonds described in clause (ii) above, (a) the Amended and Restated Reimbursement Agreement dated as of June 1, 2000 (the "Prior Bank One Reimbursement Agreement I") among the Company and the Prior LC Credit Parties, including Bank One, NA, as Prior LC Issuer and (b) the Amended and Restated Reimbursement Agreement dated as of June 1, 2000 (the "Prior Toronto Dominion Reimbursement Agreement") among the Company and the Prior LC Credit Parties, including Toronto Dominion (Texas), Inc., as Prior LC Issuer, and (III) with respect to the Prior First Mortgage Bonds described in clause (iii) above, the Amended and Restated Reimbursement Agreement II dated as of June 1, 2000 (the "Prior Bank One Reimbursement Agreement II") among the Company and the Prior LC Credit Parties, including Bank One, NA, as Prior LC Issuer (such issuing banks collectively called the "Prior LC Issuers", such lenders collectively called the "Prior LC Lenders" and the Prior LC Issuers and the Prior LC Lenders collectively called the "Prior LC Credit Parties") as security for the Company’s obligations to the Prior LC Credit Parties under the Prior Reimbursement Agreements (the Prior Morgan Reimbursement Agreement, the Prior Bank One Reimbursement Agreement I, the Prior Toronto Dominion Reimbursement Agreement and the Prior Bank One Reimbursement Agreement II, collectively called the "Prior Reimbursement Agreements"); and

WHEREAS, in order to (a) permit the NYSERDA Bonds to bear interest at various variable interest rates, including, without limitation, at daily, weekly, monthly, semi-annual, term, commercial paper and auction rates, (b) provide for new provisions made necessary or desirable by the issuance of a municipal bond insurance policy (the "Bond Insurance Policy") and (c) otherwise conform certain terms of the Prior NYSERDA Indentures relating to each series of the NYSERDA Bonds while they bear interest at variable interest rates and certain other terms of the Original Indenture with the current market standard for multi-modal bonds, NYSERDA has agreed

(i) pursuant to a First Supplemental Participation Agreement between NYSERDA and the Company dated as of May 1, 2003 (the "Series 1985A NYSERDA Participation Agreement"), as of May 1, 2003, to amend and restate the Prior Series 1985A NYSERDA Bonds (as so amended and restated and as may be further amended, supplemented or modified from time to time, the "Series 1985A NYSERDA Bonds", and to amend and restate the Prior Series 1985A NYSERDA Indenture, pursuant to an Amended and Restated Indenture of Trust dated as of May 1, 2003 (as so amended and restated and as may be further amended, supplemented or modified from time to time, the "Series 1985A NYSERDA Indenture") between NYSERDA and The Bank of New York, as trustee (together with its successors and assigns in such capacity, the "Series 1985A NYSERDA Trustee");

(ii) pursuant to a First Supplemental Participation Agreement between NYSERDA and the Company dated as of May 1, 2003 (the "Series 1985B NYSERDA Participation Agreement"), as of May 1, 2003, to amend and restate the Prior Series 1985B NYSERDA Bonds (as so amended and restated and as may be further amended, supplemented or modified from time to time, the "Series 1985B NYSERDA Bonds", and to amend and restate the Prior Series 1985B NYSERDA Indenture, pursuant to an Amended and Restated Indenture of Trust dated as of May 1, 2003 (as so amended and restated and as may be further amended, supplemented or modified from time to time, the "Series 1985B NYSERDA Indenture") between NYSERDA and The Bank of New York, as trustee (together with its successors and assigns in such capacity, the "Series 1985B NYSERDA Trustee");

(iii) pursuant to a First Supplemental Participation Agreement between NYSERDA and the Company dated as of May 1, 2003 (the "Series 1985C NYSERDA Participation Agreement"), as of May 1, 2003, to amend and restate the Prior Series 1985C NYSERDA Bonds (as so amended and restated and as may be further amended, supplemented or modified from time to time, the "Series 1985C NYSERDA Bonds", and to amend and restate the Prior Series 1985C NYSERDA Indenture, pursuant to an Amended and Restated Indenture of Trust dated as of May 1, 2003 (as so amended and restated and as may be further amended, supplemented or modified from time to time, the "Series 1985C NYSERDA Indenture") between NYSERDA and The Bank of New York, as trustee (together with its successors and assigns in such capacity, the "Series 1985C NYSERDA Trustee");

(iv) pursuant to a First Supplemental Participation Agreement between NYSERDA and the Company dated as of May 1, 2003 (the "Series 1986A NYSERDA Participation Agreement"), as of May 1, 2003, to amend and restate the Prior Series 1986A NYSERDA Bonds (as so amended and restated and as may be further amended, supplemented or modified from time to time, the "Series 1986A NYSERDA Bonds", and to amend and restate the Prior Series 1986A NYSERDA Indenture, pursuant to an Amended and Restated Indenture of Trust dated as of May 1, 2003 (as so amended and restated and as may be further amended, supplemented or modified from time to time, the "Series 1986A NYSERDA Indenture") between NYSERDA and The Bank of New York, as trustee (together with its successors and assigns in such capacity, the "Series 1986A NYSERDA Trustee");

(v) pursuant to a Second Supplemental Participation Agreement between NYSERDA and the Company dated as of May 1, 2003 (the "Series 1987A NYSERDA Participation Agreement"), as of May 1, 2003, to amend and restate the Prior Series 1987A NYSERDA Bonds (as so amended and restated and as may be further amended, supplemented or modified from time to time, the "Series 1987A NYSERDA Bonds", and to amend and restate the Prior Series 1987A NYSERDA Indenture, pursuant to an Amended and Restated Indenture of Trust dated as of May 1, 2003 (as so amended and restated and as may be further amended, supplemented or modified from time to time, the "Series 1987A NYSERDA Indenture") between NYSERDA and The Bank of New York, as trustee (together with its successors and assigns in such capacity, the "Series 1987A NYSERDA Trustee");

(vi) pursuant to a Second Supplemental Participation Agreement between NYSERDA and the Company dated as of May 1, 2003 (the "Series 1987B NYSERDA Participation Agreement"), as of May 1, 2003, to split the Prior Series 1987B NYSERDA Bonds into two series, such additional series, as amended, supplemented or modified from time to time, to be called the "Series 1987B-1 NYSERDA Bonds" and the "Series 1987B-2 NYSERDA Bonds", and to amend and restate the Prior Series 1987B NYSERDA Indenture, pursuant to an Amended and Restated Indenture of Trust dated as of May 1, 2003 (as so amended and restated and as may be further amended, supplemented or modified from time to time, the "Series 1987B NYSERDA Indenture") between NYSERDA and The Bank of New York, as trustee (together with its successors and assigns in such capacity, the "Series 1987B NYSERDA Trustee"); and

(vii) pursuant to a Second Supplemental Participation Agreement between NYSERDA and the Company dated as of May 1, 2003 (the "Series 1988A NYSERDA Participation Agreement"), to amend and restate the Prior Series 1988A NYSERDA Bonds (as so amended and restated and as may be further amended, supplemented or modified from time to time, the "Series 1988A NYSERDA Bonds", and to amend and restate the Prior Series 1988A NYSERDA Indenture, pursuant to an Amended and Restated Indenture of Trust dated as of May 1, 2003 (as so amended and restated and as may be further amended, supplemented or modified from time to time, the "Series 1988A NYSERDA Indenture") between NYSERDA and The Bank of New York, as trustee (together with its successors and assigns in such capacity, the "Series 1988A NYSERDA Trustee")

(the Series 1985A NYSERDA Bonds, the Series 1985B NYSERDA Bonds, the Series 1985C NYSERDA Bonds, the Series 1986A NYSERDA Bonds, the Series 1987A NYSERDA Bonds, the Series 1987B-1 NYSERDA Bonds, the Series 1987B-2 NYSERDA Bonds and the Series 1988A NYSERDA Bonds, collectively called the "NYSERDA Bonds"; the Series 1985A NYSERDA Indenture, the Series 1985B NYSERDA Indenture, the Series 1985C NYSERDA Indenture, the Series 1986A NYSERDA Indenture, the Series 1987A NYSERDA Indenture, the Series 1987B NYSERDA Indenture and the Series 1988A NYSERDA Indenture, collectively called the "NYSERDA Indentures" and each a "NYSERDA Indenture"; the Series 1985A NYSERDA Trustee, the Series 1985B NYSERDA Trustee, the Series 1985C NYSERDA Trustee, the Series 1986A NYSERDA Trustee, the Series 1987A NYSERDA Trustee, the Series 1987B NYSERDA Trustee and the Series 1988A NYSERDA Trustee, collectively called the "NYSERDA Trustees" and each a "NYSERDA Trustee"; and the Series 1985A NYSERDA Participation Agreement, the Series 1985B NYSERDA Participation Agreement, the Series 1985C NYSERDA Participation Agreement, the Series 1986A NYSERDA Participation Agreement, the Series 1987A NYSERDA Participation Agreement, the Series 1987B NYSERDA Participation Agreement and the Series 1988A NYSERDA Participation Agreement, collectively called the "NYSERDA Participation Agreements"); and

WHEREAS, as set forth in the Participation Agreement, NYSERDA and the Company have agreed that concurrently at such times as the Prior NYSERDA Bonds are amended and restated to become the NYSERDA Bonds and the Series 1987B-1 NYSERDA Bonds and the Series 1987B-2 NYSERDA Bonds are issued in exchange for the Prior Series 1987B NYSERDA Bonds, the Company will take actions necessary to ensure that (i) certificates representing all Prior First Mortgage Bonds relating to such Prior NYSERDA Bonds and the Prior Reimbursement Agreements shall be delivered by either the Prior LC Issuer (or its agent) or the Prior NYSERDA Trustee, as applicable, to the NYSERDA Trustee, who may transfer the same to Ambac Assurance Corporation, as the issuer of the Bond Insurance Policy (together with its successors and assigns, the "Bond Insurer"), (ii) all Prior First Mortgage Bonds relating to such Prior NYSERDA Bonds shall be amended and restated pursuant to the terms of this Supplemental Indenture, (iii) the Prior Supplemental Indenture shall be amended under and pursuant to the terms of this Supplemental Indenture, (iv) the Prior LC Issuer (or its agent) or the NYSERDA Trustee, as applicable, shall deliver the Prior First Mortgage Bonds to the Trustee and (v) the Trustee shall deliver new certificates representing the First Mortgage Bonds of the Eighty-third, Eighty-fourth, Eighty-fifth, Eighty-ninth, Ninetieth, Ninety-first, Ninety-second and Ninety-third Series to the NYSERDA Trustee pursuant to the terms of this Supplemental Indenture; and

WHEREAS, the Company desires to enter into this Supplemental Indenture, which is an indenture supplemental to the Original Indenture, with the Trustee for the purpose of (a) amending and restating the form, terms, provisions and conditions of the Eighty-third, Eighty-fourth and Eighty-fifth Series of Bonds under the Indenture, for the purpose of (i) splitting the Eighty-third Series (in the current outstanding principal amount of $163,000,000) into three series and redesignating two of such series as the Eighty-ninth (in the maximum principal amount of $69,800,000) and Ninetieth (in the maximum principal amount of $25,000,000) Series of Bonds and exchanging the Bonds of the Eighty-third Series of Bonds for an equivalent principal amount of Bonds of the Eighty-third, Eighty-ninth and Ninetieth Series of Bonds (with the remaining Eighty-third Series having a maximum principal amount of $68,200,000 after all Bonds to be exchanged for Bonds of the Eighty-ninth and Ninetieth Series have been so exchanged), (ii) splitting the Eighty-fourth Series (in the current outstanding principal amount of $213,260,000) into four series and redesignating three of such series as the Ninety-first (in the maximum principal amount of $37,500,000), Ninety-second (in the maximum principal amount of $50,000,000) and Ninety-third (in the maximum principal amount of $25,760,000) Series of Bonds and exchanging the Bonds of the Eighty-fourth Series of Bonds for an equivalent principal amount of Bonds of the Eighty-fourth, Ninety-first, Ninety-second and Ninety-third Series of Bonds (with the remaining Eighty-fourth Series having a maximum principal amount of $100,000,000 after all Bonds to be exchanged for Bonds of the Ninety-first, Ninety-second and Ninety-third Series have been so exchanged), and (b) amending the Supplemental Indentures creating and amending the Eighty-third, Eighty-fourth and Eighty-fifth Series of Bonds in accordance with this Supplemental Indenture, all as determined by resolution or resolutions of the Board of Directors of the Company and as agreed to by the Master Creditor Agent on behalf of the Prior LC Credit Parties, as holder of 100% of the Bonds of the Eighty-third, Eighty-fourth and Eighty-fifth Series, and in accordance with Section 7 of Article Fourth of the Indenture; and

WHEREAS, the current aggregate balance of principal indebtedness, in respect of the Eighty-third, Eighty-fourth, Eighty-fifth, Eighty-ninth, Ninetieth, Ninety-first, Ninety-second and Ninety-third Series of Bonds, outstanding after giving effect to this Supplemental Indenture, $413,760,000, is not and is not permitted to be in excess of the current aggregate balance of principal indebtedness, in respect of the Eighty-third, Eighty-fourth and Eighty-fifth Series of Bonds, outstanding under the Original Indenture with respect to which mortgage tax was paid, no reloans or readvances have become secured under the Indenture to date with respect to which mortgage tax was not previously paid and no additional monies are secured by this Supplemental Indenture, entitling the Company to request exemption from mortgage tax under Section 255 of the Real Estate Tax Law of the State of New York; and

WHEREAS, the Company in the exercise of the authority and power reserved to it under and by virtue of the provisions of the Indenture and pursuant to appropriate resolutions of its Board of Directors has duly resolved and determined to make, execute and deliver to the Trustee, and has requested the Trustee to enter into, a supplemental indenture in the form hereof and for the purposes herein provided; and

WHEREAS, all conditions and requirements necessary to make this Supplemental Indenture a valid, binding and legal instrument in accordance with its terms have been performed and fulfilled and the execution and delivery hereof have been in all respects duly authorized;

NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE

W I T N E S S E T H:

That for and in consideration of the premises and of the purchase or acceptance of the Bonds by those who shall hold the same from time to time and of the sum of One Dollar to the Company duly paid by the Trustee at or before the execution and delivery of this Supplemental Indenture and for other good and valuable consideration, the receipt whereof is hereby acknowledged, the Company does hereby covenant and agree with the Trustee for the benefit of the holders of the Bonds, or any of them, issued or to be issued under the Indenture, as follows:

ARTICLE I

AMENDMENT AND RESTATEMENT
OF THE SUPPLEMENTAL INDENTURE CREATING
THE PRIOR MORTGAGE BONDS

Section 1. Effectiveness of this Supplemental Indenture. Effective on the first of the Effective Dates (as hereinafter defined) of any of Articles II through IX (the "Initial Effective Date"), the prior Supplemental Indenture shall be amended and restated as set forth in this Supplemental Indenture.

Section 2. Effective Dates of Articles II through IX.

(a) Article II of this Supplemental Indenture setting forth the amended and restated terms of the First Mortgage Bonds of the Eighty-third Series shall become effective on the date on which the Prior First Mortgage Bonds of the Eighty-third Series (other than the Bonds of that series redesignated as the Bonds of the Eighty-ninth Series or the Bonds of the Ninetieth Series) shall have been delivered to the Trustee in exchange for the Amended and Restated Bonds of the Eighty-third Series, as set forth in Section 1 of Article II.

(b) Article III of this Supplemental Indenture setting forth the amended and restated terms of the First Mortgage Bonds of the Eighty-fourth Series shall become effective on the date on which the Prior First Mortgage Bonds of the Eighty-fourth Series (other than the Bonds of that series redesignated as the Bonds of the Ninety-first Series, the Bonds of the Ninety-second Series or the Bonds of the Ninety-third Series) shall have been delivered to the Trustee in exchange for the Amended and Restated Bonds of the Eighty-fourth Series, as set forth in Section 1 of Article III.

(c) Article IV of this Supplemental Indenture setting forth the amended and restated terms of the First Mortgage Bonds of the Eighty-fifth Series shall become effective on the date on which the Prior First Mortgage Bonds of the Eighty-fifth Series shall have been delivered to the Trustee in exchange for the Amended and Restated Bonds of the Eighty-fifth Series, as set forth in Section 1 of Article IV.

(d) Article V of this Supplemental Indenture setting forth the terms of the First Mortgage Bonds of the Eighty-ninth Series (which shall be split from the Prior First Mortgage Bonds of the Eighty-third Series on the date on which Article V becomes effective) shall become effective on the date on which $69,800,000 principal amount of the Prior First Mortgage Bonds of the Eighty-third Series shall have been delivered to the Trustee in exchange for the Bonds of the Eighty-ninth Series, as set forth in Section 1 of Article V.

(e) Article VI of this Supplemental Indenture setting forth the terms of the First Mortgage Bonds of the Ninetieth Series (which shall be split from the Prior First Mortgage Bonds of the Eighty-third Series on the date on which Article VI becomes effective) shall become effective on the date on which $25,000,000 principal amount of the Prior First Mortgage Bonds of the Eighty-third Series shall have been delivered to the Trustee in exchange for the Bonds of the Ninetieth Series, as set forth in Section 1 of Article VI.

(f) Article VII of this Supplemental Indenture setting forth the terms of the First Mortgage Bonds of the Ninety-first Series (which shall be split from the Prior First Mortgage Bonds of the Eighty-fourth Series on the date on which Article VII becomes effective) shall become effective on the date on which $37,500,000 of the Prior First Mortgage Bonds of the Eighty-fourth Series shall have been delivered to the Trustee in exchange for the Bonds of the Ninety-first Series, as set forth in Section 1 of Article VII.

(g) Article VIII of this Supplemental Indenture setting forth the terms of the First Mortgage Bonds of the Ninety-second Series (which shall be split from the Prior First Mortgage Bonds of the Eighty-fourth Series on the date on which Article VIII becomes effective) shall become effective on the date on which $50,000,000 of the Prior First Mortgage Bonds of the Eighty-fourth Series shall have been delivered to the Trustee in exchange for the Bonds of the Ninety-second Series, as set forth in Section 1 of Article VIII.

(h) Article IX of this Supplemental Indenture setting forth the terms of the First Mortgage Bonds of the Ninety-third Series (which shall be split from the Prior First Mortgage Bonds of the Eighty-fourth Series on the date on which Article IX becomes effective) shall become effective on the date on which $25,760,000 of the Prior First Mortgage Bonds of the Eighty-fourth Series shall have been delivered to the Trustee in exchange for the Bonds of the Ninety-third Series, as set forth in Section 1 of Article IX.

Section 3. Replacement Bonds if Effective Dates Differ. If the Effective Dates of Articles II, V and VI are not the same date, the Trustee shall, at the request of the holder to the Prior First Mortgage Bonds of the Eighty-third Series in accordance with the provisions of the Indenture, but at no charge to such holder, authenticate and deliver to such holder a replacement Bond or Bonds of the Eighty-third Series representing the portion of the Prior First Mortgage Bonds of the Eighty-third Series not delivered for exchange and replacement on such Effective Date. Likewise, if the Effective Dates of Articles III, VII, VIII and IX are not the same date, the Trustee shall, at the request of the holder to the Prior First Mortgage Bonds of the Eighty-fourth Series in accordance with the provisions of the Indenture, but at no charge to such holder, authenticate and deliver to such holder a replacement Bond or Bonds of the Eighty-fourth Series representing the portion of the Prior First Mortgage Bonds of the Eighty-fourth Series not delivered for exchange and replacement on such Effective Date.

ARTICLE II

AMENDMENT AND RESTATEMENT OF THE
EIGHTY-THIRD SERIES OF FIRST MORTGAGE BONDS

Section 1. Amendment and Restatement of Bonds of the Eighty-third Series. At such time as all Prior First Mortgage Bonds of the Eighty-third Series issued under the Prior Supplemental Indenture (other than the Bonds of that series redesignated as the Bonds of the Eighty-ninth Series or the Bonds of the Ninetieth Series) not heretofore cancelled by the Trustee or delivered to the Trustee cancelled or for cancellation have been delivered to the Trustee by the registered holder thereof to be exchanged for new Bonds under this Article II (which shall be deemed to be the "Effective Date" of this Article II), such Prior First Mortgage Bonds of the Eighty-third Series not heretofore cancelled by the Trustee or delivered to the Trustee cancelled or for cancellation shall be amended and restated as set forth in this Article II and redesignated "First Mortgage Bonds, Floating Rate Series C due July 1, 2027" (hereinafter sometimes referred to as the "Amended and Restated Bonds of the Eighty-third Series").

The Amended and Restated Bonds of the Eighty-third Series shall be registered in the name of the Series 1987B NYSERDA Trustee, as trustee on behalf of the holders of the Series 1987B-1 NYSERDA Bonds, pursuant to the Series 1987B NYSERDA Indenture.

Following such redesignation and exchange, the permitted principal amount of the Amended and Restated Bonds of the Eighty-third Series which may be amended and restated by the Company and executed by the Company in connection therewith and authenticated by the Trustee is limited so that at no time shall there be authenticated, delivered or outstanding under the Indenture, Amended and Restated Bonds of the Eighty-third Series for a principal amount exceeding $68,200,000, except that Amended and Restated Bonds of the Eighty-third Series may always be issued as provided in Section 2 of Article Fourth of the Indenture.

On the Effective Date of this Article II, the Company shall execute and deliver to the Trustee and the Trustee, without awaiting the filing or recording of this Supplemental Indenture but upon receipt of evidence of due compliance by the Company with the applicable provisions of the Indenture, shall authenticate pursuant to Section 10 of Article Second of the Indenture, the Amended and Restated Bonds of the Eighty-third Series in an aggregate principal amount not exceeding $68,200,000, and deliver the same to the Series 1987B NYSERDA Trustee, in exchange for certificates representing the same principal amount of the Prior First Mortgage Bonds delivered to the Trustee by the 1987B NYSERDA Trustee or Morgan Guaranty Trust Company, as the Prior LC Issuer.

Section 2. Terms of the Amended and Restated Bonds of the Eighty-third Series. The Amended and Restated Bonds of the Eighty-third Series shall mature according to their terms on July 1, 2027, and, in the case of the initial authentication of the Amended and Restated Bonds of the Eighty-third Series, shall be dated the Effective Date and shall bear interest from the Effective Date at the rate per annum sufficient to pay interest accruing on the Series 1987B-1 NYSERDA Bonds as it becomes due, payable on the dates on which interest is payable on the Series 1987B-1 NYSERDA Bonds under the Series 1987B NYSERDA Indenture. The principal of, and premium, if any, in respect of, the Amended and Restated Bonds of the Eighty-third Series shall be payable on the same date or dates and in the same amounts as set forth in the Series 1987B NYSERDA Indenture for the payment of principal on, or premium, if any, in respect of, the Series 1987B-1 NYSERDA Bonds. Definitive Bonds of said series shall be registered Bonds without coupons and shall be issued in denominations of $1,000 and multiples thereof.

Subsequent to the initial authentication of the Amended and Restated Bonds of the Eighty-third Series, each Amended and Restated Bond of the Eighty-third Series shall be dated as of the date of its authentication and shall bear interest from the Effective Date.

Notwithstanding any other provision contained herein, the obligation of the Company to make payments of the principal of and premium, if any, and interest on the Amended and Restated Bonds of the Eighty-third Series shall be fully or partially satisfied and discharged, and the amount of any such payment shall be reduced, to the extent that the Company shall have made the payment, in full or in part, of principal and premium, if any, and interest then due on the Series 1987B-1 NYSERDA Bonds, and the Trustee shall not have received written notice from the Company that the obligation of the Company shall not be so satisfied and discharged and the amount of any such payment so reduced.

Notwithstanding anything to the contrary contained herein or in the Indenture, the Trustee may conclusively presume that no Event of Default with respect to the Amended and Restated Bonds of the Eighty-third Series or, as that term is defined in the Series 1987B NYSERDA Indenture, with respect to the Series 1987B-1 NYSERDA Bonds, has occurred and no amounts are due under the Amended and Restated Bonds of the Eighty-third Series unless and until the Trustee shall have received from the Series 1987B NYSERDA Trustee a notice of the occurrence of an Event of Default (as defined in the Series 1987B NYSERDA Indenture) or written demand from the Series 1987B NYSERDA Trustee (which notice or demand has not been subsequently rescinded or revoked by the Series 1987B NYSERDA Trustee), setting forth in detail the amount then due with respect to such Series 1987B-1 NYSERDA Bonds, which statement shall, unless and until revoked, rescinded or amended by the Series 1987B NYSERDA Trustee, be deemed to be correct, and the Trustee shall be entitled and authorized to rely conclusively thereon.

The interest payable on any interest payment date shall be paid to the persons in whose names the Amended and Restated Bonds of the Eighty-third Series were registered at the close of business on the record date for such payment of interest (except any such Bond which has been called for redemption on a date fixed for such redemption which is after such record date and prior to such interest payment date) notwithstanding any cancellation of Amended and Restated Bonds of the Eighty-third Series upon any registration of transfer or exchange thereof between such record date and such interest payment date; except that if the Company shall default in the payment of any interest due on such interest payment date such defaulted interest shall be paid to the persons in whose names Amended and Restated Bonds of the Eighty-third Series are registered either at the close of business on the date preceding the date of payment of such defaulted interest or on a subsequent record date fixed for the payment of such defaulted interest by notice given by mail by or on behalf of the Company to holders of Bonds of the Eighty-third Series not less than ten calendar days preceding such subsequent record date. The term "record date" as used herein shall mean, with respect to a regular interest payment date, the close of business on the day that is ten calendar days prior to such interest payment date or, if such day shall be a day on which banking institutions in The City of New York are authorized by law to close, the next preceding day which shall not be a day on which such institutions are so authorized to close or, in the case of defaulted interest, the close of business on any subsequent record date established as provided above.

All of the Amended and Restated Bonds of the Eighty-third Series shall be executed in the name and on behalf of the Company by a facsimile of the signature (or manual signature) of its President or a Vice President, and imprinted with its corporate seal (or a facsimile thereof), attested by a facsimile of the signature (or manual signature) of its Secretary or an Assistant Secretary.

Amended and Restated Bonds of the Eighty-third Series shall be lettered "RU" and numbered consecutively from RU-4 upwards, or shall bear such other letters as may be provided therefor by the Board of Directors of the Company.

To the extent that any payment of principal of and interest on the Amended and Restated Bonds of the Eighty-third Series (as well as any premium thereon applicable in case of any redemption thereof prior to maturity) shall be payable, all such amounts shall be payable at the office of the Company’s paying agent, which in the case of HSBC Bank USA, shall be its corporate trust office in the Borough of Manhattan, The City of New York, State of New York, or at such other office or agency in the Borough of Manhattan, The City of New York, State of New York, as shall be maintained by the Company for such purpose, in such coin or currency of the United States of America as at the time of payment shall be legal tender for public and private debts.

Section 3. Redemption of the Amended and Restated Bonds of the Eighty-third Series. The Amended and Restated Bonds of the Eighty-third Series are subject to mandatory redemption, in whole or in part, in the event of any optional or mandatory redemption of the Series 1987B-1 NYSERDA Bonds, on the date fixed for such mandatory redemption of the Series 1987B-1 NYSERDA Bonds, upon notice given as hereinafter in this Section 3 provided, at the applicable redemption price specified in the Series 1987B NYSERDA Indenture for the Series 1987B-1 NYSERDA Bonds being redeemed, in such amount as, together with any moneys available therefor under the Series 1987B NYSERDA Indenture, shall be required, in accordance with the provisions of the Series 1987B NYSERDA Participation Agreement and the Series 1987B NYSERDA Indenture, to pay the principal of and premium, if any, and interest on the Series 1987B-1 NYSERDA Bonds so redeemed.

The Amended and Restated Bonds of the Eighty-third Series are subject to mandatory redemption, as a whole but not in part, at a redemption price equal to 100% of the principal amount thereof, together with interest accrued to the date fixed for redemption, upon a declaration by the Series 1987B NYSERDA Trustee that the principal of all Series 1987B-1 NYSERDA Bonds then outstanding is immediately due and payable pursuant to the Series 1987B NYSERDA Indenture and upon written notice thereof by the Series 1987B NYSERDA Trustee to the Trustee at least 30 days prior to the date fixed for redemption, provided that no written cancellation of such declaration shall have been received by the Trustee and the Company prior to notice of such redemption having been given to the Trustee.

No redemption of the Amended and Restated Bonds of the Eighty-third Series, either as a whole or in part, may be made except in connection with the payment of a like principal amount of Series 1987B-1 NYSERDA Bonds, either by redemption or at maturity (stated or otherwise), which Series 1987B-1 NYSERDA Bonds, shall not thereafter be remarketed. The principal amount of the Series 1987B-1 NYSERDA Bonds and, therefore, the principal of the Bonds of the Eighty-third Series, may be prepaid, and the due dates thereof shall be accelerated, in accordance with the terms of the Series 1987B NYSERDA Indenture.

In case the Company shall at any time desire or be required so to redeem part or all of the Amended and Restated Bonds of the Eighty-third Series then outstanding, the Company shall give to the Trustee notice in writing at least 45 days prior to the redemption date fixed by the Company (unless a shorter notice is required for the corresponding redemption under the Series 1987B NYSERDA Indenture or shall be satisfactory to the Trustee) of the principal amount of Amended and Restated Bonds of the Eighty-third Series which it desires or is required to redeem, specifying the date on which it desires or is required to make redemption. There shall be furnished to the Trustee a certificate or opinion executed by the President or a Vice-President and the Treasurer or an Assistant Treasurer of the Company stating that the conditions precedent specified in this Section 3 with respect to such redemption have been complied with and notwithstanding anything to the contrary contained herein or in the Indenture, prior to receipt of a notice of default, the Trustee shall be entitled and authorized to rely conclusively thereon. As soon as practicable thereafter, if the Bonds are to be redeemed in part, the Trustee shall issue to the Series 1987B NYSERDA Trustee a new Bond or Bonds of the Eighty-third Series in the principal amount not so redeemed in exchange for the outstanding Bonds.

The Trustee may, to the extent permitted by the provisions of Section 4 of Article Tenth of the Indenture, accept the certificate of the President or any Vice President or the Treasurer of the Company as sufficient evidence that the requirements as to mailing of notices of the call for redemption have been fully complied with or the Trustee may, at its option and at the expense and on behalf of the Company, give such notice and take any other action required of the Company in connection with such redemption.

Section 4. Effect of Payment. On or prior to the redemption date specified in any such notice, the Company shall deposit with the Trustee a sum of money, of the character specified as the medium of payment in the Amended and Restated Bonds of the Eighty-third Series called for redemption, which together with any moneys available therefor under the Series 1987B NYSERDA Indenture is sufficient to redeem, at the redemption price payable as hereinbefore provided, the Bonds of such series designated for redemption and the called part of any Bond of such series called only in part, and to pay the interest accrued thereon up to said redemption date, to be applied by the Trustee to the payment of such Bonds (and the called part of any such Bond) and such accrued interest thereon upon presentation and surrender of such Bonds, together with duly executed instruments of transfer, at the corporate trust office of the Trustee, or at such other office or agency as shall be maintained by the Company for such purpose; and, after such deposit shall have been made, such Bonds so called in whole and the called part of any such Bonds called only in part, whether or not presented for redemption shall cease to be entitled to any benefit, lien or security under the Indenture, no interest will accrue thereon on or after the redemption date duly specified in said notice, and claims for interest, if any, appertaining to such Bonds, and the called part of any such Bond called only in part, maturing after that date shall be void. All Bonds so redeemed shall forthwith be cancelled and, upon its written request, delivered to the Company or otherwise disposed of; and no Bonds shall be issued hereunder in place of any such Bonds, except as otherwise provided in Article Fourth of the Indenture and except that, if less than the entire principal amount of any Bond shall be so redeemed, upon presentation of such Bond so called in part, with proper instruments of transfer if required, at or after the time fixed for the payment of said Bonds so called for redemption, payment of the principal amount of the part thereof so called shall be made upon surrender and cancellation of said Bond so presented, and one or more Amended and Restated Bonds of the Eighty-third Series, for a principal amount equal to the uncalled and unpaid balance of the principal amount of such Bond, will be executed by the Company and shall be authenticated and delivered by the Trustee to the owner of such Bond, without expense to such owner. If the Series 1987B-1 NYSERDA Bonds have been redeemed in whole or in part, the Amended and Restated Bonds of the Eighty-third Series shall be deemed to have been redeemed in whole or in part in the equivalent principal amount. The Trustee shall be entitled and authorized to rely conclusively on a certificate of the Company as to such redemption, together with the surrender by the Bondholder of such redeemed Bonds for cancellation or for exchange for one or more replacement Bonds in the aggregate principal amount of such unredeemed portion of the Bonds as evidence of such redemption. Notwithstanding the foregoing, the principal and interest due on the Amended and Restated Bonds of the Eighty-third Series shall continue or be reinstated, as the case may be, if at any time any payment of principal or interest (whether under the Amended and Restated Bonds of the Eighty-third Series or the Series 1987B-1 NYSERDA Bonds) is rescinded or must otherwise be returned by the Series 1987B NYSERDA Trustee or the holders of the Series 1987B-1 NYSERDA Bonds or any other person upon the insolvency, bankruptcy or reorganization of the Company or by operation of law, all as though payment had not been made.

Section 5. Exchange of Bonds. The registered owner (or assigns) of any Amended and Restated Bond of the Eighty-third Series may at any time surrender the same at the corporate trust office of the Trustee, or at any other office or agency of the Trustee or the Company maintained for such purpose, and with instruments of transfer satisfactory to the Trustee, and, subject to the terms, conditions and limitations specified in the Indenture, shall be entitled to receive in exchange therefor an equal principal amount of Bonds of said series of other authorized denominations; and the Company will provide, and the Trustee shall authenticate and deliver, the Bonds necessary to make such exchange. The Amended and Restated Bonds of the Eighty-third Series are nontransferable except to effect transfer to any successor to the Series 1987B NYSERDA Trustee, to the Bond Insurer or to any successor to the Bond Insurer, any such transfer of an Amended and Restated Bond of the Eighty-third Series to be made at the principal corporate trust office of the Trustee, upon surrender and cancellation of such Bond, accompanied by a written instrument of transfer in a form approved by the Company and the Trustee, duly executed by the registered holder of such Bond or by his duly authorized attorney, and thereupon a new Amended and Restated Bond or Bonds of the Eighty-third Series, for a like principal amount and bearing interest at the same rates and having the same maturity date, will be issued to the successor to the Series 1987B NYSERDA Trustee, the Bond Insurer or the successor to the Bond Insurer, as the case may be, in exchange therefor, as provided in the Indenture. The provisions of Section 12 of Article Second of the Original Indenture to the contrary notwithstanding, no payment of a service charge shall be required for any exchange or registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto.

Section 6. Form of Amended and Restated Bonds of the Eighty-third Series. The definitive Amended and Restated Bonds of the Eighty-third Series, and the Trustee’s certificate to be inscribed on all Bonds of said series, are to be substantially in the forms set forth in Exhibit A. Such Amended and Restated Bonds of the Eighty-third Series shall be issued to the NYSERDA Trustee, in the initial principal amount, and with the description of the Bonds, identification of the series of NYSERDA Bonds and the corresponding NYSERDA Trustee and the NYSERDA Indenture, all as specified in Section 1 of this Article II.

ARTICLE III

AMENDMENT AND RESTATEMENT
OF THE EIGHTY-FOURTH SERIES OF FIRST MORTGAGE BONDS

Section 1. Amendment and Restatement of Bonds of the Eighty-fourth Series. At such time as all Prior First Mortgage Bonds of the Eighty-fourth Series issued under the Prior Supplemental Indenture (other than the Bonds of that series redesignated as the Bonds of the Ninety-first Series, the Bonds of the Ninety-second Series and the Bonds of the Ninety-third Series) not heretofore cancelled by the Trustee or delivered to the Trustee cancelled or for cancellation have been delivered to the Trustee by the registered holder thereof to be exchanged for new Bonds under this Article III (which shall be deemed to be the "Effective Date" of this Article III) such Prior First Mortgage Bonds of the Eighty-fourth Series not heretofore cancelled by the Trustee or delivered to the Trustee cancelled or for cancellation shall be amended and restated as set forth in this Article III and redesignated "First Mortgage Bonds, Floating Rate Series D due July 1, 2015" (hereinafter sometimes referred to as the "Amended and Restated Bonds of the Eighty-fourth Series").

The Amended and Restated Bonds of the Eighty-fourth Series shall be registered in the name of the Series 1985A NYSERDA Trustee, as trustee on behalf of the holders of the Series 1985A NYSERDA Bonds, pursuant to the Series 1985A NYSERDA Indenture.

Following such redesignation and exchange, the permitted principal amount of the Amended and Restated Bonds of the Eighty-fourth Series which may be amended and restated by the Company and executed by the Company in connection therewith and authenticated by the Trustee is limited so that at no time shall there be authenticated, delivered or outstanding under the Indenture, Amended and Restated Bonds of the Eighty-fourth Series for a principal amount exceeding $100,000,000, except that Amended and Restated Bonds of the Eighty-fourth Series may always be issued as provided in Section 2 of Article Fourth of the Indenture.

On the Effective Date of this Article III, the Company shall execute and deliver to the Trustee and the Trustee, without awaiting the filing or recording of this Supplemental Indenture but upon receipt of evidence of due compliance by the Company with the applicable provisions of the Indenture, shall authenticate pursuant to Section 10 of Article Second of the Indenture, the Amended and Restated Bonds of the Eighty-fourth Series in an aggregate principal amount not exceeding $100,000,000 and deliver the same to the Series 1985A NYSERDA Trustee, in exchange for certificates representing the same principal amount of the Prior First Mortgage Bonds delivered to the Trustee by the Series 1985A NYSERDA Trustee or Toronto Dominion (Texas), Inc., as the Prior LC Issuer.

Section 2. Terms of the Amended and Restated Bonds of the Eighty-fourth Series. The Amended and Restated Bonds of the Eighty-fourth Series shall mature according to their terms on July 1, 2015 and, in the case of the initial authentication of the Amended and Restated Bonds of the Eighty-fourth Series, shall be dated the Effective Date and shall bear interest from the Effective Date at the rate per annum sufficient to pay interest accruing on the Series 1985A NYSERDA Bonds as it becomes due, payable on the dates on which interest is payable on the Series 1985A NYSERDA Bonds under the Series 1985A NYSERDA Indenture. The principal of, and premium, if any, in respect of, the Amended and Restated Bonds of the Eighty-fourth Series shall be payable on the same date or dates and in the same amounts as set forth in the Series 1985A NYSERDA Indenture for the payment of principal on, or premium, if any, in respect of, the Series 1985A NYSERDA Bonds. Definitive Bonds of said series shall be registered Bonds without coupons and shall be issued in denominations of $1,000 and multiples thereof.

Subsequent to the initial authentication of the Amended and Restated Bonds of the Eighty-fourth Series, each Amended and Restated Bond of the Eighty-fourth Series shall be dated as of the date of its authentication and shall bear interest from the Effective Date.

Notwithstanding any other provision contained herein, the obligation of the Company to make payments of the principal of and premium, if any, and interest on the Amended and Restated Bonds of the Eighty-fourth Series shall be fully or partially satisfied and discharged, and the amount of any such payment shall be reduced, to the extent that the Company shall have made the payment, in full or in part, of principal and premium, if any, and interest then due on the Series 1985A NYSERDA Bonds, and the Trustee shall not have received written notice from the Company that the obligation of the Company shall not be so satisfied and discharged and the amount of any such payment so reduced.

Notwithstanding anything to the contrary contained herein or in the Indenture, the Trustee may conclusively presume that no Event of Default with respect to the Amended and Restated Bonds of the Eighty-fourth Series or, as that term is defined in the Series 1985A NYSERDA Indenture, with respect to the Series 1985A NYSERDA Bonds, has occurred and no amounts are due under the Amended and Restated Bonds of the Eighty-third Series unless and until the Trustee shall have received from the Series 1985A NYSERDA Trustee a notice of the occurrence of an Event of Default (as defined in the Series 1985A NYSERDA Indenture) or written demand from the Series 1985A NYSERDA Trustee (which notice or demand has not been subsequently rescinded or revoked by the Series 1985A NYSERDA Trustee), setting forth in detail the amount then due with respect to such Series 1985A NYSERDA Bonds, which statement shall, unless and until revoked, rescinded or amended by the Series 1985A NYSERDA Trustee, be deemed to be correct, and the Trustee shall be entitled and authorized to rely conclusively thereon.

The interest payable on any interest payment date shall be paid to the persons in whose names the Amended and Restated Bonds of the Eighty-fourth Series were registered at the close of business on the record date for such payment of interest (except any such Bond which has been called for redemption on a date fixed for such redemption which is after such record date and prior to such interest payment date) notwithstanding any cancellation of Amended and Restated Bonds of the Eighty-fourth Series upon any registration of transfer or exchange thereof between such record date and such interest payment date; except that if the Company shall default in the payment of any interest due on such interest payment date such defaulted interest shall be paid to the persons in whose names Amended and Restated Bonds of the Eighty-fourth Series are registered either at the close of business on the date preceding the date of payment of such defaulted interest or on a subsequent record date fixed for the payment of such defaulted interest by notice given by mail by or on behalf of the Company to holders of Bonds of the Eighty-fourth Series not less than ten calendar days preceding such subsequent record date. The term "record date" as used herein shall mean, with respect to a regular interest payment date, the close of business on the day that is ten calendar days prior to such interest payment date or, if such day shall be a day on which banking institutions in The City of New York are authorized by law to close, the next preceding day which shall not be a day on which such institutions are so authorized to close or, in the case of defaulted interest, the close of business on any subsequent record date established as provided above.

All of the Amended and Restated Bonds of the Eighty-fourth Series shall be executed in the name and on behalf of the Company by a facsimile of the signature (or manual signature) of its President or a Vice President, and imprinted with its corporate seal (or a facsimile thereof), attested by a facsimile of the signature (or manual signature) of its Secretary or an Assistant Secretary.

Amended and Restated Bonds of the Eighty-fourth Series shall be lettered "RU" and numbered consecutively from RU-5 upwards, or shall bear such other letters as may be provided therefor by the Board of Directors of the Company.

To the extent that any payment of principal of and interest on the Amended and Restated Bonds of the Eighty-fourth Series (as well as any premium thereon applicable in case of any redemption thereof prior to maturity) shall be payable, all such amounts shall be payable at the office of the Company’s paying agent, which in the case of HSBC Bank USA, shall be its corporate trust office in the Borough of Manhattan, The City of New York, State of New York, or at such other office or agency in the Borough of Manhattan, The City of New York, State of New York, as shall be maintained by the Company for such purpose, in such coin or currency of the United States of America as at the time of payment shall be legal tender for public and private debts.

Section 3. Redemption of the Amended and Restated Bonds of the Eighty-fourth Series. The Amended and Restated Bonds of the Eighty-fourth Series are subject to mandatory redemption, in whole or in part, in the event of any optional or mandatory redemption of the Series 1985A NYSERDA Bonds, on the date fixed for such mandatory redemption of the Series 1985A NYSERDA Bonds, upon notice given as hereinafter in this Section 3 provided, at the applicable redemption price specified in the Series 1985A NYSERDA Indenture for the Series 1985A NYSERDA Bonds being redeemed, in such amount as, together with any moneys available therefor under the Series 1985A NYSERDA Indenture, shall be required, in accordance with the provisions of the Series 1985A NYSERDA Participation Agreement and the Series 1985A NYSERDA Indenture, to pay the principal of and premium, if any, and interest on the Series 1985A NYSERDA Bonds so redeemed.

The Amended and Restated Bonds of the Eighty-fourth Series are subject to mandatory redemption, as a whole but not in part, at a redemption price equal to 100% of the principal amount thereof, together with interest accrued to the date fixed for redemption, upon a declaration by the Series 1985A NYSERDA Trustee that the principal of all Series 1985A NYSERDA Bonds then outstanding is immediately due and payable pursuant to the Series 1985A NYSERDA Indenture and upon written notice thereof by the Series 1985A NYSERDA Trustee to the Trustee at least 30 days prior to the date fixed for redemption, provided that no written cancellation of such declaration shall have been received by the Trustee and the Company prior to notice of such redemption having been given to the Trustee.

No redemption of the Amended and Restated Bonds of the Eighty-fourth Series, either as a whole or in part, may be made except in connection with the payment of a like principal amount of Series 1985A NYSERDA Bonds, either by redemption or at maturity (stated or otherwise), which Series 1985A NYSERDA Bonds, shall not thereafter be remarketed. The principal amount of the Series 1985A NYSERDA Bonds and, therefore, the principal of the Bonds of the Eighty-fourth Series, may be prepaid, and the due dates thereof shall be accelerated, in accordance with the terms of the Series 1985A NYSERDA Indenture.

In case the Company shall at any time desire or be required so to redeem part or all of the Amended and Restated Bonds of the Eighty-fourth Series then outstanding, the Company shall give to the Trustee notice in writing at least 45 days prior to the redemption date fixed by the Company (unless a shorter notice is required for the corresponding redemption under the Series 1985A NYSERDA Indenture or shall be satisfactory to the Trustee) of the principal amount of Amended and Restated Bonds of the Eighty-fourth Series which it desires or is required to redeem, specifying the date on which it desires or is required to make redemption. There shall be furnished to the Trustee a certificate or opinion executed by the President or a Vice-President and the Treasurer or an Assistant Treasurer of the Company stating that the conditions precedent specified in this Section 3 with respect to such redemption have been complied with and notwithstanding anything to the contrary contained herein or in the Indenture, prior to receipt of a notice of default, the Trustee shall be entitled and authorized to rely conclusively thereon. As soon as practicable thereafter, if the Bonds are to be redeemed in part, the Trustee shall issue to the Series 1985A NYSERDA Trustee, a new Bond or Bonds of the Eighty-fourth Series in the principal amount not so redeemed in exchange for the outstanding Bonds.

The Trustee may, to the extent permitted by the provisions of Section 4 of Article Tenth of the Indenture, accept the certificate of the President or any Vice President or the Treasurer of the Company as sufficient evidence that the requirements as to mailing of notices of the call for redemption have been fully complied with or the Trustee may, at its option and at the expense and on behalf of the Company, give such notice and take any other action required of the Company in connection with such redemption.

Section 4. Effect of Payment. On or prior to the redemption date specified in any such notice, the Company shall deposit with the Trustee a sum of money, of the character specified as the medium of payment in the Amended and Restated Bonds of the Eighty-fourth Series called for redemption, which together with any moneys available therefor under the Series 1985A NYSERDA Indenture is sufficient to redeem, at the redemption price payable as hereinbefore provided, the Bonds of such series designated for redemption and the called part of any Bond of such series called only in part, and to pay the interest accrued thereon up to said redemption date, to be applied by the Trustee to the payment of such Bonds (and the called part of any such Bond) and such accrued interest thereon upon presentation and surrender of such Bonds, together with duly executed instruments of transfer, at the corporate trust office of the Trustee, or at such other office or agency as shall be maintained by the Company for such purpose; and, after such deposit shall have been made, such Bonds so called in whole and the called part of any such Bonds called only in part, whether or not presented for redemption shall cease to be entitled to any benefit, lien or security under the Indenture, no interest will accrue thereon on or after the redemption date duly specified in said notice, and claims for interest, if any, appertaining to such Bonds, and the called part of any such Bond called only in part, maturing after that date shall be void. All Bonds so redeemed shall forthwith be cancelled and, upon its written request, delivered to the Company or otherwise disposed of; and no Bonds shall be issued hereunder in place of any such Bonds, except as otherwise provided in Article Fourth of the Indenture and except that, if less than the entire principal amount of any Bond shall be so redeemed, upon presentation of such Bond so called in part, with proper instruments of transfer if required, at or after the time fixed for the payment of said Bonds so called for redemption, payment of the principal amount of the part thereof so called shall be made upon surrender and cancellation of said Bond so presented, and one or more Amended and Restated Bonds of the Eighty-fourth Series, for a principal amount equal to the uncalled and unpaid balance of the principal amount of such Bond, will be executed by the Company and shall be authenticated and delivered by the Trustee to the owner of such Bond, without expense to such owner. If the Series 1985A NYSERDA Bonds have been redeemed in whole or in part, the Amended and Restated Bonds of the Eighty-fourth Series shall be deemed to have been redeemed in whole or in part in the equivalent principal amount. The Trustee shall be entitled and authorized to rely conclusively on a certificate of the Company as to such redemption, together with the surrender by the Bondholder of such redeemed Bonds for cancellation or for exchange for one or more replacement Bonds in the aggregate principal amount of such unredeemed portion of the Bonds as evidence of such redemption. Notwithstanding the foregoing, the principal and interest due on the Amended and Restated Bonds of the Eighty-fourth Series shall continue or be reinstated, as the case may be, if at any time any payment of principal or interest (whether under the Amended and Restated Bonds of the Eighty-fourth Series or the Series 1985A NYSERDA Bonds) is rescinded or must otherwise be returned by the Series 1985A NYSERDA Trustee or the holders of the Series 1985A NYSERDA Bonds or any other person upon the insolvency, bankruptcy or reorganization of the Company or by operation of law, all as though payment had not been made.

Section 5. Exchange of Bonds. The registered owner (or assigns) of any Amended and Restated Bond of the Eighty-fourth Series may at any time surrender the same at the corporate trust office of the Trustee, or at any other office or agency of the Trustee or the Company maintained for such purpose, and with instruments of transfer satisfactory to the Trustee, and, subject to the terms, conditions and limitations specified in the Indenture, shall be entitled to receive in exchange therefor an equal principal amount of Bonds of said series of other authorized denominations; and the Company will provide, and the Trustee shall authenticate and deliver, the Bonds necessary to make such exchange. The Amended and Restated Bonds of the Eighty-fourth Series are nontransferable except to effect transfer to any successor to the Series 1985A NYSERDA Trustee, to the Bond Insurer or to any successor to the Bond Insurer, any such transfer of an Amended and Restated Bond of the Eighty-fourth Series to be made at the principal corporate trust office of the Trustee, upon surrender and cancellation of such Bond, accompanied by a written instrument of transfer in a form approved by the Company and the Trustee, duly executed by the registered holder of such Bond or by his duly authorized attorney, and thereupon a new Amended and Restated Bond or Bonds of the Eighty-fourth Series, for a like principal amount and bearing interest at the same rates and having the same maturity date, will be issued to the successor to the Series 1985A NYSERDA Trustee, the Bond Insurer or the successor to the Bond Insurer, as the case may be, in exchange therefor, as provided in the Indenture. The provisions of Section 12 of Article Second of the Original Indenture to the contrary notwithstanding, no payment of a service charge shall be required for any exchange or registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto.

Section 6. Form of Amended and Restated Bonds of the Eighty-fourth Series. The definitive Amended and Restated Bonds of the Eighty-fourth Series, and the Trustee’s certificate to be inscribed on all Bonds of said series, are to be substantially in the forms set forth in Exhibit A. Such Amended and Restated Bonds of the Eighty-fourth Series shall be issued to the NYSERDA Trustee, in the initial principal amount, and with the description of the Bonds, identification of the series of NYSERDA Bonds and the corresponding NYSERDA Trustee and the NYSERDA Indenture, all as specified in Section 1 of this Article III.

ARTICLE IV

AMENDMENT AND RESTATEMENT
OF THE EIGHTY-FIFTH SERIES OF FIRST MORTGAGE BONDS

Section 1. Amendment and Restatement of Bonds of the Eighty-fifth Series. At such time as all Prior First Mortgage Bonds of the Eighty-fifth Series issued under the Prior Supplemental Indenture not heretofore cancelled by the Trustee or delivered to the Trustee cancelled or for cancellation have been delivered to the Trustee by the registered holder thereof to be exchanged for new Bonds under this Article IV (which shall be deemed to be the "Effective Date" of this Article IV), such Prior First Mortgage Bonds of the Eighty-fifth Series not heretofore cancelled by the Trustee or delivered to the Trustee cancelled or for cancellation shall be amended and restated as set forth in this Article IV and redesignated "First Mortgage Bonds, Floating Rate Series E due December 1, 2025" (hereinafter sometimes referred to as the "Amended and Restated Bonds of the Eighty-fifth Series").

The Amended and Restated Bonds of the Eighty-fifth Series shall be registered in the name of the Series 1985C NYSERDA Trustee, as trustee on behalf of the holders of the Series 1985C NYSERDA Bonds, pursuant to the Series 1985C NYSERDA Indenture.

The permitted principal amount of the Amended and Restated Bonds of the Eighty-fifth Series which may be amended and restated by the Company and executed by the Company in connection therewith and authenticated by the Trustee is limited so that at no time shall there be authenticated, delivered or outstanding under the Indenture, Amended and Restated Bonds of the Eighty-fifth Series for a principal amount exceeding $37,500,000, except that Amended and Restated Bonds of the Eighty-fifth Series may always be issued as provided in Section 2 of Article Fourth of the Indenture.

On the Effective Date of this Article IV, the Company shall execute and deliver to the Trustee and the Trustee, without awaiting the filing or recording of this Supplemental Indenture but upon receipt of evidence of due compliance by the Company with the applicable provisions of the Indenture, shall authenticate pursuant to Section 10 of Article Second of the Indenture, the Amended and Restated Bonds of the Eighty-fifth Series in an aggregate principal amount not exceeding $37,500,000 and deliver the same to the Series 1985C NYSERDA Trustee, in exchange for certificates representing the same principal amount of the Prior First Mortgage Bonds delivered to the Trustee by the Series 1985C NYSERDA Trustee or Morgan Guaranty Trust Company, as the Prior LC Issuer.

Section 2. Terms of the Amended and Restated Bonds of the Eighty-fifth Series. The Amended and Restated Bonds of the Eighty-fifth Series shall mature according to their terms on December 1, 2025 and, in the case of the initial authentication of the Amended and Restated Bonds of the Eighty-fifth Series, shall be dated the Effective Date and shall bear interest from the Effective Date at the rate per annum sufficient to pay interest accruing on the Series 1985C NYSERDA Bonds, as it becomes due, payable on the dates on which interest is payable on the Series 1985C NYSERDA Bonds, under the Series 1985C NYSERDA Indenture. The principal of, and premium, if any, in respect of, the Amended and Restated Bonds of the Eighty-fifth Series shall be payable on the same date or dates and in the same amounts as set forth in the Series 1985C NYSERDA Indenture for the payment of principal on, or premium, if any, in respect of, the Series 1985C NYSERDA Bonds. Definitive Bonds of said series shall be registered Bonds without coupons and shall be issued in denominations of $1,000 and multiples thereof.

Subsequent to the initial authentication of the Amended and Restated Bonds of the Eighty-fifth Series, each Amended and Restated Bond of the Eighty-fifth Series shall be dated as of the date of its authentication and shall bear interest from the Effective Date.

Notwithstanding any other provision contained herein, the obligation of the Company to make payments of the principal of and premium, if any, and interest on the Amended and Restated Bonds of the Eighty-fifth Series shall be fully or partially satisfied and discharged, and the amount of any such payment shall be reduced, to the extent that the Company shall have made the payment, in full or in part, of principal and premium, if any, and interest then due on the Series 1985C NYSERDA Bonds, and the Trustee shall not have received written notice from the Company that the obligation of the Company shall not be so satisfied and discharged and the amount of any such payment so reduced.

Notwithstanding anything to the contrary contained herein or in the Indenture, the Trustee may conclusively presume that no Event of Default with respect to the Amended and Restated Bonds of the Eighty-fifth Series or, as that term is defined in the Series 1985C NYSERDA Indenture, with respect to the Series 1985C NYSERDA Bonds, has occurred and no amounts are due under the Amended and Restated Bonds of the Eighty-third Series unless and until the Trustee shall have received from the Series 1985C NYSERDA Trustee a notice of the occurrence of an Event of Default (as defined in the Series 1985C NYSERDA Indenture) or written demand from the Series 1985C NYSERDA Trustee (which notice or demand has not been subsequently rescinded or revoked by the Series 1985C NYSERDA Trustee), setting forth in detail the amount then due with respect to such Series 1985C NYSERDA Bonds, which statement shall, unless and until revoked, rescinded or amended by the Series 1985C NYSERDA Trustee, be deemed to be correct, and the Trustee shall be entitled and authorized to rely conclusively thereon.

The interest payable on any interest payment date shall be paid to the persons in whose names the Amended and Restated Bonds of the Eighty-fifth Series were registered at the close of business on the record date for such payment of interest (except any such Bond which has been called for redemption on a date fixed for such redemption which is after such record date and prior to such interest payment date) notwithstanding any cancellation of Amended and Restated Bonds of the Eighty-fifth Series upon any registration of transfer or exchange thereof between such record date and such interest payment date; except that if the Company shall default in the payment of any interest due on such interest payment date such defaulted interest shall be paid to the persons in whose names Amended and Restated Bonds of the Eighty-fifth Series are registered either at the close of business on the date preceding the date of payment of such defaulted interest or on a subsequent record date fixed for the payment of such defaulted interest by notice given by mail by or on behalf of the Company to holders of Bonds of the Eighty-fifth Series not less than ten calendar days preceding such subsequent record date. The term "record date" as used herein shall mean, with respect to a regular interest payment date, the close of business on the day that is ten calendar days prior to such interest payment date or, if such day shall be a day on which banking institutions in The City of New York are authorized by law to close, the next preceding day which shall not be a day on which such institutions are so authorized to close or, in the case of defaulted interest, the close of business on any subsequent record date established as provided above.

All of the Amended and Restated Bonds of the Eighty-fifth Series shall be executed in the name and on behalf of the Company by a facsimile of the signature (or manual signature) of its President or a Vice President, and imprinted with its corporate seal (or a facsimile thereof), attested by a facsimile of the signature (or manual signature) of its Secretary or an Assistant Secretary.

Amended and Restated Bonds of the Eighty-fifth Series shall be lettered "RU" and numbered consecutively from RU-4 upwards, or shall bear such other letters as may be provided therefor by the Board of Directors of the Company.

To the extent that any payment of principal of and interest on the Amended and Restated Bonds of the Eighty-fifth Series (as well as any premium thereon applicable in case of any redemption thereof prior to maturity) shall be payable, all such amounts shall be payable at the office of the Company’s paying agent, which in the case of HSBC Bank USA, shall be its corporate trust office in the Borough of Manhattan, The City of New York, State of New York, or at such other office or agency in the Borough of Manhattan, The City of New York, State of New York, as shall be maintained by the Company for such purpose, in such coin or currency of the United States of America as at the time of payment shall be legal tender for public and private debts.

Section 3. Redemption of the Amended and Restated Bonds of the Eighty-fifth Series. The Amended and Restated Bonds of the Eighty-fifth Series are subject to mandatory redemption, in whole or in part, in the event of any optional or mandatory redemption of the Series 1985C NYSERDA Bonds, on the date fixed for such mandatory redemption of the Series 1985C NYSERDA Bonds, upon notice given as hereinafter in this Section 3 provided, at the applicable redemption price specified in the Series 1985C NYSERDA Indenture for the Series 1985C NYSERDA Bonds being redeemed, in such amount as, together with any moneys available therefor under the Series 1985C NYSERDA Indenture, shall be required, in accordance with the provisions of the Series 1985C NYSERDA Participation Agreement and the Series 1985C NYSERDA Indenture, to pay the principal of and premium, if any, and interest on the Series 1985C NYSERDA Bonds, so redeemed.

The Amended and Restated Bonds of the Eighty-fifth Series are subject to mandatory redemption, as a whole but not in part, at a redemption price equal to 100% of the principal amount thereof, together with interest accrued to the date fixed for redemption, upon a declaration by the Series 1985C NYSERDA Trustee that the principal of all Series 1985C NYSERDA Bonds then outstanding is immediately due and payable pursuant to the Series 1985C NYSERDA Indenture and upon written notice thereof by the Series 1985C NYSERDA Trustee to the Trustee at least 30 days prior to the date fixed for redemption, provided that no written cancellation of such declaration shall have been received by the Trustee and the Company prior to notice of such redemption having been given to the Trustee.

No redemption of the Amended and Restated Bonds of the Eighty-fifth Series, either as a whole or in part, may be made except in connection with the payment of a like principal amount of Series 1985C NYSERDA Bonds, either by redemption or at maturity (stated or otherwise), which Series 1985C NYSERDA Bonds, shall not thereafter be remarketed. The principal amount of the Series 1985C NYSERDA Bonds and, therefore, the principal of the Bonds of the Eighty-fifth Series, may be prepaid, and the due dates thereof shall be accelerated, in accordance with the terms of the Series 1985C NYSERDA Indenture.

In case the Company shall at any time desire or be required so to redeem part or all of the Amended and Restated Bonds of the Eighty-fifth Series then outstanding, the Company shall give to the Trustee notice in writing at least 45 days prior to the redemption date fixed by the Company (unless a shorter notice is required for the corresponding redemption under the Series 1985C NYSERDA Indenture or shall be satisfactory to the Trustee) of the principal amount of Amended and Restated Bonds of the Eighty-fifth Series which it desires or is required to redeem, specifying the date on which it desires or is required to make redemption. There shall be furnished to the Trustee a certificate or opinion executed by the President or a Vice-President and the Treasurer or an Assistant Treasurer of the Company stating that the conditions precedent specified in this Section 3 with respect to such redemption have been complied with and notwithstanding anything to the contrary contained herein or in the Indenture, prior to receipt of a notice of default, the Trustee shall be entitled and authorized to rely conclusively thereon. As soon as practicable thereafter, if the Bonds are to be redeemed in part, the Trustee shall issue to the Series 1985C NYSERDA Trustee, a new Bond or Bonds of the Eighty-fifth Series in the principal amount not so redeemed in exchange for the outstanding Bonds.

The Trustee may, to the extent permitted by the provisions of Section 4 of Article Tenth of the Indenture, accept the certificate of the President or any Vice President or the Treasurer of the Company as sufficient evidence that the requirements as to mailing of notices of the call for redemption have been fully complied with or the Trustee may, at its option and at the expense and on behalf of the Company, give such notice and take any other action required of the Company in connection with such redemption.

Section 4. Effect of Payment. On or prior to the redemption date specified in any such notice, the Company shall deposit with the Trustee a sum of money, of the character specified as the medium of payment in the Amended and Restated Bonds of the Eighty-fifth Series called for redemption, which together with any moneys available therefor under the Series 1985C NYSERDA Indenture is sufficient to redeem, at the redemption price payable as hereinbefore provided, the Bonds of such series designated for redemption and the called part of any Bond of such series called only in part, and to pay the interest accrued thereon up to said redemption date, to be applied by the Trustee to the payment of such Bonds (and the called part of any such Bond) and such accrued interest thereon upon presentation and surrender of such Bonds, together with duly executed instruments of transfer, at the corporate trust office of the Trustee, or at such other office or agency as shall be maintained by the Company for such purpose; and, after such deposit shall have been made, such Bonds so called in whole and the called part of any such Bonds called only in part, whether or not presented for redemption shall cease to be entitled to any benefit, lien or security under the Indenture, no interest will accrue thereon on or after the redemption date duly specified in said notice, and claims for interest, if any, appertaining to such Bonds, and the called part of any such Bond called only in part, maturing after that date shall be void. All Bonds so redeemed shall forthwith be cancelled and, upon its written request, delivered to the Company or otherwise disposed of; and no Bonds shall be issued hereunder in place of any such Bonds, except as otherwise provided in Article Fourth of the Indenture and except that, if less than the entire principal amount of any Bond shall be so redeemed, upon presentation of such Bond so called in part, with proper instruments of transfer if required, at or after the time fixed for the payment of said Bonds so called for redemption, payment of the principal amount of the part thereof so called shall be made upon surrender and cancellation of said Bond so presented, and one or more Amended and Restated Bonds of the Eighty-fifth Series, for a principal amount equal to the uncalled and unpaid balance of the principal amount of such Bond, will be executed by the Company and shall be authenticated and delivered by the Trustee to the owner of such Bond, without expense to such owner. If the Series 1985C NYSERDA Bonds have been redeemed in whole or in part, the Amended and Restated Bonds of the Eighty-fifth Series shall be deemed to have been redeemed in whole or in part in the equivalent principal amount. The Trustee shall be entitled and authorized to rely conclusively on a certificate of the Company as to such redemption, together with the surrender by the Bondholder of such redeemed Bonds for cancellation or for exchange for one or more replacement Bonds in the aggregate principal amount of such unredeemed portion of the Bonds as evidence of such redemption. Notwithstanding the foregoing, the principal and interest due on the Amended and Restated Bonds of the Eighty-fifth Series shall continue or be reinstated, as the case may be, if at any time any payment of principal or interest (whether under the Amended and Restated Bonds of the Eighty-fifth Series or the Series 1985C NYSERDA Bonds) is rescinded or must otherwise be returned by the Series 1985C NYSERDA Trustee or the holders of the Series 1985C NYSERDA Bonds or any other person upon the insolvency, bankruptcy or reorganization of the Company or by operation of law, all as though payment had not been made.

Section 5. Exchange of Bonds. The registered owner (or assigns) of any Amended and Restated Bond of the Eighty-fifth Series may at any time surrender the same at the corporate trust office of the Trustee, or at any other office or agency of the Trustee or the Company maintained for such purpose, and with instruments of transfer satisfactory to the Trustee, and, subject to the terms, conditions and limitations specified in the Indenture, shall be entitled to receive in exchange therefor an equal principal amount of Bonds of said series of other authorized denominations; and the Company will provide, and the Trustee shall authenticate and deliver, the Bonds necessary to make such exchange. The Amended and Restated Bonds of the Eighty-fifth Series are nontransferable except to effect transfer to any successor to the Series 1985C NYSERDA Trustee, to the Bond Insurer or to any successor to the Bond Insurer, any such transfer of an Amended and Restated Bond of the Eighty-fifth Series to be made at the principal corporate trust office of the Trustee, upon surrender and cancellation of such Bond, accompanied by a written instrument of transfer in a form approved by the Company and the Trustee, duly executed by the registered holder of such Bond or by his duly authorized attorney, and thereupon a new Amended and Restated Bond or Bonds of the Eighty-fifth Series, for a like principal amount and bearing interest at the same rates and having the same maturity date, will be issued to the successor to the Series 1985C NYSERDA Trustee, the Bond Insurer or the successor to the Bond Insurer, as the case may be, in exchange therefor, as provided in the Indenture. The provisions of Section 12 of Article Second of the Original Indenture to the contrary notwithstanding, no payment of a service charge shall be required for any exchange or registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto.

Section 6. Form of Amended and Restated Bonds of the Eighty-fifth Series. The definitive Amended and Restated Bonds of the Eighty-fifth Series, and the Trustee’s certificate to be inscribed on all Bonds of said series, are to be substantially in the forms set forth in Exhibit A. Such Amended and Restated Bonds of the Eighty-fifth Series shall be issued to the NYSERDA Trustee, in the initial principal amount, and with the description of the Bonds, identification of the series of NYSERDA Bonds and the corresponding NYSERDA Trustee and the NYSERDA Indenture, all as specified in Section 1 of this Article IV.

ARTICLE V

AMENDMENT AND RESTATEMENT OF
THE FIRST SPLIT PORTION OF THE BONDS OF THE EIGHTY-THIRD SERIES
REDESIGNATED AS THE BONDS OF THE EIGHTY-NINTH SERIES

Section 1. Exchange, Amendment and Restatement of Bonds of the Eighty-ninth Series. At such time as Prior First Mortgage Bonds of the Eighty-third Series in the principal amount of $69,800,000 issued under the Prior Supplemental Indenture not heretofore cancelled by the Trustee or delivered to the Trustee cancelled or for cancellation have been delivered to the Trustee by the registered holder thereof to be exchanged for new Bonds under this Article V (which shall be deemed to be the "Effective Date" of this Article V), such portion of the Prior First Mortgage Bonds of the Eighty-third Series shall be split from the remaining Prior First Mortgage Bonds of the Eighty-third Series, shall be amended and restated as set forth in this Article V, and shall be redesignated "First Mortgage Bonds, Floating Rate Series F due December 1, 2023" (hereinafter sometimes referred to as the "Bonds of the Eighty-ninth Series").

The Bonds of the Eighty-ninth Series shall be registered in the name of the Series 1988A NYSERDA Trustee, as trustee on behalf of the holders of the Series 1988A NYSERDA Bonds pursuant to the Series 1988A NYSERDA Indenture.

Following such redesignation and exchange, the permitted principal amount of the Bonds of the Eighty-ninth Series which may be amended and restated by the Company and executed by the Company in connection therewith and authenticated by the Trustee is limited so that at no time shall there be authenticated, delivered or outstanding under the Indenture, Bonds of the Eighty-ninth Series for a principal amount exceeding $69,800,000, except that Bonds of the Eighty-ninth Series may always be issued as provided in Section 2 of Article Fourth of the Indenture.

On the Effective Date of this Article V, the Company shall execute and deliver to the Trustee and the Trustee, without awaiting the filing or recording of this Supplemental Indenture but upon receipt of evidence of due compliance by the Company with the applicable provisions of the Indenture, shall authenticate pursuant to Section 10 of Article Second of the Indenture, the Bonds of the Eighty-ninth Series in an aggregate principal amount not exceeding $69,800,000 and deliver the same to the Series 1988A NYSERDA Trustee, in exchange for certificates representing the same principal amount of the Prior First Mortgage Bonds delivered to the Trustee by the NYSERDA Trustee or Morgan Guaranty Trust Company, as the Prior LC Issuer.

Section 2. Terms of the Bonds of the Eighty-ninth Series. The Bonds of the Eighty-ninth Series shall mature according to their terms on December 1, 2023 and, in the case of the initial authentication of the Bonds of the Eighty-ninth Series, shall be dated the Effective Date and shall bear interest from the Effective Date at the rate per annum sufficient to pay interest accruing on the Series 1988A NYSERDA Bonds as it becomes due, payable on the dates on which interest is payable on the Series 1988A NYSERDA Bonds under the Series 1988A NYSERDA Indenture. The principal of, and premium, if any, in respect of, the Bonds of the Eighty-ninth Series shall be payable on the same date or dates and in the same amounts as set forth in the Series 1988A NYSERDA Indenture for the payment of principal on, or premium, if any, in respect of, the Series 1988A NYSERDA Bonds. Definitive Bonds of said series shall be registered Bonds without coupons and shall be issued in denominations of $1,000 and multiples thereof.

Subsequent to the initial authentication of the Bonds of the Eighty-ninth Series, each Bond of the Eighty-ninth Series shall be dated as of the date of its authentication and shall bear interest from the Effective Date.

Notwithstanding any other provision contained herein, the obligation of the Company to make payments of the principal of and premium, if any, and interest on the Bonds of the Eighty-ninth Series shall be fully or partially satisfied and discharged, and the amount of any such payment shall be reduced, to the extent that the Company shall have made the payment, in full or in part, of principal and premium, if any, and interest then due on the Series 1988A NYSERDA Bonds, and the Trustee shall not have received written notice from the Company that the obligation of the Company shall not be so satisfied and discharged and the amount of any such payment so reduced.

Notwithstanding anything to the contrary contained herein or in the Indenture, the Trustee may conclusively presume that no Event of Default with respect to the Bonds of the Eighty-ninth Series or, as that term is defined in the Series 1988A NYSERDA Indenture, with respect to the Series 1988A NYSERDA Bonds, has occurred and no amounts are due under the Bonds of the Eighty-ninth Series unless and until the Trustee shall have received from the Series 1988A NYSERDA Trustee a notice of the occurrence of an Event of Default (as defined in the Series 1988A NYSERDA Indenture) or written demand from the Series 1988A NYSERDA Trustee (which notice or demand has not been subsequently rescinded or revoked by the Series 1988A NYSERDA Trustee), setting forth in detail the amount then due with respect to such Series 1988A NYSERDA Bonds, which statement shall, unless and until revoked, rescinded or amended by the Series 1988A NYSERDA Trustee, be deemed to be correct, and the Trustee shall be entitled and authorized to rely conclusively thereon.

The interest payable on any interest payment date shall be paid to the persons in whose names the Bonds of the Eighty-ninth Series were registered at the close of business on the record date for such payment of interest (except any such Bond which has been called for redemption on a date fixed for such redemption which is after such record date and prior to such interest payment date) notwithstanding any cancellation of Bonds of the Eighty-ninth Series upon any registration of transfer or exchange thereof between such record date and such interest payment date; except that if the Company shall default in the payment of any interest due on such interest payment date such defaulted interest shall be paid to the persons in whose names Bonds of the Eighty-ninth Series are registered either at the close of business on the date preceding the date of payment of such defaulted interest or on a subsequent record date fixed for the payment of such defaulted interest by notice given by mail by or on behalf of the Company to holders of Bonds of the Eighty-ninth Series not less than ten calendar days preceding such subsequent record date. The term "record date" as used herein shall mean, with respect to a regular interest payment date, the close of business on the day that is ten calendar days prior to such interest payment date or, if such day shall be a day on which banking institutions in The City of New York are authorized by law to close, the next preceding day which shall not be a day on which such institutions are so authorized to close or, in the case of defaulted interest, the close of business on any subsequent record date established as provided above.

All of the Bonds of the Eighty-ninth Series shall be executed in the name and on behalf of the Company by a facsimile of the signature (or manual signature) of its President or a Vice President, and imprinted with its corporate seal (or a facsimile thereof), attested by a facsimile of the signature (or manual signature) of its Secretary or an Assistant Secretary.

Bonds of the Eighty-ninth Series shall be lettered "RU" and numbered consecutively from RU-1 upwards, or shall bear such other letters as may be provided therefor by the Board of Directors of the Company.

Both principal of and interest on the Bonds of the Eighty-ninth Series (as well as any premium thereon applicable in case of any redemption thereof prior to maturity) shall be payable at the office of the Company’s paying agent, which in the case of HSBC Bank USA, shall be its corporate trust office in the Borough of Manhattan, The City of New York, State of New York, or at such other office or agency in the Borough of Manhattan, The City of New York, State of New York, as shall be maintained by the Company for such purpose, in such coin or currency of the United States of America as at the time of payment shall be legal tender for public and private debts.

Section 3. Redemption of the Bonds of the Eighty-ninth Series. The Bonds of the Eighty-ninth Series are subject to mandatory redemption, in whole or in part, in the event of any optional or mandatory redemption of the Series 1988A NYSERDA Bonds, on the date fixed for such mandatory redemption of the Series 1988A NYSERDA Bonds, upon notice given as hereinafter in this Section 3 provided, at the applicable redemption price specified in the Series 1988A NYSERDA Indenture for the Series 1988A NYSERDA Bonds being redeemed, in such amount as, together with any moneys available therefor under the Series 1988A NYSERDA Indenture, shall be required, in accordance with the provisions of the Series 1988A NYSERDA Participation Agreement and the Series 1988A NYSERDA Indenture, to pay the principal of and premium, if any, and interest on the Series 1988A NYSERDA Bonds so redeemed.

The Bonds of the Eighty-ninth Series are subject to mandatory redemption, as a whole but not in part, at a redemption price equal to 100% of the principal amount thereof, together with interest accrued to the date fixed for redemption, upon a declaration by the Series 1988A NYSERDA Trustee that the principal of all Series 1988A NYSERDA Bonds then outstanding is immediately due and payable pursuant to the Series 1988A NYSERDA Indenture and upon written notice thereof by the Series 1988A NYSERDA Trustee to the Trustee at least 30 days prior to the date fixed for redemption, provided that no written cancellation of such declaration shall have been received by the Trustee and the Company prior to notice of such redemption having been given to the Trustee.

No redemption of the Bonds of the Eighty-ninth Series, either as a whole or in part, may be made except in connection with the payment of a like principal amount of Series 1988A NYSERDA Bonds, either by redemption or at maturity (stated or otherwise), which Series 1988A NYSERDA Bonds, shall not thereafter be remarketed. The principal amount of the Series 1988A NYSERDA Bonds and, therefore, the principal of the Bonds of the Eighty-ninth Series, may be prepaid, and the due dates thereof shall be accelerated, in accordance with the terms of the Series 1988A NYSERDA Indenture.

In case the Company shall at any time desire or be required so to redeem part or all of the Bonds of the Eighty-ninth Series then outstanding, the Company shall give to the Trustee notice in writing at least 45 days prior to the redemption date fixed by the Company (unless a shorter notice is required for the corresponding redemption under the Series 1988A NYSERDA Indenture or shall be satisfactory to the Trustee) of the principal amount of Bonds of the Eighty-ninth Series which it desires or is required to redeem, specifying the date on which it desires or is required to make redemption. There shall be furnished to the Trustee a certificate or opinion executed by the President or a Vice-President and the Treasurer or an Assistant Treasurer of the Company stating that the conditions precedent specified in this Section 3 with respect to such redemption have been complied with and notwithstanding anything to the contrary contained herein or in the Indenture, prior to receipt of a notice of default, the Trustee shall be entitled and authorized to rely conclusively thereon. As soon as practicable thereafter, if the Bonds are to be redeemed in part, the Trustee shall issue to the Series 1988A NYSERDA Trustee a new Bond or Bonds of the Eighty-ninth Series in the principal amount not so redeemed in exchange for the outstanding Bonds.

The Trustee may, to the extent permitted by the provisions of Section 4 of Article Tenth of the Indenture, accept the certificate of the President or any Vice President or the Treasurer of the Company as sufficient evidence that the requirements as to mailing of notices of the call for redemption have been fully complied with or the Trustee may, at its option and at the expense and on behalf of the Company, give such notice and take any other action required of the Company in connection with such redemption.

Section 4. Effect of Payment. On or prior to the redemption date specified in any such notice, the Company shall deposit with the Trustee a sum of money, of the character specified as the medium of payment in the Bonds of the Eighty-ninth Series called for redemption, which together with any moneys available therefor under the Series 1988A NYSERDA Indenture is sufficient to redeem, at the redemption price payable as hereinbefore provided, the Bonds of such series designated for redemption and the called part of any Bond of such series called only in part, and to pay the interest accrued thereon up to said redemption date, to be applied by the Trustee to the payment of such Bonds (and the called part of any such Bond) and such accrued interest thereon upon presentation and surrender of such Bonds, together with duly executed instruments of transfer, at the corporate trust office of the Trustee, or at such other office or agency as shall be maintained by the Company for such purpose; and, after such deposit shall have been made, such Bonds so called in whole and the called part of any such Bonds called only in part, whether or not presented for redemption shall cease to be entitled to any benefit, lien or security under the Indenture, no interest will accrue thereon on or after the redemption date duly specified in said notice, and claims for interest, if any, appertaining to such Bonds, and the called part of any such Bond called only in part, maturing after that date shall be void. All Bonds so redeemed shall forthwith be cancelled and, upon its written request, delivered to the Company or otherwise disposed of; and no Bonds shall be issued hereunder in place of any such Bonds, except as otherwise provided in Article Fourth of the Indenture and except that, if less than the entire principal amount of any Bond shall be so redeemed, upon presentation of such Bond so called in part, with proper instruments of transfer if required, at or after the time fixed for the payment of said Bonds so called for redemption, payment of the principal amount of the part thereof so called shall be made upon surrender and cancellation of said Bond so presented, and one or more Bonds of the Eighty-ninth Series, for a principal amount equal to the uncalled and unpaid balance of the principal amount of such Bond, will be executed by the Company and shall be authenticated and delivered by the Trustee to the owner of such Bond, without expense to such owner. If the Series 1988A NYSERDA Bonds have been redeemed in whole or in part, the Bonds of the Eighty-ninth Series shall be deemed to have been redeemed in whole or in part in the equivalent principal amount. The Trustee shall be entitled and authorized to rely conclusively on a certificate of the Company as to such redemption, together with the surrender by the Bondholder of such redeemed Bonds for cancellation or for exchange for one or more replacement Bonds in the aggregate principal amount of such unredeemed portion of the Bonds as evidence of such redemption. Notwithstanding the foregoing, the principal and interest due on the Bonds of the Eighty-ninth Series shall continue or be reinstated, as the case may be, if at any time any payment of principal or interest (whether under the Bonds of the Eighty-ninth Series or the Series 1988A NYSERDA Bonds) is rescinded or must otherwise be returned by the Series 1988A NYSERDA Trustee or the holders of the Series 1988A NYSERDA Bonds or any other person upon the insolvency, bankruptcy or reorganization of the Company or by operation of law, all as though payment had not been made.

Section 5. Exchange of Bonds. The registered owner (or assigns) of any Bond of the Eighty-ninth Series may at any time surrender the same at the corporate trust office of the Trustee, or at any other office or agency of the Trustee or the Company maintained for such purpose, and with instruments of transfer satisfactory to the Trustee, and, subject to the terms, conditions and limitations specified in the Indenture, shall be entitled to receive in exchange therefor an equal principal amount of Bonds of said series of other authorized denominations; and the Company will provide, and the Trustee shall authenticate and deliver, the Bonds necessary to make such exchange. The Bonds of the Eighty-ninth Series are nontransferable except to effect transfer to any successor to the Series 1988A NYSERDA Trustee, to the Bond Insurer or to any successor to the Bond Insurer, any such transfer of a Bond of the Eighty-ninth Series to be made at the principal corporate trust office of the Trustee, upon surrender and cancellation of such Bond, accompanied by a written instrument of transfer in a form approved by the Company and the Trustee, duly executed by the registered holder of such Bond or by his duly authorized attorney, and thereupon a new Bond or Bonds of the Eighty-ninth Series, for a like principal amount and bearing interest at the same rates and having the same maturity date, will be issued to the successor to the Series 1988A NYSERDA Trustee, the Bond Insurer or the successor to the Bond Insurer, as the case may be, in exchange therefor, as provided in the Indenture. The provisions of Section 12 of Article Second of the Original Indenture to the contrary notwithstanding, no payment of a service charge shall be required for any exchange or registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto.

Section 6. Form of Bonds of the Eighty-ninth Series. The definitive Bonds of the Eighty-ninth Series, and the Trustee’s certificate to be inscribed on all Bonds of said series, are to be substantially in the forms set forth in Exhibit A. Such Bonds of the Eighty-ninth Series shall be issued to the NYSERDA Trustee, in the initial principal amount, and with the description of the Bonds, identification of the series of NYSERDA Bonds and the corresponding NYSERDA Trustee and the NYSERDA Indenture, all as specified in Section 1 of this Article V.

ARTICLE VI

AMENDMENT AND RESTATEMENT OF
THE SECOND SPLIT PORTION OF THE BONDS OF THE EIGHTY-THIRD SERIES
REDESIGNATED AS THE BONDS OF THE NINETIETH SERIES

Section 1. Exchange, Amendment and Restatement of Bonds of the Ninetieth Series. At such time as Prior First Mortgage Bonds of the Eighty-third Series in the principal amount of $25,000,000 issued under the Prior Supplemental Indenture not heretofore cancelled by the Trustee or delivered to the Trustee cancelled or for cancellation have been delivered to the Trustee by the registered holder thereof to be exchanged for new Bonds under this Article VI (which shall be deemed to be the "Effective Date" of this Article VI), such portion of the Prior First Mortgage Bonds of the Eighty-third Series shall be split from the remaining Prior First Mortgage Bonds of the Eighty-third Series, shall be amended and restated as set forth in this Article VI, and shall be redesignated "First Mortgage Bonds, Floating Rate Series G due July 1, 2027" (hereinafter sometimes referred to as the "Bonds of the Ninetieth Series").

The Bonds of the Ninetieth Series shall be registered in the name of the Series 1987B NYSERDA Trustee, as trustee on behalf of the holders of the Series 1987B-2 NYSERDA Bonds pursuant to the Series 1987B NYSERDA Indenture.

Following such redesignation and exchange, the permitted principal amount of the Bonds of the Ninetieth Series which may be amended and restated by the Company and executed by the Company in connection therewith and authenticated by the Trustee is limited so that at no time shall there be authenticated, delivered or outstanding under the Indenture, Bonds of the Ninetieth Series for a principal amount exceeding $25,000,000, except that Bonds of the Ninetieth Series may always be issued as provided in Section 2 of Article Fourth of the Indenture.

On the Effective Date of this Article VI, the Company shall execute and deliver to the Trustee and the Trustee, without awaiting the filing or recording of this Supplemental Indenture but upon receipt of evidence of due compliance by the Company with the applicable provisions of the Indenture, shall authenticate pursuant to Section 10 of Article Second of the Indenture, the Bonds of the Ninetieth Series in an aggregate principal amount not exceeding $25,000,000, and deliver the same to the Series 1987B NYSERDA Trustee, in exchange for certificates representing the same principal amount of the Prior First Mortgage Bonds delivered to the Trustee by the NYSERDA Trustee or Morgan Guaranty Trust Company, as the Prior LC Issuer.

Section 2. Terms of the Bonds of the Ninetieth Series. The Bonds of the Ninetieth Series shall mature according to their terms on July 1, 2027, and, in the case of the initial authentication of the Bonds of the Ninetieth Series, shall be dated the Effective Date and shall bear interest from the Effective Date at the rate per annum sufficient to pay interest accruing on the Series 1987B-2 NYSERDA Bonds as it becomes due, payable on the dates on which interest is payable on the Series 1987B-2 NYSERDA Bonds under the Series 1987B NYSERDA Indenture. The principal of, and premium, if any, in respect of, the Bonds of the Ninetieth Series shall be payable on the same date or dates and in the same amounts as set forth in the Series 1987B NYSERDA Indenture for the payment of principal on, or premium, if any, in respect of, the Series 1987B-2 NYSERDA Bonds. Definitive Bonds of said series shall be registered Bonds without coupons and shall be issued in denominations of $1,000 and multiples thereof.

Subsequent to the initial authentication of the Bonds of the Ninetieth Series, each Bond of the Ninetieth Series shall be dated as of the date of its authentication and shall bear interest from the Effective Date.

Notwithstanding any other provision contained herein, the obligation of the Company to make payments of the principal of and premium, if any, and interest on the Bonds of the Ninetieth Series shall be fully or partially satisfied and discharged, and the amount of any such payment shall be reduced, to the extent that the Company shall have made the payment, in full or in part, of principal and premium, if any, and interest then due on the Series 1987B NYSERDA Bonds, and the Trustee shall not have received written notice from the Company that the obligation of the Company shall not be so satisfied and discharged and the amount of any such payment so reduced.

Notwithstanding anything to the contrary contained herein or in the Indenture, the Trustee may conclusively presume that no Event of Default with respect to the Bonds of the Ninetieth Series or, as that term is defined in the Series 1987B NYSERDA Indenture, with respect to the Series 1987B-2 NYSERDA Bonds, has occurred and no amounts are due under the Bonds of the Ninetieth Series unless and until the Trustee shall have received from the Series 1987B NYSERDA Trustee a notice of the occurrence of an Event of Default (as defined in the Series 1987B NYSERDA Indenture) or written demand from the Series 1987B NYSERDA Trustee (which notice or demand has not been subsequently rescinded or revoked by the Series 1987B NYSERDA Trustee), setting forth in detail the amount then due with respect to such Series 1987B-2 NYSERDA Bonds, which statement shall, unless and until revoked, rescinded or amended by the Series 1987B NYSERDA Trustee, be deemed to be correct, and the Trustee shall be entitled and authorized to rely conclusively thereon.

The interest payable on any interest payment date shall be paid to the persons in whose names the Bonds of the Ninetieth Series were registered at the close of business on the record date for such payment of interest (except any such Bond which has been called for redemption on a date fixed for such redemption which is after such record date and prior to such interest payment date) notwithstanding any cancellation of Bonds of the Ninetieth Series upon any registration of transfer or exchange thereof between such record date and such interest payment date; except that if the Company shall default in the payment of any interest due on such interest payment date such defaulted interest shall be paid to the persons in whose names Bonds of the Ninetieth Series are registered either at the close of business on the date preceding the date of payment of such defaulted interest or on a subsequent record date fixed for the payment of such defaulted interest by notice given by mail by or on behalf of the Company to holders of Bonds of the Ninetieth Series not less than ten calendar days preceding such subsequent record date. The term "record date" as used herein shall mean, with respect to a regular interest payment date, the close of business on the day that is ten calendar days prior to such interest payment date or, if such day shall be a day on which banking institutions in The City of New York are authorized by law to close, the next preceding day which shall not be a day on which such institutions are so authorized to close or, in the case of defaulted interest, the close of business on any subsequent record date established as provided above.

All of the Bonds of the Ninetieth Series shall be executed in the name and on behalf of the Company by a facsimile of the signature (or manual signature) of its President or a Vice President, and imprinted with its corporate seal (or a facsimile thereof), attested by a facsimile of the signature (or manual signature) of its Secretary or an Assistant Secretary.

Bonds of the Ninetieth Series shall be lettered "RU" and numbered consecutively from RU-1 upwards, or shall bear such other letters as may be provided therefor by the Board of Directors of the Company.

Both principal of and interest on the Bonds of the Ninetieth Series (as well as any premium thereon applicable in case of any redemption thereof prior to maturity) shall be payable at the office of the Company’s paying agent, which in the case of HSBC Bank USA, shall be its corporate trust office in the Borough of Manhattan, The City of New York, State of New York, or at such other office or agency in the Borough of Manhattan, The City of New York, State of New York, as shall be maintained by the Company for such purpose, in such coin or currency of the United States of America as at the time of payment shall be legal tender for public and private debts.

Section 3. Redemption of the Bonds of the Ninetieth Series. The Bonds of the Ninetieth Series are subject to mandatory redemption, in whole or in part, in the event of any optional or mandatory redemption of the Series 1987B-2 NYSERDA Bonds, on the date fixed for such mandatory redemption of the Series 1987B-2 NYSERDA Bonds, upon notice given as hereinafter in this Section 3 provided, at the applicable redemption price specified in the Series 1987B NYSERDA Indenture for the Series 1987B-2 NYSERDA Bonds being redeemed, in such amount as, together with any moneys available therefor under the Series 1987B NYSERDA Indenture, shall be required, in accordance with the provisions of the Series 1987B NYSERDA Participation Agreement and the Series 1987B NYSERDA Indenture, to pay the principal of and premium, if any, and interest on the Series 1987B-2 NYSERDA Bonds so redeemed.

The Bonds of the Ninetieth Series are subject to mandatory redemption, as a whole but not in part, at a redemption price equal to 100% of the principal amount thereof, together with interest accrued to the date fixed for redemption, upon a declaration by the Series 1987B NYSERDA Trustee that the principal of all Series 1987B-2 NYSERDA Bonds then outstanding is immediately due and payable pursuant to the Series 1987B NYSERDA Indenture and upon written notice thereof by the Series 1987B NYSERDA Trustee to the Trustee at least 30 days prior to the date fixed for redemption, provided that no written cancellation of such declaration shall have been received by the Trustee and the Company prior to notice of such redemption having been given to the Trustee.

No redemption of the Bonds of the Ninetieth Series, either as a whole or in part, may be made except in connection with the payment of a like principal amount of Series 1987B-2 NYSERDA Bonds, either by redemption or at maturity (stated or otherwise), which Series 1987B-2 NYSERDA Bonds, shall not thereafter be remarketed. The principal amount of the Series 1987B-2 NYSERDA Bonds and, therefore, the principal of the Bonds of the Ninetieth Series, may be prepaid, and the due dates thereof shall be accelerated, in accordance with the terms of the Series 1987B NYSERDA Indenture.

In case the Company shall at any time desire or be required so to redeem part or all of the Bonds of the Ninetieth Series then outstanding, the Company shall give to the Trustee notice in writing at least 45 days prior to the redemption date fixed by the Company (unless a shorter notice is required for the corresponding redemption under the Series 1987B NYSERDA Indenture or shall be satisfactory to the Trustee) of the principal amount of Bonds of the Ninetieth Series which it desires or is required to redeem, specifying the date on which it desires or is required to make redemption. There shall be furnished to the Trustee a certificate or opinion executed by the President or a Vice-President and the Treasurer or an Assistant Treasurer of the Company stating that the conditions precedent specified in this Section 3 with respect to such redemption have been complied with and notwithstanding anything to the contrary contained herein or in the Indenture, prior to receipt of a notice of default, the Trustee shall be entitled and authorized to rely conclusively thereon. As soon as practicable thereafter, if the Bonds are to be redeemed in part, the Trustee shall issue to the Series 1987B NYSERDA Trustee a new Bond or Bonds of the Ninetieth Series in the principal amount not so redeemed in exchange for the outstanding Bonds.

The Trustee may, to the extent permitted by the provisions of Section 4 of Article Tenth of the Indenture, accept the certificate of the President or any Vice President or the Treasurer of the Company as sufficient evidence that the requirements as to mailing of notices of the call for redemption have been fully complied with or the Trustee may, at its option and at the expense and on behalf of the Company, give such notice and take any other action required of the Company in connection with such redemption.

Section 4. Effect of Payment. On or prior to the redemption date specified in any such notice, the Company shall deposit with the Trustee a sum of money, of the character specified as the medium of payment in the Bonds of the Ninetieth Series called for redemption, which together with any moneys available therefor under the Series 1987B NYSERDA Indenture is sufficient to redeem, at the redemption price payable as hereinbefore provided, the Bonds of such series designated for redemption and the called part of any Bond of such series called only in part, and to pay the interest accrued thereon up to said redemption date, to be applied by the Trustee to the payment of such Bonds (and the called part of any such Bond) and such accrued interest thereon upon presentation and surrender of such Bonds, together with duly executed instruments of transfer, at the corporate trust office of the Trustee, or at such other office or agency as shall be maintained by the Company for such purpose; and, after such deposit shall have been made, such Bonds so called in whole and the called part of any such Bonds called only in part, whether or not presented for redemption shall cease to be entitled to any benefit, lien or security under the Indenture, no interest will accrue thereon on or after the redemption date duly specified in said notice, and claims for interest, if any, appertaining to such Bonds, and the called part of any such Bond called only in part, maturing after that date shall be void. All Bonds so redeemed shall forthwith be cancelled and, upon its written request, delivered to the Company or otherwise disposed of; and no Bonds shall be issued hereunder in place of any such Bonds, except as otherwise provided in Article Fourth of the Indenture and except that, if less than the entire principal amount of any Bond shall be so redeemed, upon presentation of such Bond so called in part, with proper instruments of transfer if required, at or after the time fixed for the payment of said Bonds so called for redemption, payment of the principal amount of the part thereof so called shall be made upon surrender and cancellation of said Bond so presented, and one or more Bonds of the Ninetieth Series, for a principal amount equal to the uncalled and unpaid balance of the principal amount of such Bond, will be executed by the Company and shall be authenticated and delivered by the Trustee to the owner of such Bond, without expense to such owner. If the Series 1987B-2 NYSERDA Bonds have been redeemed in whole or in part, the Bonds of the Ninetieth Series shall be deemed to have been redeemed in whole or in part in the equivalent principal amount. The Trustee shall be entitled and authorized to rely conclusively on a certificate of the Company as to such redemption, together with the surrender by the Bondholder of such redeemed Bonds for cancellation or for exchange for one or more replacement Bonds in the aggregate principal amount of such unredeemed portion of the Bonds as evidence of such redemption. Notwithstanding the foregoing, the principal and interest due on the Bonds of the Ninetieth Series shall continue or be reinstated, as the case may be, if at any time any payment of principal or interest (whether under the Bonds of the Ninetieth Series or the Series 1987B-2 NYSERDA Bonds) is rescinded or must otherwise be returned by the Series 1987B NYSERDA Trustee or the holders of the Series 1987B-2 NYSERDA Bonds or any other person upon the insolvency, bankruptcy or reorganization of the Company or by operation of law, all as though payment had not been made.

Section 5. Exchange of Bonds. The registered owner (or assigns) of any Bond of the Ninetieth Series may at any time surrender the same at the corporate trust office of the Trustee, or at any other office or agency of the Trustee or the Company maintained for such purpose, and with instruments of transfer satisfactory to the Trustee, and, subject to the terms, conditions and limitations specified in the Indenture, shall be entitled to receive in exchange therefor an equal principal amount of Bonds of said series of other authorized denominations; and the Company will provide, and the Trustee shall authenticate and deliver, the Bonds necessary to make such exchange. The Bonds of the Ninetieth Series are nontransferable except to effect transfer to any successor to the Series 1987B NYSERDA Trustee, to the Bond Insurer or to any successor to the Bond Insurer, any such transfer of a Bond of the Ninetieth Series to be made at the principal corporate trust office of the Trustee, upon surrender and cancellation of such Bond, accompanied by a written instrument of transfer in a form approved by the Company and the Trustee, duly executed by the registered holder of such Bond or by his duly authorized attorney, and thereupon a new Bond or Bonds of the Ninetieth Series, for a like principal amount and bearing interest at the same rates and having the same maturity date, will be issued to the successor to the Series 1987B NYSERDA Trustee, the Bond Insurer or the successor to the Bond Insurer, as the case may be, in exchange therefor, as provided in the Indenture. The provisions of Section 12 of Article Second of the Original Indenture to the contrary notwithstanding, no payment of a service charge shall be required for any exchange or registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto.

Section 6. Form of Bonds of the Ninetieth Series. The definitive Bonds of the Ninetieth Series, and the Trustee’s certificate to be inscribed on all Bonds of said series, are to be substantially in the forms set forth in Exhibit A. Such Bonds of the Ninetieth Series shall be issued to the NYSERDA Trustee, in the initial principal amount, and with the description of the Bonds, identification of the series of NYSERDA Bonds and the corresponding NYSERDA Trustee and the NYSERDA Indenture, all as specified in Section 1 of this Article VI.

ARTICLE VII

AMENDMENT AND RESTATEMENT OF
THE FIRST SPLIT PORTION OF THE BONDS OF THE EIGHTY-FOURTH SERIES
REDESIGNATED AS THE BONDS OF THE NINETY-FIRST SERIES

Section 1. Exchange, Amendment and Restatement of Bonds of the Ninety-first Series. At such time as Prior First Mortgage Bonds of the Eighty-fourth Series in the principal amount of $37,500,000 issued under the Prior Supplemental Indenture not heretofore cancelled by the Trustee or delivered to the Trustee cancelled or for cancellation have been delivered to the Trustee by the registered holder thereof to be exchanged for new Bonds under this Article VII (which shall be deemed to be the "Effective Date" of this Article VII), such portion of the Prior First Mortgage Bonds of the Eighty-fourth Series shall be split from the remaining Prior First Mortgage Bonds of the Eighty-fourth Series, shall be amended and restated as set forth in this Article VII, and shall be redesignated "First Mortgage Bonds, Floating Rate Series H due December 1, 2025" (hereinafter sometimes referred to as the "Bonds of the Ninety-first Series").

The Bonds of the Ninety-first Series shall be registered in the name of the Series 1985B NYSERDA Trustee, as trustee on behalf of the holders of the Series 1985B NYSERDA Bonds, pursuant to the Series 1985B NYSERDA Indenture.

Following such redesignation and exchange, the permitted principal amount of the Bonds of the Ninety-first Series which may be amended and restated by the Company and executed by the Company in connection therewith and authenticated by the Trustee is limited so that at no time shall there be authenticated, delivered or outstanding under the Indenture, Bonds of the Ninety-first Series for a principal amount exceeding $37,500,000, except that Bonds of the Ninety-first Series may always be issued as provided in Section 2 of Article Fourth of the Indenture.

On the Effective Date of this Article VII, the Company shall execute and deliver to the Trustee and the Trustee, without awaiting the filing or recording of this Supplemental Indenture but upon receipt of evidence of due compliance by the Company with the applicable provisions of the Indenture, shall authenticate pursuant to Section 10 of Article Second of the Indenture, the Bonds of the Ninety-first Series in an aggregate principal amount not exceeding $37,500,000 and deliver the same to the NYSERDA Trustee, in exchange for certificates representing the same principal amount of the Prior First Mortgage Bonds delivered to the Trustee by the Series 1985B NYSERDA Trustee or Bank One, NA, as the Prior LC Issuer.

Section 2. Terms of the Bonds of the Ninety-first Series. The Bonds of the Ninety-first Series shall mature according to their terms on December 1, 2025 and, in the case of the initial authentication of the Bonds of the Ninety-first Series, shall be dated the Effective Date and shall bear interest from the Effective Date at the rate per annum sufficient to pay interest accruing on the Series 1985B NYSERDA Bonds as it becomes due, payable on the dates on which interest is payable on the Series 1985B NYSERDA Bonds under the Series 1985B NYSERDA Indenture. The principal of, and premium, if any, in respect of, the Bonds of the Ninety-first Series shall be payable on the same date or dates and in the same amounts as set forth in the Series 1985B NYSERDA Indenture for the payment of principal on, or premium, if any, in respect of, the Series 1985B NYSERDA Bonds. Definitive Bonds of said series shall be registered Bonds without coupons and shall be issued in denominations of $1,000 and multiples thereof.

Subsequent to the initial authentication of the Bonds of the Ninety-first Series, each Bond of the Ninety-first Series shall be dated as of the date of its authentication and shall bear interest from the Effective Date.

Notwithstanding any other provision contained herein, the obligation of the Company to make payments of the principal of and premium, if any, and interest on the Bonds of the Ninety-first Series shall be fully or partially satisfied and discharged, and the amount of any such payment shall be reduced, to the extent that the Company shall have made the payment, in full or in part, of principal and premium, if any, and interest then due on the Series 1985B NYSERDA Bonds, and the Trustee shall not have received written notice from the Company that the obligation of the Company shall not be so satisfied and discharged and the amount of any such payment so reduced.

Notwithstanding anything to the contrary contained herein or in the Indenture, the Trustee may conclusively presume that no Event of Default with respect to the Bonds of the Ninety-first Series or, as that term is defined in the Series 1985B NYSERDA Indenture, with respect to the Series 1985B NYSERDA Bonds, has occurred and no amounts are due under the Bonds of the Ninety-first Series unless and until the Trustee shall have received from the Series 1985B NYSERDA Trustee a notice of the occurrence of an Event of Default (as defined in the Series 1985B NYSERDA Indenture) or written demand from the Series 1985B NYSERDA Trustee (which notice or demand has not been subsequently rescinded or revoked by the Series 1985B NYSERDA Trustee), setting forth in detail the amount then due with respect to such Series 1985B NYSERDA Bonds, which statement shall, unless and until revoked, rescinded or amended by the Series 1985B NYSERDA Trustee, be deemed to be correct, and the Trustee shall be entitled and authorized to rely conclusively thereon.

The interest payable on any interest payment date shall be paid to the persons in whose names the Bonds of the Ninety-first Series were registered at the close of business on the record date for such payment of interest (except any such Bond which has been called for redemption on a date fixed for such redemption which is after such record date and prior to such interest payment date) notwithstanding any cancellation of Bonds of the Ninety-first Series upon any registration of transfer or exchange thereof between such record date and such interest payment date; except that if the Company shall default in the payment of any interest due on such interest payment date such defaulted interest shall be paid to the persons in whose names Bonds of the Ninety-first Series are registered either at the close of business on the date preceding the date of payment of such defaulted interest or on a subsequent record date fixed for the payment of such defaulted interest by notice given by mail by or on behalf of the Company to holders of Bonds of the Ninety-first Series not less than ten calendar days preceding such subsequent record date. The term "record date" as used herein shall mean, with respect to a regular interest payment date, the close of business on the day that is ten calendar days prior to such interest payment date or, if such day shall be a day on which banking institutions in The City of New York are authorized by law to close, the next preceding day which shall not be a day on which such institutions are so authorized to close or, in the case of defaulted interest, the close of business on any subsequent record date established as provided above.

All of the Bonds of the Ninety-first Series shall be executed in the name and on behalf of the Company by a facsimile of the signature (or manual signature) of its President or a Vice President, and imprinted with its corporate seal (or a facsimile thereof), attested by a facsimile of the signature (or manual signature) of its Secretary or an Assistant Secretary.

Bonds of the Ninety-first Series shall be lettered "RU" and numbered consecutively from RU-1 upwards, or shall bear such other letters as may be provided therefor by the Board of Directors of the Company.

Both principal of and interest on the Bonds of the Ninety-first Series (as well as any premium thereon applicable in case of any redemption thereof prior to maturity) shall be payable at the office of the Company’s paying agent, which in the case of HSBC Bank USA, shall be its corporate trust office in the Borough of Manhattan, The City of New York, State of New York, or at such other office or agency in the Borough of Manhattan, The City of New York, State of New York, as shall be maintained by the Company for such purpose, in such coin or currency of the United States of America as at the time of payment shall be legal tender for public and private debts.

Section 3. Redemption of the Bonds of the Ninety-first Series. The Bonds of the Ninety-first Series are subject to mandatory redemption, in whole or in part, in the event of any optional or mandatory redemption of the Series 1985B NYSERDA Bonds, on the date fixed for such mandatory redemption of the Series 1985B NYSERDA Bonds, upon notice given as hereinafter in this Section 3 provided, at the applicable redemption price specified in the Series 1985B NYSERDA Indenture for the Series 1985B NYSERDA Bonds being redeemed, in such amount as, together with any moneys available therefor under the Series 1985B NYSERDA Indenture, shall be required, in accordance with the provisions of the Series 1985B NYSERDA Participation Agreement and the Series 1985B NYSERDA Indenture, to pay the principal of and premium, if any, and interest on the Series 1985B NYSERDA Bonds so redeemed.

The Bonds of the Ninety-first Series are subject to mandatory redemption, as a whole but not in part, at a redemption price equal to 100% of the principal amount thereof, together with interest accrued to the date fixed for redemption, upon a declaration by the Series 1985B NYSERDA Trustee that the principal of all Series 1985B NYSERDA Bonds then outstanding is immediately due and payable pursuant to the Series 1985B NYSERDA Indenture and upon written notice thereof by the Series 1985B NYSERDA Trustee to the Trustee at least 30 days prior to the date fixed for redemption, provided that no written cancellation of such declaration shall have been received by the Trustee and the Company prior to notice of such redemption having been given to the Trustee.

No redemption of the Bonds of the Ninety-first Series, either as a whole or in part, may be made except in connection with the payment of a like principal amount of Series 1985B NYSERDA Bonds, either by redemption or at maturity (stated or otherwise), which Series 1985B NYSERDA Bonds, shall not thereafter be remarketed. The principal amount of the Series 1985B NYSERDA Bonds and, therefore, the principal of the Bonds of the Ninety-first Series, may be prepaid, and the due dates thereof shall be accelerated, in accordance with the terms of the Series 1985B NYSERDA Indenture.

In case the Company shall at any time desire or be required so to redeem part or all of the Bonds of the Ninety-first Series then outstanding, the Company shall give to the Trustee notice in writing at least 45 days prior to the redemption date fixed by the Company (unless a shorter notice is required for the corresponding redemption under the Series 1985B NYSERDA Indenture or shall be satisfactory to the Trustee) of the principal amount of Bonds of the Ninety-first Series which it desires or is required to redeem, specifying the date on which it desires or is required to make redemption. There shall be furnished to the Trustee a certificate or opinion executed by the President or a Vice-President and the Treasurer or an Assistant Treasurer of the Company stating that the conditions precedent specified in this Section 3 with respect to such redemption have been complied with and notwithstanding anything to the contrary contained herein or in the Indenture, prior to receipt of a notice of default, the Trustee shall be entitled and authorized to rely conclusively thereon. As soon as practicable thereafter, if the Bonds are to be redeemed in part, the Trustee shall issue to the Series 1985B NYSERDA Trustee a new Bond or Bonds of the Ninety-first Series in the principal amount not so redeemed in exchange for the outstanding Bonds.

The Trustee may, to the extent permitted by the provisions of Section 4 of Article Tenth of the Indenture, accept the certificate of the President or any Vice President or the Treasurer of the Company as sufficient evidence that the requirements as to mailing of notices of the call for redemption have been fully complied with or the Trustee may, at its option and at the expense and on behalf of the Company, give such notice and take any other action required of the Company in connection with such redemption.

Section 4. Effect of Payment. On or prior to the redemption date specified in any such notice, the Company shall deposit with the Trustee a sum of money, of the character specified as the medium of payment in the Bonds of the Ninety-first Series called for redemption, which together with any moneys available therefor under the Series 1985B NYSERDA Indenture is sufficient to redeem, at the redemption price payable as hereinbefore provided, the Bonds of such series designated for redemption and the called part of any Bond of such series called only in part, and to pay the interest accrued thereon up to said redemption date, to be applied by the Trustee to the payment of such Bonds (and the called part of any such Bond) and such accrued interest thereon upon presentation and surrender of such Bonds, together with duly executed instruments of transfer, at the corporate trust office of the Trustee, or at such other office or agency as shall be maintained by the Company for such purpose; and, after such deposit shall have been made, such Bonds so called in whole and the called part of any such Bonds called only in part, whether or not presented for redemption shall cease to be entitled to any benefit, lien or security under the Indenture, no interest will accrue thereon on or after the redemption date duly specified in said notice, and claims for interest, if any, appertaining to such Bonds, and the called part of any such Bond called only in part, maturing after that date shall be void. All Bonds so redeemed shall forthwith be cancelled and, upon its written request, delivered to the Company or otherwise disposed of; and no Bonds shall be issued hereunder in place of any such Bonds, except as otherwise provided in Article Fourth of the Indenture and except that, if less than the entire principal amount of any Bond shall be so redeemed, upon presentation of such Bond so called in part, with proper instruments of transfer if required, at or after the time fixed for the payment of said Bonds so called for redemption, payment of the principal amount of the part thereof so called shall be made upon surrender and cancellation of said Bond so presented, and one or more Bonds of the Ninety-first Series, for a principal amount equal to the uncalled and unpaid balance of the principal amount of such Bond, will be executed by the Company and shall be authenticated and delivered by the Trustee to the owner of such Bond, without expense to such owner. If the Series 1985B NYSERDA Bonds have been redeemed in whole or in part, the Bonds of the Ninety-first Series shall be deemed to have been redeemed in whole or in part in the equivalent principal amount. The Trustee shall be entitled and authorized to rely conclusively on a certificate of the Company as to such redemption, together with the surrender by the Bondholder of such redeemed Bonds for cancellation or for exchange for one or more replacement Bonds in the aggregate principal amount of such unredeemed portion of the Bonds as evidence of such redemption. Notwithstanding the foregoing, the principal and interest due on the Bonds of the Ninety-first Series shall continue or be reinstated, as the case may be, if at any time any payment of principal or interest (whether under the Bonds of the Ninety-first Series or the Series 1985B NYSERDA Bonds) is rescinded or must otherwise be returned by the Series 1985B NYSERDA Trustee or the holders of the Series 1985B NYSERDA Bonds or any other person upon the insolvency, bankruptcy or reorganization of the Company or by operation of law, all as though payment had not been made.

Section 5. Exchange of Bonds. The registered owner (or assigns) of any Bond of the Ninety-first Series may at any time surrender the same at the corporate trust office of the Trustee, or at any other office or agency of the Trustee or the Company maintained for such purpose, and with instruments of transfer satisfactory to the Trustee, and, subject to the terms, conditions and limitations specified in the Indenture, shall be entitled to receive in exchange therefor an equal principal amount of Bonds of said series of other authorized denominations; and the Company will provide, and the Trustee shall authenticate and deliver, the Bonds necessary to make such exchange. The Bonds of the Ninety-first Series are nontransferable except to effect transfer to any successor to the Series 1985B NYSERDA Trustee, to the Bond Insurer or to any successor to the Bond Insurer, any such transfer of a Bond of the Ninety-first Series to be made at the principal corporate trust office of the Trustee, upon surrender and cancellation of such Bond, accompanied by a written instrument of transfer in a form approved by the Company and the Trustee, duly executed by the registered holder of such Bond or by his duly authorized attorney, and thereupon a new Bond or Bonds of the Ninety-first Series, for a like principal amount and bearing interest at the same rates and having the same maturity date, will be issued to the successor to the Series 1985B NYSERDA Trustee, the Bond Insurer or the successor to the Bond Insurer, as the case may be, in exchange therefor, as provided in the Indenture. The provisions of Section 12 of Article Second of the Original Indenture to the contrary notwithstanding, no payment of a service charge shall be required for any exchange or registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto.

Section 6. Form of Bonds of the Ninety-first Series. The definitive Bonds of the Ninety-first Series, and the Trustee’s certificate to be inscribed on all Bonds of said series, are to be substantially in the forms set forth in Exhibit A. Such Bonds of the Ninety-first Series shall be issued to the NYSERDA Trustee, in the initial principal amount, and with the description of the Bonds, identification of the series of NYSERDA Bonds and the corresponding NYSERDA Trustee and the NYSERDA Indenture, all as specified in Section 1 of this Article VII.

ARTICLE VIII

AMENDMENT AND RESTATEMENT OF
THE SECOND SPLIT PORTION OF THE BONDS OF THE EIGHTY-FOURTH SERIES
REDESIGNATED AS THE BONDS OF THE NINETY-SECOND SERIES

Section 1. Exchange, Amendment and Restatement of Bonds of the Ninety-second Series. At such time as Prior First Mortgage Bonds of the Eighty-fourth Series in the principal amount of $50,000,000 issued under the Prior Supplemental Indenture not heretofore cancelled by the Trustee or delivered to the Trustee cancelled or for cancellation have been delivered to the Trustee by the registered holder thereof to be exchanged for new Bonds under this Article VIII (which shall be deemed to be the "Effective Date" of this Article VIII), such portion of the Prior First Mortgage Bonds of the Eighty-fourth Series shall be split from the remaining Prior First Mortgage Bonds of the Eighty-fourth Series, shall be amended and restated as set forth in this Article VIII, and shall be redesignated "First Mortgage Bonds, Floating Rate Series I due December 1, 2026" (hereinafter sometimes referred to as the "Bonds of the Ninety-second Series").

The Bonds of the Ninety-second Series shall be registered in the name of the Series 1986A NYSERDA Trustee, as trustee on behalf of the holders of the Series 1986A NYSERDA Bonds, pursuant to the Series 1986A NYSERDA Indenture.

Following such redesignation and exchange, the permitted principal amount of the Bonds of the Ninety-second Series which may be amended and restated by the Company and executed by the Company in connection therewith and authenticated by the Trustee is limited so that at no time shall there be authenticated, delivered or outstanding under the Indenture, Bonds of the Ninety-second Series for a principal amount exceeding $50,000,000, except that Bonds of the Ninety-second Series may always be issued as provided in Section 2 of Article Fourth of the Indenture.

On the Effective Date of this Article VIII, the Company shall execute and deliver to the Trustee and the Trustee, without awaiting the filing or recording of this Supplemental Indenture but upon receipt of evidence of due compliance by the Company with the applicable provisions of the Indenture, shall authenticate pursuant to Section 10 of Article Second of the Indenture, the Bonds of the Ninety-second Series in an aggregate principal amount not exceeding $50,000,000 and deliver the same to the Series 1986A NYSERDA Trustee, in exchange for certificates representing the same principal amount of the Prior First Mortgage Bonds delivered to the Trustee by the Series 1986A NYSERDA Trustee or Bank One, NA, as the Prior LC Issuer.

Section 2. Terms of the Bonds of the Ninety-second Series. The Bonds of the Ninety-second Series shall mature according to their terms on December 1, 2026 and, in the case of the initial authentication of the Bonds of the Ninety-second Series, shall be dated the Effective Date and shall bear interest from the Effective Date at the rate per annum sufficient to pay interest accruing on the Series 1986A NYSERDA Bonds as it becomes due, payable on the dates on which interest is payable on the Series 1986A NYSERDA Bonds under the Series 1986A NYSERDA Indenture. The principal of, and premium, if any, in respect of, the Bonds of the Ninety-second Series shall be payable on the same date or dates and in the same amounts as set forth in the Series 1986A NYSERDA Indenture for the payment of principal on, or premium, if any, in respect of, the Series 1986A NYSERDA Bonds. Definitive Bonds of said series shall be registered Bonds without coupons and shall be issued in denominations of $1,000 and multiples thereof.

Subsequent to the initial authentication of the Bonds of the Ninety-second Series, each Bond of the Ninety-second Series shall be dated as of the date of its authentication and shall bear interest from the Effective Date.

Notwithstanding any other provision contained herein, the obligation of the Company to make payments of the principal of and premium, if any, and interest on the Bonds of the Ninety-second Series shall be fully or partially satisfied and discharged, and the amount of any such payment shall be reduced, to the extent that the Company shall have made the payment, in full or in part, of principal and premium, if any, and interest then due on the Series 1986A NYSERDA Bonds, and the Trustee shall not have received written notice from the Company that the obligation of the Company shall not be so satisfied and discharged and the amount of any such payment so reduced.

Notwithstanding anything to the contrary contained herein or in the Indenture, the Trustee may conclusively presume that no Event of Default with respect to the Bonds of the Ninety-second Series or, as that term is defined in the Series 1986A NYSERDA Indenture, with respect to the Series 1986A NYSERDA Bonds, has occurred and no amounts are due under the Bonds of the Ninety-second Series unless and until the Trustee shall have received from the Series 1986A NYSERDA Trustee a notice of the occurrence of an Event of Default (as defined in the Series 1986A NYSERDA Indenture) or written demand from the Series 1986A NYSERDA Trustee (which notice or demand has not been subsequently rescinded or revoked by the Series 1986A NYSERDA Trustee), setting forth in detail the amount then due with respect to such Series 1986A NYSERDA Bonds, which statement shall, unless and until revoked, rescinded or amended by the Series 1986A NYSERDA Trustee, be deemed to be correct, and the Trustee shall be entitled and authorized to rely conclusively thereon.

The interest payable on any interest payment date shall be paid to the persons in whose names the Bonds of the Ninety-second Series were registered at the close of business on the record date for such payment of interest (except any such Bond which has been called for redemption on a date fixed for such redemption which is after such record date and prior to such interest payment date) notwithstanding any cancellation of Bonds of the Ninety-second Series upon any registration of transfer or exchange thereof between such record date and such interest payment date; except that if the Company shall default in the payment of any interest due on such interest payment date such defaulted interest shall be paid to the persons in whose names Bonds of the Ninety-second Series are registered either at the close of business on the date preceding the date of payment of such defaulted interest or on a subsequent record date fixed for the payment of such defaulted interest by notice given by mail by or on behalf of the Company to holders of Bonds of the Ninety-second Series not less than ten calendar days preceding such subsequent record date. The term "record date" as used herein shall mean, with respect to a regular interest payment date, the close of business on the day that is ten calendar days prior to such interest payment date or, if such day shall be a day on which banking institutions in The City of New York are authorized by law to close, the next preceding day which shall not be a day on which such institutions are so authorized to close or, in the case of defaulted interest, the close of business on any subsequent record date established as provided above.

All of the Bonds of the Ninety-second Series shall be executed in the name and on behalf of the Company by a facsimile of the signature (or manual signature) of its President or a Vice President, and imprinted with its corporate seal (or a facsimile thereof), attested by a facsimile of the signature (or manual signature) of its Secretary or an Assistant Secretary.

Bonds of the Ninety-second Series shall be lettered "RU" and numbered consecutively from RU-1 upwards, or shall bear such other letters as may be provided therefor by the Board of Directors of the Company.

Both principal of and interest on the Bonds of the Ninety-second Series (as well as any premium thereon applicable in case of any redemption thereof prior to maturity) shall be payable at the office of the Company’s paying agent, which in the case of HSBC Bank USA, shall be its corporate trust office in the Borough of Manhattan, The City of New York, State of New York, or at such other office or agency in the Borough of Manhattan, The City of New York, State of New York, as shall be maintained by the Company for such purpose, in such coin or currency of the United States of America as at the time of payment shall be legal tender for public and private debts.

Section 3. Redemption of the Bonds of the Ninety-second Series. The Bonds of the Ninety-second Series are subject to mandatory redemption, in whole or in part, in the event of any optional or mandatory redemption of the Series 1986A NYSERDA Bonds, on the date fixed for such mandatory redemption of the Series 1986A NYSERDA Bonds, upon notice given as hereinafter in this Section 3 provided, at the applicable redemption price specified in the Series 1986A NYSERDA Indenture for the Series 1986A NYSERDA Bonds being redeemed, in such amount as, together with any moneys available therefor under the Series 1986A NYSERDA Indenture, shall be required, in accordance with the provisions of the Series 1986A NYSERDA Participation Agreement and the Series 1986A NYSERDA Indenture, to pay the principal of and premium, if any, and interest on the Series 1986A NYSERDA Bonds so redeemed.

The Bonds of the Ninety-second Series are subject to mandatory redemption, as a whole but not in part, at a redemption price equal to 100% of the principal amount thereof, together with interest accrued to the date fixed for redemption, upon a declaration by the Series 1986A NYSERDA Trustee that the principal of all Series 1986A NYSERDA Bonds then outstanding is immediately due and payable pursuant to the Series 1986A NYSERDA Indenture and upon written notice thereof by the Series 1986A NYSERDA Trustee to the Trustee at least 30 days prior to the date fixed for redemption, provided that no written cancellation of such declaration shall have been received by the Trustee and the Company prior to notice of such redemption having been given to the Trustee.

No redemption of the Bonds of the Ninety-second Series, either as a whole or in part, may be made except in connection with the payment of a like principal amount of Series 1986A NYSERDA Bonds, either by redemption or at maturity (stated or otherwise), which Series 1986A NYSERDA Bonds, shall not thereafter be remarketed. The principal amount of the Series 1986A NYSERDA Bonds and, therefore, the principal of the Bonds of the Ninety-second Series, may be prepaid, and the due dates thereof shall be accelerated, in accordance with the terms of the Series 1986A NYSERDA Indenture.

In case the Company shall at any time desire or be required so to redeem part or all of the Bonds of the Ninety-second Series then outstanding, the Company shall give to the Trustee notice in writing at least 45 days prior to the redemption date fixed by the Company (unless a shorter notice is required for the corresponding redemption under the Series 1986A NYSERDA Indenture or shall be satisfactory to the Trustee) of the principal amount of Bonds of the Ninety-second Series which it desires or is required to redeem, specifying the date on which it desires or is required to make redemption. There shall be furnished to the Trustee a certificate or opinion executed by the President or a Vice-President and the Treasurer or an Assistant Treasurer of the Company stating that the conditions precedent specified in this Section 3 with respect to such redemption have been complied with and notwithstanding anything to the contrary contained herein or in the Indenture, prior to receipt of a notice of default, the Trustee shall be entitled and authorized to rely conclusively thereon. As soon as practicable thereafter, if the Bonds are to be redeemed in part, the Trustee shall issue to the Series 1986A NYSERDA Trustee a new Bond or Bonds of the Ninety-second Series in the principal amount not so redeemed in exchange for the outstanding Bonds.

The Trustee may, to the extent permitted by the provisions of Section 4 of Article Tenth of the Indenture, accept the certificate of the President or any Vice President or the Treasurer of the Company as sufficient evidence that the requirements as to mailing of notices of the call for redemption have been fully complied with or the Trustee may, at its option and at the expense and on behalf of the Company, give such notice and take any other action required of the Company in connection with such redemption.

Section 4. Effect of Payment. On or prior to the redemption date specified in any such notice, the Company shall deposit with the Trustee a sum of money, of the character specified as the medium of payment in the Bonds of the Ninety-second Series called for redemption, which together with any moneys available therefor under the Series 1986A NYSERDA Indenture is sufficient to redeem, at the redemption price payable as hereinbefore provided, the Bonds of such series designated for redemption and the called part of any Bond of such series called only in part, and to pay the interest accrued thereon up to said redemption date, to be applied by the Trustee to the payment of such Bonds (and the called part of any such Bond) and such accrued interest thereon upon presentation and surrender of such Bonds, together with duly executed instruments of transfer, at the corporate trust office of the Trustee, or at such other office or agency as shall be maintained by the Company for such purpose; and, after such deposit shall have been made, such Bonds so called in whole and the called part of any such Bonds called only in part, whether or not presented for redemption shall cease to be entitled to any benefit, lien or security under the Indenture, no interest will accrue thereon on or after the redemption date duly specified in said notice, and claims for interest, if any, appertaining to such Bonds, and the called part of any such Bond called only in part, maturing after that date shall be void. All Bonds so redeemed shall forthwith be cancelled and, upon its written request, delivered to the Company or otherwise disposed of; and no Bonds shall be issued hereunder in place of any such Bonds, except as otherwise provided in Article Fourth of the Indenture and except that, if less than the entire principal amount of any Bond shall be so redeemed, upon presentation of such Bond so called in part, with proper instruments of transfer if required, at or after the time fixed for the payment of said Bonds so called for redemption, payment of the principal amount of the part thereof so called shall be made upon surrender and cancellation of said Bond so presented, and one or more Bonds of the Ninety-second Series, for a principal amount equal to the uncalled and unpaid balance of the principal amount of such Bond, will be executed by the Company and shall be authenticated and delivered by the Trustee to the owner of such Bond, without expense to such owner. If the Series 1986A NYSERDA Bonds have been redeemed in whole or in part, the Bonds of the Ninety-second Series shall be deemed to have been redeemed in whole or in part in the equivalent principal amount. The Trustee shall be entitled and authorized to rely conclusively on a certificate of the Company as to such redemption, together with the surrender by the Bondholder of such redeemed Bonds for cancellation or for exchange for one or more replacement Bonds in the aggregate principal amount of such unredeemed portion of the Bonds as evidence of such redemption. Notwithstanding the foregoing, the principal and interest due on the Bonds of the Ninety-second Series shall continue or be reinstated, as the case may be, if at any time any payment of principal or interest (whether under the Bonds of the Ninety-second Series or the Series 1986A NYSERDA Bonds) is rescinded or must otherwise be returned by the Series 1986A NYSERDA Trustee or the holders of the Series 1986A NYSERDA Bonds or any other person upon the insolvency, bankruptcy or reorganization of the Company or by operation of law, all as though payment had not been made.

Section 5. Exchange of Bonds. The registered owner (or assigns) of any Bond of the Ninety-second Series may at any time surrender the same at the corporate trust office of the Trustee, or at any other office or agency of the Trustee or the Company maintained for such purpose, and with instruments of transfer satisfactory to the Trustee, and, subject to the terms, conditions and limitations specified in the Indenture, shall be entitled to receive in exchange therefor an equal principal amount of Bonds of said series of other authorized denominations; and the Company will provide, and the Trustee shall authenticate and deliver, the Bonds necessary to make such exchange. The Bonds of the Ninety-second Series are nontransferable except to effect transfer to any successor to the Series 1986A NYSERDA Trustee, to the Bond Insurer or to any successor to the Bond Insurer, any such transfer of a Bond of the Ninety-second Series to be made at the principal corporate trust office of the Trustee, upon surrender and cancellation of such Bond, accompanied by a written instrument of transfer in a form approved by the Company and the Trustee, duly executed by the registered holder of such Bond or by his duly authorized attorney, and thereupon a new Bond or Bonds of the Ninety-second Series, for a like principal amount and bearing interest at the same rates and having the same maturity date, will be issued to the successor to the Series 1986A NYSERDA Trustee, the Bond Insurer or the successor to the Bond Insurer, as the case may be, in exchange therefor, as provided in the Indenture. The provisions of Section 12 of Article Second of the Original Indenture to the contrary notwithstanding, no payment of a service charge shall be required for any exchange or registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto.

Section 6. Form of Bonds of the Ninety-second Series. The definitive Bonds of the Ninety-second Series, and the Trustee’s certificate to be inscribed on all Bonds of said series, are to be substantially in the forms set forth in Exhibit A. Such Bonds of the Ninety-second Series shall be issued to the NYSERDA Trustee, in the initial principal amount, and with the description of the Bonds, identification of the series of NYSERDA Bonds and the corresponding NYSERDA Trustee and the NYSERDA Indenture, all as specified in Section 1 of this Article VIII.

ARTICLE IX

AMENDMENT AND RESTATEMENT OF
THE THIRD SPLIT PORTION OF THE BONDS OF THE EIGHTY-FOURTH SERIES
REDESIGNATED AS THE BONDS OF THE NINETY-THIRD SERIES

Section 1. Exchange, Amendment and Restatement of Bonds of the Ninety-third Series. At such time as Prior First Mortgage Bonds of the Eighty-fourth Series in the principal amount of $25,760,000 issued under the Prior Supplemental Indenture not heretofore cancelled by the Trustee or delivered to the Trustee cancelled or for cancellation have been delivered to the Trustee by the registered holder thereof to be exchanged for new Bonds under this Article IX (which shall be deemed to be the "Effective Date" of this Article IX), such portion of the Prior First Mortgage Bonds of the Eighty-fourth Series shall be split from the remaining Prior First Mortgage Bonds of the Eighty-fourth Series, shall be amended and restated as set forth in this Article IX, and shall be redesignated "First Mortgage Bonds, Floating Rate Series J due March 1, 2027" (hereinafter sometimes referred to as the "Bonds of the Ninety-third Series").

The Bonds of the Ninety-third Series shall be registered in the name of the Series 1987A NYSERDA Trustee, as trustee on behalf of the holders of the Series 1987A NYSERDA Bonds, pursuant to the Series 1987A NYSERDA Indenture.

Following such redesignation and exchange, the permitted principal amount of the Bonds of the Ninety-third Series which may be amended and restated by the Company and executed by the Company in connection therewith and authenticated by the Trustee is limited so that at no time shall there be authenticated, delivered or outstanding under the Indenture, Bonds of the Ninety-third Series for a principal amount exceeding $25,760,000, except that Bonds of the Ninety-third Series may always be issued as provided in Section 2 of Article Fourth of the Indenture.

On the Effective Date of this Article IX, the Company shall execute and deliver to the Trustee and the Trustee, without awaiting the filing or recording of this Supplemental Indenture but upon receipt of evidence of due compliance by the Company with the applicable provisions of the Indenture, shall authenticate pursuant to Section 10 of Article Second of the Indenture, the Bonds of the Ninety-third Series in an aggregate principal amount not exceeding $25,760,000 and deliver the same to the Series 1987A NYSERDA Trustee, in exchange for certificates representing the same principal amount of the Prior First Mortgage Bonds delivered to the Trustee by the Series 1987A NYSERDA Trustee or Toronto Dominion (Texas), Inc., as the Prior LC Issuer.

Section 2. Terms of the Bonds of the Ninety-third Series. The Bonds of the Ninety-third Series shall mature according to their terms on March 1, 2027 and, in the case of the initial authentication of the Bonds of the Ninety-third Series, shall be dated the Effective Date and shall bear interest from the Effective Date at the rate per annum sufficient to pay interest accruing on the Series 1987A NYSERDA Bonds as it becomes due, payable on the dates on which interest is payable on the Series 1987A NYSERDA Bonds under the Series 1987A NYSERDA Indenture. The principal of, and premium, if any, in respect of, the Bonds of the Ninety-third Series shall be payable on the same date or dates and in the same amounts as set forth in the Series 1987A NYSERDA Indenture for the payment of principal on, or premium, if any, in respect of, the Series 1987A NYSERDA Bonds. Definitive Bonds of said series shall be registered Bonds without coupons and shall be issued in denominations of $1,000 and multiples thereof.

Subsequent to the initial authentication of the Bonds of the Ninety-third Series, each Bond of the Ninety-third Series shall be dated as of the date of its authentication and shall bear interest from the Effective Date.

Notwithstanding any other provision contained herein, the obligation of the Company to make payments of the principal of and premium, if any, and interest on the Bonds of the Ninety-third Series shall be fully or partially satisfied and discharged, and the amount of any such payment shall be reduced, to the extent that the Company shall have made the payment, in full or in part, of principal and premium, if any, and interest then due on the Series 1987A NYSERDA Bonds, and the Trustee shall not have received written notice from the Company that the obligation of the Company shall not be so satisfied and discharged and the amount of any such payment so reduced.

Notwithstanding anything to the contrary contained herein or in the Indenture, the Trustee may conclusively presume that no Event of Default with respect to the Bonds of the Ninety-third Series or, as that term is defined in the Series 1987A NYSERDA Indenture, with respect to the Series 1987A NYSERDA Bonds, has occurred and no amounts are due under the Bonds of the Ninety-third Series unless and until the Trustee shall have received from the Series 1987A NYSERDA Trustee a notice of the occurrence of an Event of Default (as defined in the Series 1987A NYSERDA Indenture) or written demand from the Series 1987A NYSERDA Trustee (which notice or demand has not been subsequently rescinded or revoked by the Series 1987A NYSERDA Trustee), setting forth in detail the amount then due with respect to such Series 1987A NYSERDA Bonds, which statement shall, unless and until revoked, rescinded or amended by the Series 1987A NYSERDA Trustee, be deemed to be correct, and the Trustee shall be entitled and authorized to rely conclusively thereon.

The interest payable on any interest payment date shall be paid to the persons in whose names the Bonds of the Ninety-third Series were registered at the close of business on the record date for such payment of interest (except any such Bond which has been called for redemption on a date fixed for such redemption which is after such record date and prior to such interest payment date) notwithstanding any cancellation of Bonds of the Ninety-third Series upon any registration of transfer or exchange thereof between such record date and such interest payment date; except that if the Company shall default in the payment of any interest due on such interest payment date such defaulted interest shall be paid to the persons in whose names Bonds of the Ninety-third Series are registered either at the close of business on the date preceding the date of payment of such defaulted interest or on a subsequent record date fixed for the payment of such defaulted interest by notice given by mail by or on behalf of the Company to holders of Bonds of the Ninety-third Series not less than ten calendar days preceding such subsequent record date. The term "record date" as used herein shall mean, with respect to a regular interest payment date, the close of business on the day that is ten calendar days prior to such interest payment date or, if such day shall be a day on which banking institutions in The City of New York are authorized by law to close, the next preceding day which shall not be a day on which such institutions are so authorized to close or, in the case of defaulted interest, the close of business on any subsequent record date established as provided above.

All of the Bonds of the Ninety-third Series shall be executed in the name and on behalf of the Company by a facsimile of the signature (or manual signature) of its President or a Vice President, and imprinted with its corporate seal (or a facsimile thereof), attested by a facsimile of the signature (or manual signature) of its Secretary or an Assistant Secretary.

Bonds of the Ninety-third Series shall be lettered "RU" and numbered consecutively from RU-1 upwards, or shall bear such other letters as may be provided therefor by the Board of Directors of the Company.

Both principal of and interest on the Bonds of the Ninety-third Series (as well as any premium thereon applicable in case of any redemption thereof prior to maturity) shall be payable at the office of the Company’s paying agent, which in the case of HSBC Bank USA, shall be its corporate trust office in the Borough of Manhattan, The City of New York, State of New York, or at such other office or agency in the Borough of Manhattan, The City of New York, State of New York, as shall be maintained by the Company for such purpose, in such coin or currency of the United States of America as at the time of payment shall be legal tender for public and private debts.

Section 3. Redemption of the Bonds of the Ninety-third Series. The Bonds of the Ninety-third Series are subject to mandatory redemption, in whole or in part, in the event of any optional or mandatory redemption of the Series 1987A NYSERDA Bonds, on the date fixed for such mandatory redemption of the Series 1987A NYSERDA Bonds, upon notice given as hereinafter in this Section 3 provided, at the applicable redemption price specified in the Series 1987A NYSERDA Indenture for the Series 1987A NYSERDA Bonds being redeemed, in such amount as, together with any moneys available therefor under the Series 1987A NYSERDA Indenture, shall be required, in accordance with the provisions of the Series 1987A NYSERDA Participation Agreement and the Series 1987A NYSERDA Indenture, to pay the principal of and premium, if any, and interest on the Series 1987A NYSERDA Bonds so redeemed.

The Bonds of the Ninety-third Series are subject to mandatory redemption, as a whole but not in part, at a redemption price equal to 100% of the principal amount thereof, together with interest accrued to the date fixed for redemption, upon a declaration by the Series 1987A NYSERDA Trustee that the principal of all Series 1987A NYSERDA Bonds then outstanding is immediately due and payable pursuant to the Series 1987A NYSERDA Indenture and upon written notice thereof by the Series 1987A NYSERDA Trustee to the Trustee at least 30 days prior to the date fixed for redemption, provided that no written cancellation of such declaration shall have been received by the Trustee and the Company prior to notice of such redemption having been given to the Trustee.

No redemption of the Bonds of the Ninety-third Series, either as a whole or in part, may be made except in connection with the payment of a like principal amount of Series 1987A NYSERDA Bonds, either by redemption or at maturity (stated or otherwise), which Series 1987A NYSERDA Bonds, shall not thereafter be remarketed. The principal amount of the Series 1987A NYSERDA Bonds and, therefore, the principal of the Bonds of the Ninety-third Series, may be prepaid, and the due dates thereof shall be accelerated, in accordance with the terms of the Series 1987A NYSERDA Indenture.

In case the Company shall at any time desire or be required so to redeem part or all of the Bonds of the Ninety-third Series then outstanding, the Company shall give to the Trustee notice in writing at least 45 days prior to the redemption date fixed by the Company (unless a shorter notice is required for the corresponding redemption under the Series 1987A NYSERDA Indenture or shall be satisfactory to the Trustee) of the principal amount of Bonds of the Ninety-third Series which it desires or is required to redeem, specifying the date on which it desires or is required to make redemption. There shall be furnished to the Trustee a certificate or opinion executed by the President or a Vice-President and the Treasurer or an Assistant Treasurer of the Company stating that the conditions precedent specified in this Section 3 with respect to such redemption have been complied with and notwithstanding anything to the contrary contained herein or in the Indenture, prior to receipt of a notice of default, the Trustee shall be entitled and authorized to rely conclusively thereon. As soon as practicable thereafter, if the Bonds are to be redeemed in part, the Trustee shall issue to the Series 1987A NYSERDA Trustee a new Bond or Bonds of the Ninety-third Series in the principal amount not so redeemed in exchange for the outstanding Bonds.

The Trustee may, to the extent permitted by the provisions of Section 4 of Article Tenth of the Indenture, accept the certificate of the President or any Vice President or the Treasurer of the Company as sufficient evidence that the requirements as to mailing of notices of the call for redemption have been fully complied with or the Trustee may, at its option and at the expense and on behalf of the Company, give such notice and take any other action required of the Company in connection with such redemption.

Section 4. Effect of Payment. On or prior to the redemption date specified in any such notice, the Company shall deposit with the Trustee a sum of money, of the character specified as the medium of payment in the Bonds of the Ninety-third Series called for redemption, which together with any moneys available therefor under the Series 1987A NYSERDA Indenture is sufficient to redeem, at the redemption price payable as hereinbefore provided, the Bonds of such series designated for redemption and the called part of any Bond of such series called only in part, and to pay the interest accrued thereon up to said redemption date, to be applied by the Trustee to the payment of such Bonds (and the called part of any such Bond) and such accrued interest thereon upon presentation and surrender of such Bonds, together with duly executed instruments of transfer, at the corporate trust office of the Trustee, or at such other office or agency as shall be maintained by the Company for such purpose; and, after such deposit shall have been made, such Bonds so called in whole and the called part of any such Bonds called only in part, whether or not presented for redemption shall cease to be entitled to any benefit, lien or security under the Indenture, no interest will accrue thereon on or after the redemption date duly specified in said notice, and claims for interest, if any, appertaining to such Bonds, and the called part of any such Bond called only in part, maturing after that date shall be void. All Bonds so redeemed shall forthwith be cancelled and, upon its written request, delivered to the Company or otherwise disposed of; and no Bonds shall be issued hereunder in place of any such Bonds, except as otherwise provided in Article Fourth of the Indenture and except that, if less than the entire principal amount of any Bond shall be so redeemed, upon presentation of such Bond so called in part, with proper instruments of transfer if required, at or after the time fixed for the payment of said Bonds so called for redemption, payment of the principal amount of the part thereof so called shall be made upon surrender and cancellation of said Bond so presented, and one or more Bonds of the Ninety-third Series, for a principal amount equal to the uncalled and unpaid balance of the principal amount of such Bond, will be executed by the Company and shall be authenticated and delivered by the Trustee to the owner of such Bond, without expense to such owner. If the Series 1987A NYSERDA Bonds have been redeemed in whole or in part, the Bonds of the Ninety-third Series shall be deemed to have been redeemed in whole or in part in the equivalent principal amount. The Trustee shall be entitled and authorized to rely conclusively on a certificate of the Company as to such redemption, together with the surrender by the Bondholder of such redeemed Bonds for cancellation or for exchange for one or more replacement Bonds in the aggregate principal amount of such unredeemed portion of the Bonds as evidence of such redemption. Notwithstanding the foregoing, the principal and interest due on the Bonds of the Ninety-third Series shall continue or be reinstated, as the case may be, if at any time any payment of principal or interest (whether under the Bonds of the Ninety-third Series or the Series 1987A NYSERDA Bonds) is rescinded or must otherwise be returned by the Series 1987A NYSERDA Trustee or the holders of the Series 1987A NYSERDA Bonds or any other person upon the insolvency, bankruptcy or reorganization of the Company or by operation of law, all as though payment had not been made.

Section 5. Exchange of Bonds. The registered owner (or assigns) of any Bond of the Ninety-third Series may at any time surrender the same at the corporate trust office of the Trustee, or at any other office or agency of the Trustee or the Company maintained for such purpose, and with instruments of transfer satisfactory to the Trustee, and, subject to the terms, conditions and limitations specified in the Indenture, shall be entitled to receive in exchange therefor an equal principal amount of Bonds of said series of other authorized denominations; and the Company will provide, and the Trustee shall authenticate and deliver, the Bonds necessary to make such exchange. The Bonds of the Ninety-third Series are nontransferable except to effect transfer to any successor to the Series 1987A NYSERDA Trustee, to the Bond Insurer or to any successor to the Bond Insurer, any such transfer of a Bond of the Ninety-third Series to be made at the principal corporate trust office of the Trustee, upon surrender and cancellation of such Bond, accompanied by a written instrument of transfer in a form approved by the Company and the Trustee, duly executed by the registered holder of such Bond or by his duly authorized attorney, and thereupon a new Bond or Bonds of the Ninety-third Series, for a like principal amount and bearing interest at the same rates and having the same maturity date, will be issued to the successor to the Series 1987A NYSERDA Trustee, the Bond Insurer or the successor to the Bond Insurer, as the case may be, in exchange therefor, as provided in the Indenture. The provisions of Section 12 of Article Second of the Original Indenture to the contrary notwithstanding, no payment of a service charge shall be required for any exchange or registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto.

Section 6. Form of Bonds of the Ninety-third Series. The definitive Bonds of the Ninety-third Series, and the Trustee’s certificate to be inscribed on all Bonds of said series, are to be substantially in the forms set forth in Exhibit A. Such Bonds of the Ninety-third Series shall be issued to the NYSERDA Trustee, in the initial principal amount, and with the description of the Bonds, identification of the series of NYSERDA Bonds and the corresponding NYSERDA Trustee and the NYSERDA Indenture, all as specified in Section 1 of this Article IX.

ARTICLE X

MAINTENANCE FUND PROVISIONS AND
RESTRICTIONS AS TO DIVIDENDS

The Company covenants that so long as any of the Bonds of the Eighty-third, Eighty-fourth, Eighty-fifth, Eighty-ninth, Ninetieth, Ninety-first, Ninety-second or Ninety-third Series shall be outstanding, it will comply with the provisions of Section 22 (providing for a maintenance fund for the benefit of Bonds issued under the Indenture) and Section 23 (providing for certain restrictions on the payment of dividends) of Article Fifth of the Indenture as added by the Supplemental Indenture dated as of March 1, 1978.

ARTICLE XI

PROVISIONS RELATING TO INSTITUTIONAL HOLDERS

Section 1. Payments to Institutional Holders. Any term of the Indenture or of the Bonds of the Eighty-third, Eighty-fourth, Eighty-fifth, Eighty-ninth, Ninetieth, Ninety-first, Ninety-second or Ninety-third Series to the contrary notwithstanding, so long as the NYSERDA Trustee (herein called the "Original Holder") or any of its nominees shall be a holder of any of the Bonds of the Eighty-third, Eighty-fourth, Eighty-fifth, Eighty-ninth, Ninetieth, Ninety-first, Ninety-second or Ninety-third Series, or if any other institutional holder or its nominee or nominees shall at any time be the holder or holders of at least 5% in aggregate principal amount of the Bonds of the Eighty-third, Eighty-fourth, Eighty-fifth, Eighty-ninth, Ninetieth, Ninety-first, Ninety-second or Ninety-third Series then outstanding (any such other institutional holder being herein called an "Institutional Holder"), payment to such holder of the principal of and the premium, if any, on any such Bond being redeemed in part and payment of the interest on such Bond shall be made in such manner and at such place as shall be specified by the Original Holder or such Institutional Holder in a written notice filed with the Company, and without any requirement of surrendering such Bond to the Trustee or noting payments thereon. As a condition to making any such payment, there shall be filed with the Trustee an agreement by the Original Holder or other Institutional Holder (designating its nominee or nominees, if any) that in the event that it shall sell or transfer any such Bond it will (a) make a notation thereon of all principal, if any, paid on such Bond and will also note the date to which interest has been paid on such Bond, and (b) promptly notify the Company and the Trustee of the name and address of the transferee of any such Bond so sold or transferred by such holder. Upon request of the Trustee there shall be furnished to the Trustee a certificate or opinion made by the President or a Vice-President and the Treasurer or an Assistant Treasurer of the Company whether the holder of any of the Bonds of the Eighty-third, Eighty-fourth, Eighty-fifth, Eighty-ninth, Ninetieth, Ninety-first, Ninety-second or Ninety-third Series, other than the Original Holder or its nominee or nominees, is an Institutional Holder and the Trustee may conclusively rely thereon. The Trustee shall not be liable or responsible to the Original Holder or any Institutional Holder or to the Company or to any other person for any act or omission to act on the part of the Company or the Original Holder or such Institutional Holder in connection with the foregoing. The Company will indemnify and save the Trustee harmless against any liabilities resulting from any such act or omission.

Section 2. Redemption of Bonds from Institutional Holders. Any term of the Indenture or of the Bonds of the Eighty-third, Eighty-fourth, Eighty-fifth, Eighty-ninth, Ninetieth, Ninety-first, Ninety-second or Ninety-third Series to the contrary notwithstanding, so long as the Original Holder or any Institutional Holder, or a nominee of the Original Holder or such Institutional Holder, shall be a holder of any of the Bonds of the Eighty-third, Eighty-fourth, Eighty-fifth, Eighty-ninth, Ninetieth, Ninety-first, Ninety-second or Ninety-third Series in case of any partial redemption of the Bonds of the Eighty-third, Eighty-fourth, Eighty-fifth, Eighty-ninth, Ninetieth, Ninety-first, Ninety-second or Ninety-third Series, the Trustee shall prorate the principal amount of such Bonds to be redeemed among all holders of Bonds of such series in proportion to the principal amount of such Bonds registered in the name of each such holder and shall then designate for redemption with respect to each such holder particular Bonds of such series or portions thereof equal to the principal amount of Bonds to be redeemed so prorated to such registered owner; provided, however, that in any such prorating pursuant to this paragraph the Trustee shall, according to such method as it shall deem proper in its discretion, make such adjustments by increasing or decreasing by not more than $1,000 the amount which would be allocable on the basis of exact proportion to any one or more holders of such Bonds, as may be required to provide that the principal amount so prorated shall be in each instance an integral multiple of $1,000.

ARTICLE XII

THE TRUSTEE

The Trustee hereby accepts the trusts hereby declared and provided, and agrees to perform the same upon the terms and conditions set forth in the Original Indenture and in the indentures supplemental thereto, including this Supplemental Indenture and upon the following terms and conditions:

The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture, or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. To the extent permitted by the provisions of Section 4 of Article Tenth of the Indenture, the Trustee shall not be answerable or accountable for anything whatsoever in connection with this Supplemental Indenture except for its own willful misconduct or negligence.

ARTICLE XIII

AMENDMENT OF INDENTURE

Article Tenth of the Original Indenture as heretofore modified and amended is further amended by adding thereto, following Section 18 thereof, a new Section 19 which shall be and read as follows:

"SECTION 19. The Trustee may appoint an authenticating agent with power to act on the Trustee’s behalf and subject to its direction in the authentication and delivery of Bonds in connection with transfers and exchanges of Bonds under the provisions of this Indenture as fully to all intents and purposes as though such authenticating agent had been expressly authorized by said provisions to authenticate and deliver Bonds. For all purposes of this Indenture, the authentication and delivery of Bonds by such authenticating agent pursuant to this Section shall be deemed to be authentication and delivery of such Bonds "by the Trustee". Such authenticating agent shall at all times be a bank or trust company organized and doing business under the laws of the United States or of any State, with a combined capital and surplus of at least $5,000,000 and authorized under such laws to exercise corporate trust powers and subject to supervision or examination by Federal or State authority. The Trustee hereby appoints HSBC Bank USA (successor to Bankers Trust Company, in turn, successor to Marine Midland Bank, N.A., a national banking association and, in turn, successor to Marine Midland Bank, a corporation duly organized and existing under the laws of the State of New York, formerly named The Marine Midland Trust Company of New York, Marine Midland Grace Trust Company of New York and Marine Midland Bank – New York), a banking association duly organized and existing under the laws of the State of New York, as an authenticating agent. Any corporation into which any authenticating agent so appointed may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, consolidation or conversion to which any authenticating agent shall be a party, or any corporation succeeding to the corporate trust business of any authenticating agent, shall be the successor of an authenticating agent hereunder, if such successor corporation is otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the parties hereto or such authenticating agent or such successor corporation. Any authenticating agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of any authenticating agent by giving written notice of termination to such authenticating agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any authenticating agent shall cease to be eligible under this Section, the Trustee may appoint a successor authenticating agent, in which case it shall give written notice of such appointment to the Company and shall mail notice of such appointment. Any amounts paid by the Trustee to the authenticating agent from time to time as reasonable compensation for its services shall be included in the Trustee’s Charges. The provisions of Article Second, Section 8, and Article Tenth, Section 5 shall be applicable to any authenticating agent."

ARTICLE XIV

FUTURE AMENDMENTS OF INDENTURE

Section 1. Certain Amendments to Article Fourth. The Company reserves the right, without any consent or other action by holders of the Bonds of the Eighty-third Series, Eighty-fourth Series, Eighty-fifth Series, Eighty-ninth Series, Ninetieth Series, Ninety-first Series, Ninety-second or Ninety-third Series, or of any subsequently created series, to amend at any time Article Fourth of the Indenture, as it may heretofore, hereby and hereafter be or have been supplemented and amended, as follows:

1. by deleting the provisions of subparagraph 1(b) of Paragraph F of Section 6 of Article Fourth thereof, of subparagraph 1(b) of Paragraph E of Section 7 of Article Fourth thereof and of subsection 1(b) of Section 8 of Article Fourth thereof;

2. by restating Paragraph A of Section 7 of Article Fourth of the Indenture so that, as so restated, it shall be and read as follows:

"A. The Bonds, Underlying Mortgage Obligations and Constituent Corporation Bonds, if any, for which Bonds are then to be issued under this Section 7, shall not previously have been made the basis for the issuance of Bonds or for the withdrawal of money under any provision of this Indenture, or retired out of moneys paid out by the Trustee under the provisions of Section 9 of this Article Fourth or Section 2 of Article Seventh hereof, or retired with moneys deposited under an Underlying Mortgage or Constituent Corporation Mortgage and representing the proceeds of any insurance on the Mortgaged Property or of any part of the Mortgaged Property which shall have been released from the lien of this Indenture, or used as the basis for a credit under Section 4 of Article Third of this Indenture."; and

3. by restating subsection (a) of subparagraph 3 of Paragraph E of Section 7 of Article Fourth of the Indenture so that, as so restated, it shall be and read as follows:

"(a) That the Bonds, Underlying Mortgage Obligations and Constituent Corporation Bonds, if any, for which Bonds are then to be issued under this Section 7, had not been made the basis for the issuance of Bonds or for the withdrawal of money under any provision of this Indenture, and had not been retired out of moneys paid out by the Trustee under the provisions of Section 9 of this Article Fourth or Section 2 of Article Seventh hereof, or retired with moneys deposited under an Underlying Mortgage or Constituent Corporation Mortgage and representing the proceeds of any insurance on the Mortgaged Property or of any part of the Mortgaged Property which shall have been released from the lien of this Indenture and had not been used as the basis for a credit under Section 4 of Article Third of this Indenture."

Section 2. Amendment to Article Ninth. The Company reserves the right, without any consent or other action by holders of the Bonds of the Eighty-third Series, Eighty-fourth Series, Eighty-fifth Series, Eighty-ninth Series, Ninetieth Series, Ninety-first Series, Ninety-second or Ninety-third Series, or of any subsequently created series, to amend at any time Article Ninth of the Indenture, as it may heretofore, hereby and hereafter be or have been supplemented and amended, by adding the following Section 19 at the end of said Article Ninth:

"SECTION 19. All Parties to this Indenture agree, and each holder of Bonds by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any holder, or group of holders, of more than 10% in aggregate principal amount of the bonds outstanding, or to any suit instituted by any holder of Bonds for the enforcement of the payment of the principal of (or premium, if any) or interest on any Bond on or after the maturity date expressed in such Bond."

Section 3. Amendment to Article Eleventh. The Company reserves the right, without any consent or other action by holders of the Bonds of the Eighty-third Series, Eighty-fourth Series, Eighty-fifth Series, Eighty-ninth Series, Ninetieth Series, Ninety-first Series, Ninety-second or Ninety-third Series, or of any subsequently created series, to amend at any time Article Eleventh of the Indenture, as it may heretofore, hereby and hereafter be or have been supplemented and amended, by amending the first paragraph of Section 2 thereof so that, as so amended, it shall be and read as follows:

"SECTION 2. Anything herein contained to the contrary notwithstanding, any moneys at any time deposited with the Trustee pursuant to the provisions hereof for the payment of the principal, premium or interest of or upon any Bond or interest coupon and remaining unclaimed for three (3) years after the date upon which such payment shall have become due shall, upon the request of the Company, be repaid to it by the Trustee; provided, that, before being required to make any such repayment, the Trustee may, at the expense of the Company, cause to be published, once a week for four (4) successive calendar weeks, in a daily newspaper, printed in the English language, published and of general circulation in the Borough of Manhattan, The City of New York, State of New York, and in a daily newspaper, printed in the English language, published and of general circulation in each of the other cities (if any) in which such principal, premium or interest, as the case may be, was payable in accordance with the terms of the Bond or interest coupon with respect to which such moneys were deposited, notice that the said moneys have not been claimed, and that after a date named in such notice, the balance of such moneys then unclaimed will be repaid to the Company."

Section 4. Certain Amendments to Article Twelfth. The Company reserves the right, without any consent or other action by holders of the Bonds of the Eighty-third Series, Eighty-fourth Series, Eighty-fifth Series, Eighty-ninth Series, Ninetieth Series, Ninety-first Series, Ninety-second or Ninety-third Series, or of any subsequently created series, to amend at any time Article Twelfth of the Indenture, as it may heretofore, hereby and hereafter be or have been supplemented and amended, by amending Paragraph A of Section 2 of Article Twelfth of the Indenture by the addition of the following:

"The Trustee may, and, upon written request of the Company or of the holders of a majority in principal amount of the Bonds outstanding, shall, fix a day, not less than ten (10) days prior to the date of first publication of notice of such meeting, as a record date for the determination of holders of Registered Bonds without coupons, and of Coupon Bonds registered as to principal (otherwise than to bearer), entitled to notice of and to vote at such meeting and any adjournment thereof, and only such registered holders who shall have been such on the date so fixed shall be entitled to notice of and to vote such Bonds at such meeting, and the Registered Bonds without coupons, and the Coupon Bonds registered as to principal (otherwise than to bearer), on such record date may be voted at such meeting and any adjournment thereof only by the persons who shall have been registered holders of such Bonds on such record date or their proxies, notwithstanding any registration of transfer of any such Bonds on the books of the Company after such date. If any Registered Bonds without coupons shall be transferred or shall be exchanged for Coupon Bonds after such record date, or if any Coupon Bonds registered as to principal (otherwise than to bearer) on such record date shall thereafter be registered to bearer, a suitable notation shall be made upon such Bonds at the time of registration of transfer from such registered holder’s name or exchange, as the case may be, to record the fact that the registered holder of such Bonds on said record date or his proxies shall be the only persons entitled to vote such Bonds at the meeting. If any Coupon Bond not registered as to principal upon such record date is thereafter so registered (otherwise than to bearer) or is thereafter exchanged for a Registered Bond, the first registered holder in whose name such Bond shall be so registered shall be deemed to have been the registered holder of such Bond on the record date for the purposes of this section, and upon such registration or exchange a notice of such meeting shall be delivered to such registered holder. In any case where a record date is fixed as aforesaid, the list of Bondholders referred to in Paragraph B of this Section 2 shall be based upon the holdings of Bonds on such record date, but shall also include the holder of Coupon Bonds registered as to principal (otherwise than to bearer) after such record date and prior to such meeting and the holders of Registered Bonds received in exchange for Coupon Bonds after such record date and prior to such meeting."

Section 5. Additional Amendment to Article Twelfth. The Company reserves the right, without any consent or other action by holders of the Bonds of the Eighty-third Series, Eighty-fourth Series, Eighty-fifth Series, Eighty-ninth Series, Ninetieth Series, Ninety-first Series, Ninety-second Series or Ninety-third Series, or of any subsequently created series, to amend at any time Article Twelfth of the Indenture, as it may heretofore, hereby and hereafter be or have been supplemented and amended, by adding the following Paragraph G to Section 2 thereof:

"G. Whenever the Company shall deliver to the Trustee an instrument or instruments executed by holders of at least sixty-six and two-thirds percent (66-2/3%) in aggregate principal amount of the Bonds affected and outstanding at the time of such delivery, consenting to the substance of a proposed modification or amendment to the provisions hereof, thereupon the Trustee shall execute a supplemental indenture in substantially the form provided for by or in such instrument or instruments, and no holder of any Bond shall have any right or interest to object to the execution of said supplemental indenture or to object to any of the terms or provisions therein contained, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin or restrain the Trustee or the Company from executing the same or from taking any action pursuant to the provisions thereof, provided that, in lieu of an instrument or instruments executed by holders of Bonds, the consent of the holders of any series of Bonds to any such proposed modification or amendment may be set forth in and evidenced by the supplemental indenture establishing the terms and provisions of such series; and provided further that no such change or modification shall (a) alter or impair the obligation of the Company to pay the principal and interest on any Bond outstanding at the time and place and at the rate and in the currency prescribed therein, without the consent of the holder of such Bond, (b) permit the creation by the Company of any mortgage, or lien in the nature of a mortgage, ranking prior to or pari passu with the lien of the Indenture, or alter adversely to the Bondholders the character of the lien of the Indenture, except as in the Indenture otherwise expressly provided, unless the creation of such mortgage or lien, or such alteration of the lien of the Indenture, be consented to by the holders of all outstanding Bonds, (c) affect the Trustee unless consented to by the Trustee or (d) permit a reduction of the percentage required for any change or modification of the indenture, without the consent of the holders of all outstanding Bonds.

It shall not be necessary for any consent of Bondholders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent approves the substances of the matters to which such consent relates. Any consent executed and delivered by any Bondholder shall be binding upon all future holders of Bonds held by such Bondholder at the time of execution of such consent, including without limitation any Bonds issued in substitution or exchange therefor, whether upon transfer or otherwise."

Section 6. Amendment to Article Thirteenth. The Company reserves the right, without any consent or other action by holders of the Bonds of the Eighty-third Series, Eighty-fourth Series, Eighty-fifth Series, Eighty-ninth Series, Ninetieth Series, Ninety-first Series, Ninety-second Series or Ninety-third Series, or of any subsequently created series, to amend at any time Article Thirteenth of the Indenture, as it may heretofore, hereby and hereafter be or have been supplemented and amended, by amending the first paragraph of Section 1 thereof so that, as so amended, it shall be and read as follows:

"SECTION 1. Any demand, consent, waiver, request, notice or other instrument in writing required or provided by this Indenture to be signed or executed by the holders of any Bonds may be in any number of concurrent writings of similar tenor, and may be signed or executed by such holders in person or by attorney appointed in writing.

The fact and date of the execution by any person of any such instrument, or of the writing appointing any such attorney, and of the ownership by any person of any Bonds, may be proved in any manner deemed sufficient by the Trustee, and such proof shall be conclusive in favor of the Trustee and the Company.

Without limiting the generality of the foregoing paragraph:

A. The signature on a proxy, consent or other such instrument or writing, if believed by the Trustee to be genuine, shall be sufficient to establish the fact of the execution thereof.

B. The fact of the ownership of any Coupon Bond which shall not at the time be registered as to principal or shall be registered to bearer, and the denomination and serial number of such Bonds and the date of holding the same, may be proved by a certificate executed by any trust company, bank, banker or other depositary (wherever situated), showing that at the date therein mentioned the person named in such certificate had on deposit with such depositary the Bond described in such certificate. For all purposes of this Indenture and of any proceedings pursuant hereto for the enforcement hereof or otherwise, to the extent permitted by the provisions of Section 4 of Article Tenth, such person shall be deemed to continue to be the owner of such Bond until the Trustee shall have received notice in writing to the contrary. The ownership of any Registered Bond or of any Coupon Bond which shall at the time be registered as to principal (otherwise than to bearer) shall be proved by the register of Bonds maintained for such purpose."

Section 7. Additional Amendment to Article Fourth. The Company reserves the right, without any consent or other action by holders of the Bonds of the Eighty-third Series, Eighty-fourth Series, Eighty-fifth Series, Eighty-ninth Series, Ninetieth Series, Ninety-first Series, Ninety-second or Ninety-third Series, or of any subsequently created series, to amend at any time Article Fourth of the Indenture, as it may heretofore, hereby and hereafter be or have been supplemented and amended, by amending subparagraph (3) of Paragraph E of Section 9 thereof so that, as so amended, it shall be and read as follows:

"(3) A statement, in form satisfactory to the Trustee, signed by the President or a Vice President and the Treasurer or an Assistant Treasurer of the Company, and verified on information and belief by one of such officers not more than sixty (60) days prior to the receipt thereof by the Trustee, certifying (a) that the Bonds so delivered had previously been actually negotiated by the Company for value; (b) that the Company had bona fide purchased or contracted to purchase the said Bonds, Underlying Mortgage Obligations and Constituent Corporation Bonds at prices (inclusive of accrued interest) to be set forth in the statement, and that such prices were not in excess of 115% of the principal amount of said Bonds, Underlying Mortgage Obligations and Constituent Corporation Bonds; (c) that the Company is not, so far as known to the officers signing such statement, in default with respect to the performance or observance of any covenant or agreement contained in this Indenture; and (d) that it is not then necessary to retire the Underlying Mortgage Obligations to be purchased to eliminate any excess of the nature described in Paragraph D of Section 7 hereof."

Section 8. Amendment to Article Seventh. The Company reserves the right, without any consent or other action by holders of the Bonds of the Eighty-third Series, Eighty-fourth Series, Eighty-fifth Series, Eighty-ninth Series, Ninetieth Series, Ninety-first Series, Ninety-second or Ninety-third Series, or of any subsequently created series, to amend at any time Article Seventh of the Indenture, as it may heretofore, hereby and hereafter be or have been supplemented and amended, by amending Paragraph E of Section 2 thereof so that, as so amended, it shall be and read as follows:

"E. To the purchase of Bonds of any series issued and outstanding hereunder or of Underlying Mortgage Obligations or of Constituent Corporation Bonds at not in excess of 115% of the principal amount thereof, in accordance with the provisions of Paragraph E of Section 9 of Article Fourth."

ARTICLE XV

MISCELLANEOUS PROVISIONS

Section 1. Amendment of Indenture. This Supplemental Indenture shall, pursuant to the provisions of Section 4 of Article Twelfth of the Indenture, hereafter form a part of the Indenture; and all the terms and conditions contained in this Supplemental Indenture as to any provision authorized to be contained herein shall be and be deemed to be part of the terms and conditions of the Indenture for any and all purposes. Except as expressly amended and supplemented by this Supplemental Indenture, the Indenture is hereby ratified and confirmed in all respects.

Section 2. Execution in Counterparts. This Supplemental Indenture may be simultaneously executed in any number of counterparts, and each of such counterparts shall for all purposes be deemed to be an originals and shall remain in full force and effect, and all such counterparts shall together constitute but one and the same instrument.

Section 3. Headings. Headings of Articles and Sections of this Supplemental Indenture are intended for ease of reference and are not a part of the terms of this Supplemental Indenture.

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be executed in their respective corporate names by their respective officers thereunto duly authorized, and their respective corporate seals to be hereto attached and to be duly attested, all as of the day and year first above written.

	NIAGARA MOHAWK POWER CORPORATION
(SEAL)
	By: _________________________
:	Name Title
Attest:
______________________________
Name: Title:
	HSBC BANK USA
(SEAL)
	By: _________________________
	Name Title
Attest:
______________________________
Name: Title:

STATE OF NEW YORK )

: ss.:

COUNTY OF NEW YORK )

On this ___________ day of ________________, 2003, before me personally came ________________________ and ________________________, each to me personally known, who, being by me duly sworn, did depose and say that he/she resides at ________________________________ and ________________________________, respectively; that he/she is a/the ________________ and ____________ secretary, respectively, of Niagara Mohawk Power Corporation, the corporation described in and which executed the above instrument; that he/she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he/she signed his name thereto by like order.

______________________________

Notary Public

My Commission Expires:

STATE OF NEW YORK )

: ss.:

COUNTY OF NEW YORK )

On this ___________ day of ____________, 2003, before me personally came ________________________ and _________________________each to me personally known, who, being by me duly sworn, did depose and say that he/she resides at _____________________________________ and _____________________________________, respectively; that he/she is a/the ___________________ and ________________ secretary, respectively, of HSBC Bank USA, the ___________________ described in and which executed the above instrument; that he/she knows the seal of said _____________________; that the seal affixed to said instrument is such ________________ seal; that it was so affixed by order of the Board of Directors of said ___________________, and that he/she signed his name thereto by like order.

______________________________

Notary Public

My Commission Expires:

Exhibit A
Form of Bonds

THIS BOND MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A BOND REGISTERED, AND NO TRANSFER OF THIS BOND IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN THE SERIES _____ NYSERDA TRUSTEE OR ITS SUCCESSOR OR THE BOND INSURER OR ITS SUCCESSOR, AS DESCRIBED HEREIN AND ON THE REVERSE HEREOF.

THIS BOND HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES ("BLUE SKY LAWS") AND RECORD OR BENEFICIAL OWNERSHIP OF THIS BOND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT, IN ACCORDANCE WITH ALL APPLICABLE BLUE SKY LAWS AND IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH ON THE REVERSE HEREOF.

No. RU-__ $___________

NIAGARA MOHAWK POWER CORPORATION

FIRST MORTGAGE BOND
FLOATING RATE SERIES ___ DUE _______

NIAGARA MOHAWK POWER CORPORATION, a New York corporation (herein called the "Company"), for value received, hereby promises to pay to _______________ or registered assigns, the principal sum of __________________ Dollars ($________) or, if less, such principal amount as is equal to the aggregate principal amount of Series ________ NYSERDA Bonds (as defined in the Supplemental Indenture dated as of May 1, 2003), on ____________ or such earlier date or dates on which the principal amount of outstanding Series _________ NYSERDA Bonds is stated to be due and payable (whether due to optional prepayment or acceleration) under the Series ________ NYSERDA Indenture, and to pay interest (as defined below) as provided below and on the reverse hereof.

Both principal of and interest on this Bond and premium, if any, are payable at the corporate trust office of the Trustee hereinafter named, in the Borough of Manhattan, City and State of New York, or at such other office or agency in said Borough as shall be maintained by the Company for such purpose, in such coin or currency of the United States of America as at the time of payment shall be legal tender for public and private debts.

Reference is made to the further provisions of this Bond set forth on the reverse hereof, which for all purposes have the same effect as though fully set forth at this place.

This Bond shall not be valid or obligatory for any purpose until authenticated by the execution by the Trustee of the certificate inscribed hereon.

IN WITNESS WHEREOF, the Company has caused this Bond to be executed in its corporate name by a facsimile of the signature (or manual signature) of its President or a Vice President and imprinted with its corporate seal (or a facsimile thereof), attested by a facsimile of the signature (or manual signature) of its Secretary or an Assistant Secretary.

Dated: __________ __, 2003

NIAGARA MOHAWK POWER CORPORATION

By:____________________________

Attest:

____________________________
Asst. Secretary

This is one of the Bonds of the Series designated above described in the within-mentioned Indenture.

HSBC BANK USA
as Trustee

By:______________________________
Authorized Officer

[Reverse of Bond of the _______________ Series]

This Bond is one of a duly authorized issue of Bonds of the Company, of an unlimited (except as provided in the Indenture hereinafter mentioned) permitted principal amount, all issued or to be issued in one or more series (the Bonds of the series of which this Bond is a part being herein called the "Bonds of the ______________ Series"), all of the Bonds of all series being issued or to be issued under and, irrespective of the time of issue, all equally secured by a Mortgage Trust Indenture (herein, with all instruments stated to be supplemental thereto to which the Trustee hereinafter named or its predecessor as Trustee hereunder is or shall be a party, called the "Indenture"), dated as of October 1, 1937, to HSBC Bank USA (successor to Bankers Trust Company, in turn, successor to Marine Midland Bank, in turn, successor to Marine Midland Bank, N.A., a national banking association and, in turn, successor to Marine Midland Bank, a corporation duly organized and existing under the laws of the State of New York, formerly named the Marine Midland Trust Company of New York, Marine Midland Grace Trust Company of New York and Marine Midland Bank – New York and hereinafter, with its successors as defined in the Indenture, referred to as the "Trustee"), to which Indenture, an executed counterpart of which is on file with the Trustee, reference is hereby made for a description of the property mortgaged and pledged to the Trustee, and for a statement of the nature and extent of the security, the rights of the holders of the Bonds with respect to such security, and the terms and conditions upon which said Bonds are or are to be issued and secured; but neither the foregoing reference to the Indenture, nor any provision of this Bond or of the Indenture, shall affect or impair the obligation of the Company, which is absolute and unconditional, to pay, at the stated or accelerated maturities herein provided, the principal of and interest on this Bond as herein provided.

The Bonds of the _____________ Series have been issued to The Bank of New York, as trustee (the "Series ______ NYSERDA Trustee") under the Indenture of Trust dated as of __________ (as the same may be amended, supplemented or otherwise modified from time to time, the "Series ________ NYSERDA Indenture") between the New York State Energy Research and Development Authority ("NYSERDA") and the Series ______ NYSERDA Trustee in respect of the pollution control bonds issued under the Series _____ NYSERDA Indenture (the Series _____ NYSERDA Bonds"), (i) to evidence the obligation of the Company to make payments in respect of the principal amount of the Series _______ NYSERDA Bonds, interest on the principal amount of the Series _______ NYSERDA Bonds and premium, if any, payable upon prepayment or redemption of the Series _______ NYSERDA Bonds and (ii) to provide to the Series _____ NYSERDA Trustee the benefit of the security provided for under the Indenture and by the Bonds in respect of the obligations of the Company set forth in clause (i) of this sentence.

Interest on this Bond accrues and is payable at the same rates and on the same dates as provided in the Series _____ NYSERDA Indenture for the accrual and payment of interest in respect of outstanding principal of the Series ______ NYSERDA Bonds.

The obligation of the Company to make payments with respect to the principal of, interest on, and premium, if any, with respect to Bonds of the _____________ Series shall be fully or partially, as the case may be, satisfied and discharged, and the amount of any such payments shall be reduced, to the extent that the Company shall have made the payment, in full or in part, of principal and premium, if any, and interest then due on the Series _______ NYSERDA Bonds, and the Trustee shall not have received written notice from the Company that the obligation of the Company shall not be so satisfied and discharged and the amount of any such payment so reduced. Notwithstanding the foregoing, the principal and interest due on this Bond shall continue or be reinstated, as the case may be, if at any time any payment of principal or interest (whether paid under this Bond or the Series ______ NYSERDA Bonds) is rescinded or must otherwise be returned by the Series _____ NYSERDA Trustee, the holders of the Series ______ NYSERDA Bonds, or any other person upon the insolvency, bankruptcy or reorganization of the Company or by operation of law, all as though payment had not been made.

The Indenture and the rights and obligations of the Company and of the holders of the Bonds thereunder may be changed or modified at any time upon the consent and approval of the Company and of the holders of 66-2/3 per cent in principal amount of the Bonds then outstanding affected by such change or modification, given as provided in the Indenture, and in the manner and subject to the limitations therein set forth; provided, that no such change or modification shall (a) alter or impair the obligation of the Company to pay the principal of, and premium, if any, and interest on any Bond at the time and place and at the rate and in the currency provided therein, without the consent of the holder of such Bond, (b) permit the creation by the Company of any mortgage, or lien in the nature of a mortgage, ranking prior to or pari passu with the lien of the Indenture, or alter adversely to the Bondholders the character of the lien of the Indenture, except as in the Indenture otherwise expressly provided, unless the creation of such mortgage or lien, or such alteration of the lien of the Indenture, be consented to by the holders of all outstanding Bonds, (c) affect the Trustee unless consented to by the Trustee or (d) permit a reduction of the percentage required for any change or modification of the Indenture, without the consent of the holders of all outstanding Bonds.

The outstanding principal indebtedness evidenced by this Bond together with accrued interest thereon may be declared, or may become, due and payable before maturity in certain events, on the conditions, in the manner and with the effect set forth in the Indenture.

Each Bond of the ______________ Series shall be dated as of the date of its authentication, and shall bear interest from such date.

Upon surrender for cancellation, at any time or from time to time, of Bonds of the ______ Series by the Series _____ NYSERDA Trustee to the Trustee, the Bonds so surrendered shall be deemed fully paid and the obligations of the Company thereunder shall be terminated, and such Bonds shall be cancelled.

The Bonds of the _____________ Series are subject to mandatory redemption, in whole or in part, in the event of any optional or mandatory redemption of the Series ______ NYSERDA Bonds, in each case upon notice given as provided in the Series ______ NYSERDA Indenture, at the applicable redemption price specified in the Series _____ NYSERDA Indenture for the Series _______ NYSERDA Bonds being redeemed, in such amount as, together with any moneys available therefor under the Series ______ NYSERDA Indenture, shall be required, in accordance with the provisions of the Participation Agreement dated as of ____________ between the Company and NYSERDA, as amended, and the Series ______ NYSERDA Indenture, to pay the principal of and premium, if any, and interest on the Series ________ NYSERDA Bonds so redeemed.

The Bonds of the ___________ Series are subject to mandatory redemption, as a whole but not in part, at a redemption price equal to 100% of the principal amount thereof, together with interest accrued to the date fixed for redemption, upon a declaration by the Series _____ NYSERDA Trustee that the principal of all Series _______ NYSERDA Bonds then outstanding is immediately due and payable pursuant to the Series _____ NYSERDA Indenture and upon written notice thereof by the Series _____ NYSERDA Trustee to the Trustee at least 30 days prior to the date fixed for redemption, provided that no written cancellation of such declaration shall have been received by the Trustee and the Company prior to notice of such redemption having been given to the Trustee.

The Bonds of the ___________ Series may not be redeemed, either as a whole or in part, except in connection with the payment of a like principal amount of Series _______ NYSERDA Bonds, either by redemption or at maturity (stated or otherwise). The principal amount of the Series _______ NYSERDA Bonds and, therefore, the principal of the Bonds of the ____________ Series, may be prepaid, and the due dates thereof shall be accelerated, in accordance with the terms of the Series ______ NYSERDA Indenture.

No recourse shall be had for the payment of any part of principal of, or interest on, this Bond, or for any claim based hereon or thereon, or otherwise in any manner with respect hereto, or with respect to the Indenture, to or against any incorporator or any past, present or future stockholder, officer or director of the Company or of any successor corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or other provision of law, or by the enforcement of any assessment or penalty, or otherwise, all such liability being expressly waived and released by the acceptance of this Bond and as part of the consideration for the issue hereof, as provided in the Indenture.

If this Bond or any part thereof is called for redemption and payment duly provided, this Bond or such part thereof shall cease to bear interest from and after the date fixed for such redemption.

This Bond is nontransferable except to effect transfer to the Bond Insurer or to any successor to either the Series ______ NYSERDA Trustee or the Bond Insurer, registration of any such transfer of this Bond may be made by the registered owner (or assigns) in person or by duly authorized attorney, at the principal corporate trust office of the Trustee, or at such other offices or agencies of the Trustee or the Company as shall be maintained for such purpose, upon surrender and cancellation of this Bond, accompanied by a written instrument of transfer in a form approved by the Company and the Trustee, duly executed by the registered holder of this Bond or by his duly authorized attorney, and thereupon a new Bond or Bonds of the _______________ Series, for a like principal amount and having the same interest rate and maturity date, will be issued to the Bond Insurer or to the successor to the Series ______NYSERDA Trustee or the Bond Insurer, as the case may be, in exchange therefor, as provided in the Indenture. No service charge shall be made for any exchange or registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto. The Company and the Trustee may deem and treat the person in whose name this Bond is registered as the absolute owner hereof for the purpose of receiving payment and for all other purposes and the Company, the Trustee and any paying agent or agency may disregard any notice to the contrary, whether this Bond or interest thereon shall be overdue or not. This Bond, alone or with other Bonds of the ______________ Series, may in like manner be exchanged at such office or agency for one or more new Bonds of the _______________ Series of the same aggregate principal amount and having the same interest rate and maturity date, all as provided in the Indenture.

EX-4

Executed in 52 Counterparts of which this is Counterpart No. _____.

EX-4

EXECUTION COPY

NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY


AND


NIAGARA MOHAWK POWER CORPORATION


_________________________________

FIRST SUPPLEMENTAL PARTICIPATION AGREEMENT


Dated as of May 1, 2003

to

PARTICIPATION AGREEMENT

Dated as of August 15, 1985

_________________________________

relating to

$100,000,000 Pollution Control Revenue Bonds

(Niagara Mohawk Power Corporation Project), 1985 Series A

THIS FIRST SUPPLEMENTAL PARTICIPATION AGREEMENT, made and dated as of May 1, 2003 (the "Supplemental Agreement") to the PARTICIPATION AGREEMENT made and dated as of August 15, 1985, by and between NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY (the "Authority"), a body corporate and politic, constituting a public benefit corporation, and NIAGARA MOHAWK POWER CORPORATION, a corporation duly organized and existing and qualified to do business as a public utility under the laws of the State of New York (the "Corporation"),

W I T N E S S E T H   T H A T:

WHEREAS, pursuant to special act of the Legislature of the State of New York (Title 9 of Article 8 of the Public Authorities Law of New York, as from time to time amended and supplemented, herein called the "Act"), the Authority has been established as a body corporate and politic, constituting a public benefit corporation; and

WHEREAS, pursuant to the Act, the Authority is empowered to contract with any power company to participate in the incorporation of features in power plants and the construction of associated facilities to the extent required by the public interest in development, health, recreation, safety, conservation of natural resources and aesthetics; and

WHEREAS, the Legislature of the State of New York has determined that, because interest costs incurred by public utilities are reflected in the rates paid by the customers of such utilities and because governmental action has mandated the installation of pollution control facilities, it is in the public interest to enable utilities to obtain the lowest possible interest rate on bonds sold to provide pollution control facilities; and

WHEREAS, pursuant to the Act, the Authority has also been empowered to extend credit and make loans from bond and note proceeds to any person for the construction, acquisition and installation of, or for the reimbursement to any person for costs in connection with, any special energy project (as defined in the Act), including, but not limited to, any land, works, system, building or other improvement, and all real and personal properties of any nature or any interest in any of them which are suitable for or related to the furnishing, generation or production of energy; and

WHEREAS, the Authority is also authorized under the Act to borrow money and issue its negotiable bonds and notes to provide sufficient monies for achieving its corporate purposes, including the refunding of outstanding obligations of the Authority; and

WHEREAS, the Authority is also authorized under the Act to enter into any contracts and to execute all instruments necessary or convenient for the exercise of its corporate powers and the fulfillment of its corporate purposes, including the refunding of outstanding bonds and notes of the Authority; and

WHEREAS, the Authority and the Corporation have entered into a Participation Agreement, dated as of August 15, 1985 (herein referred to as the "Agreement"), providing for the financing or refinancing of certain costs related to the acquisition, construction, and installation of certain pollution control, solid waste, sewage disposal facilities and other facilities identified and described in Exhibit A to the Agreement, and, as part of such participation, that the Authority issue bonds pursuant to the Act to provide funds for such financing or refinancing; and

WHEREAS, on September 5, 1985, the Authority issued $100,000,000 aggregate principal amount of its Pollution Control Revenue Bonds (Niagara Mohawk Power Corporation Project), 1985 Series A (the "Bonds"), under and pursuant to Resolution No. 615 of the Authority, adopted June 24, 1985, and an Indenture of Trust dated as of August 15, 1985 (the "Original Indenture"), between the Authority and The Bank of New York (as successor in interest to Irving Trust Company), as trustee (the "Trustee"), to provide funds for the financing or refinancing described in the preceding whereas clause; and

WHEREAS, the Original Indenture was amended and supplemented by a First Supplemental Indenture of Trust dated as of December 17, 1993 (collectively with the Original Indenture, the "1985 Series A Indenture"), between the Authority and the Trustee; and

WHEREAS, the Bonds previously bore interest at a Variable Rate, and upon a change in the interest rate determination method to a Daily Rate to be effective on May 1, 2003, all Bonds were subject to mandatory redemption and purchase in lieu of redemption by the Corporation; and

WHEREAS, Section 7.04 of the Agreement and Section 4.02 of the 1985 Series A Indenture provide that the Authority and the Trustee may, in accordance with the terms thereof, modify, amend or supplement the Agreement; and

WHEREAS, the Corporation has requested that upon changing the interest rate determination method of the Bonds to a Daily Rate to be effective on May 1, 2003, the 1985 Series A Indenture be amended and restated and that the Agreement be amended to (i) permit the Bonds to bear interest at various variable interest rates, including, without limitation, at daily, weekly, monthly, semi-annual, term, commercial paper and auction rates, (ii) provide for new provisions made necessary or desirable by the issuance of a municipal bond insurance policy and (iii) otherwise conform certain terms of the 1985 Series A Indenture relating to the Bonds while they bear interest at variable interest rates and certain other terms of the 1985 Series A Indenture with the current market standard for multi-modal bonds; and

WHEREAS, upon a change in the interest rate determination method to a Daily Rate to be effective on May 1, 2003, the registered owners of all the Bonds consented to the amendments to the 1985 Series A Indenture and the Agreement requested by the Corporation, and waived any and all rights to any notification or filing procedures or requirements under the 1985 Series A Indenture in addition to the consent provided thereby; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, the Authority and the Trustee have executed and delivered an Amended and Restated Indenture of Trust, dated as of May 1, 2003 (the "Amended and Restated Indenture"), which amends and restates the 1985 Series A Indenture; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, an Opinion of Bond Counsel described in Section 4.01.3(C) of the Amended and Restated Indenture has been delivered to the Trustee; and

WHEREAS, simultaneously with the execution and delivery of the Amended and Restated Indenture, without any further notice, the Bonds will bear interest at an Auction Period Rate; and

WHEREAS, all acts, conditions and things necessary or required by the Constitution and statutes of the State of New York, or otherwise, to exist, happen, and be performed as prerequisites to the passage of this Supplemental Agreement, do exist, have happened, and have been performed; and

NOW, THEREFORE, for and in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the Authority agrees with the Corporation, with the written consent of the Trustee, as follows:

ARTICLE I

AUTHORIZATION; DEFINITIONS

Section 1.01. Supplemental Agreement. This Supplemental Agreement is amendatory and supplemental to the Agreement, and is entered into in accordance with Section 7.04 of the Agreement and Article IV of the 1985 Series A Indenture; and except as modified, amended and supplemented by this Supplemental Agreement, the provisions of the Agreement are in all respects ratified and confirmed and shall remain in full force and effect.

Section 1.02. Definitions. Capitalized terms used herein and not otherwise defined herein or in the Agreement shall have the meaning given to such terms in the Amended and Restated Indenture.

ARTICLE II

REPRESENTATIONS

Section 2.01. Representations of the Authority. The Authority represents and warrants as follows:

(a) The Authority is a body corporate and politic, constituting a public benefit corporation, established and existing under the laws of the State of New York;

(b) The Authority has full power and authority to execute and deliver this Supplemental Agreement and the Amended and Restated Indenture and to consummate the transactions contemplated hereby and thereby and perform its obligations hereunder and thereunder;

(c) The Authority is not in default under any of the provisions of the laws of the State of New York which would affect its existence or its powers referred to in the preceding paragraph (b); and

(d) The Authority has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Amended and Restated Indenture.

Section 2.02. Representations of the Corporation. The Corporation represents and warrants as follows:

(a) The Corporation is a corporation duly incorporated and in good standing under the laws of the State of New York, is duly qualified and authorized to engage in business as a public utility in the State of New York, has power to enter into, execute and deliver this Supplemental Agreement, the Supplemental Tax Regulatory Agreement, and the Corporation Obligation and by proper corporate action has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation;

(b) The execution, delivery and performance of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation and the consummation of the transactions herein contemplated will not conflict with or constitute a breach of or a default under the Corporation's Certificate of Consolidation or By-Laws or any judgment, decree, order, statute, rule or regulation applicable to the Corporation or any indenture, mortgage, loan agreement or other contract or instrument to which the Corporation is a party or by which it is bound;

(c) The execution and delivery of this Supplemental Agreement and the issuance of the Corporation Obligation by the Corporation in the manner and for the purposes herein set forth have been duly authorized by order of the Public Service Commission of the State of New York; and

(d) All necessary authorizations for or approvals of the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation have been obtained by the Corporation.

The Corporation additionally represents and warrants that the representations and warranties of the Corporation set forth in the Supplemental Tax Regulatory Agreement are true and correct in all material respects.

ARTICLE III

AMENDMENTS TO THE AGREEMENT

Section 3.01. Amendment to Section 1.01 of the Agreement. Section 1.01 of the Agreement is hereby amended and restated to read as follows:

Section 1.01. Definitions. Capitalized terms used in this Participation Agreement and not otherwise defined herein shall have the meanings set forth in Section 1.01 of the Amended and Restated Indenture. Capitalized terms used in this Participation Agreement and not otherwise defined herein or in Section 1.01 of the Amended and Restated Indenture shall have the meanings set forth in Section 1.01 of the 1985 Series A Indenture.

Section 3.02. Replacement of certain terms in the Agreement. The Agreement is hereby amended to replace throughout the Agreement any reference to a term set forth under the Old Term column below with a corresponding term set forth under the New Term column below.

Old Term	New Term
Letter of Credit	Support Facility
Bank	Support Facility Issuer
Paying Agent	Registrar and Paying Agent
Indenture	Amended and Restated Indenture

Section 3.03. Amendment to Section 3.01 of the Agreement. Section 3.01 of the Agreement is hereby amended and restated to read as follows:

Section 3.01. Construction of the Project. The Corporation hereby represents that it has caused the Project to be completed and acknowledges that it shall not be entitled to any reimbursement for the cost of construction of the Project from the Authority, the Trustee or the Holders of the Bonds, nor shall it be entitled to any diminution or postponement of the payments required to be paid by the Corporation pursuant to this Participation Agreement or the Corporation Obligations.

Section 3.04. Amendment to Section 3.03 of the Agreement. Section 3.03 of the Agreement is hereby amended and restated to read as follows:

Section 3.03. Application of proceeds of the Bonds. The Corporation has applied the proceeds of sale of the Bonds in accordance with the Original Indenture and the Agreement.

Section 3.05. Amendments to Sections 3.04, 3.05 and 3.06 of the Agreement. Sections 3.04, 3.05 and 3.06 of the Agreement are hereby deleted.

Section 3.06. Amendment to Section 3.07 of the Agreement. Section 3.07 of the Agreement is hereby amended and restated to read as follows:

Section 3.07. Sale of the Project . Pursuant to an Asset Purchase Agreement relating to Nine Mile Point Unit 1 Nuclear Generating Facility ("NMP1"), dated as of December 11, 2000, by and among the Corporation, Constellation Energy Group, Inc. and Constellation Nuclear, LLC (the "NMP1 Purchaser"), the Corporation has sold NMP1 of which certain portions of the Project are a part to the NMP1 Purchaser.

Pursuant to an Asset Purchase Agreement relating to Nine Mile Point Unit 2 Nuclear Generating Facility ("NMP2"), dated as of December 11, 2000, by and among the Corporation, New York State Electric & Gas Corporation, Rochester Gas and Electric Corporation, Central Hudson Gas & Electric Corporation, Constellation Energy Group, Inc. and Constellation Nuclear, LLC (the "NMP2 Purchaser"), the Corporation has sold its interest in NMP2 of which certain portions of the Project are a part to the NMP2 Purchaser.

Pursuant to an Asset Sales Agreement relating to Huntley Steam Station ("Huntley") and Dunkirk Steam Station ("Dunkirk"), dated as of December 23, 1998, between the Corporation, and NRG Energy, Inc. (the "Huntley/Dunkirk Purchaser"), the Corporation has sold Huntley and Dunkirk of which certain portions of the Project are a part to the Huntley/Dunkirk Purchaser.

Pursuant to an Asset Sales Agreement relating to Oswego Steam Station ("Oswego"), dated as of April 1, 1999, by and among the Corporation, Rochester Gas and Electric Corporation, Oswego Harbor Power LLC, and NRG Energy, Inc. (the "Oswego Purchaser"), the Corporation has sold its interest in Oswego of which certain portions of the Project are a part to the Oswego Purchaser.

Pursuant to an Asset Sales Agreement relating to Granby Hydroelectric Station ("Granby"), dated as of December 2, 1998, between the Corporation and Erie Boulevard Hydropower, L.P. (the "Granby Purchaser"), the Corporation has sold Granby of which certain portions of the Project are a part to the Granby Purchaser.

Pursuant to an Asset Sales Agreement relating to Albany Steam Station ("Albany"), dated as of October 6, 1999, between the Corporation and PSEG Power, L.L.C. (the "Albany Purchaser"), the Corporation has sold Albany of which certain portions of the Project are a part to the Albany Purchaser.

Section 3.07. Amendment to Section 3.09 of the Agreement. Section 3.09 of the Agreement is hereby amended and restated to read as follows:

Section 3.09. Investment of moneys in funds under the Amended and Restated Indenture. Any moneys held as part of any fund created under the Amended and Restated Indenture shall, at the direction of an Authorized Corporation Representative, be invested or reinvested by the Trustee as provided in Section 9.04 of the Amended and Restated Indenture.

Section 3.08. Amendment to Section 4.01 of the Agreement. Section 4.01 of the Agreement is hereby amended and restated to read as follows:

Section 4.01. Execution and delivery of Corporation Obligation to Trustee. In order to evidence the obligation of the Corporation to the Authority to repay the advance of the proceeds of the Bonds, the Authority hereby directs the Corporation, and the Corporation hereby agrees, to deliver or cause to be delivered the First Mortgage Bonds to the Trustee on the Effective Date in exchange for the cancellation of the Corporation Note. The First Mortgage Bonds shall be the amended and restated first mortgage bonds of the Corporation issued under the Corporation Indenture and relating to the Bonds in substantially the form included in the Supplemental Corporation Indenture attached hereto as Exhibit B, with only such changes, omissions and insertions thereto as shall have been approved by the Authority.

Section 3.09. Amendment to Section 4.04 of the Agreement. Section 4.04 of the Agreement is hereby amended to add the following paragraph between the first and second paragraph in such section:

In addition, the Corporation shall wire to the State of New York on the Effective Date a bond issuance charge fee applicable to the Bonds pursuant to Section 2976 of the Public Authorities Law of the State of New York in the amount specified by such section on the Effective Date. The Corporation shall also pay to the Authority on the Effective Date an additional Administration Fee in the amount of $250,000.00.

Section 3.10. Amendment to Section 4.11 of the Agreement. Section 4.11 of the Agreement is hereby amended and restated to read as follows:

Section 4.11. Payment to Registrar and Paying Agent. The Corporation shall pay, or cause to be paid, to the Registrar and Paying Agent for deposit in the Bond Purchase Fund and credit to the Company Account therein an amount sufficient to provide for the payment of the Purchase Price of any Bond tendered for purchase pursuant to the Amended and Restated Indenture and the Bond Purchase Trust Agreement to the extent that sufficient moneys are not available for the payment of such Purchase Price from the other sources described therein.

Section 3.11. Amendment to Section 4.12 of the Agreement. Section 4.12 of the Agreement is hereby amended and restated to read as follows:

Section 4.12. Agreements of the Corporation relating to Support Facilities. The Corporation agrees not to request that the interest rate mode applicable to the Bonds be adjusted to an Adjustable Rate or a Fixed Rate unless on the effective date of the applicable Change in the Interest Rate Mode the Bonds shall be rated at least "A" by S&P or "A" by Moody's or an equivalent rating by any nationally recognized rating agency. Such rating of the Bonds may, but is not required to, be achieved by obtaining a Support Facility which meets the requirements of this Article VI of the Amended and Restated Indenture.

The Corporation further agrees that it will maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate, a Term Rate for a Calculation Period of greater than 13 months or a Fixed Rate. Notwithstanding the foregoing, so long as the conditions set forth in Section 6.05 of the Amended and Restated Indenture are met by the Bond Insurer and with respect to the Policy, and unless otherwise agreed by the Bond Insurer, the Corporation shall maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate or a Fixed Rate.

Section 3.12. Addition of Section 4.13 to Article IV of the Agreement. The Agreement is hereby amended to add the following Section 4.13 at the end of Article IV of the Agreement:

Section 4.13. Corporation liable to owners of Bonds in the case of certain events of taxability. The Corporation confirms and agrees that if as result of action by the Corporation, the owner of the Project as of the date hereof, or any successor owner of the Project, the interest on the Bonds is determined to be included for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of section 147(a)(1) of the Code), as evidenced by a published or private ruling of the Internal Revenue Service or a final, nonappealable judicial decision by a court of competent jurisdiction, then the Corporation, in addition to its obligation to redeem the Bonds pursuant to Section 5.06 of the Amended and Restated Indenture, shall be liable to the affected owners of the Bonds for any taxes, penalties and interest assessed against such owners by the Internal Revenue Service and attributable to the Bonds.

The Authority and the Trustee agree not to object to the intervention in or participation by the Corporation at its own expense in any proceedings by or before the Internal Revenue Service or any court relating to whether interest on the Bonds is includable for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of Section 147(a)(1) of the Code).

Section 3.13. Addition of Section 5.08 to Article V of the Agreement. The Agreement is hereby amended to add the following Section 5.08 at the end of Article V of the Agreement:

Section 5.08. Recording and Filing. The Corporation hereby covenants that it will cause all financing statements related to the Amended and Restated Indenture and all supplements thereto and this Participation Agreement and all supplements thereto, as well as such other security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may from time to time be required by law in order to preserve and protect fully the security of Holders and the rights of the Trustee hereunder, and to take or cause to be taken any and all other action necessary to perfect the security interest created by the Amended and Restated Indenture and shall, within ten (10) days after such filing, cause there to be furnished to the Trustee an opinion of counsel as to the adequacy and details of such filing and specifying any re-filing to be effected in the future.

Section 3.14. Amendment to Section 6.01 of the Agreement. Section 6.01 of the Agreement is hereby amended to replace any reference to the "Corporation Note" with reference to "Corporation Obligation" throughout such Section 6.01. Section 6.01 of the Agreement is hereby further amended to replace any reference to "Section 10.01 of the Indenture" with reference to "Section 12.03 of the Amended and Restated Indenture" throughout such Section 6.01. Paragraph (b) of Section 6.01 of the Agreement is hereby amended and restated to read as follows:

(b) failure the Corporation to pay when due any amount required to be paid under Section 4.11 of this Participation Agreement, which failure causes an Event of Default to occur pursuant to paragraph (a) of Section 12.01 of the Amended and Restated Indenture; or

Section 3.15. Addition of Section 6.04 to Article VI of the Agreement. Article VI of the Agreement is hereby amended to add the following Section 6.04:

Section 6.04. Rights of the Credit Facility Issuer; Other rights of the Trustee to enforce this Participation Agreement. Notwithstanding anything herein to the contrary, any judicial proceedings of the Trustee under Section 6.03 may be instituted only with the written consent of the Credit Facility Issuer and shall be instituted by the Trustee at the written direction of the Credit Facility Issuer.

Nothing in this Participation Agreement shall limit any other rights of the Trustee to enforce this Participation Agreement.

Section 3.16. Amendment to Section 7.02 of the Agreement. Section 7.02 of the Agreement is hereby amended and restated to read as follows:

Section 7.02. Notices. All notices, certificates, requests or other communications between the Authority, the Corporation and the Trustee required to be given under this Participation Agreement or under the Amended and Restated Indenture shall be sufficiently given and shall be deemed given when delivered by hand or first class mail, postage prepaid, addressed as follows: if to the Authority, at 17 Columbia Circle, Albany, New York 12203, Attention: President; if to the Corporation, at 300 Erie Boulevard West, Syracuse, New York 13202, Attention: Treasurer, with a copy to Niagara Mohawk Power Corporation, 25 Research Drive, Westborough, Massachusetts 01582, Attention: Assistant Treasurer; and if to the Trustee or the Registrar and Paying Agent, at The Bank of New York, 101 Barclay Street - 21W, New York, New York 10286, Attention: Corporate Trust Administration. A duplicate copy of each notice, certificate, request or other communication given hereunder to the Authority, the Company or the Trustee shall also be given to the others. The Corporation, the Authority and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent.

Section 3.17. Amendment to Section 7.04 of the Agreement. Section 7.04 of the Agreement is hereby amended and restated to read as follows:

Section 7.04. Amendment of Participation Agreement. This Participation Agreement may not be amended except by an instrument in writing signed by the parties hereto and, if such amendment occurs after the issuance of the Bonds, upon compliance with the provisions of Article XIV of the Amended and Restated Indenture.

Section 3.18. Amendment to Exhibits B and C of the Agreement. Exhibits B and C of the Agreement are hereby deleted and replaced with Exhibit B to this Supplemental Agreement.

ARTICLE IV

MISCELLANEOUS

Section 4.01. Consent to Amended and Restated Indenture. The Corporation hereby consents to the execution and delivery of the Amended and Restated Indenture.

Section 4.02. Law and Place of Enforcement of this Supplemental Agreement. This Supplemental Agreement shall be construed and interpreted in accordance with the laws of the State of New York and all suits and actions arising out of this Supplemental Agreement shall be instituted in a court of competent jurisdiction in the State of New York.

Section 4.03. Effective Date; Counterparts. This Supplemental Agreement may be simultaneously executed in counterparts. Each such counterpart so executed shall be deemed to be an original, and all together shall constitute but one and the same instrument. This Supplemental Agreement shall become effective on the Effective Date. Notwithstanding the Effective Date, for convenience and purposes of reference this Supplemental Agreement shall be dated as of May 1, 2003 and may be cited and referred to as the "First Supplemental Participation Agreement dated as of May 1, 2003."

None of the rights, covenants, interests, duties or obligations accruing to or required of any Bondholder, the Authority, the Corporation, the Trustee, or any Support Facility Issuer prior to the Effective Date shall be affected by the execution and delivery of this Supplemental Agreement.

[Signature Page of this Supplemental Agreement Follows]

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

NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY


By_________________________________
         Acting President

(SEAL)

Attest:

_______________________________
Assistant Secretary

NIAGARA MOHAWK POWER CORPORATION


By_________________________________
       Name: Robert G. Seega
       Title: Assistant Treasurer

(SEAL)

Attest:

_______________________________

[Signature Page of Supplemental Agreement relating to Pollution Control Revenue Bonds

(Niagara Mohawk Power Corporation Project), 1985 Series A]

EXHIBIT B

Corporation Supplemental Indenture

[See Item Number 30 of this Record of Proceedings]

EX-4

EXECUTION COPY

______________________________________________________________________________
______________________________________________________________________________

NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY


AND


NIAGARA MOHAWK POWER CORPORATION


_________________________________

FIRST SUPPLEMENTAL PARTICIPATION AGREEMENT


Dated as of May 1, 2003

to

PARTICIPATION AGREEMENT

Dated as of December 1, 1985

_________________________________

relating to

$37,500,000 Pollution Control Revenue Bonds
(Niagara Mohawk Power Corporation Project), 1985 Series B


______________________________________________________________________________
______________________________________________________________________________

THIS FIRST SUPPLEMENTAL PARTICIPATION AGREEMENT, made and dated as of May 1, 2003 (the "Supplemental Agreement") to the PARTICIPATION AGREEMENT made and dated as of December 1, 1985, by and between NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY (the "Authority"), a body corporate and politic, constituting a public benefit corporation, and NIAGARA MOHAWK POWER CORPORATION, a corporation duly organized and existing and qualified to do business as a public utility under the laws of the State of New York (the "Corporation"),

W I T N E S S E T H    T H A T:

WHEREAS, pursuant to special act of the Legislature of the State of New York (Title 9 of Article 8 of the Public Authorities Law of New York, as from time to time amended and supplemented, herein called the "Act"), the Authority has been established as a body corporate and politic, constituting a public benefit corporation; and

WHEREAS, pursuant to the Act, the Authority is empowered to contract with any power company to participate in the incorporation of features in power plants and the construction of associated facilities to the extent required by the public interest in development, health, recreation, safety, conservation of natural resources and aesthetics; and

WHEREAS, the Legislature of the State of New York has determined that, because interest costs incurred by public utilities are reflected in the rates paid by the customers of such utilities and because governmental action has mandated the installation of pollution control facilities, it is in the public interest to enable utilities to obtain the lowest possible interest rate on bonds sold to provide pollution control facilities; and

WHEREAS, pursuant to the Act, the Authority has also been empowered to extend credit and make loans from bond and note proceeds to any person for the construction, acquisition and installation of, or for the reimbursement to any person for costs in connection with, any special energy project (as defined in the Act), including, but not limited to, any land, works, system, building or other improvement, and all real and personal properties of any nature or any interest in any of them which are suitable for or related to the furnishing, generation or production of energy; and

WHEREAS, the Authority is also authorized under the Act to borrow money and issue its negotiable bonds and notes to provide sufficient monies for achieving its corporate purposes, including the refunding of outstanding obligations of the Authority; and

WHEREAS, the Authority is also authorized under the Act to enter into any contracts and to execute all instruments necessary or convenient for the exercise of its corporate powers and the fulfillment of its corporate purposes, including the refunding of outstanding bonds and notes of the Authority; and

WHEREAS, the Authority and the Corporation have entered into a Participation Agreement, dated as of December 1, 1985 (herein referred to as the "Agreement"), providing for the financing or refinancing of certain costs related to the acquisition, construction, and installation of certain pollution control, solid waste, sewage disposal facilities and other facilities identified and described in Exhibit A to the Agreement, and, as part of such participation, that the Authority issue bonds pursuant to the Act to provide funds for such financing or refinancing; and

WHEREAS, on December 26, 1985, the Authority issued $37,500,000 aggregate principal amount of its Pollution Control Refunding Revenue Bonds (Niagara Mohawk Power Corporation Project), 1985 Series B (which are being renamed as provided in Section 2.02 of the Amended and Restated Indenture (as defined below)) (the "Bonds"), under and pursuant to Resolution No. 637 of the Authority, adopted October 31, 1985, and an Indenture of Trust dated as of December 1, 1985 (the "Original Indenture"), between the Authority and The Bank of New York (as successor in interest to Irving Trust Company), as trustee (the "Trustee"), to provide funds for the financing or refinancing described in the preceding whereas clause; and

WHEREAS, the Bonds previously bore interest at a Variable Rate, and upon a change in the interest rate determination method to a Daily Rate to be effective on May 1, 2003, all Bonds were subject to mandatory redemption and purchase in lieu of redemption by the Corporation; and

WHEREAS, Section 7.04 of the Agreement and Section 4.02 of the Original Indenture provide that the Authority and the Trustee may, in accordance with the terms thereof, modify, amend or supplement the Agreement; and

WHEREAS, the Corporation has requested that upon changing the interest rate determination method of the Bonds to a Daily Rate to be effective on May 1, 2003, the Original Indenture be amended and restated and that the Agreement be amended to (i) permit the Bonds to bear interest at various variable interest rates, including, without limitation, at daily, weekly, monthly, semi-annual, term, commercial paper and auction rates, (ii) provide for new provisions made necessary or desirable by the issuance of a municipal bond insurance policy and (iii) otherwise conform certain terms of the Original Indenture relating to the Bonds while they bear interest at variable interest rates and certain other terms of the Original Indenture with the current market standard for multi-modal bonds; and

WHEREAS, upon a change in the interest rate determination method to a Daily Rate to be effective on May 1, 2003, the registered owners of all the Bonds consented to the amendments to the Original Indenture and the Agreement requested by the Corporation, and waived any and all rights to any notification or filing procedures or requirements under the Original Indenture in addition to the consent provided thereby; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, the Authority and the Trustee have executed and delivered an Amended and Restated Indenture of Trust, dated as of May 1, 2003 (the "Amended and Restated Indenture"), which amends and restates the Original Indenture; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, an Opinion of Bond Counsel described in Section 4.01.3(C) of the Amended and Restated Indenture has been delivered to the Trustee; and

WHEREAS, simultaneously with the execution and delivery of the Amended and Restated Indenture, without any further notice, the Bonds will bear interest at an Auction Period Rate; and

WHEREAS, all acts, conditions and things necessary or required by the Constitution and statutes of the State of New York, or otherwise, to exist, happen, and be performed as prerequisites to the passage of this Supplemental Agreement, do exist, have happened, and have been performed; and

NOW, THEREFORE, for and in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the Authority agrees with the Corporation, with the written consent of the Trustee, as follows:

ARTICLE I

AUTHORIZATION; DEFINITIONS

Section 1.01. Supplemental Agreement. This Supplemental Agreement is amendatory and supplemental to the Agreement, and is entered into in accordance with Section 7.04 of the Agreement and Article IV of the Original Indenture; and except as modified, amended and supplemented by this Supplemental Agreement, the provisions of the Agreement are in all respects ratified and confirmed and shall remain in full force and effect.

Section 1.02. Definitions. Capitalized terms used herein and not otherwise defined herein or in the Agreement shall have the meaning given to such terms in the Amended and Restated Indenture.

ARTICLE II

REPRESENTATIONS

Section 2.01. Representations of the Authority. The Authority represents and warrants as follows:

(a) The Authority is a body corporate and politic, constituting a public benefit corporation, established and existing under the laws of the State of New York;

(b) The Authority has full power and authority to execute and deliver this Supplemental Agreement and the Amended and Restated Indenture and to consummate the transactions contemplated hereby and thereby and perform its obligations hereunder and thereunder;

(c) The Authority is not in default under any of the provisions of the laws of the State of New York which would affect its existence or its powers referred to in the preceding paragraph (b); and

(d) The Authority has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Amended and Restated Indenture.

Section 2.02. Representations of the Corporation. The Corporation represents and warrants as follows:

(a) The Corporation is a corporation duly incorporated and in good standing under the laws of the State of New York, is duly qualified and authorized to engage in business as a public utility in the State of New York, has power to enter into, execute and deliver this Supplemental Agreement, the Supplemental Tax Regulatory Agreement, and the Corporation Obligation and by proper corporate action has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation;

(b) The execution, delivery and performance of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation and the consummation of the transactions herein contemplated will not conflict with or constitute a breach of or a default under the Corporation's Certificate of Consolidation or By-Laws or any judgment, decree, order, statute, rule or regulation applicable to the Corporation or any indenture, mortgage, loan agreement or other contract or instrument to which the Corporation is a party or by which it is bound;

(c) The execution and delivery of this Supplemental Agreement and the issuance of the Corporation Obligation by the Corporation in the manner and for the purposes herein set forth have been duly authorized by order of the Public Service Commission of the State of New York; and

(d) All necessary authorizations for or approvals of the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation have been obtained by the Corporation.

The Corporation additionally represents and warrants that the representations and warranties of the Corporation set forth in the Supplemental Tax Regulatory Agreement are true and correct in all material respects.

ARTICLE III

AMENDMENTS TO THE AGREEMENT

Section 3.01. Amendment to Section 1.01 of the Agreement. Section 1.01 of the Agreement is hereby amended and restated to read as follows:

Section 1.01. Definitions. Capitalized terms used in this Participation Agreement and not otherwise defined herein shall have the meanings set forth in Section 1.01 of the Amended and Restated Indenture. Capitalized terms used in this Participation Agreement and not otherwise defined herein or in Section 1.01 of the Amended and Restated Indenture shall have the meanings set forth in Section 1.01 of the Original Indenture.

Section 3.02. Replacement of certain terms in the Agreement. The Agreement is hereby amended to replace throughout the Agreement any reference to a term set forth under the Old Term column below with a corresponding term set forth under the New Term column below.

Old Term	New Term
Letter of Credit	Support Facility
Bank	Support Facility Issuer
Paying Agent	Registrar and Paying Agent
Indenture	Amended and Restated Indenture

Section 3.03. Amendment to Section 3.01 of the Agreement. Section 3.01 of the Agreement is hereby amended and restated to read as follows:

Section 3.01. Construction of the Project. The Corporation hereby represents that it has caused the Project to be completed and acknowledges that it shall not be entitled to any reimbursement for the cost of construction of the Project from the Authority, the Trustee or the Holders of the Bonds, nor shall it be entitled to any diminution or postponement of the payments required to be paid by the Corporation pursuant to this Participation Agreement or the Corporation Obligations.

Section 3.04. Amendment to Section 3.03 of the Agreement. Section 3.03 of the Agreement is hereby amended and restated to read as follows:

Section 3.03. Application of proceeds of the Bonds. The Corporation has applied the proceeds of sale of the Bonds in accordance with the Original Indenture and the Agreement.

Section 3.05. Amendments to Sections 3.04, 3.05 and 3.06 of the Agreement. Sections 3.04, 3.05 and 3.06 of the Agreement are hereby deleted.

Section 3.06. Amendment to Section 3.07 of the Agreement. Section 3.07 of the Agreement is hereby amended and restated to read as follows:

Section 3.07. Sale of the Project . Pursuant to an Asset Purchase Agreement relating to Nine Mile Point Unit 1 Nuclear Generating Facility ("NMP1"), dated as of December 11, 2000, by and among the Corporation, Constellation Energy Group, Inc. and Constellation Nuclear, LLC (the "NMP1 Purchaser"), the Corporation has sold NMP1 of which certain portions of the Project are a part to the NMP1 Purchaser.

Pursuant to an Asset Purchase Agreement relating to Nine Mile Point Unit 2 Nuclear Generating Facility ("NMP2"), dated as of December 11, 2000, by and among the Corporation, New York State Electric & Gas Corporation, Rochester Gas and Electric Corporation, Central Hudson Gas & Electric Corporation, Constellation Energy Group, Inc. and Constellation Nuclear, LLC (the "NMP2 Purchaser"), the Corporation has sold its interest in NMP2 of which certain portions of the Project are a part to the NMP2 Purchaser.

Section 3.07. Amendment to Section 3.09 of the Agreement. Section 3.09 of the Agreement is hereby amended and restated to read as follows:

Section 3.09. Investment of moneys in funds under the Amended and Restated Indenture. Any moneys held as part of any fund created under the Amended and Restated Indenture shall, at the direction of an Authorized Corporation Representative, be invested or reinvested by the Trustee as provided in Section 9.04 of the Amended and Restated Indenture.

Section 3.08. Amendment to Section 4.01 of the Agreement. Section 4.01 of the Agreement is hereby amended and restated to read as follows:

Section 4.01. Execution and delivery of Corporation Obligation to Trustee. In order to evidence the obligation of the Corporation to the Authority to repay the advance of the proceeds of the Bonds, the Authority hereby directs the Corporation, and the Corporation hereby agrees, to deliver or cause to be delivered the First Mortgage Bonds to the Trustee on the Effective Date in exchange for the cancellation of the Corporation Note. The First Mortgage Bonds shall be the amended and restated first mortgage bonds of the Corporation issued under the Corporation Indenture and relating to the Bonds in substantially the form included in the Supplemental Corporation Indenture attached hereto as Exhibit B, with only such changes, omissions and insertions thereto as shall have been approved by the Authority.

Section 3.09. Amendment to Section 4.04 of the Agreement. Section 4.04 of the Agreement is hereby amended to add the following paragraph between the first and second paragraph in such section:

In addition, the Corporation shall wire to the State of New York on the Effective Date a bond issuance charge fee applicable to the Bonds pursuant to Section 2976 of the Public Authorities Law of the State of New York in the amount specified by such section on the Effective Date. The Corporation shall also pay to the Authority on the Effective Date an additional Administration Fee in the amount of $93,750.00.

Section 3.10. Amendment to Section 4.06 of the Agreement. Section 4.06 of the Agreement is hereby deleted.

Section 3.11. Amendment to Section 4.11 of the Agreement. Section 4.11 of the Agreement is hereby amended and restated to read as follows:

Section 4.11. Payment to Registrar and Paying Agent. The Corporation shall pay, or cause to be paid, to the Registrar and Paying Agent for deposit in the Bond Purchase Fund and credit to the Company Account therein an amount sufficient to provide for the payment of the Purchase Price of any Bond tendered for purchase pursuant to the Amended and Restated Indenture and the Bond Purchase Trust Agreement to the extent that sufficient moneys are not available for the payment of such Purchase Price from the other sources described therein.

Section 3.12. Amendment to Section 4.12 of the Agreement. Section 4.12 of the Agreement is hereby amended and restated to read as follows:

Section 4.12. Agreements of the Corporation relating to Support Facilities. The Corporation agrees not to request that the interest rate mode applicable to the Bonds be adjusted to an Adjustable Rate or a Fixed Rate unless on the effective date of the applicable Change in the Interest Rate Mode the Bonds shall be rated at least "A" by S&P or "A" by Moody's or an equivalent rating by any nationally recognized rating agency. Such rating of the Bonds may, but is not required to, be achieved by obtaining a Support Facility which meets the requirements of this Article VI of the Amended and Restated Indenture.

The Corporation further agrees that it will maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate, a Term Rate for a Calculation Period of greater than 13 months or a Fixed Rate. Notwithstanding the foregoing, so long as the conditions set forth in Section 6.05 of the Amended and Restated Indenture are met by the Bond Insurer and with respect to the Policy, and unless otherwise agreed by the Bond Insurer, the Corporation shall maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate or a Fixed Rate.

Section 3.13. Addition of Section 4.13 to Article IV of the Agreement. The Agreement is hereby amended to add the following Section 4.13 at the end of Article IV of the Agreement:

Section 4.13. Corporation liable to owners of Bonds in the case of certain events of taxability. The Corporation confirms and agrees that if as result of action by the Corporation, the owner of the Project as of the date hereof, or any successor owner of the Project, the interest on the Bonds is determined to be included for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of section 147(a)(1) of the Code), as evidenced by a published or private ruling of the Internal Revenue Service or a final, nonappealable judicial decision by a court of competent jurisdiction, then the Corporation, in addition to its obligation to redeem the Bonds pursuant to Section 5.06 of the Amended and Restated Indenture, shall be liable to the affected owners of the Bonds for any taxes, penalties and interest assessed against such owners by the Internal Revenue Service and attributable to the Bonds.

The Authority and the Trustee agree not to object to the intervention in or participation by the Corporation at its own expense in any proceedings by or before the Internal Revenue Service or any court relating to whether interest on the Bonds is includable for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of Section 147(a)(1) of the Code).

Section 3.14. Addition of Section 5.08 to Article V of the Agreement. The Agreement is hereby amended to add the following Section 5.08 at the end of Article V of the Agreement:

Section 5.08. Recording and Filing. The Corporation hereby covenants that it will cause all financing statements related to the Amended and Restated Indenture and all supplements thereto and this Participation Agreement and all supplements thereto, as well as such other security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may from time to time be required by law in order to preserve and protect fully the security of Holders and the rights of the Trustee hereunder, and to take or cause to be taken any and all other action necessary to perfect the security interest created by the Amended and Restated Indenture and shall, within ten (10) days after such filing, cause there to be furnished to the Trustee an opinion of counsel as to the adequacy and details of such filing and specifying any re-filing to be effected in the future.

Section 3.15. Amendment to Section 6.01 of the Agreement. Section 6.01 of the Agreement is hereby amended to replace any reference to the "Corporation Note" with reference to "Corporation Obligation" throughout such Section 6.01. Section 6.01 of the Agreement is hereby further amended to replace any reference to "Section 10.01 of the Indenture" with reference to "Section 12.03 of the Amended and Restated Indenture" throughout such Section 6.01. Paragraph (b) of Section 6.01 of the Agreement is hereby amended and restated to read as follows:

(b) failure the Corporation to pay when due any amount required to be paid under Section 4.11 of this Participation Agreement, which failure causes an Event of Default to occur pursuant to paragraph (a) of Section 12.01 of the Amended and Restated Indenture; or

Section 3.16. Addition of Section 6.04 to Article VI of the Agreement. Article VI of the Agreement is hereby amended to add the following Section 6.04:

Section 6.04. Rights of the Credit Facility Issuer; Other rights of the Trustee to enforce this Participation Agreement. Notwithstanding anything herein to the contrary, any judicial proceedings of the Trustee under Section 6.03 may be instituted only with the written consent of the Credit Facility Issuer and shall be instituted by the Trustee at the written direction of the Credit Facility Issuer.

Nothing in this Participation Agreement shall limit any other rights of the Trustee to enforce this Participation Agreement.

Section 3.17. Amendment to Section 7.02 of the Agreement. Section 7.02 of the Agreement is hereby amended and restated to read as follows:

Section 7.02. Notices. All notices, certificates, requests or other communications between the Authority, the Corporation and the Trustee required to be given under this Participation Agreement or under the Amended and Restated Indenture shall be sufficiently given and shall be deemed given when delivered by hand or first class mail, postage prepaid, addressed as follows: if to the Authority, at 17 Columbia Circle, Albany, New York 12203, Attention: President; if to the Corporation, at 300 Erie Boulevard West, Syracuse, New York 13202, Attention: Treasurer, with a copy to Niagara Mohawk Power Corporation, 25 Research Drive, Westborough, Massachusetts 01582, Attention: Assistant Treasurer; and if to the Trustee or the Registrar and Paying Agent, at The Bank of New York, 101 Barclay Street - 21W, New York, New York 10286, Attention: Corporate Trust Administration. A duplicate copy of each notice, certificate, request or other communication given hereunder to the Authority, the Company or the Trustee shall also be given to the others. The Corporation, the Authority and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent.

Section 3.18. Amendment to Section 7.04 of the Agreement. Section 7.04 of the Agreement is hereby amended and restated to read as follows:

Section 7.04. Amendment of Participation Agreement. This Participation Agreement may not be amended except by an instrument in writing signed by the parties hereto and, if such amendment occurs after the issuance of the Bonds, upon compliance with the provisions of Article XIV of the Amended and Restated Indenture.

Section 3.19. Amendment to Exhibits B and C of the Agreement. Exhibits B and C of the Agreement are hereby deleted and replaced with Exhibit B to this Supplemental Agreement.

ARTICLE IV

MISCELLANEOUS

Section 4.01. Consent to Amended and Restated Indenture. The Corporation hereby consents to the execution and delivery of the Amended and Restated Indenture.

Section 4.02. Law and Place of Enforcement of this Supplemental Agreement. This Supplemental Agreement shall be construed and interpreted in accordance with the laws of the State of New York and all suits and actions arising out of this Supplemental Agreement shall be instituted in a court of competent jurisdiction in the State of New York.

Section 4.03. Effective Date; Counterparts. This Supplemental Agreement may be simultaneously executed in counterparts. Each such counterpart so executed shall be deemed to be an original, and all together shall constitute but one and the same instrument. This Supplemental Agreement shall become effective on the Effective Date. Notwithstanding the Effective Date, for convenience and purposes of reference this Supplemental Agreement shall be dated as of May 1, 2003 and may be cited and referred to as the "First Supplemental Participation Agreement dated as of May 1, 2003."

None of the rights, covenants, interests, duties or obligations accruing to or required of any Bondholder, the Authority, the Corporation, the Trustee, or any Support Facility Issuer prior to the Effective Date shall be affected by the execution and delivery of this Supplemental Agreement.

[Signature Page of this Supplemental Agreement Follows]

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

NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY

By_________________________________________
       Acting President

(SEAL)

Attest:

______________________________
      Assistant Secretary

NIAGARA MOHAWK POWER CORPORATION

By_____________________________________
       Name: Robert G. Seega
      Title: Assistant Treasurer

(SEAL)

Attest:

_______________________________

[Signature Page of Supplemental Agreement relating to Pollution Control Revenue Bonds

(Niagara Mohawk Power Corporation Project), 1985 Series B]

EXHIBIT B

Corporation Supplemental Indenture

[See Item Number 30 of this Record of Proceedings]

EX-4

EXECUTION COPY

_____________________________________________________________________________
_____________________________________________________________________________




NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY


AND


NIAGARA MOHAWK POWER CORPORATION


_________________________________

FIRST SUPPLEMENTAL PARTICIPATION AGREEMENT


Dated as of May 1, 2003

to

PARTICIPATION AGREEMENT

Dated as of December 1, 1985

_________________________________

relating to

$37,500,000 Pollution Control Revenue Bonds
(Niagara Mohawk Power Corporation Project), 1985 Series C

______________________________________________________________________________
______________________________________________________________________________

THIS FIRST SUPPLEMENTAL PARTICIPATION AGREEMENT, made and dated as of May 1, 2003 (the "Supplemental Agreement") to the PARTICIPATION AGREEMENT made and dated as of December 1, 1985, by and between NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY (the "Authority"), a body corporate and politic, constituting a public benefit corporation, and NIAGARA MOHAWK POWER CORPORATION, a corporation duly organized and existing and qualified to do business as a public utility under the laws of the State of New York (the "Corporation"),

W I T N E S S E T H    T H A T:

WHEREAS, pursuant to special act of the Legislature of the State of New York (Title 9 of Article 8 of the Public Authorities Law of New York, as from time to time amended and supplemented, herein called the "Act"), the Authority has been established as a body corporate and politic, constituting a public benefit corporation; and

WHEREAS, pursuant to the Act, the Authority is empowered to contract with any power company to participate in the incorporation of features in power plants and the construction of associated facilities to the extent required by the public interest in development, health, recreation, safety, conservation of natural resources and aesthetics; and

WHEREAS, the Legislature of the State of New York has determined that, because interest costs incurred by public utilities are reflected in the rates paid by the customers of such utilities and because governmental action has mandated the installation of pollution control facilities, it is in the public interest to enable utilities to obtain the lowest possible interest rate on bonds sold to provide pollution control facilities; and

WHEREAS, pursuant to the Act, the Authority has also been empowered to extend credit and make loans from bond and note proceeds to any person for the construction, acquisition and installation of, or for the reimbursement to any person for costs in connection with, any special energy project (as defined in the Act), including, but not limited to, any land, works, system, building or other improvement, and all real and personal properties of any nature or any interest in any of them which are suitable for or related to the furnishing, generation or production of energy; and

WHEREAS, the Authority is also authorized under the Act to borrow money and issue its negotiable bonds and notes to provide sufficient monies for achieving its corporate purposes, including the refunding of outstanding obligations of the Authority; and

WHEREAS, the Authority is also authorized under the Act to enter into any contracts and to execute all instruments necessary or convenient for the exercise of its corporate powers and the fulfillment of its corporate purposes, including the refunding of outstanding bonds and notes of the Authority; and

WHEREAS, the Authority and the Corporation have entered into a Participation Agreement, dated as of December 1, 1985 (herein referred to as the "Agreement"), providing for the financing or refinancing of certain costs related to the acquisition, construction, and installation of certain pollution control, solid waste, sewage disposal facilities and other facilities identified and described in Exhibit A to the Agreement, and, as part of such participation, that the Authority issue bonds pursuant to the Act to provide funds for such financing or refinancing; and

WHEREAS, on December 26, 1985, the Authority issued $37,500,000 aggregate principal amount of its Pollution Control Refunding Revenue Bonds (Niagara Mohawk Power Corporation Project), 1985 Series C (which are being renamed as provided in Section 2.02 of the Amended and Restated Indenture (as defined below)) (the "Bonds"), under and pursuant to Resolution No. 637 of the Authority, adopted October 31, 1985, and an Indenture of Trust dated as of December 1, 1985 (the "Original Indenture"), between the Authority and The Bank of New York (as successor in interest to Irving Trust Company), as trustee (the "Trustee"), to provide funds for the financing or refinancing described in the preceding whereas clause; and

WHEREAS, the Bonds previously bore interest at a Variable Rate, and upon a change in the interest rate determination method to a Daily Rate to be effective on May 1, 2003, all Bonds were subject to mandatory redemption and purchase in lieu of redemption by the Corporation; and

WHEREAS, Section 7.04 of the Agreement and Section 4.02 of the Original Indenture provide that the Authority and the Trustee may, in accordance with the terms thereof, modify, amend or supplement the Agreement; and

WHEREAS, the Corporation has requested that upon changing the interest rate determination method of the Bonds to a Daily Rate to be effective on May 1, 2003, the Original Indenture be amended and restated and that the Agreement be amended to (i) permit the Bonds to bear interest at various variable interest rates, including, without limitation, at daily, weekly, monthly, semi-annual, term, commercial paper and auction rates, (ii) provide for new provisions made necessary or desirable by the issuance of a municipal bond insurance policy and (iii) otherwise conform certain terms of the Original Indenture relating to the Bonds while they bear interest at variable interest rates and certain other terms of the Original Indenture with the current market standard for multi-modal bonds; and

WHEREAS, upon a change in the interest rate determination method to a Daily Rate to be effective on May 1, 2003, the registered owners of all the Bonds consented to the amendments to the Original Indenture and the Agreement requested by the Corporation, and waived any and all rights to any notification or filing procedures or requirements under the Original Indenture in addition to the consent provided thereby; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, the Authority and the Trustee have executed and delivered an Amended and Restated Indenture of Trust, dated as of May 1, 2003 (the "Amended and Restated Indenture"), which amends and restates the Original Indenture; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, an Opinion of Bond Counsel described in Section 4.01.3(C) of the Amended and Restated Indenture has been delivered to the Trustee; and

WHEREAS, simultaneously with the execution and delivery of the Amended and Restated Indenture, without any further notice, the Bonds will bear interest at an Auction Period Rate; and

WHEREAS, all acts, conditions and things necessary or required by the Constitution and statutes of the State of New York, or otherwise, to exist, happen, and be performed as prerequisites to the passage of this Supplemental Agreement, do exist, have happened, and have been performed; and

NOW, THEREFORE, for and in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the Authority agrees with the Corporation, with the written consent of the Trustee, as follows:

ARTICLE I

AUTHORIZATION; DEFINITIONS

Section 1.01. Supplemental Agreement. This Supplemental Agreement is amendatory and supplemental to the Agreement, and is entered into in accordance with Section 7.04 of the Agreement and Article IV of the Original Indenture; and except as modified, amended and supplemented by this Supplemental Agreement, the provisions of the Agreement are in all respects ratified and confirmed and shall remain in full force and effect.
Section 1.02. Definitions. Capitalized terms used herein and not otherwise defined herein or in the Agreement shall have the meaning given to such terms in the Amended and Restated Indenture.

ARTICLE II

REPRESENTATIONS

Section 2.01. Representations of the Authority. The Authority represents and warrants as follows:

(a) The Authority is a body corporate and politic, constituting a public benefit corporation, established and existing under the laws of the State of New York;

(b) The Authority has full power and authority to execute and deliver this Supplemental Agreement and the Amended and Restated Indenture and to consummate the transactions contemplated hereby and thereby and perform its obligations hereunder and thereunder;

(c) The Authority is not in default under any of the provisions of the laws of the State of New York which would affect its existence or its powers referred to in the preceding paragraph (b); and

(d) The Authority has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Amended and Restated Indenture.

Section 2.02. Representations of the Corporation. The Corporation represents and warrants as follows:

(a) The Corporation is a corporation duly incorporated and in good standing under the laws of the State of New York, is duly qualified and authorized to engage in business as a public utility in the State of New York, has power to enter into, execute and deliver this Supplemental Agreement, the Supplemental Tax Regulatory Agreement, and the Corporation Obligation and by proper corporate action has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation;

(b) The execution, delivery and performance of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation and the consummation of the transactions herein contemplated will not conflict with or constitute a breach of or a default under the Corporation's Certificate of Consolidation or By-Laws or any judgment, decree, order, statute, rule or regulation applicable to the Corporation or any indenture, mortgage, loan agreement or other contract or instrument to which the Corporation is a party or by which it is bound;

(c) The execution and delivery of this Supplemental Agreement and the issuance of the Corporation Obligation by the Corporation in the manner and for the purposes herein set forth have been duly authorized by order of the Public Service Commission of the State of New York; and

(d) All necessary authorizations for or approvals of the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation have been obtained by the Corporation.

The Corporation additionally represents and warrants that the representations and warranties of the Corporation set forth in the Supplemental Tax Regulatory Agreement are true and correct in all material respects.

ARTICLE III

AMENDMENTS TO THE AGREEMENT

Section 3.01. Amendment to Section 1.01 of the Agreement. Section 1.01 of the Agreement is hereby amended and restated to read as follows:

Section 1.01. Definitions. Capitalized terms used in this Participation Agreement and not otherwise defined herein shall have the meanings set forth in Section 1.01 of the Amended and Restated Indenture. Capitalized terms used in this Participation Agreement and not otherwise defined herein or in Section 1.01 of the Amended and Restated Indenture shall have the meanings set forth in Section 1.01 of the Original Indenture.

Section 3.02. Replacement of certain terms in the Agreement. The Agreement is hereby amended to replace throughout the Agreement any reference to a term set forth under the Old Term column below with a corresponding term set forth under the New Term column below.

Old Term	New Term
Letter of Credit	Support Facility
Bank	Support Facility Issuer
Paying Agent	Registrar and Paying Agent
Indenture	Amended and Restated Indenture

Section 3.03. Amendment to Section 3.01 of the Agreement. Section 3.01 of the Agreement is hereby amended and restated to read as follows:

Section 3.01. Construction of the Project. The Corporation hereby represents that it has caused the Project to be completed and acknowledges that it shall not be entitled to any reimbursement for the cost of construction of the Project from the Authority, the Trustee or the Holders of the Bonds, nor shall it be entitled to any diminution or postponement of the payments required to be paid by the Corporation pursuant to this Participation Agreement or the Corporation Obligations.

Section 3.04. Amendment to Section 3.03 of the Agreement. Section 3.03 of the Agreement is hereby amended and restated to read as follows:

Section 3.03. Application of proceeds of the Bonds. The Corporation has applied the proceeds of sale of the Bonds in accordance with the Original Indenture and the Agreement.

Section 3.05. Amendments to Sections 3.04, 3.05 and 3.06 of the Agreement. Sections 3.04, 3.05 and 3.06 of the Agreement are hereby deleted.

Section 3.06. Amendment to Section 3.07 of the Agreement. Section 3.07 of the Agreement is hereby amended and restated to read as follows:

Section 3.07. Sale of the Project . Pursuant to an Asset Purchase Agreement relating to Nine Mile Point Unit 1 Nuclear Generating Facility ("NMP1"), dated as of December 11, 2000, by and among the Corporation, Constellation Energy Group, Inc. and Constellation Nuclear, LLC (the "NMP1 Purchaser"), the Corporation has sold NMP1 of which certain portions of the Project are a part to the NMP1 Purchaser.

Pursuant to an Asset Purchase Agreement relating to Nine Mile Point Unit 2 Nuclear Generating Facility ("NMP2"), dated as of December 11, 2000, by and among the Corporation, New York State Electric & Gas Corporation, Rochester Gas and Electric Corporation, Central Hudson Gas & Electric Corporation, Constellation Energy Group, Inc. and Constellation Nuclear, LLC (the "NMP2 Purchaser"), the Corporation has sold its interest in NMP2 of which certain portions of the Project are a part to the NMP2 Purchaser.

Section 3.07. Amendment to Section 3.09 of the Agreement. Section 3.09 of the Agreement is hereby amended and restated to read as follows:

Section 3.09. Investment of moneys in funds under the Amended and Restated Indenture. Any moneys held as part of any fund created under the Amended and Restated Indenture shall, at the direction of an Authorized Corporation Representative, be invested or reinvested by the Trustee as provided in Section 9.04 of the Amended and Restated Indenture.

Section 3.08. Amendment to Section 4.01 of the Agreement. Section 4.01 of the Agreement is hereby amended and restated to read as follows:

Section 4.01. Execution and delivery of Corporation Obligation to Trustee. In order to evidence the obligation of the Corporation to the Authority to repay the advance of the proceeds of the Bonds, the Authority hereby directs the Corporation, and the Corporation hereby agrees, to deliver or cause to be delivered the First Mortgage Bonds to the Trustee on the Effective Date in exchange for the cancellation of the Corporation Note. The First Mortgage Bonds shall be the amended and restated first mortgage bonds of the Corporation issued under the Corporation Indenture and relating to the Bonds in substantially the form included in the Supplemental Corporation Indenture attached hereto as Exhibit B, with only such changes, omissions and insertions thereto as shall have been approved by the Authority.

Section 3.09. Amendment to Section 4.04 of the Agreement. Section 4.04 of the Agreement is hereby amended to add the following paragraph between the first and second paragraph in such section:

In addition, the Corporation shall wire to the State of New York on the Effective Date a bond issuance charge fee applicable to the Bonds to Section 2976 of the Public Authorities Law of the State of New York in the amount specified by such section on the Effective Date. The Corporation shall also pay to the Authority on the Effective Date an additional Administration Fee in the amount of $93,750.00.

Section 3.10. Amendment to Section 4.06 of the Agreement. Section 4.06 of the Agreement is hereby deleted.

Section 3.11. Amendment to Section 4.11 of the Agreement. Section 4.11 of the Agreement is hereby amended and restated to read as follows:

Section 4.11. Payment to Registrar and Paying Agent. The Corporation shall pay, or cause to be paid, to the Registrar and Paying Agent for deposit in the Bond Purchase Fund and credit to the Company Account therein an amount sufficient to provide for the payment of the Purchase Price of any Bond tendered for purchase pursuant to the Amended and Restated Indenture and the Bond Purchase Trust Agreement to the extent that sufficient moneys are not available for the payment of such Purchase Price from the other sources described therein.

Section 3.12. Amendment to Section 4.12 of the Agreement. Section 4.12 of the Agreement is hereby amended and restated to read as follows:

Section 4.12. Agreements of the Corporation relating to Support Facilities. The Corporation agrees not to request that the interest rate mode applicable to the Bonds be adjusted to an Adjustable Rate or a Fixed Rate unless on the effective date of the applicable Change in the Interest Rate Mode the Bonds shall be rated at least "A" by S&P or "A" by Moody's or an equivalent rating by any nationally recognized rating agency. Such rating of the Bonds may, but is not required to, be achieved by obtaining a Support Facility which meets the requirements of this Article VI of the Amended and Restated Indenture.

The Corporation further agrees that it will maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate, a Term Rate for a Calculation Period of greater than 13 months or a Fixed Rate. Notwithstanding the foregoing, so long as the conditions set forth in Section 6.05 of the Amended and Restated Indenture are met by the Bond Insurer and with respect to the Policy, and unless otherwise agreed by the Bond Insurer, the Corporation shall maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate or a Fixed Rate.

Section 3.13. Addition of Section 4.13 to Article IV of the Agreement. The Agreement is hereby amended to add the following Section 4.13 at the end of Article IV of the Agreement:

Section 4.13. Corporation liable to owners of Bonds in the case of certain events of taxability. The Corporation confirms and agrees that if as result of action by the Corporation, the owner of the Project as of the date hereof, or any successor owner of the Project, the interest on the Bonds is determined to be included for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of section 147(a)(1) of the Code), as evidenced by a published or private ruling of the Internal Revenue Service or a final, nonappealable judicial decision by a court of competent jurisdiction, then the Corporation, in addition to its obligation to redeem the Bonds pursuant to Section 5.06 of the Amended and Restated Indenture, shall be liable to the affected owners of the Bonds for any taxes, penalties and interest assessed against such owners by the Internal Revenue Service and attributable to the Bonds.

The Authority and the Trustee agree not to object to the intervention in or participation by the Corporation at its own expense in any proceedings by or before the Internal Revenue Service or any court relating to whether interest on the Bonds is includable for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of Section 147(a)(1) of the Code).

Section 3.14. Addition of Section 5.08 to Article V of the Agreement. The Agreement is hereby amended to add the following Section 5.08 at the end of Article V of the Agreement:

Section 5.08. Recording and Filing. The Corporation hereby covenants that it will cause all financing statements related to the Amended and Restated Indenture and all supplements thereto and this Participation Agreement and all supplements thereto, as well as such other security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may from time to time be required by law in order to preserve and protect fully the security of Holders and the rights of the Trustee hereunder, and to take or cause to be taken any and all other action necessary to perfect the security interest created by the Amended and Restated Indenture and shall, within ten (10) days after such filing, cause there to be furnished to the Trustee an opinion of counsel as to the adequacy and details of such filing and specifying any re-filing to be effected in the future.

Section 3.15. Amendment to Section 6.01 of the Agreement. Section 6.01 of the Agreement is hereby amended to replace any reference to the "Corporation Note" with reference to "Corporation Obligation" throughout such Section 6.01. Section 6.01 of the Agreement is hereby further amended to replace any reference to "Section 10.01 of the Indenture" with reference to "Section 12.03 of the Amended and Restated Indenture" throughout such Section 6.01. Paragraph (b) of Section 6.01 of the Agreement is hereby amended and restated to read as follows:

(b) failure the Corporation to pay when due any amount required to be paid under Section 4.11 of this Participation Agreement, which failure causes an Event of Default to occur pursuant to paragraph (a) of Section 12.01 of the Amended and Restated Indenture; or

Section 3.16. Addition of Section 6.04 to Article VI of the Agreement. Article VI of the Agreement is hereby amended to add the following Section 6.04:

Section 6.04. Rights of the Credit Facility Issuer; Other rights of the Trustee to enforce this Participation Agreement. Notwithstanding anything herein to the contrary, any judicial proceedings of the Trustee under Section 6.03 may be instituted only with the written consent of the Credit Facility Issuer and shall be instituted by the Trustee at the written direction of the Credit Facility Issuer.

Nothing in this Participation Agreement shall limit any other rights of the Trustee to enforce this Participation Agreement.

Section 3.17. Amendment to Section 7.02 of the Agreement. Section 7.02 of the Agreement is hereby amended and restated to read as follows:

Section 7.02. Notices. All notices, certificates, requests or other communications between the Authority, the Corporation and the Trustee required to be given under this Participation Agreement or under the Amended and Restated Indenture shall be sufficiently given and shall be deemed given when delivered by hand or first class mail, postage prepaid, addressed as follows: if to the Authority, at 17 Columbia Circle, Albany, New York 12203, Attention: President; if to the Corporation, at 300 Erie Boulevard West, Syracuse, New York 13202, Attention: Treasurer, with a copy to Niagara Mohawk Power Corporation, 25 Research Drive, Westborough, Massachusetts 01582, Attention: Assistant Treasurer; and if to the Trustee or the Registrar and Paying Agent, at The Bank of New York, 101 Barclay Street - 21W, New York, New York 10286, Attention: Corporate Trust Administration. A duplicate copy of each notice, certificate, request or other communication given hereunder to the Authority, the Company or the Trustee shall also be given to the others. The Corporation, the Authority and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent.

Section 3.18. Amendment to Section 7.04 of the Agreement. Section 7.04 of the Agreement is hereby amended and restated to read as follows:

Section 7.04. Amendment of Participation Agreement. This Participation Agreement may not be amended except by an instrument in writing signed by the parties hereto and, if such amendment occurs after the issuance of the Bonds, upon compliance with the provisions of Article XIV of the Amended and Restated Indenture.

Section 3.19. Amendment to Exhibits B and C of the Agreement. Exhibits B and C of the Agreement are hereby deleted and replaced with Exhibit B to this Supplemental Agreement.

ARTICLE IV

MISCELLANEOUS

Section 4.01. Consent to Amended and Restated Indenture. The Corporation hereby consents to the execution and delivery of the Amended and Restated Indenture.

Section 4.02. Law and Place of Enforcement of this Supplemental Agreement. This Supplemental Agreement shall be construed and interpreted in accordance with the laws of the State of New York and all suits and actions arising out of this Supplemental Agreement shall be instituted in a court of competent jurisdiction in the State of New York.

Section 4.03. Effective Date; Counterparts. This Supplemental Agreement may be simultaneously executed in counterparts. Each such counterpart so executed shall be deemed to be an original, and all together shall constitute but one and the same instrument. This Supplemental Agreement shall become effective on the Effective Date. Notwithstanding the Effective Date, for convenience and purposes of reference this Supplemental Agreement shall be dated as of May 1, 2003 and may be cited and referred to as the "First Supplemental Participation Agreement dated as of May 1, 2003."

None of the rights, covenants, interests, duties or obligations accruing to or required of any Bondholder, the Authority, the Corporation, the Trustee, or any Support Facility Issuer prior to the Effective Date shall be affected by the execution and delivery of this Supplemental Agreement.

[Signature Page of this Supplemental Agreement Follows]

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

NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY

By____________________________________________
       Acting President

(SEAL)

Attest:

______________________________
      Assistant Secretary

NIAGARA MOHAWK POWER CORPORATION

By__________________________________________
      Name:   Robert G. Seega
      Title:   Assistant Treasurer

(SEAL)

Attest:

________________________________

[Signature Page of Supplemental Agreement relating to Pollution Control Revenue Bonds (Niagara Mohawk Power Corporation Project), 1985 Series C]

EXHIBIT B

Corporation Supplemental Indenture

[See Item Number 30 of this Record of Proceedings]

EX-4

EXECUTION COPY

______________________________________________________________________________
______________________________________________________________________________



NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY


AND


NIAGARA MOHAWK POWER CORPORATION


_________________________________

FIRST SUPPLEMENTAL PARTICIPATION AGREEMENT


Dated as of May 1, 2003

to

PARTICIPATION AGREEMENT

Dated as of December 1, 1986

_________________________________

relating to

$50,000,000 Pollution Control Revenue Bonds

(Niagara Mohawk Power Corporation Project), 1986 Series A
______________________________________________________________________________
______________________________________________________________________________

THIS FIRST SUPPLEMENTAL PARTICIPATION AGREEMENT, made and dated as of May 1, 2003 (the "Supplemental Agreement") to the PARTICIPATION AGREEMENT made and dated as of December 1, 1986, by and between NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY (the "Authority"), a body corporate and politic, constituting a public benefit corporation, and NIAGARA MOHAWK POWER CORPORATION, a corporation duly organized and existing and qualified to do business as a public utility under the laws of the State of New York (the "Corporation"),

W I T N E S S E T H   T H A T:

WHEREAS, pursuant to special act of the Legislature of the State of New York (Title 9 of Article 8 of the Public Authorities Law of New York, as from time to time amended and supplemented, herein called the "Act"), the Authority has been established as a body corporate and politic, constituting a public benefit corporation; and

WHEREAS, pursuant to the Act, the Authority is empowered to contract with any power company to participate in the incorporation of features in power plants and the construction of associated facilities to the extent required by the public interest in development, health, recreation, safety, conservation of natural resources and aesthetics; and

WHEREAS, the Legislature of the State of New York has determined that, because interest costs incurred by public utilities are reflected in the rates paid by the customers of such utilities and because governmental action has mandated the installation of pollution control facilities, it is in the public interest to enable utilities to obtain the lowest possible interest rate on bonds sold to provide pollution control facilities; and

WHEREAS, pursuant to the Act, the Authority has also been empowered to extend credit and make loans from bond and note proceeds to any person for the construction, acquisition and installation of, or for the reimbursement to any person for costs in connection with, any special energy project (as defined in the Act), including, but not limited to, any land, works, system, building or other improvement, and all real and personal properties of any nature or any interest in any of them which are suitable for or related to the furnishing, generation or production of energy; and

WHEREAS, the Authority is also authorized under the Act to borrow money and issue its negotiable bonds and notes to provide sufficient monies for achieving its corporate purposes, including the refunding of outstanding obligations of the Authority; and

WHEREAS, the Authority is also authorized under the Act to enter into any contracts and to execute all instruments necessary or convenient for the exercise of its corporate powers and the fulfillment of its corporate purposes, including the refunding of outstanding bonds and notes of the Authority; and

WHEREAS, the Authority and the Corporation have entered into a Participation Agreement, dated as of December 1, 1986 (herein referred to as the "Agreement"), providing for the financing or refinancing of certain costs related to the acquisition, construction, and installation of certain pollution control, solid waste, sewage disposal facilities and other facilities identified and described in Exhibit A to the Agreement, and, as part of such participation, that the Authority issue bonds pursuant to the Act to provide funds for such financing or refinancing; and

WHEREAS, on December 18, 1986, the Authority issued $50,000,000 aggregate principal amount of its Pollution Control Revenue Bonds (Niagara Mohawk Power Corporation Project), 1986 Series A (the "Bonds"), under and pursuant to Resolution No. 661 of the Authority, adopted November 10, 1986, and an Indenture of Trust dated as of December 1, 1986 (the "Original Indenture"), between the Authority and The Bank of New York (as successor in interest to Irving Trust Company), as trustee (the "Trustee"), to provide funds for the financing or refinancing described in the preceding whereas clause; and

WHEREAS, the Original Indenture was amended and supplemented by a First Supplemental Indenture of Trust dated as of March 20, 1987 (the "First Supplemental Indenture"), and was further supplemented by a Second Supplemental Indenture of Trust dated as of November 6, 1991, between the Authority and the Trustee (collectively with the Original Indenture and the First Supplemental Indenture, the "1986 Series A Indenture"), between the Authority and the Trustee; and

WHEREAS, the Bonds previously bore interest at a Variable Rate, and upon a change in the interest rate determination method to a Daily Rate to be effective on May 1, 2003, all Bonds were subject to mandatory redemption and purchase in lieu of redemption by the Corporation; and

WHEREAS, Section 7.04 of the Agreement and Section 4.02 of the 1986 Series A Indenture provide that the Authority and the Trustee may, in accordance with the terms thereof, modify, amend or supplement the Agreement; and

WHEREAS, the Corporation has requested that upon changing the interest rate determination method of the Bonds to a Daily Rate to be effective on May 1, 2003, the 1986 Series A Indenture be amended and restated and that the Agreement be amended to (i) permit the Bonds to bear interest at various variable interest rates, including, without limitation, at daily, weekly, monthly, semi-annual, term, commercial paper and auction rates, (ii) provide for new provisions made necessary or desirable by the issuance of a municipal bond insurance policy and (iii) otherwise conform certain terms of the 1986 Series A Indenture relating to the Bonds while they bear interest at variable interest rates and certain other terms of the 1986 Series A Indenture with the current market standard for multi-modal bonds; and

WHEREAS, upon a change in the interest rate determination method to a Daily Rate to be effective on May 1, 2003, the registered owners of all the Bonds consented to the amendments to the 1986 Series A Indenture and the Agreement requested by the Corporation, and waived any and all rights to any notification or filing procedures or requirements under the 1986 Series A Indenture in addition to the consent provided thereby; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, the Authority and the Trustee have executed and delivered an Amended and Restated Indenture of Trust, dated as of May 1, 2003 (the "Amended and Restated Indenture"), which amends and restates the 1986 Series A Indenture; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, an Opinion of Bond Counsel described in Section 4.01.3(C) of the Amended and Restated Indenture has been delivered to the Trustee; and

WHEREAS, simultaneously with the execution and delivery of the Amended and Restated Indenture, without any further notice, the Bonds will bear interest at an Auction Period Rate; and

WHEREAS, all acts, conditions and things necessary or required by the Constitution and statutes of the State of New York, or otherwise, to exist, happen, and be performed as prerequisites to the passage of this Supplemental Agreement, do exist, have happened, and have been performed; and

NOW, THEREFORE, for and in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the Authority agrees with the Corporation, with the written consent of the Trustee, as follows:

ARTICLE I

AUTHORIZATION; DEFINITIONS

Section 1.01. Supplemental Agreement. This Supplemental Agreement is amendatory and supplemental to the Agreement, and is entered into in accordance with Section 7.04 of the Agreement and Article IV of the 1986 Series A Indenture; and except as modified, amended and supplemented by this Supplemental Agreement, the provisions of the Agreement are in all respects ratified and confirmed and shall remain in full force and effect.

Section 1.02. Definitions. Capitalized terms used herein and not otherwise defined herein or in the Agreement shall have the meaning given to such terms in the Amended and Restated Indenture.

ARTICLE II

REPRESENTATIONS

Section 2.01. Representations of the Authority. The Authority represents and warrants as follows:

(a) The Authority is a body corporate and politic, constituting a public benefit corporation, established and existing under the laws of the State of New York;

(b) The Authority has full power and authority to execute and deliver this Supplemental Agreement and the Amended and Restated Indenture and to consummate the transactions contemplated hereby and thereby and perform its obligations hereunder and thereunder;

(c) The Authority is not in default under any of the provisions of the laws of the State of New York which would affect its existence or its powers referred to in the preceding paragraph (b); and

(d) The Authority has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Amended and Restated Indenture.

Section 2.02. Representations of the Corporation. The Corporation represents and warrants as follows:

(a) The Corporation is a corporation duly incorporated and in good standing under the laws of the State of New York, is duly qualified and authorized to engage in business as a public utility in the State of New York, has power to enter into, execute and deliver this Supplemental Agreement, the Supplemental Tax Regulatory Agreement, and the Corporation Obligation and by proper corporate action has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation;

(b) The execution, delivery and performance of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation and the consummation of the transactions herein contemplated will not conflict with or constitute a breach of or a default under the Corporation's Certificate of Consolidation or By-Laws or any judgment, decree, order, statute, rule or regulation applicable to the Corporation or any indenture, mortgage, loan agreement or other contract or instrument to which the Corporation is a party or by which it is bound;

(c) The execution and delivery of this Supplemental Agreement and the issuance of the Corporation Obligation by the Corporation in the manner and for the purposes herein set forth have been duly authorized by order of the Public Service Commission of the State of New York; and

(d) All necessary authorizations for or approvals of the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation have been obtained by the Corporation.

The Corporation additionally represents and warrants that the representations and warranties of the Corporation set forth in the Supplemental Tax Regulatory Agreement are true and correct in all material respects.

ARTICLE III

AMENDMENTS TO THE AGREEMENT

Section 3.01. Amendment to Section 1.01 of the Agreement. Section 1.01 of the Agreement is hereby amended and restated to read as follows:

Section 1.01. Definitions. Capitalized terms used in this Participation Agreement and not otherwise defined herein shall have the meanings set forth in Section 1.01 of the Amended and Restated Indenture. Capitalized terms used in this Participation Agreement and not otherwise defined herein or in Section 1.01 of the Amended and Restated Indenture shall have the meanings set forth in Section 1.01 of the 1986 Series A Indenture.

Section 3.02. Replacement of certain terms in the Agreement. The Agreement is hereby amended to replace throughout the Agreement any reference to a term set forth under the Old Term column below with a corresponding term set forth under the New Term column below.

Old Term	New Term
Letter of Credit	Support Facility
Bank	Support Facility Issuer
Paying Agent	Registrar and Paying Agent
Indenture	Amended and Restated Indenture

Section 3.03. Amendment to Section 3.01 of the Agreement. Section 3.01 of the Agreement is hereby amended and restated to read as follows:

Section 3.01. Construction of the Project. The Corporation hereby represents that it has caused the Project to be completed and acknowledges that it shall not be entitled to any reimbursement for the cost of construction of the Project from the Authority, the Trustee or the Holders of the Bonds, nor shall it be entitled to any diminution or postponement of the payments required to be paid by the Corporation pursuant to this Participation Agreement or the Corporation Obligations.

Section 3.04. Amendment to Section 3.03 of the Agreement. Section 3.03 of the Agreement is hereby amended and restated to read as follows:

Section 3.03. Application of proceeds of the Bonds. The Corporation has applied the proceeds of sale of the Bonds in accordance with the Original Indenture and the Agreement.

Section 3.05. Amendments to Sections 3.04, 3.05 and 3.06 of the Agreement. Sections 3.04, 3.05 and 3.06 of the Agreement are hereby deleted.

Section 3.06. Amendment to Section 3.07 of the Agreement. Section 3.07 of the Agreement is hereby amended and restated to read as follows:

Section 3.07. Sale of the Project . Pursuant to an Asset Purchase Agreement relating to Nine Mile Point Unit 2 Nuclear Generating Facility ("NMP2"), dated as of December 11, 2000, by and among the Corporation, New York State Electric & Gas Corporation, Rochester Gas and Electric Corporation, Central Hudson Gas & Electric Corporation, Constellation Energy Group, Inc. and Constellation Nuclear, LLC (the "NMP2 Purchaser"), the Corporation has sold its interest in NMP2 of which certain portions of the Project are a part to the NMP2 Purchaser.

Pursuant to an Asset Sales Agreement relating to Dunkirk Steam Station ("Dunkirk"), dated as of December 23, 1998, between the Corporation and NRG Energy, Inc. (the "Dunkirk Purchaser"), the Corporation has sold Dunkirk of which certain portions of the Project are a part to the Dunkirk Purchaser.

Section 3.07. Amendment to Section 3.09 of the Agreement. Section 3.09 of the Agreement is hereby amended and restated to read as follows:

Section 3.09. Investment of moneys in funds under the Amended and Restated Indenture. Any moneys held as part of any fund created under the Amended and Restated Indenture shall, at the direction of an Authorized Corporation Representative, be invested or reinvested by the Trustee as provided in Section 9.04 of the Amended and Restated Indenture.

Section 3.08. Amendment to Section 4.01 of the Agreement. Section 4.01 of the Agreement is hereby amended and restated to read as follows:

Section 4.01. Execution and delivery of Corporation Obligation to Trustee. In order to evidence the obligation of the Corporation to the Authority to repay the advance of the proceeds of the Bonds, the Authority hereby directs the Corporation, and the Corporation hereby agrees, to deliver or cause to be delivered the First Mortgage Bonds to the Trustee on the Effective Date in exchange for the cancellation of the Corporation Note. The First Mortgage Bonds shall be the amended and restated first mortgage bonds of the Corporation issued under the Corporation Indenture and relating to the Bonds in substantially the form included in the Supplemental Corporation Indenture attached hereto as Exhibit B, with only such changes, omissions and insertions thereto as shall have been approved by the Authority.

Section 3.09. Amendment to Section 4.04 of the Agreement. Section 4.04 of the Agreement is hereby amended to add the following paragraph between the first and second paragraph in such section:

In addition, the Corporation shall wire to the State of New York on the Effective Date a bond issuance charge fee applicable to the Bonds pursuant to Section 2976 of the Public Authorities Law of the State of New York in the amount specified by such section on the Effective Date. The Corporation shall also pay to the Authority on the Effective Date an additional Administration Fee in the amount of $125,000.00.

Section 3.10. Amendment to Section 4.06 of the Agreement. Section 4.06 of the Agreement is hereby deleted.

Section 3.11. Amendment to Section 4.11 of the Agreement. Section 4.11 of the Agreement is hereby amended and restated to read as follows:

Section 4.11. Payment to Registrar and Paying Agent. The Corporation shall pay, or cause to be paid, to the Registrar and Paying Agent for deposit in the Bond Purchase Fund and credit to the Company Account therein an amount sufficient to provide for the payment of the Purchase Price of any Bond tendered for purchase pursuant to the Amended and Restated Indenture and the Bond Purchase Trust Agreement to the extent that sufficient moneys are not available for the payment of such Purchase Price from the other sources described therein.

Section 3.12. Amendment to Section 4.12 of the Agreement. Section 4.12 of the Agreement is hereby amended and restated to read as follows:

Section 4.12. Agreements of the Corporation relating to Support Facilities. The Corporation agrees not to request that the interest rate mode applicable to the Bonds be adjusted to an Adjustable Rate or a Fixed Rate unless on the effective date of the applicable Change in the Interest Rate Mode the Bonds shall be rated at least "A" by S&P or "A" by Moody's or an equivalent rating by any nationally recognized rating agency. Such rating of the Bonds may, but is not required to, be achieved by obtaining a Support Facility which meets the requirements of this Article VI of the Amended and Restated Indenture.

The Corporation further agrees that it will maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate, a Term Rate for a Calculation Period of greater than 13 months or a Fixed Rate. Notwithstanding the foregoing, so long as the conditions set forth in Section 6.05 of the Amended and Restated Indenture are met by the Bond Insurer and with respect to the Policy, and unless otherwise agreed by the Bond Insurer, the Corporation shall maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate or a Fixed Rate.

Section 3.13. Amendment of Section 4.13 of the Agreement. Section 4.13 of the Agreement is hereby amended and restated to read as follows:

Section 4.13. Corporation liable to owners of Bonds in the case of certain events of taxability. The Corporation confirms and agrees that if as result of action by the Corporation, the owner of the Project as of the date hereof, or any successor owner of the Project, the interest on the Bonds is determined to be included for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of section 147(a)(1) of the Code), as evidenced by a published or private ruling of the Internal Revenue Service or a final, nonappealable judicial decision by a court of competent jurisdiction, then the Corporation, in addition to its obligation to redeem the Bonds pursuant to Section 5.06 of the Amended and Restated Indenture, shall be liable to the affected owners of the Bonds for any taxes, penalties and interest assessed against such owners by the Internal Revenue Service and attributable to the Bonds.

The Authority and the Trustee agree not to object to the intervention in or participation by the Corporation at its own expense in any proceedings by or before the Internal Revenue Service or any court relating to whether interest on the Bonds is includable for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of Section 147(a)(1) of the Code).

Section 3.14. Addition of Section 5.08 to Article V of the Agreement. The Agreement is hereby amended to add the following Section 5.08 at the end of Article V of the Agreement:

Section 5.08. Recording and Filing. The Corporation hereby covenants that it will cause all financing statements related to the Amended and Restated Indenture and all supplements thereto and this Participation Agreement and all supplements thereto, as well as such other security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may from time to time be required by law in order to preserve and protect fully the security of Holders and the rights of the Trustee hereunder, and to take or cause to be taken any and all other action necessary to perfect the security interest created by the Amended and Restated Indenture and shall, within ten (10) days after such filing, cause there to be furnished to the Trustee an opinion of counsel as to the adequacy and details of such filing and specifying any re-filing to be effected in the future.

Section 3.15. Amendment to Section 6.01 of the Agreement. Section 6.01 of the Agreement is hereby amended to replace any reference to the "Corporation Note" with reference to "Corporation Obligation" throughout such Section 6.01. Section 6.01 of the Agreement is hereby further amended to replace any reference to "Section 10.01 of the Indenture" with reference to "Section 12.03 of the Amended and Restated Indenture" throughout such Section 6.01. Paragraph (b) of Section 6.01 of the Agreement is hereby amended and restated to read as follows:

(b) failure the Corporation to pay when due any amount required to be paid under Section 4.11 of this Participation Agreement, which failure causes an Event of Default to occur pursuant to paragraph (a) of Section 12.01 of the Amended and Restated Indenture; or

Section 3.16. Addition of Section 6.04 to Article VI of the Agreement. Article VI of the Agreement is hereby amended to add the following Section 6.04:

Section 6.04. Rights of the Credit Facility Issuer; Other rights of the Trustee to enforce this Participation Agreement. Notwithstanding anything herein to the contrary, any judicial proceedings of the Trustee under Section 6.03 may be instituted only with the written consent of the Credit Facility Issuer and shall be instituted by the Trustee at the written direction of the Credit Facility Issuer.

Nothing in this Participation Agreement shall limit any other rights of the Trustee to enforce this Participation Agreement.

Section 3.17. Amendment to Section 7.02 of the Agreement. Section 7.02 of the Agreement is hereby amended and restated to read as follows:

Section 7.02. Notices. All notices, certificates, requests or other communications between the Authority, the Corporation and the Trustee required to be given under this Participation Agreement or under the Amended and Restated Indenture shall be sufficiently given and shall be deemed given when delivered by hand or first class mail, postage prepaid, addressed as follows: if to the Authority, at 17 Columbia Circle, Albany, New York 12203, Attention: President; if to the Corporation, at 300 Erie Boulevard West, Syracuse, New York 13202, Attention: Treasurer, with a copy to Niagara Mohawk Power Corporation, 25 Research Drive, Westborough, Massachusetts 01582, Attention: Assistant Treasurer; and if to the Trustee or the Registrar and Paying Agent, at The Bank of New York, 101 Barclay Street - 21W, New York, New York 10286, Attention: Corporate Trust Administration. A duplicate copy of each notice, certificate, request or other communication given hereunder to the Authority, the Company or the Trustee shall also be given to the others. The Corporation, the Authority and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent.

Section 3.18. Amendment to Section 7.04 of the Agreement. Section 7.04 of the Agreement is hereby amended and restated to read as follows:

Section 7.04. Amendment of Participation Agreement. This Participation Agreement may not be amended except by an instrument in writing signed by the parties hereto and, if such amendment occurs after the issuance of the Bonds, upon compliance with the provisions of Article XIV of the Amended and Restated Indenture.

Section 3.19. Amendment to Exhibits B and C of the Agreement. Exhibits B and C of the Agreement are hereby deleted and replaced with Exhibit B to this Supplemental Agreement.

ARTICLE IV

MISCELLANEOUS

Section 4.01. Consent to Amended and Restated Indenture. The Corporation hereby consents to the execution and delivery of the Amended and Restated Indenture.

Section 4.02. Law and Place of Enforcement of this Supplemental Agreement. This Supplemental Agreement shall be construed and interpreted in accordance with the laws of the State of New York and all suits and actions arising out of this Supplemental Agreement shall be instituted in a court of competent jurisdiction in the State of New York.

Section 4.03. Effective Date; Counterparts. This Supplemental Agreement may be simultaneously executed in counterparts. Each such counterpart so executed shall be deemed to be an original, and all together shall constitute but one and the same instrument. This Supplemental Agreement shall become effective on the Effective Date. Notwithstanding the Effective Date, for convenience and purposes of reference this Supplemental Agreement shall be dated as of May 1, 2003 and may be cited and referred to as the "First Supplemental Participation Agreement dated as of May 1, 2003."

None of the rights, covenants, interests, duties or obligations accruing to or required of any Bondholder, the Authority, the Corporation, the Trustee, or any Support Facility Issuer prior to the Effective Date shall be affected by the execution and delivery of this Supplemental Agreement.

[Signature Page of this Supplemental Agreement Follows]

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

NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY

By________________________________________
      Acting President

(SEAL)

Attest:

______________________________
      Assistant Secretary

NIAGARA MOHAWK POWER CORPORATION


By ________________________________________
       Name:    Robert G. Seega
      Title:    Assistant Treasurer

(SEAL)

Attest:


_____________________________

[Signature Page of Supplemental Agreement relating to Pollution Control Revenue Bonds

(Niagara Mohawk Power Corporation Project), 1986 Series A]

EXHIBIT B

Corporation Supplemental Indenture

[See Item Number 30 of this Record of Proceedings]

EX-4 8 exh4e6.htm

EXECUTION COPY

______________________________________________________________________________
______________________________________________________________________________



NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY


AND


NIAGARA MOHAWK POWER CORPORATION


_________________________________

SECOND SUPPLEMENTAL PARTICIPATION AGREEMENT


Dated as of May 1, 2003

to

PARTICIPATION AGREEMENT

Dated as of March 1, 1987

_________________________________

relating to

$25,760,000 Pollution Control Revenue Bonds
(Niagara Mohawk Power Corporation Project), 1987 Series A

______________________________________________________________________________
______________________________________________________________________________

THIS SECOND SUPPLEMENTAL PARTICIPATION AGREEMENT, made and dated as of May 1, 2003 (the "Supplemental Agreement") to the PARTICIPATION AGREEMENT made and dated as of March 1, 1987, by and between NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY (the "Authority"), a body corporate and politic, constituting a public benefit corporation, and NIAGARA MOHAWK POWER CORPORATION, a corporation duly organized and existing and qualified to do business as a public utility under the laws of the State of New York (the "Corporation"),

W I T N E S S E T H   T H A T:

WHEREAS, pursuant to special act of the Legislature of the State of New York (Title 9 of Article 8 of the Public Authorities Law of New York, as from time to time amended and supplemented, herein called the "Act"), the Authority has been established as a body corporate and politic, constituting a public benefit corporation; and

WHEREAS, pursuant to the Act, the Authority is empowered to contract with any power company to participate in the incorporation of features in power plants and the construction of associated facilities to the extent required by the public interest in development, health, recreation, safety, conservation of natural resources and aesthetics; and

WHEREAS, the Legislature of the State of New York has determined that, because interest costs incurred by public utilities are reflected in the rates paid by the customers of such utilities and because governmental action has mandated the installation of pollution control facilities, it is in the public interest to enable utilities to obtain the lowest possible interest rate on bonds sold to provide pollution control facilities; and

WHEREAS, pursuant to the Act, the Authority has also been empowered to extend credit and make loans from bond and note proceeds to any person for the construction, acquisition and installation of, or for the reimbursement to any person for costs in connection with, any special energy project (as defined in the Act), including, but not limited to, any land, works, system, building or other improvement, and all real and personal properties of any nature or any interest in any of them which are suitable for or related to the furnishing, generation or production of energy; and

WHEREAS, the Authority is also authorized under the Act to borrow money and issue its negotiable bonds and notes to provide sufficient monies for achieving its corporate purposes, including the refunding of outstanding obligations of the Authority; and

WHEREAS, the Authority is also authorized under the Act to enter into any contracts and to execute all instruments necessary or convenient for the exercise of its corporate powers and the fulfillment of its corporate purposes, including the refunding of outstanding bonds and notes of the Authority; and

WHEREAS, the Authority and the Corporation have entered into a Participation Agreement, dated as of March 1, 1987 (herein referred to as the "Original Participation Agreement"), providing for the financing or refinancing of certain costs related to the acquisition, construction, and installation of certain pollution control, solid waste, sewage disposal facilities and other facilities identified and described in Exhibit A to the Original Participation Agreement, and, as part of such participation, that the Authority issue bonds pursuant to the Act to provide funds for such financing or refinancing; and

WHEREAS, on March 26, 1987, the Authority issued $25,760,000 aggregate principal amount of its Pollution Control Flexible Rate Refunding Revenue Bonds (Niagara Mohawk Power Corporation Project), 1987 Series A (which are being renamed as provided in Section 2.02 of the Amended and Restated Indenture (as defined below)) (the "Bonds"), under and pursuant to Resolution No. 664 of the Authority, adopted January 15, 1987, and an Indenture of Trust dated as of March 1, 1987 (the "Original Indenture"), between the Authority and The Bank of New York (as successor in interest to Irving Trust Company), as trustee (the "Trustee"), to provide funds for the financing or refinancing described in the preceding whereas clause; and

WHEREAS, the Original Participation Agreement was amended and supplemented by a First Supplemental Participation Agreement dated as of March 13, 1996 (the "First Supplemental Participation Agreement"), between the Authority and the Corporation, and was further amended and supplemented by a Supplemental Participation Agreement dated as of December 1, 2002 (together with the Original Participation Agreement and the First Supplemental Participation Agreement, the "Agreement"); and

WHEREAS, the Original Indenture was amended and supplemented by a Letter Amendment No. 1 dated March 19, 1991 (the "Letter Amendment"), and was further supplemented by a First Supplemental Indenture of Trust dated as of March 13, 1996 (collectively with the Original Indenture and the Letter Amendment, the "1987 Series A Indenture"), between the Authority and the Trustee; and

WHEREAS, the Bonds previously bore interest at a Daily Rate, and upon a change in the Interest Rate Determination Method to a Variable-Term Rate to be effective on May 1, 2003, all Bonds were subject to mandatory tender and purchase by the Corporation; and

WHEREAS, Section 7.04 of the Agreement and Section 4.02 of the 1987 Series A Indenture provide that the Authority and the Trustee may, in accordance with the terms thereof, modify, amend or supplement the Agreement; and

WHEREAS, the Corporation has requested that upon changing the Interest Rate Determination Method of the Bonds to a Variable-Term Rate to be effective on May 1, 2003, the 1987 Series A Indenture be amended and restated and that the Agreement be amended to (i) permit the Bonds to bear interest at various variable interest rates, including, without limitation, at daily, weekly, monthly, semi-annual, term, commercial paper and auction rates, (ii) provide for new provisions made necessary or desirable by the issuance of a municipal bond insurance policy and (iii) otherwise conform certain terms of the 1987 Series A Indenture relating to the Bonds while they bear interest at variable interest rates and certain other terms of the 1987 Series A Indenture with the current market standard for multi-modal bonds; and

WHEREAS, upon a change in the Interest Rate Determination Method to a Variable-Term Rate to be effective on May 1, 2003, the registered owners of all the Bonds consented to the amendments to the 1987 Series A Indenture and the Agreement requested by the Corporation, and waived any and all rights to any notification or filing procedures or requirements under the 1987 Series A Indenture in addition to the consent provided thereby; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, the Authority and the Trustee have executed and delivered an Amended and Restated Indenture of Trust, dated as of May 1, 2003 (the "Amended and Restated Indenture"), which amends and restates the 1987 Series A Indenture; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, an Opinion of Bond Counsel described in Section 4.01.3(C) of the Amended and Restated Indenture has been delivered to the Trustee; and

WHEREAS, simultaneously with the execution and delivery of the Amended and Restated Indenture, without any further notice, the Bonds will bear interest at an Auction Period Rate; and

WHEREAS, all acts, conditions and things necessary or required by the Constitution and statutes of the State of New York, or otherwise, to exist, happen, and be performed as prerequisites to the passage of this Supplemental Agreement, do exist, have happened, and have been performed; and

NOW, THEREFORE, for and in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the Authority agrees with the Corporation, with the written consent of the Trustee, as follows:

ARTICLE I

AUTHORIZATION; DEFINITIONS

Section 1.01. Supplemental Agreement. This Supplemental Agreement is amendatory and supplemental to the Agreement, and is entered into in accordance with Section 7.04 of the Agreement and Article IV of the 1987 Series A Indenture; and except as modified, amended and supplemented by this Supplemental Agreement, the provisions of the Agreement are in all respects ratified and confirmed and shall remain in full force and effect.

Section 1.02. Definitions. Capitalized terms used herein and not otherwise defined herein or in the Agreement shall have the meaning given to such terms in the Amended and Restated Indenture.

ARTICLE II

REPRESENTATIONS

Section 2.01. Representations of the Authority. The Authority represents and warrants as follows:

(a) The Authority is a body corporate and politic, constituting a public benefit corporation, established and existing under the laws of the State of New York;

(b) The Authority has full power and authority to execute and deliver this Supplemental Agreement and the Amended and Restated Indenture and to consummate the transactions contemplated hereby and thereby and perform its obligations hereunder and thereunder;

(c) The Authority is not in default under any of the provisions of the laws of the State of New York which would affect its existence or its powers referred to in the preceding paragraph (b); and

(d) The Authority has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Amended and Restated Indenture.

Section 2.02. Representations of the Corporation. The Corporation represents and warrants as follows:

(a) The Corporation is a corporation duly incorporated and in good standing under the laws of the State of New York, is duly qualified and authorized to engage in business as a public utility in the State of New York, has power to enter into, execute and deliver this Supplemental Agreement, the Supplemental Tax Regulatory Agreement, and the Corporation Obligation and by proper corporate action has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation;

(b) The execution, delivery and performance of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation and the consummation of the transactions herein contemplated will not conflict with or constitute a breach of or a default under the Corporation's Certificate of Consolidation or By-Laws or any judgment, decree, order, statute, rule or regulation applicable to the Corporation or any indenture, mortgage, loan agreement or other contract or instrument to which the Corporation is a party or by which it is bound;

(c) The execution and delivery of this Supplemental Agreement and the issuance of the Corporation Obligation by the Corporation in the manner and for the purposes herein set forth have been duly authorized by order of the Public Service Commission of the State of New York; and

(d) All necessary authorizations for or approvals of the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation have been obtained by the Corporation.

The Corporation additionally represents and warrants that the representations and warranties of the Corporation set forth in the Supplemental Tax Regulatory Agreement are true and correct in all material respects.

ARTICLE III

AMENDMENTS TO THE AGREEMENT

Section 3.01. Amendment to Section 1.01 of the Agreement. Section 1.01 of the Agreement is hereby amended and restated to read as follows:

Section 1.01. Definitions. Capitalized terms used in this Participation Agreement and not otherwise defined herein shall have the meanings set forth in Section 1.01 of the Amended and Restated Indenture. Capitalized terms used in this Participation Agreement and not otherwise defined herein or in Section 1.01 of the Amended and Restated Indenture shall have the meanings set forth in Section 1.01 of the 1987 Series A Indenture.

Section 3.02. Replacement of certain terms in the Agreement. The Agreement is hereby amended to replace throughout the Agreement any reference to a term set forth under the Old Term column below with a corresponding term set forth under the New Term column below.

Old Term	New Term
Letter of Credit	Support Facility
Bank	Support Facility Issuer
Tender Agent	Registrar and Paying Agent
Paying Agent	Registrar and Paying Agent
Registrar	Registrar and Paying Agent
Indenture	Amended and Restated Indenture
Placement Agent	Remarketing Agent
Placement Agreement	Remarketing Agreement
Pledge Agent	Remarketing Agent

Section 3.03. Addition of Section 3.06 to Article III of the Agreement. Article III of the Agreement is hereby amended to add the following Section 3.06:

Section 3.06. Application of proceeds of the Bonds. The Corporation has applied the proceeds of sale of the Bonds in accordance with the Original Indenture and the Original Participation Agreement.

Section 3.04. Amendment to Section 3.03 of the Agreement. Section 3.03 of the Agreement is hereby amended and restated to read as follows:

Section 3.03. Sale of the Project . Pursuant to an Asset Purchase Agreement relating to Nine Mile Point Unit 2 Nuclear Generating Facility ("NMP2"), dated as of December 11, 2000, by and among the Corporation, New York State Electric & Gas Corporation, Rochester Gas and Electric Corporation, Central Hudson Gas & Electric Corporation, Constellation Energy Group, Inc. and Constellation Nuclear, LLC (the "NMP2 Purchaser"), the Corporation has sold its interest in NMP2 of which the Project is a part to the NMP2 Purchaser.

Section 3.05. Amendment to Section 3.05 of the Agreement. Section 3.05 of the Agreement is hereby amended and restated to read as follows:

Section 3.05. Investment of moneys in funds under the Amended and Restated Indenture. Any moneys held as part of any fund created under the Amended and Restated Indenture shall, at the direction of an Authorized Corporation Representative, be invested or reinvested by the Trustee as provided in Section 9.04 of the Amended and Restated Indenture.

Section 3.06. Amendment to Section 4.01 of the Agreement. Section 4.01 of the Agreement is hereby amended and restated to read as follows:

Section 4.01. Execution and delivery of Corporation Obligation to Trustee. In order to evidence the obligation of the Corporation to the Authority to repay the advance of the proceeds of the Bonds, the Authority hereby directs the Corporation, and the Corporation hereby agrees, to deliver or cause to be delivered the First Mortgage Bonds to the Trustee on the Effective Date in exchange for the cancellation of the Corporation Note. The First Mortgage Bonds shall be the amended and restated first mortgage bonds of the Corporation issued under the Corporation Indenture and relating to the Bonds in substantially the form included in the Supplemental Corporation Indenture attached hereto as Exhibit B, with only such changes, omissions and insertions thereto as shall have been approved by the Authority.

Section 3.07. Amendment to Section 4.04 of the Agreement. Section 4.04 of the Agreement is hereby amended to add the following paragraph between the first and second paragraph in such section:

In addition, the Corporation shall wire to the State of New York on the Effective Date a bond issuance charge fee applicable to the Bonds pursuant to Section 2976 of the Public Authorities Law of the State of New York in the amount specified by such section on the Effective Date. The Corporation shall also pay to the Authority on the Effective Date an additional Administration Fee in the amount of $64,400.00.

Section 3.08. Amendment to Section 4.06 of the Agreement. Section 4.06 of the Agreement is hereby deleted.

Section 3.09. Amendment to Section 4.11 of the Agreement. Section 4.11 of the Agreement is hereby amended and restated to read as follows:

Section 4.11. Payment to Registrar and Paying Agent. The Corporation shall pay, or cause to be paid, to the Registrar and Paying Agent for deposit in the Bond Purchase Fund and credit to the Company Account therein an amount sufficient to provide for the payment of the Purchase Price of any Bond tendered for purchase pursuant to the Amended and Restated Indenture and the Bond Purchase Trust Agreement to the extent that sufficient moneys are not available for the payment of such Purchase Price from the other sources described therein.

Section 3.10. Amendment to Section 4.12 of the Agreement. Section 4.12 of the Agreement is hereby amended and restated to read as follows:

Section 4.12. Agreements of the Corporation relating to Support Facilities. The Corporation agrees not to request that the interest rate mode applicable to the Bonds be adjusted to an Adjustable Rate or a Fixed Rate unless on the effective date of the applicable Change in the Interest Rate Mode the Bonds shall be rated at least "A" by S&P or "A" by Moody's or an equivalent rating by any nationally recognized rating agency. Such rating of the Bonds may, but is not required to, be achieved by obtaining a Support Facility which meets the requirements of this Article VI of the Amended and Restated Indenture.

The Corporation further agrees that it will maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate, a Term Rate for a Calculation Period of greater than 13 months or a Fixed Rate. Notwithstanding the foregoing, so long as the conditions set forth in Section 6.05 of the Amended and Restated Indenture are met by the Bond Insurer and with respect to the Policy, and unless otherwise agreed by the Bond Insurer, the Corporation shall maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate or a Fixed Rate.

Section 3.11. Amendment of Section 4.13 of the Agreement. Section 4.13 of the Agreement is hereby amended and restated to read as follows:

Section 4.13. Corporation liable to owners of Bonds in the case of certain events of taxability. The Corporation confirms and agrees that if as result of action by the Corporation, the owner of the Project as of the date hereof, or any successor owner of the Project, the interest on the Bonds is determined to be included for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of section 147(a)(1) of the Code), as evidenced by a published or private ruling of the Internal Revenue Service or a final, nonappealable judicial decision by a court of competent jurisdiction, then the Corporation, in addition to its obligation to redeem the Bonds pursuant to Section 5.06 of the Amended and Restated Indenture, shall be liable to the affected owners of the Bonds for any taxes, penalties and interest assessed against such owners by the Internal Revenue Service and attributable to the Bonds.

The Authority and the Trustee agree not to object to the intervention in or participation by the Corporation at its own expense in any proceedings by or before the Internal Revenue Service or any court relating to whether interest on the Bonds is includable for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of Section 147(a)(1) of the Code).

Section 3.12. Addition of Section 5.08 to Article V of the Agreement. The Agreement is hereby amended to add the following Section 5.08 at the end of Article V of the Agreement:

Section 5.08. Recording and Filing. The Corporation hereby covenants that it will cause all financing statements related to the Amended and Restated Indenture and all supplements thereto and this Participation Agreement and all supplements thereto, as well as such other security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may from time to time be required by law in order to preserve and protect fully the security of Holders and the rights of the Trustee hereunder, and to take or cause to be taken any and all other action necessary to perfect the security interest created by the Amended and Restated Indenture and shall, within ten (10) days after such filing, cause there to be furnished to the Trustee an opinion of counsel as to the adequacy and details of such filing and specifying any re-filing to be effected in the future.

Section 3.13. Amendment to Section 6.01 of the Agreement. Section 6.01 of the Agreement is hereby amended to replace any reference to the "Corporation Note" with reference to "Corporation Obligation" throughout such Section 6.01. Section 6.01 of the Agreement is hereby further amended to replace any reference to "Section 10.01 of the Indenture" with reference to "Section 12.03 of the Amended and Restated Indenture" throughout such Section 6.01. Paragraph (b) of Section 6.01 of the Agreement is hereby amended and restated to read as follows:

(b) failure the Corporation to pay when due any amount required to be paid under Section 4.11 of this Participation Agreement, which failure causes an Event of Default to occur pursuant to paragraph (a) of Section 12.01 of the Amended and Restated Indenture; or

Section 3.14. Addition of Section 6.04 to Article VI of the Agreement. Article VI of the Agreement is hereby amended to add the following Section 6.04:

Section 6.04. Rights of the Credit Facility Issuer; Other rights of the Trustee to enforce this Participation Agreement. Notwithstanding anything herein to the contrary, any judicial proceedings of the Trustee under Section 6.03 may be instituted only with the written consent of the Credit Facility Issuer and shall be instituted by the Trustee at the written direction of the Credit Facility Issuer.

Nothing in this Participation Agreement shall limit any other rights of the Trustee to enforce this Participation Agreement.

Section 3.15. Amendment to Section 7.02 of the Agreement. Section 7.02 of the Agreement is hereby amended and restated to read as follows:

Section 7.02. Notices. All notices, certificates, requests or other communications between the Authority, the Corporation and the Trustee required to be given under this Participation Agreement or under the Amended and Restated Indenture shall be sufficiently given and shall be deemed given when delivered by hand or first class mail, postage prepaid, addressed as follows: if to the Authority, at 17 Columbia Circle, Albany, New York 12203, Attention: President; if to the Corporation, at 300 Erie Boulevard West, Syracuse, New York 13202, Attention: Treasurer, with a copy to Niagara Mohawk Power Corporation, 25 Research Drive, Westborough, Massachusetts 01582, Attention: Assistant Treasurer; and if to the Trustee or the Registrar and Paying Agent, at The Bank of New York, 101 Barclay Street - 21W, New York, New York 10286, Attention: Corporate Trust Administration. A duplicate copy of each notice, certificate, request or other communication given hereunder to the Authority, the Company or the Trustee shall also be given to the others. The Corporation, the Authority and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent.

Section 3.16. Amendment to Section 7.04 of the Agreement. Section 7.04 of the Agreement is hereby amended and restated to read as follows:

Section 7.04. Amendment of Participation Agreement. This Participation Agreement may not be amended except by an instrument in writing signed by the parties hereto and, if such amendment occurs after the issuance of the Bonds, upon compliance with the provisions of Article XIV of the Amended and Restated Indenture.

Section 3.17. Amendment to Exhibits B and C of the Agreement. Exhibits B and C of the Agreement are hereby deleted and replaced with Exhibit B to this Supplemental Agreement.

ARTICLE IV

MISCELLANEOUS

Section 4.01. Consent to Amended and Restated Indenture. The Corporation hereby consents to the execution and delivery of the Amended and Restated Indenture.

Section 4.02. Law and Place of Enforcement of this Supplemental Agreement. This Supplemental Agreement shall be construed and interpreted in accordance with the laws of the State of New York and all suits and actions arising out of this Supplemental Agreement shall be instituted in a court of competent jurisdiction in the State of New York.

Section 4.03. Effective Date; Counterparts. This Supplemental Agreement may be simultaneously executed in counterparts. Each such counterpart so executed shall be deemed to be an original, and all together shall constitute but one and the same instrument. This Supplemental Agreement shall become effective on the Effective Date. Notwithstanding the Effective Date, for convenience and purposes of reference this Supplemental Agreement shall be dated as of May 1, 2003 and may be cited and referred to as the "Second Supplemental Participation Agreement dated as of May 1, 2003."

None of the rights, covenants, interests, duties or obligations accruing to or required of any Bondholder, the Authority, the Corporation, the Trustee, or any Support Facility Issuer prior to the Effective Date shall be affected by the execution and delivery of this Supplemental Agreement.

[Signature Page of this Supplemental Agreement Follows]

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

NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY


By__________________________________________
      Acting President

(SEAL)

Attest:


_______________________________
       Assistant Secretary

NIAGARA MOHAWK POWER CORPORATION


By___________________________________________
      Name:    Robert G. Seega
      Title:    Assistant Treasurer

(SEAL)

Attest:


_______________________________

[Signature Page of Supplemental Agreement relating to Pollution Control Revenue Bonds

(Niagara Mohawk Power Corporation Project), 1987 Series A]

EXHIBIT B

Corporation Supplemental Indenture

[See Item Number 30 of this Record of Proceedings]

EX-4 9 exh4e7.htm

EXECUTION COPY

______________________________________________________________________________
______________________________________________________________________________




NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY


AND


NIAGARA MOHAWK POWER CORPORATION


_________________________________

SECOND SUPPLEMENTAL PARTICIPATION AGREEMENT


Dated as of May 1, 2003

to

PARTICIPATION AGREEMENT

Dated as of July 1, 1987

_________________________________

relating to

$93,200,000 Pollution Control Revenue Bonds

(Niagara Mohawk Power Corporation Project), 1987 Series B

______________________________________________________________________________
______________________________________________________________________________

THIS SECOND SUPPLEMENTAL PARTICIPATION AGREEMENT, made and dated as of May 1, 2003 (the "Supplemental Agreement") to the PARTICIPATION AGREEMENT made and dated as of July 1, 1987, by and between NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY (the "Authority"), a body corporate and politic, constituting a public benefit corporation, and NIAGARA MOHAWK POWER CORPORATION, a corporation duly organized and existing and qualified to do business as a public utility under the laws of the State of New York (the "Corporation"),

W I T N E S S E T H    T H A T:

WHEREAS, pursuant to special act of the Legislature of the State of New York (Title 9 of Article 8 of the Public Authorities Law of New York, as from time to time amended and supplemented, herein called the "Act"), the Authority has been established as a body corporate and politic, constituting a public benefit corporation; and

WHEREAS, pursuant to the Act, the Authority is empowered to contract with any power company to participate in the incorporation of features in power plants and the construction of associated facilities to the extent required by the public interest in development, health, recreation, safety, conservation of natural resources and aesthetics; and

WHEREAS, the Legislature of the State of New York has determined that, because interest costs incurred by public utilities are reflected in the rates paid by the customers of such utilities and because governmental action has mandated the installation of pollution control facilities, it is in the public interest to enable utilities to obtain the lowest possible interest rate on bonds sold to provide pollution control facilities; and

WHEREAS, pursuant to the Act, the Authority has also been empowered to extend credit and make loans from bond and note proceeds to any person for the construction, acquisition and installation of, or for the reimbursement to any person for costs in connection with, any special energy project (as defined in the Act), including, but not limited to, any land, works, system, building or other improvement, and all real and personal properties of any nature or any interest in any of them which are suitable for or related to the furnishing, generation or production of energy; and

WHEREAS, the Authority is also authorized under the Act to borrow money and issue its negotiable bonds and notes to provide sufficient monies for achieving its corporate purposes, including the refunding of outstanding obligations of the Authority; and

WHEREAS, the Authority is also authorized under the Act to enter into any contracts and to execute all instruments necessary or convenient for the exercise of its corporate powers and the fulfillment of its corporate purposes, including the refunding of outstanding bonds and notes of the Authority; and

WHEREAS, the Authority and the Corporation have entered into a Participation Agreement, dated as of July 1, 1987 (herein referred to as the "Original Participation Agreement"), providing for the financing or refinancing of certain costs related to the acquisition, construction, and installation of certain pollution control, solid waste, sewage disposal facilities and other facilities identified and described in Exhibit A to the Original Participation Agreement, and, as part of such participation, that the Authority issue bonds pursuant to the Act to provide funds for such financing or refinancing; and

WHEREAS, on July 16, 1987, the Authority issued $93,200,000 aggregate principal amount of its Pollution Control Flexible Rate Revenue Bonds (Niagara Mohawk Power Corporation Project), 1987 Series B (which are being renamed as provided in Section 2.02 of the Amended and Restated Indenture (as defined below)) (the "Bonds"), under and pursuant to Resolution No. 667 of the Authority, adopted April 20, 1987, and an Indenture of Trust dated as of July 1, 1987 (the "Original Indenture"), between the Authority and The Bank of New York (as successor in interest to Irving Trust Company), as trustee (the "Trustee"), to provide funds for the financing or refinancing described in the preceding whereas clause; and

WHEREAS, the Original Participation Agreement was amended and supplemented by a First Supplemental Participation Agreement dated as of March 13, 1996 (collectively with the Original Participation Agreement, the "Agreement"), between the Authority and the Corporation, and was further amended and supplemented by a Supplemental Participation Agreement dated as of December 1, 2002 (together with the Original Participation Agreement and the First Supplemental Participation Agreement, the "Agreement"); and

WHEREAS, the Original Indenture was amended and supplemented by a First Supplemental Indenture of Trust dated as of March 13, 1996 (collectively with the Original Indenture, the "1987 Series B Indenture"), between the Authority and the Trustee; and

WHEREAS, the Bonds previously bore interest at a Daily Rate, and upon a change in the Interest Rate Determination Method to a Variable-Term Rate to be effective on May 1, 2003, all Bonds were subject to mandatory tender and purchase by the Corporation; and

WHEREAS, Section 7.04 of the Agreement and Section 4.02 of the 1987 Series B Indenture provide that the Authority and the Trustee may, in accordance with the terms thereof, modify, amend or supplement the Agreement; and

WHEREAS, the Corporation has requested that upon changing the Interest Rate Determination Method of the Bonds to a Variable-Term Rate to be effective on May 1, 2003, the 1987 Series B Indenture be amended and restated and that the Agreement be amended to (i) permit the Bonds to bear interest at various variable interest rates, including, without limitation, at daily, weekly, monthly, semi-annual, term, commercial paper and auction rates, (ii) provide for new provisions made necessary or desirable by the issuance of a municipal bond insurance policy and (iii) otherwise conform certain terms of the 1987 Series B Indenture relating to the Bonds while they bear interest at variable interest rates and certain other terms of the 1987 Series B Indenture with the current market standard for multi-modal bonds; and

WHEREAS, upon a change in the Interest Rate Determination Method to a Variable-Term Rate to be effective on May 1, 2003, the registered owners of all the Bonds consented to the amendments to the 1987 Series B Indenture and the Agreement requested by the Corporation, and waived any and all rights to any notification or filing procedures or requirements under the 1987 Series B Indenture in addition to the consent provided thereby; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, the Authority and the Trustee have executed and delivered an Amended and Restated Indenture of Trust, dated as of May 1, 2003 (the "Amended and Restated Indenture"), which amends and restates the 1987 Series B Indenture; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, an Opinion of Bond Counsel described in Section 4.01.3(C) of the Amended and Restated Indenture has been delivered to the Trustee; and

WHEREAS, simultaneously with the execution and delivery of the Amended and Restated Indenture, without any further notice, the Bonds will bear interest at an Auction Period Rate; and

WHEREAS, all acts, conditions and things necessary or required by the Constitution and statutes of the State of New York, or otherwise, to exist, happen, and be performed as prerequisites to the passage of this Supplemental Agreement, do exist, have happened, and have been performed; and

NOW, THEREFORE, for and in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the Authority agrees with the Corporation, with the written consent of the Trustee, as follows:

ARTICLE I

AUTHORIZATION; DEFINITIONS

Section 1.01. Supplemental Agreement. This Supplemental Agreement is amendatory and supplemental to the Agreement, and is entered into in accordance with Section 7.04 of the Agreement and Article IV of the 1987 Series B Indenture; and except as modified, amended and supplemented by this Supplemental Agreement, the provisions of the Agreement are in all respects ratified and confirmed and shall remain in full force and effect.

Section 1.02. Definitions. Capitalized terms used herein and not otherwise defined herein or in the Agreement shall have the meaning given to such terms in the Amended and Restated Indenture.

ARTICLE II

REPRESENTATIONS

Section 2.01. Representations of the Authority. The Authority represents and warrants as follows:

(a) The Authority is a body corporate and politic, constituting a public benefit corporation, established and existing under the laws of the State of New York;

(b) The Authority has full power and authority to execute and deliver this Supplemental Agreement and the Amended and Restated Indenture and to consummate the transactions contemplated hereby and thereby and perform its obligations hereunder and thereunder;

(c) The Authority is not in default under any of the provisions of the laws of the State of New York which would affect its existence or its powers referred to in the preceding paragraph (b); and

(d) The Authority has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Amended and Restated Indenture.

Section 2.02. Representations of the Corporation. The Corporation represents and warrants as follows:

(a) The Corporation is a corporation duly incorporated and in good standing under the laws of the State of New York, is duly qualified and authorized to engage in business as a public utility in the State of New York, has power to enter into, execute and deliver this Supplemental Agreement, the Supplemental Tax Regulatory Agreement, and the Corporation Obligation and by proper corporate action has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation;

(b) The execution, delivery and performance of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation and the consummation of the transactions herein contemplated will not conflict with or constitute a breach of or a default under the Corporation's Certificate of Consolidation or By-Laws or any judgment, decree, order, statute, rule or regulation applicable to the Corporation or any indenture, mortgage, loan agreement or other contract or instrument to which the Corporation is a party or by which it is bound;

(c) The execution and delivery of this Supplemental Agreement and the issuance of the Corporation Obligation by the Corporation in the manner and for the purposes herein set forth have been duly authorized by order of the Public Service Commission of the State of New York; and

(d) All necessary authorizations for or approvals of the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation have been obtained by the Corporation.

The Corporation additionally represents and warrants that the representations and warranties of the Corporation set forth in the Supplemental Tax Regulatory Agreement are true and correct in all material respects.

ARTICLE III

AMENDMENTS TO THE AGREEMENT

Section 3.01. Amendment to Section 1.01 of the Agreement. Section 1.01 of the Agreement is hereby amended and restated to read as follows:

Section 1.01. Definitions. Capitalized terms used in this Participation Agreement and not otherwise defined herein shall have the meanings set forth in Section 1.01 of the Amended and Restated Indenture. Capitalized terms used in this Participation Agreement and not otherwise defined herein or in Section 1.01 of the Amended and Restated Indenture shall have the meanings set forth in Section 1.01 of the 1987 Series B Indenture.

Section 3.02. Replacement of certain terms in the Agreement. The Agreement is hereby amended to replace throughout the Agreement any reference to a term set forth under the Old Term column below with a corresponding term set forth under the New Term column below.

Old Term	New Term
Letter of Credit	Support Facility
Bank	Support Facility Issuer
Tender Agent	Registrar and Paying Agent
Paying Agent	Registrar and Paying Agent
Registrar	Registrar and Paying Agent
Indenture	Amended and Restated Indenture
Placement Agent	Remarketing Agent
Placement Agreement	Remarketing Agreement
Pledge Agent	Remarketing Agent

Section 3.03. Amendment to Section 3.01 of the Agreement. Section 3.01 of the Agreement is hereby amended and restated to read as follows:

Section 3.01. Construction of the Project. The Corporation hereby represents that it has caused the Project to be completed and acknowledges that it shall not be entitled to any reimbursement for the cost of construction of the Project from the Authority, the Trustee or the Holders of the Bonds, nor shall it be entitled to any diminution or postponement of the payments required to be paid by the Corporation pursuant to this Participation Agreement or the Corporation Obligations.

Section 3.04. Amendment to Section 3.03 of the Agreement. Section 3.03 of the Agreement is hereby amended and restated to read as follows:

Section 3.03. Application of proceeds of the Bonds. The Corporation has applied the proceeds of sale of the Bonds in accordance with the Original Indenture and the Original Participation Agreement.

Section 3.05. Amendments to Sections 3.04, 3.05 and 3.06 of the Agreement. Sections 3.04, 3.05 and 3.06 of the Agreement are hereby deleted.

Section 3.06. Amendment to Section 3.07 of the Agreement. Section 3.07 of the Agreement is hereby amended and restated to read as follows:

Section 3.07. Sale of the Project . Pursuant to an Asset Purchase Agreement relating to Nine Mile Point Unit 2 Nuclear Generating Facility ("NMP2"), dated as of December 11, 2000, by and among the Corporation, New York State Electric & Gas Corporation, Rochester Gas and Electric Corporation, Central Hudson Gas & Electric Corporation, Constellation Energy Group, Inc. and Constellation Nuclear, LLC (the "NMP2 Purchaser"), the Corporation has sold its interest in NMP2 of which the Project is a part to the NMP2 Purchaser.

Section 3.07. Amendment to Section 3.09 of the Agreement. Section 3.09 of the Agreement is hereby amended and restated to read as follows:

Section 3.09. Investment of moneys in funds under the Amended and Restated Indenture. Any moneys held as part of any fund created under the Amended and Restated Indenture shall, at the direction of an Authorized Corporation Representative, be invested or reinvested by the Trustee as provided in Section 9.04 of the Amended and Restated Indenture.

Section 3.08. Amendment to Section 4.01 of the Agreement. Section 4.01 of the Agreement is hereby amended and restated to read as follows:

Section 4.01. Execution and delivery of Corporation Obligation to Trustee. In order to evidence the obligation of the Corporation to the Authority to repay the advance of the proceeds of the Bonds, the Authority hereby directs the Corporation, and the Corporation hereby agrees, to deliver or cause to be delivered the First Mortgage Bonds to the Trustee on the Effective Date in exchange for the cancellation of the Corporation Note. The First Mortgage Bonds shall be the amended and restated first mortgage bonds of the Corporation issued under the Corporation Indenture and relating to the Bonds in substantially the form included in the Supplemental Corporation Indenture attached hereto as Exhibit B, with only such changes, omissions and insertions thereto as shall have been approved by the Authority.

Section 3.09. Amendment to Section 4.04 of the Agreement. Section 4.04 of the Agreement is hereby amended to add the following paragraph between the first and second paragraph in such section:

In addition, the Corporation shall wire to the State of New York on the Effective Date a bond issuance charge fee applicable to the Bonds pursuant to Section 2976 of the Public Authorities Law of the State of New York in the amount specified by such section on the Effective Date. The Corporation shall also pay to the Authority on the Effective Date an additional Administration Fee in the amount of $233,000.00.

Section 3.10. Amendment to Section 4.06 of the Agreement. Section 4.06 of the Agreement is hereby deleted.

Section 3.11. Amendment to Section 4.11 of the Agreement. Section 4.11 of the Agreement is hereby amended and restated to read as follows:

Section 4.11. Payment to Registrar and Paying Agent. The Corporation shall pay, or cause to be paid, to the Registrar and Paying Agent for deposit in the Bond Purchase Fund and credit to the Company Account therein an amount sufficient to provide for the payment of the Purchase Price of any Bond tendered for purchase pursuant to the Amended and Restated Indenture and the Bond Purchase Trust Agreement to the extent that sufficient moneys are not available for the payment of such Purchase Price from the other sources described therein.

Section 3.12. Amendment to Section 4.12 of the Agreement. Section 4.12 of the Agreement is hereby amended and restated to read as follows:

Section 4.12. Agreements of the Corporation relating to Support Facilities. The Corporation agrees not to request that the interest rate mode applicable to the Bonds be adjusted to an Adjustable Rate or a Fixed Rate unless on the effective date of the applicable Change in the Interest Rate Mode the Bonds shall be rated at least "A" by S&P or "A" by Moody's or an equivalent rating by any nationally recognized rating agency. Such rating of the Bonds may, but is not required to, be achieved by obtaining a Support Facility which meets the requirements of this Article VI of the Amended and Restated Indenture.

The Corporation further agrees that it will maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate, a Term Rate for a Calculation Period of greater than 13 months or a Fixed Rate. Notwithstanding the foregoing, so long as the conditions set forth in Section 6.05 of the Amended and Restated Indenture are met by the Bond Insurer and with respect to the Policy, and unless otherwise agreed by the Bond Insurer, the Corporation shall maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate or a Fixed Rate.

Section 3.13. Amendment of Section 4.13 of the Agreement. Section 4.13 of the Agreement is hereby amended and restated to read as follows:

Section 4.13. Corporation liable to owners of Bonds in the case of certain events of taxability. The Corporation confirms and agrees that if as result of action by the Corporation, the owner of the Project as of the date hereof, or any successor owner of the Project, the interest on the Bonds is determined to be included for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of section 147(a)(1) of the Code), as evidenced by a published or private ruling of the Internal Revenue Service or a final, nonappealable judicial decision by a court of competent jurisdiction, then the Corporation, in addition to its obligation to redeem the Bonds pursuant to Section 5.06 of the Amended and Restated Indenture, shall be liable to the affected owners of the Bonds for any taxes, penalties and interest assessed against such owners by the Internal Revenue Service and attributable to the Bonds.

The Authority and the Trustee agree not to object to the intervention in or participation by the Corporation at its own expense in any proceedings by or before the Internal Revenue Service or any court relating to whether interest on the Bonds is includable for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of Section 147(a)(1) of the Code).

Section 3.14. Addition of Section 5.08 to Article V of the Agreement. The Agreement is hereby amended to add the following Section 5.08 at the end of Article V of the Agreement:

Section 5.08. Recording and Filing. The Corporation hereby covenants that it will cause all financing statements related to the Amended and Restated Indenture and all supplements thereto and this Participation Agreement and all supplements thereto, as well as such other security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may from time to time be required by law in order to preserve and protect fully the security of Holders and the rights of the Trustee hereunder, and to take or cause to be taken any and all other action necessary to perfect the security interest created by the Amended and Restated Indenture and shall, within ten (10) days after such filing, cause there to be furnished to the Trustee an opinion of counsel as to the adequacy and details of such filing and specifying any re-filing to be effected in the future.

Section 3.15. Amendment to Section 6.01 of the Agreement. Section 6.01 of the Agreement is hereby amended to replace any reference to the "Corporation Note" with reference to "Corporation Obligation" throughout such Section 6.01. Section 6.01 of the Agreement is hereby further amended to replace any reference to "Section 10.01 of the Indenture" with reference to "Section 12.03 of the Amended and Restated Indenture" throughout such Section 6.01. Paragraph (b) of Section 6.01 of the Agreement is hereby amended and restated to read as follows:

(b) failure the Corporation to pay when due any amount required to be paid under Section 4.11 of this Participation Agreement, which failure causes an Event of Default to occur pursuant to paragraph (a) of Section 12.01 of the Amended and Restated Indenture; or

Section 3.16. Addition of Section 6.04 to Article VI of the Agreement. Article VI of the Agreement is hereby amended to add the following Section 6.04:

Section 6.04. Rights of the Credit Facility Issuer; Other rights of the Trustee to enforce this Participation Agreement. Notwithstanding anything herein to the contrary, any judicial proceedings of the Trustee under Section 6.03 may be instituted only with the written consent of the Credit Facility Issuer and shall be instituted by the Trustee at the written direction of the Credit Facility Issuer.
Nothing in this Participation Agreement shall limit any other rights of the Trustee to enforce this Participation Agreement.

Section 3.17. Amendment to Section 7.02 of the Agreement. Section 7.02 of the Agreement is hereby amended and restated to read as follows:

Section 7.02. Notices. All notices, certificates, requests or other communications between the Authority, the Corporation and the Trustee required to be given under this Participation Agreement or under the Amended and Restated Indenture shall be sufficiently given and shall be deemed given when delivered by hand or first class mail, postage prepaid, addressed as follows: if to the Authority, at 17 Columbia Circle, Albany, New York 12203, Attention: President; if to the Corporation, at 300 Erie Boulevard West, Syracuse, New York 13202, Attention: Treasurer, with a copy to Niagara Mohawk Power Corporation, 25 Research Drive, Westborough, Massachusetts 01582, Attention: Assistant Treasurer; and if to the Trustee or the Registrar and Paying Agent, at The Bank of New York, 101 Barclay Street - 21W, New York, New York 10286, Attention: Corporate Trust Administration. A duplicate copy of each notice, certificate, request or other communication given hereunder to the Authority, the Company or the Trustee shall also be given to the others. The Corporation, the Authority and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent.

Section 3.18. Amendment to Section 7.04 of the Agreement. Section 7.04 of the Agreement is hereby amended and restated to read as follows:

Section 7.04. Amendment of Participation Agreement. This Participation Agreement may not be amended except by an instrument in writing signed by the parties hereto and, if such amendment occurs after the issuance of the Bonds, upon compliance with the provisions of Article XIV of the Amended and Restated Indenture.

Section 3.19. Amendment to Exhibits B and C of the Agreement. Exhibits B and C of the Agreement are hereby deleted and replaced with Exhibit B to this Supplemental Agreement.

ARTICLE IV

MISCELLANEOUS

Section 4.01. Consent to Amended and Restated Indenture. The Corporation hereby consents to the execution and delivery of the Amended and Restated Indenture.

Section 4.02. Law and Place of Enforcement of this Supplemental Agreement. This Supplemental Agreement shall be construed and interpreted in accordance with the laws of the State of New York and all suits and actions arising out of this Supplemental Agreement shall be instituted in a court of competent jurisdiction in the State of New York.

Section 4.03. Effective Date; Counterparts. This Supplemental Agreement may be simultaneously executed in counterparts. Each such counterpart so executed shall be deemed to be an original, and all together shall constitute but one and the same instrument. This Supplemental Agreement shall become effective on the Effective Date. Notwithstanding the Effective Date, for convenience and purposes of reference this Supplemental Agreement shall be dated as of May 1, 2003 and may be cited and referred to as the "Second Supplemental Participation Agreement dated as of May 1, 2003."

None of the rights, covenants, interests, duties or obligations accruing to or required of any Bondholder, the Authority, the Corporation, the Trustee, or any Support Facility Issuer prior to the Effective Date shall be affected by the execution and delivery of this Supplemental Agreement.

[Signature Page of this Supplemental Agreement Follows]

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

NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY


By_______________________________________
       Acting President

(SEAL)

Attest:


__________________________________
       Assistant Secretary

NIAGARA MOHAWK POWER CORPORATION


By________________________________________
       Name:   Robert G. Seega
       Title:    Assistant Treasurer

(SEAL)

Attest:


___________________________________

[Signature Page of Supplemental Agreement relating to Pollution Control Revenue Bonds

(Niagara Mohawk Power Corporation Project), 1987 Series B]

EXHIBIT B

Corporation Supplemental Indenture

[See Item Number 30 of this Record of Proceedings]

EX-4 10 exh4e8.htm

EXECUTION COPY

______________________________________________________________________________
______________________________________________________________________________

NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY


AND


NIAGARA MOHAWK POWER CORPORATION


_________________________________

SECOND SUPPLEMENTAL PARTICIPATION AGREEMENT


Dated as of May 1, 2003

to

PARTICIPATION AGREEMENT

Dated as of December 1, 1988

_________________________________

relating to

$69,800,000 Pollution Control Revenue Bonds

(Niagara Mohawk Power Corporation Project), 1988 Series A

______________________________________________________________________________
______________________________________________________________________________

THIS SECOND SUPPLEMENTAL PARTICIPATION AGREEMENT, made and dated as of May 1, 2003 (the "Supplemental Agreement") to the PARTICIPATION AGREEMENT made and dated as of December 1, 1988, by and between NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY (the "Authority"), a body corporate and politic, constituting a public benefit corporation, and NIAGARA MOHAWK POWER CORPORATION, a corporation duly organized and existing and qualified to do business as a public utility under the laws of the State of New York (the "Corporation"),

W I T N E S S E T H   T H A T:

WHEREAS, pursuant to special act of the Legislature of the State of New York (Title 9 of Article 8 of the Public Authorities Law of New York, as from time to time amended and supplemented, herein called the "Act"), the Authority has been established as a body corporate and politic, constituting a public benefit corporation; and

WHEREAS, pursuant to the Act, the Authority is empowered to contract with any power company to participate in the incorporation of features in power plants and the construction of associated facilities to the extent required by the public interest in development, health, recreation, safety, conservation of natural resources and aesthetics; and

WHEREAS, the Legislature of the State of New York has determined that, because interest costs incurred by public utilities are reflected in the rates paid by the customers of such utilities and because governmental action has mandated the installation of pollution control facilities, it is in the public interest to enable utilities to obtain the lowest possible interest rate on bonds sold to provide pollution control facilities; and

WHEREAS, pursuant to the Act, the Authority has also been empowered to extend credit and make loans from bond and note proceeds to any person for the construction, acquisition and installation of, or for the reimbursement to any person for costs in connection with, any special energy project (as defined in the Act), including, but not limited to, any land, works, system, building or other improvement, and all real and personal properties of any nature or any interest in any of them which are suitable for or related to the furnishing, generation or production of energy; and

WHEREAS, the Authority is also authorized under the Act to borrow money and issue its negotiable bonds and notes to provide sufficient monies for achieving its corporate purposes, including the refunding of outstanding obligations of the Authority; and

WHEREAS, the Authority is also authorized under the Act to enter into any contracts and to execute all instruments necessary or convenient for the exercise of its corporate powers and the fulfillment of its corporate purposes, including the refunding of outstanding bonds and notes of the Authority; and

WHEREAS, the Authority and the Corporation have entered into a Participation Agreement, dated as of December 1, 1988 (herein referred to as the "Original Participation Agreement"), providing for the financing or refinancing of certain costs related to the acquisition, construction, and installation of certain pollution control, solid waste, sewage disposal facilities and other facilities identified and described in Exhibit A to the Original Participation Agreement, and, as part of such participation, that the Authority issue bonds pursuant to the Act to provide funds for such financing or refinancing; and

WHEREAS, on December 28, 1988, the Authority issued $69,800,000 aggregate principal amount of its Adjustable Rate Pollution Control Revenue Bonds (Niagara Mohawk Power Corporation Project), 1988 Series A (which are being renamed as provided in Section 2.02 of the Amended and Restated Indenture (as defined below)) (the "Bonds"), under and pursuant to Resolution No. 697 of the Authority, adopted October 7, 1988, and an Indenture of Trust dated as of December 1, 1988 (the "Original Indenture"), between the Authority and The Bank of New York (as successor in interest to Irving Trust Company), as trustee (the "Trustee"), to provide funds for the financing or refinancing described in the preceding whereas clause; and

WHEREAS, the Original Participation Agreement was amended and supplemented by a First Supplemental Participation Agreement dated as of March 13, 1996 (collectively with the Original Participation Agreement, the "Agreement"), between the Authority and the Corporation, and was further amended and supplemented by a Supplemental Participation Agreement dated as of December 1, 2002 (together with the Original Participation Agreement and the First Supplemental Participation Agreement, the "Agreement"); and

WHEREAS, the Original Indenture was amended and supplemented by a First Supplemental Indenture of Trust dated as of November 12, 1991 (the "First Supplemental Indenture"), between the Authority and the Trustee, and was further amended and supplemented by a Second Supplemental Indenture of Trust dated as of March 13, 1996 (collectively with the Original Indenture and the First Supplemental Indenture of Trust, the "1988 Series A Indenture"), between the Authority and the Trustee; and

WHEREAS, the Bonds previously bore interest at a Daily Rate, and upon a change in the Interest Rate Determination Method to a Variable-Term Rate to be effective on May 1, 2003, all Bonds were subject to mandatory tender and purchase by the Corporation; and

WHEREAS, Section 7.04 of the Agreement and Section 4.02 of the 1988 Series A Indenture provide that the Authority and the Trustee may, in accordance with the terms thereof, modify, amend or supplement the Agreement; and

WHEREAS, the Corporation has requested that upon changing the Interest Rate Determination Method of the Bonds to a Variable-Term Rate to be effective on May 1, 2003, the 1988 Series A Indenture be amended and restated and that the Agreement be amended to (i) permit the Bonds to bear interest at various variable interest rates, including, without limitation, at daily, weekly, monthly, semi-annual, term, commercial paper and auction rates, (ii) provide for new provisions made necessary or desirable by the issuance of a municipal bond insurance policy and (iii) otherwise conform certain terms of the 1988 Series A Indenture relating to the Bonds while they bear interest at variable interest rates and certain other terms of the 1988 Series A Indenture with the current market standard for multi-modal bonds; and

WHEREAS, upon a change in the Interest Rate Determination Method to a Variable-Term Rate to be effective on May 1, 2003, the registered owners of all the Bonds consented to the amendments to the 1988 Series A Indenture and the Agreement requested by the Corporation, and waived any and all rights to any notification or filing procedures or requirements under the 1988 Series A Indenture in addition to the consent provided thereby; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, the Authority and the Trustee have executed and delivered an Amended and Restated Indenture of Trust, dated as of May 1, 2003 (the "Amended and Restated Indenture"), which amends and restates the 1988 Series A Indenture; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, an Opinion of Bond Counsel described in Section 4.01.3(C) of the Amended and Restated Indenture has been delivered to the Trustee; and

WHEREAS, simultaneously with the execution and delivery of the Amended and Restated Indenture, without any further notice, the Bonds will bear interest at an Auction Period Rate; and

WHEREAS, all acts, conditions and things necessary or required by the Constitution and statutes of the State of New York, or otherwise, to exist, happen, and be performed as prerequisites to the passage of this Supplemental Agreement, do exist, have happened, and have been performed; and

NOW, THEREFORE, for and in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the Authority agrees with the Corporation, with the written consent of the Trustee, as follows:

ARTICLE I

AUTHORIZATION; DEFINITIONS

Section 1.01. Supplemental Agreement. This Supplemental Agreement is amendatory and supplemental to the Agreement, and is entered into in accordance with Section 7.04 of the Agreement and Article IV of the 1988 Series A Indenture; and except as modified, amended and supplemented by this Supplemental Agreement, the provisions of the Agreement are in all respects ratified and confirmed and shall remain in full force and effect.

Section 1.02. Definitions. Capitalized terms used herein and not otherwise defined herein or in the Agreement shall have the meaning given to such terms in the Amended and Restated Indenture.

ARTICLE II

REPRESENTATIONS

Section 2.01. Representations of the Authority. The Authority represents and warrants as follows:

(a) The Authority is a body corporate and politic, constituting a public benefit corporation, established and existing under the laws of the State of New York;

(b) The Authority has full power and authority to execute and deliver this Supplemental Agreement and the Amended and Restated Indenture and to consummate the transactions contemplated hereby and thereby and perform its obligations hereunder and thereunder;

(c) The Authority is not in default under any of the provisions of the laws of the State of New York which would affect its existence or its powers referred to in the preceding paragraph (b); and

(d) The Authority has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Amended and Restated Indenture.

Section 2.02. Representations of the Corporation. The Corporation represents and warrants as follows:

(a) The Corporation is a corporation duly incorporated and in good standing under the laws of the State of New York, is duly qualified and authorized to engage in business as a public utility in the State of New York, has power to enter into, execute and deliver this Supplemental Agreement, the Supplemental Tax Regulatory Agreement, and the Corporation Obligation and by proper corporate action has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation;

(b) The execution, delivery and performance of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation and the consummation of the transactions herein contemplated will not conflict with or constitute a breach of or a default under the Corporation's Certificate of Consolidation or By-Laws or any judgment, decree, order, statute, rule or regulation applicable to the Corporation or any indenture, mortgage, loan agreement or other contract or instrument to which the Corporation is a party or by which it is bound;

(c) The execution and delivery of this Supplemental Agreement and the issuance of the Corporation Obligation by the Corporation in the manner and for the purposes herein set forth have been duly authorized by order of the Public Service Commission of the State of New York; and

(d) All necessary authorizations for or approvals of the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation have been obtained by the Corporation.

The Corporation additionally represents and warrants that the representations and warranties of the Corporation set forth in the Supplemental Tax Regulatory Agreement are true and correct in all material respects.

ARTICLE III

AMENDMENTS TO THE AGREEMENT

Section 3.01. Amendment to Section 1.01 of the Agreement. Section 1.01 of the Agreement is hereby amended and restated to read as follows:

Section 1.01. Definitions. Capitalized terms used in this Participation Agreement and not otherwise defined herein shall have the meanings set forth in Section 1.01 of the Amended and Restated Indenture. Capitalized terms used in this Participation Agreement and not otherwise defined herein or in Section 1.01 of the Amended and Restated Indenture shall have the meanings set forth in Section 1.01 of the 1988 Series A Indenture.

Section 3.02. Replacement of certain terms in the Agreement. The Agreement is hereby amended to replace throughout the Agreement any reference to a term set forth under the Old Term column below with a corresponding term set forth under the New Term column below.

Old Term	New Term
Letter of Credit	Support Facility
Bank	Support Facility Issuer
Tender Agent	Registrar and Paying Agent
Paying Agent	Registrar and Paying Agent
Registrar	Registrar and Paying Agent
Indenture	Amended and Restated Indenture

Section 3.03. Amendment to Section 3.01 of the Agreement. Section 3.01 of the Agreement is hereby amended and restated to read as follows:

Section 3.01. Construction of the Project. The Corporation hereby represents that it has caused the Project to be completed and acknowledges that it shall not be entitled to any reimbursement for the cost of construction of the Project from the Authority, the Trustee or the Holders of the Bonds, nor shall it be entitled to any diminution or postponement of the payments required to be paid by the Corporation pursuant to this Participation Agreement or the Corporation Obligations.

Section 3.04. Amendment to Section 3.03 of the Agreement. Section 3.03 of the Agreement is hereby amended and restated to read as follows:

Section 3.03. Application of proceeds of the Bonds. The Corporation has applied the proceeds of sale of the Bonds in accordance with the Original Indenture and the Original Participation Agreement.

Section 3.05. Amendment to Section 3.04 of the Agreement. Sections 3.04 of the Agreement are hereby deleted.

Section 3.06. Amendment to Section 3.05 of the Agreement. Section 3.05 of the Agreement is hereby amended and restated to read as follows:

Section 3.05. Sale of the Project . Pursuant to an Asset Purchase Agreement relating to Nine Mile Point Unit 2 Nuclear Generating Facility ("NMP2"), dated as of December 11, 2000, by and among the Corporation, New York State Electric & Gas Corporation, Rochester Gas and Electric Corporation, Central Hudson Gas & Electric Corporation, Constellation Energy Group, Inc. and Constellation Nuclear, LLC (the "NMP2 Purchaser"), the Corporation has sold its interest in NMP2 of which the Project is a part to the NMP2 Purchaser.

Section 3.07. Amendment to Section 3.07 of the Agreement. Section 3.07 of the Agreement is hereby amended and restated to read as follows:

Section 3.07. Investment of moneys in funds under the Amended and Restated Indenture. Any moneys held as part of any fund created under the Amended and Restated Indenture shall, at the direction of an Authorized Corporation Representative, be invested or reinvested by the Trustee as provided in Section 9.04 of the Amended and Restated Indenture.

Section 3.08. Amendment to Section 4.01 of the Agreement. Section 4.01 of the Agreement is hereby amended and restated to read as follows:

Section 4.01. Execution and delivery of Corporation Obligation to Trustee. In order to evidence the obligation of the Corporation to the Authority to repay the advance of the proceeds of the Bonds, the Authority hereby directs the Corporation, and the Corporation hereby agrees, to deliver or cause to be delivered the First Mortgage Bonds to the Trustee on the Effective Date in exchange for the cancellation of the Corporation Note. The First Mortgage Bonds shall be the amended and restated first mortgage bonds of the Corporation issued under the Corporation Indenture and relating to the Bonds in substantially the form included in the Supplemental Corporation Indenture attached hereto as Exhibit B, with only such changes, omissions and insertions thereto as shall have been approved by the Authority.

Section 3.09. Amendment to Section 4.04 of the Agreement. Section 4.04 of the Agreement is hereby amended to add the following paragraph between the first and second paragraph in such section:

In addition, the Corporation shall wire to the State of New York on the Effective Date a bond issuance charge fee applicable to the Bonds pursuant to Section 2976 of the Public Authorities Law of the State of New York in the amount specified by such section on the Effective Date. The Corporation shall also pay to the Authority on the Effective Date an additional Administration Fee in the amount of $174,500.00.

Section 3.10. Amendment to Section 4.06 of the Agreement. Section 4.06 of the Agreement is hereby deleted.

Section 3.11. Amendment to Section 4.11 of the Agreement. Section 4.11 of the Agreement is hereby amended and restated to read as follows:

Section 4.11. Payment to Registrar and Paying Agent. The Corporation shall pay, or cause to be paid, to the Registrar and Paying Agent for deposit in the Bond Purchase Fund and credit to the Company Account therein an amount sufficient to provide for the payment of the Purchase Price of any Bond tendered for purchase pursuant to the Amended and Restated Indenture and the Bond Purchase Trust Agreement to the extent that sufficient moneys are not available for the payment of such Purchase Price from the other sources described therein.

Section 3.12. Amendment to Section 4.12 of the Agreement. Section 4.12 of the Agreement is hereby amended and restated to read as follows:

Section 4.12. Agreements of the Corporation relating to Support Facilities. The Corporation agrees not to request that the interest rate mode applicable to the Bonds be adjusted to an Adjustable Rate or a Fixed Rate unless on the effective date of the applicable Change in the Interest Rate Mode the Bonds shall be rated at least "A" by S&P or "A" by Moody's or an equivalent rating by any nationally recognized rating agency. Such rating of the Bonds may, but is not required to, be achieved by obtaining a Support Facility which meets the requirements of this Article VI of the Amended and Restated Indenture.

The Corporation further agrees that it will maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate, a Term Rate for a Calculation Period of greater than 13 months or a Fixed Rate. Notwithstanding the foregoing, so long as the conditions set forth in Section 6.05 of the Amended and Restated Indenture are met by the Bond Insurer and with respect to the Policy, and unless otherwise agreed by the Bond Insurer, the Corporation shall maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate or a Fixed Rate.

Section 3.13. Addition of Section 4.13 to Article IV of the Agreement. The Agreement is hereby amended to add the following Section 4.13 at the end of Article IV of the Agreement:

Section 4.13. Corporation liable to owners of Bonds in the case of certain events of taxability. The Corporation confirms and agrees that if as result of action by the Corporation, the owner of the Project as of the date hereof, or any successor owner of the Project, the interest on the Bonds is determined to be included for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of section 147(a)(1) of the Code), as evidenced by a published or private ruling of the Internal Revenue Service or a final, nonappealable judicial decision by a court of competent jurisdiction, then the Corporation, in addition to its obligation to redeem the Bonds pursuant to Section 5.06 of the Amended and Restated Indenture, shall be liable to the affected owners of the Bonds for any taxes, penalties and interest assessed against such owners by the Internal Revenue Service and attributable to the Bonds.

The Authority and the Trustee agree not to object to the intervention in or participation by the Corporation at its own expense in any proceedings by or before the Internal Revenue Service or any court relating to whether interest on the Bonds is includable for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of Section 147(a)(1) of the Code).

Section 3.14. Addition of Section 5.08 to Article V of the Agreement. The Agreement is hereby amended to add the following Section 5.08 at the end of Article V of the Agreement:

Section 5.08. Recording and Filing. The Corporation hereby covenants that it will cause all financing statements related to the Amended and Restated Indenture and all supplements thereto and this Participation Agreement and all supplements thereto, as well as such other security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may from time to time be required by law in order to preserve and protect fully the security of Holders and the rights of the Trustee hereunder, and to take or cause to be taken any and all other action necessary to perfect the security interest created by the Amended and Restated Indenture and shall, within ten (10) days after such filing, cause there to be furnished to the Trustee an opinion of counsel as to the adequacy and details of such filing and specifying any re-filing to be effected in the future.

Section 3.15. Amendment to Section 6.01 of the Agreement. Section 6.01 of the Agreement is hereby amended to replace any reference to the "Corporation Note" with reference to "Corporation Obligation" throughout such Section 6.01. Section 6.01 of the Agreement is hereby further amended to replace any reference to "Section 10.01 of the Indenture" with reference to "Section 12.03 of the Amended and Restated Indenture" throughout such Section 6.01. Paragraph (b) of Section 6.01 of the Agreement is hereby amended and restated to read as follows:

(b) failure the Corporation to pay when due any amount required to be paid under Section 4.11 of this Participation Agreement, which failure causes an Event of Default to occur pursuant to paragraph (a) of Section 12.01 of the Amended and Restated Indenture; or

Section 3.16. Addition of Section 6.04 to Article VI of the Agreement. Article VI of the Agreement is hereby amended to add the following Section 6.04:

Section 6.04. Rights of the Credit Facility Issuer; Other rights of the Trustee to enforce this Participation Agreement. Notwithstanding anything herein to the contrary, any judicial proceedings of the Trustee under Section 6.03 may be instituted only with the written consent of the Credit Facility Issuer and shall be instituted by the Trustee at the written direction of the Credit Facility Issuer.
Nothing in this Participation Agreement shall limit any other rights of the Trustee to enforce this Participation Agreement.

Section 3.17. Amendment to Section 7.02 of the Agreement. Section 7.02 of the Agreement is hereby amended and restated to read as follows:

Section 7.02. Notices. All notices, certificates, requests or other communications between the Authority, the Corporation and the Trustee required to be given under this Participation Agreement or under the Amended and Restated Indenture shall be sufficiently given and shall be deemed given when delivered by hand or first class mail, postage prepaid, addressed as follows: if to the Authority, at 17 Columbia Circle, Albany, New York 12203, Attention: President; if to the Corporation, at 300 Erie Boulevard West, Syracuse, New York 13202, Attention: Treasurer, with a copy to Niagara Mohawk Power Corporation, 25 Research Drive, Westborough, Massachusetts 01582, Attention: Assistant Treasurer; and if to the Trustee or the Registrar and Paying Agent, at The Bank of New York, 101 Barclay Street - 21W, New York, New York 10286, Attention: Corporate Trust Administration. A duplicate copy of each notice, certificate, request or other communication given hereunder to the Authority, the Company or the Trustee shall also be given to the others. The Corporation, the Authority and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent.

Section 3.18. Amendment to Section 7.04 of the Agreement. Section 7.04 of the Agreement is hereby amended and restated to read as follows:

Section 7.04. Amendment of Participation Agreement. This Participation Agreement may not be amended except by an instrument in writing signed by the parties hereto and, if such amendment occurs after the issuance of the Bonds, upon compliance with the provisions of Article XIV of the Amended and Restated Indenture.

Section 3.19. Amendment to Exhibits B and C of the Agreement. Exhibits B and C of the Agreement are hereby deleted and replaced with Exhibit B to this Supplemental Agreement.

ARTICLE IV

MISCELLANEOUS

Section 4.01. Consent to Amended and Restated Indenture. The Corporation hereby consents to the execution and delivery of the Amended and Restated Indenture.

Section 4.02. Law and Place of Enforcement of this Supplemental Agreement. This Supplemental Agreement shall be construed and interpreted in accordance with the laws of the State of New York and all suits and actions arising out of this Supplemental Agreement shall be instituted in a court of competent jurisdiction in the State of New York.

Section 4.03. Effective Date; Counterparts. This Supplemental Agreement may be simultaneously executed in counterparts. Each such counterpart so executed shall be deemed to be an original, and all together shall constitute but one and the same instrument. This Supplemental Agreement shall become effective on the Effective Date. Notwithstanding the Effective Date, for convenience and purposes of reference this Supplemental Agreement shall be dated as of May 1, 2003 and may be cited and referred to as the "Second Supplemental Participation Agreement dated as of May 1, 2003."

None of the rights, covenants, interests, duties or obligations accruing to or required of any Bondholder, the Authority, the Corporation, the Trustee, or any Support Facility Issuer prior to the Effective Date shall be affected by the execution and delivery of this Supplemental Agreement.

[Signature Page of this Supplemental Agreement Follows]

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

NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY


By________________________________________
      Acting President

(SEAL)

Attest:


_______________________________
       Assistant Secretary

NIAGARA MOHAWK POWER CORPORATION


By________________________________________
       Name:    Robert G. Seega
       Title:    Assistant Treasurer

(SEAL)

Attest:


________________________________

[Signature Page of Supplemental Agreement relating to Pollution Control Revenue Bonds

(Niagara Mohawk Power Corporation Project), 1988 Series A]

EXHIBIT B

Corporation Supplemental Indenture

[See Item Number 30 of this Record of Proceedings]

EX-21 11 exh21.htm

EXHIBIT 21

NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES

SUBSIDIARIES OF THE REGISTRANT

Name of Company	State of Organization
NM Uranium, Inc.	Texas
NM Properties, Inc. (Note 1)	New York
NM Receivables Corp. II	New York
NM Receivables LLC	New York

1. 1: At March 31, 2003, NM Properties, Inc. owns Salmon Shores, Inc.; Moreau Park, Inc.; Riverview, Inc.; Hudson Pointe, Inc.; Upper Hudson Development, Inc.; Land Management & Development, Inc.; Oprop Co., Inc.; and Landwest, Inc.

EX-99 12 exh99-1.htm

Exhibit 99.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Niagara Mohawk Power Corporation (the “Company”) on Form 10-K for the fiscal year ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William F. Edwards, President and Chief Executive Officer of the Company, certify, to the best of my 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: June 30, 2003	/s/ William F. Edwards
	William F. Edwards
	President and Chief Executive Officer

EX-99 13 exh99-2.htm

Exhibit 99.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Niagara Mohawk Power Corporation (the “Company”) on Form 10-K for the fiscal year ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John G. Cochrane, Chief Financial Officer of the Company, certify, to the best of my 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: June 30, 2003	/s/ John G. Cochrane
	John G. Cochrane
	Chief Financial Officer

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

EX-4

EXECUTION COPY

______________________________________________________________________________
______________________________________________________________________________



NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY


AND


NIAGARA MOHAWK POWER CORPORATION


_________________________________

SECOND SUPPLEMENTAL PARTICIPATION AGREEMENT


Dated as of May 1, 2003

to

PARTICIPATION AGREEMENT

Dated as of March 1, 1987

_________________________________

relating to

$25,760,000 Pollution Control Revenue Bonds
(Niagara Mohawk Power Corporation Project), 1987 Series A

______________________________________________________________________________
______________________________________________________________________________

THIS SECOND SUPPLEMENTAL PARTICIPATION AGREEMENT, made and dated as of May 1, 2003 (the "Supplemental Agreement") to the PARTICIPATION AGREEMENT made and dated as of March 1, 1987, by and between NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY (the "Authority"), a body corporate and politic, constituting a public benefit corporation, and NIAGARA MOHAWK POWER CORPORATION, a corporation duly organized and existing and qualified to do business as a public utility under the laws of the State of New York (the "Corporation"),

W I T N E S S E T H   T H A T:

WHEREAS, pursuant to special act of the Legislature of the State of New York (Title 9 of Article 8 of the Public Authorities Law of New York, as from time to time amended and supplemented, herein called the "Act"), the Authority has been established as a body corporate and politic, constituting a public benefit corporation; and

WHEREAS, pursuant to the Act, the Authority is empowered to contract with any power company to participate in the incorporation of features in power plants and the construction of associated facilities to the extent required by the public interest in development, health, recreation, safety, conservation of natural resources and aesthetics; and

WHEREAS, the Legislature of the State of New York has determined that, because interest costs incurred by public utilities are reflected in the rates paid by the customers of such utilities and because governmental action has mandated the installation of pollution control facilities, it is in the public interest to enable utilities to obtain the lowest possible interest rate on bonds sold to provide pollution control facilities; and

WHEREAS, pursuant to the Act, the Authority has also been empowered to extend credit and make loans from bond and note proceeds to any person for the construction, acquisition and installation of, or for the reimbursement to any person for costs in connection with, any special energy project (as defined in the Act), including, but not limited to, any land, works, system, building or other improvement, and all real and personal properties of any nature or any interest in any of them which are suitable for or related to the furnishing, generation or production of energy; and

WHEREAS, the Authority is also authorized under the Act to borrow money and issue its negotiable bonds and notes to provide sufficient monies for achieving its corporate purposes, including the refunding of outstanding obligations of the Authority; and

WHEREAS, the Authority is also authorized under the Act to enter into any contracts and to execute all instruments necessary or convenient for the exercise of its corporate powers and the fulfillment of its corporate purposes, including the refunding of outstanding bonds and notes of the Authority; and

WHEREAS, the Authority and the Corporation have entered into a Participation Agreement, dated as of March 1, 1987 (herein referred to as the "Original Participation Agreement"), providing for the financing or refinancing of certain costs related to the acquisition, construction, and installation of certain pollution control, solid waste, sewage disposal facilities and other facilities identified and described in Exhibit A to the Original Participation Agreement, and, as part of such participation, that the Authority issue bonds pursuant to the Act to provide funds for such financing or refinancing; and

WHEREAS, on March 26, 1987, the Authority issued $25,760,000 aggregate principal amount of its Pollution Control Flexible Rate Refunding Revenue Bonds (Niagara Mohawk Power Corporation Project), 1987 Series A (which are being renamed as provided in Section 2.02 of the Amended and Restated Indenture (as defined below)) (the "Bonds"), under and pursuant to Resolution No. 664 of the Authority, adopted January 15, 1987, and an Indenture of Trust dated as of March 1, 1987 (the "Original Indenture"), between the Authority and The Bank of New York (as successor in interest to Irving Trust Company), as trustee (the "Trustee"), to provide funds for the financing or refinancing described in the preceding whereas clause; and

WHEREAS, the Original Participation Agreement was amended and supplemented by a First Supplemental Participation Agreement dated as of March 13, 1996 (the "First Supplemental Participation Agreement"), between the Authority and the Corporation, and was further amended and supplemented by a Supplemental Participation Agreement dated as of December 1, 2002 (together with the Original Participation Agreement and the First Supplemental Participation Agreement, the "Agreement"); and

WHEREAS, the Original Indenture was amended and supplemented by a Letter Amendment No. 1 dated March 19, 1991 (the "Letter Amendment"), and was further supplemented by a First Supplemental Indenture of Trust dated as of March 13, 1996 (collectively with the Original Indenture and the Letter Amendment, the "1987 Series A Indenture"), between the Authority and the Trustee; and

WHEREAS, the Bonds previously bore interest at a Daily Rate, and upon a change in the Interest Rate Determination Method to a Variable-Term Rate to be effective on May 1, 2003, all Bonds were subject to mandatory tender and purchase by the Corporation; and

WHEREAS, Section 7.04 of the Agreement and Section 4.02 of the 1987 Series A Indenture provide that the Authority and the Trustee may, in accordance with the terms thereof, modify, amend or supplement the Agreement; and

WHEREAS, the Corporation has requested that upon changing the Interest Rate Determination Method of the Bonds to a Variable-Term Rate to be effective on May 1, 2003, the 1987 Series A Indenture be amended and restated and that the Agreement be amended to (i) permit the Bonds to bear interest at various variable interest rates, including, without limitation, at daily, weekly, monthly, semi-annual, term, commercial paper and auction rates, (ii) provide for new provisions made necessary or desirable by the issuance of a municipal bond insurance policy and (iii) otherwise conform certain terms of the 1987 Series A Indenture relating to the Bonds while they bear interest at variable interest rates and certain other terms of the 1987 Series A Indenture with the current market standard for multi-modal bonds; and

WHEREAS, upon a change in the Interest Rate Determination Method to a Variable-Term Rate to be effective on May 1, 2003, the registered owners of all the Bonds consented to the amendments to the 1987 Series A Indenture and the Agreement requested by the Corporation, and waived any and all rights to any notification or filing procedures or requirements under the 1987 Series A Indenture in addition to the consent provided thereby; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, the Authority and the Trustee have executed and delivered an Amended and Restated Indenture of Trust, dated as of May 1, 2003 (the "Amended and Restated Indenture"), which amends and restates the 1987 Series A Indenture; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, an Opinion of Bond Counsel described in Section 4.01.3(C) of the Amended and Restated Indenture has been delivered to the Trustee; and

WHEREAS, simultaneously with the execution and delivery of the Amended and Restated Indenture, without any further notice, the Bonds will bear interest at an Auction Period Rate; and

WHEREAS, all acts, conditions and things necessary or required by the Constitution and statutes of the State of New York, or otherwise, to exist, happen, and be performed as prerequisites to the passage of this Supplemental Agreement, do exist, have happened, and have been performed; and

NOW, THEREFORE, for and in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the Authority agrees with the Corporation, with the written consent of the Trustee, as follows:

ARTICLE I

AUTHORIZATION; DEFINITIONS

Section 1.01. Supplemental Agreement. This Supplemental Agreement is amendatory and supplemental to the Agreement, and is entered into in accordance with Section 7.04 of the Agreement and Article IV of the 1987 Series A Indenture; and except as modified, amended and supplemented by this Supplemental Agreement, the provisions of the Agreement are in all respects ratified and confirmed and shall remain in full force and effect.

Section 1.02. Definitions. Capitalized terms used herein and not otherwise defined herein or in the Agreement shall have the meaning given to such terms in the Amended and Restated Indenture.

ARTICLE II

REPRESENTATIONS

Section 2.01. Representations of the Authority. The Authority represents and warrants as follows:

(a) The Authority is a body corporate and politic, constituting a public benefit corporation, established and existing under the laws of the State of New York;

(b) The Authority has full power and authority to execute and deliver this Supplemental Agreement and the Amended and Restated Indenture and to consummate the transactions contemplated hereby and thereby and perform its obligations hereunder and thereunder;

(c) The Authority is not in default under any of the provisions of the laws of the State of New York which would affect its existence or its powers referred to in the preceding paragraph (b); and

(d) The Authority has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Amended and Restated Indenture.

Section 2.02. Representations of the Corporation. The Corporation represents and warrants as follows:

(a) The Corporation is a corporation duly incorporated and in good standing under the laws of the State of New York, is duly qualified and authorized to engage in business as a public utility in the State of New York, has power to enter into, execute and deliver this Supplemental Agreement, the Supplemental Tax Regulatory Agreement, and the Corporation Obligation and by proper corporate action has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation;

(b) The execution, delivery and performance of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation and the consummation of the transactions herein contemplated will not conflict with or constitute a breach of or a default under the Corporation's Certificate of Consolidation or By-Laws or any judgment, decree, order, statute, rule or regulation applicable to the Corporation or any indenture, mortgage, loan agreement or other contract or instrument to which the Corporation is a party or by which it is bound;

(c) The execution and delivery of this Supplemental Agreement and the issuance of the Corporation Obligation by the Corporation in the manner and for the purposes herein set forth have been duly authorized by order of the Public Service Commission of the State of New York; and

(d) All necessary authorizations for or approvals of the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation have been obtained by the Corporation.

The Corporation additionally represents and warrants that the representations and warranties of the Corporation set forth in the Supplemental Tax Regulatory Agreement are true and correct in all material respects.

ARTICLE III

AMENDMENTS TO THE AGREEMENT

Section 3.01. Amendment to Section 1.01 of the Agreement. Section 1.01 of the Agreement is hereby amended and restated to read as follows:

Section 1.01. Definitions. Capitalized terms used in this Participation Agreement and not otherwise defined herein shall have the meanings set forth in Section 1.01 of the Amended and Restated Indenture. Capitalized terms used in this Participation Agreement and not otherwise defined herein or in Section 1.01 of the Amended and Restated Indenture shall have the meanings set forth in Section 1.01 of the 1987 Series A Indenture.

Section 3.02. Replacement of certain terms in the Agreement. The Agreement is hereby amended to replace throughout the Agreement any reference to a term set forth under the Old Term column below with a corresponding term set forth under the New Term column below.

Old Term	New Term
Letter of Credit	Support Facility
Bank	Support Facility Issuer
Tender Agent	Registrar and Paying Agent
Paying Agent	Registrar and Paying Agent
Registrar	Registrar and Paying Agent
Indenture	Amended and Restated Indenture
Placement Agent	Remarketing Agent
Placement Agreement	Remarketing Agreement
Pledge Agent	Remarketing Agent

Section 3.03. Addition of Section 3.06 to Article III of the Agreement. Article III of the Agreement is hereby amended to add the following Section 3.06:

Section 3.06. Application of proceeds of the Bonds. The Corporation has applied the proceeds of sale of the Bonds in accordance with the Original Indenture and the Original Participation Agreement.

Section 3.04. Amendment to Section 3.03 of the Agreement. Section 3.03 of the Agreement is hereby amended and restated to read as follows:

Section 3.03. Sale of the Project . Pursuant to an Asset Purchase Agreement relating to Nine Mile Point Unit 2 Nuclear Generating Facility ("NMP2"), dated as of December 11, 2000, by and among the Corporation, New York State Electric & Gas Corporation, Rochester Gas and Electric Corporation, Central Hudson Gas & Electric Corporation, Constellation Energy Group, Inc. and Constellation Nuclear, LLC (the "NMP2 Purchaser"), the Corporation has sold its interest in NMP2 of which the Project is a part to the NMP2 Purchaser.

Section 3.05. Amendment to Section 3.05 of the Agreement. Section 3.05 of the Agreement is hereby amended and restated to read as follows:

Section 3.05. Investment of moneys in funds under the Amended and Restated Indenture. Any moneys held as part of any fund created under the Amended and Restated Indenture shall, at the direction of an Authorized Corporation Representative, be invested or reinvested by the Trustee as provided in Section 9.04 of the Amended and Restated Indenture.

Section 3.06. Amendment to Section 4.01 of the Agreement. Section 4.01 of the Agreement is hereby amended and restated to read as follows:

Section 4.01. Execution and delivery of Corporation Obligation to Trustee. In order to evidence the obligation of the Corporation to the Authority to repay the advance of the proceeds of the Bonds, the Authority hereby directs the Corporation, and the Corporation hereby agrees, to deliver or cause to be delivered the First Mortgage Bonds to the Trustee on the Effective Date in exchange for the cancellation of the Corporation Note. The First Mortgage Bonds shall be the amended and restated first mortgage bonds of the Corporation issued under the Corporation Indenture and relating to the Bonds in substantially the form included in the Supplemental Corporation Indenture attached hereto as Exhibit B, with only such changes, omissions and insertions thereto as shall have been approved by the Authority.

Section 3.07. Amendment to Section 4.04 of the Agreement. Section 4.04 of the Agreement is hereby amended to add the following paragraph between the first and second paragraph in such section:

In addition, the Corporation shall wire to the State of New York on the Effective Date a bond issuance charge fee applicable to the Bonds pursuant to Section 2976 of the Public Authorities Law of the State of New York in the amount specified by such section on the Effective Date. The Corporation shall also pay to the Authority on the Effective Date an additional Administration Fee in the amount of $64,400.00.

Section 3.08. Amendment to Section 4.06 of the Agreement. Section 4.06 of the Agreement is hereby deleted.

Section 3.09. Amendment to Section 4.11 of the Agreement. Section 4.11 of the Agreement is hereby amended and restated to read as follows:

Section 4.11. Payment to Registrar and Paying Agent. The Corporation shall pay, or cause to be paid, to the Registrar and Paying Agent for deposit in the Bond Purchase Fund and credit to the Company Account therein an amount sufficient to provide for the payment of the Purchase Price of any Bond tendered for purchase pursuant to the Amended and Restated Indenture and the Bond Purchase Trust Agreement to the extent that sufficient moneys are not available for the payment of such Purchase Price from the other sources described therein.

Section 3.10. Amendment to Section 4.12 of the Agreement. Section 4.12 of the Agreement is hereby amended and restated to read as follows:

Section 4.12. Agreements of the Corporation relating to Support Facilities. The Corporation agrees not to request that the interest rate mode applicable to the Bonds be adjusted to an Adjustable Rate or a Fixed Rate unless on the effective date of the applicable Change in the Interest Rate Mode the Bonds shall be rated at least "A" by S&P or "A" by Moody's or an equivalent rating by any nationally recognized rating agency. Such rating of the Bonds may, but is not required to, be achieved by obtaining a Support Facility which meets the requirements of this Article VI of the Amended and Restated Indenture.

The Corporation further agrees that it will maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate, a Term Rate for a Calculation Period of greater than 13 months or a Fixed Rate. Notwithstanding the foregoing, so long as the conditions set forth in Section 6.05 of the Amended and Restated Indenture are met by the Bond Insurer and with respect to the Policy, and unless otherwise agreed by the Bond Insurer, the Corporation shall maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate or a Fixed Rate.

Section 3.11. Amendment of Section 4.13 of the Agreement. Section 4.13 of the Agreement is hereby amended and restated to read as follows:

Section 4.13. Corporation liable to owners of Bonds in the case of certain events of taxability. The Corporation confirms and agrees that if as result of action by the Corporation, the owner of the Project as of the date hereof, or any successor owner of the Project, the interest on the Bonds is determined to be included for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of section 147(a)(1) of the Code), as evidenced by a published or private ruling of the Internal Revenue Service or a final, nonappealable judicial decision by a court of competent jurisdiction, then the Corporation, in addition to its obligation to redeem the Bonds pursuant to Section 5.06 of the Amended and Restated Indenture, shall be liable to the affected owners of the Bonds for any taxes, penalties and interest assessed against such owners by the Internal Revenue Service and attributable to the Bonds.

The Authority and the Trustee agree not to object to the intervention in or participation by the Corporation at its own expense in any proceedings by or before the Internal Revenue Service or any court relating to whether interest on the Bonds is includable for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of Section 147(a)(1) of the Code).

Section 3.12. Addition of Section 5.08 to Article V of the Agreement. The Agreement is hereby amended to add the following Section 5.08 at the end of Article V of the Agreement:

Section 5.08. Recording and Filing. The Corporation hereby covenants that it will cause all financing statements related to the Amended and Restated Indenture and all supplements thereto and this Participation Agreement and all supplements thereto, as well as such other security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may from time to time be required by law in order to preserve and protect fully the security of Holders and the rights of the Trustee hereunder, and to take or cause to be taken any and all other action necessary to perfect the security interest created by the Amended and Restated Indenture and shall, within ten (10) days after such filing, cause there to be furnished to the Trustee an opinion of counsel as to the adequacy and details of such filing and specifying any re-filing to be effected in the future.

Section 3.13. Amendment to Section 6.01 of the Agreement. Section 6.01 of the Agreement is hereby amended to replace any reference to the "Corporation Note" with reference to "Corporation Obligation" throughout such Section 6.01. Section 6.01 of the Agreement is hereby further amended to replace any reference to "Section 10.01 of the Indenture" with reference to "Section 12.03 of the Amended and Restated Indenture" throughout such Section 6.01. Paragraph (b) of Section 6.01 of the Agreement is hereby amended and restated to read as follows:

(b) failure the Corporation to pay when due any amount required to be paid under Section 4.11 of this Participation Agreement, which failure causes an Event of Default to occur pursuant to paragraph (a) of Section 12.01 of the Amended and Restated Indenture; or

Section 3.14. Addition of Section 6.04 to Article VI of the Agreement. Article VI of the Agreement is hereby amended to add the following Section 6.04:

Section 6.04. Rights of the Credit Facility Issuer; Other rights of the Trustee to enforce this Participation Agreement. Notwithstanding anything herein to the contrary, any judicial proceedings of the Trustee under Section 6.03 may be instituted only with the written consent of the Credit Facility Issuer and shall be instituted by the Trustee at the written direction of the Credit Facility Issuer.

Nothing in this Participation Agreement shall limit any other rights of the Trustee to enforce this Participation Agreement.

Section 3.15. Amendment to Section 7.02 of the Agreement. Section 7.02 of the Agreement is hereby amended and restated to read as follows:

Section 7.02. Notices. All notices, certificates, requests or other communications between the Authority, the Corporation and the Trustee required to be given under this Participation Agreement or under the Amended and Restated Indenture shall be sufficiently given and shall be deemed given when delivered by hand or first class mail, postage prepaid, addressed as follows: if to the Authority, at 17 Columbia Circle, Albany, New York 12203, Attention: President; if to the Corporation, at 300 Erie Boulevard West, Syracuse, New York 13202, Attention: Treasurer, with a copy to Niagara Mohawk Power Corporation, 25 Research Drive, Westborough, Massachusetts 01582, Attention: Assistant Treasurer; and if to the Trustee or the Registrar and Paying Agent, at The Bank of New York, 101 Barclay Street - 21W, New York, New York 10286, Attention: Corporate Trust Administration. A duplicate copy of each notice, certificate, request or other communication given hereunder to the Authority, the Company or the Trustee shall also be given to the others. The Corporation, the Authority and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent.

Section 3.16. Amendment to Section 7.04 of the Agreement. Section 7.04 of the Agreement is hereby amended and restated to read as follows:

Section 7.04. Amendment of Participation Agreement. This Participation Agreement may not be amended except by an instrument in writing signed by the parties hereto and, if such amendment occurs after the issuance of the Bonds, upon compliance with the provisions of Article XIV of the Amended and Restated Indenture.

Section 3.17. Amendment to Exhibits B and C of the Agreement. Exhibits B and C of the Agreement are hereby deleted and replaced with Exhibit B to this Supplemental Agreement.

ARTICLE IV

MISCELLANEOUS

Section 4.01. Consent to Amended and Restated Indenture. The Corporation hereby consents to the execution and delivery of the Amended and Restated Indenture.

Section 4.02. Law and Place of Enforcement of this Supplemental Agreement. This Supplemental Agreement shall be construed and interpreted in accordance with the laws of the State of New York and all suits and actions arising out of this Supplemental Agreement shall be instituted in a court of competent jurisdiction in the State of New York.

Section 4.03. Effective Date; Counterparts. This Supplemental Agreement may be simultaneously executed in counterparts. Each such counterpart so executed shall be deemed to be an original, and all together shall constitute but one and the same instrument. This Supplemental Agreement shall become effective on the Effective Date. Notwithstanding the Effective Date, for convenience and purposes of reference this Supplemental Agreement shall be dated as of May 1, 2003 and may be cited and referred to as the "Second Supplemental Participation Agreement dated as of May 1, 2003."

None of the rights, covenants, interests, duties or obligations accruing to or required of any Bondholder, the Authority, the Corporation, the Trustee, or any Support Facility Issuer prior to the Effective Date shall be affected by the execution and delivery of this Supplemental Agreement.

[Signature Page of this Supplemental Agreement Follows]

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

NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY


By__________________________________________
      Acting President

(SEAL)

Attest:


_______________________________
       Assistant Secretary

NIAGARA MOHAWK POWER CORPORATION


By___________________________________________
      Name:    Robert G. Seega
      Title:    Assistant Treasurer

(SEAL)

Attest:


_______________________________

[Signature Page of Supplemental Agreement relating to Pollution Control Revenue Bonds

(Niagara Mohawk Power Corporation Project), 1987 Series A]

EXHIBIT B

Corporation Supplemental Indenture

[See Item Number 30 of this Record of Proceedings]

EX-4

EXECUTION COPY

______________________________________________________________________________
______________________________________________________________________________




NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY


AND


NIAGARA MOHAWK POWER CORPORATION


_________________________________

SECOND SUPPLEMENTAL PARTICIPATION AGREEMENT


Dated as of May 1, 2003

to

PARTICIPATION AGREEMENT

Dated as of July 1, 1987

_________________________________

relating to

$93,200,000 Pollution Control Revenue Bonds

(Niagara Mohawk Power Corporation Project), 1987 Series B

______________________________________________________________________________
______________________________________________________________________________

THIS SECOND SUPPLEMENTAL PARTICIPATION AGREEMENT, made and dated as of May 1, 2003 (the "Supplemental Agreement") to the PARTICIPATION AGREEMENT made and dated as of July 1, 1987, by and between NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY (the "Authority"), a body corporate and politic, constituting a public benefit corporation, and NIAGARA MOHAWK POWER CORPORATION, a corporation duly organized and existing and qualified to do business as a public utility under the laws of the State of New York (the "Corporation"),

W I T N E S S E T H    T H A T:

WHEREAS, pursuant to special act of the Legislature of the State of New York (Title 9 of Article 8 of the Public Authorities Law of New York, as from time to time amended and supplemented, herein called the "Act"), the Authority has been established as a body corporate and politic, constituting a public benefit corporation; and

WHEREAS, pursuant to the Act, the Authority is empowered to contract with any power company to participate in the incorporation of features in power plants and the construction of associated facilities to the extent required by the public interest in development, health, recreation, safety, conservation of natural resources and aesthetics; and

WHEREAS, the Legislature of the State of New York has determined that, because interest costs incurred by public utilities are reflected in the rates paid by the customers of such utilities and because governmental action has mandated the installation of pollution control facilities, it is in the public interest to enable utilities to obtain the lowest possible interest rate on bonds sold to provide pollution control facilities; and

WHEREAS, pursuant to the Act, the Authority has also been empowered to extend credit and make loans from bond and note proceeds to any person for the construction, acquisition and installation of, or for the reimbursement to any person for costs in connection with, any special energy project (as defined in the Act), including, but not limited to, any land, works, system, building or other improvement, and all real and personal properties of any nature or any interest in any of them which are suitable for or related to the furnishing, generation or production of energy; and

WHEREAS, the Authority is also authorized under the Act to borrow money and issue its negotiable bonds and notes to provide sufficient monies for achieving its corporate purposes, including the refunding of outstanding obligations of the Authority; and

WHEREAS, the Authority is also authorized under the Act to enter into any contracts and to execute all instruments necessary or convenient for the exercise of its corporate powers and the fulfillment of its corporate purposes, including the refunding of outstanding bonds and notes of the Authority; and

WHEREAS, the Authority and the Corporation have entered into a Participation Agreement, dated as of July 1, 1987 (herein referred to as the "Original Participation Agreement"), providing for the financing or refinancing of certain costs related to the acquisition, construction, and installation of certain pollution control, solid waste, sewage disposal facilities and other facilities identified and described in Exhibit A to the Original Participation Agreement, and, as part of such participation, that the Authority issue bonds pursuant to the Act to provide funds for such financing or refinancing; and

WHEREAS, on July 16, 1987, the Authority issued $93,200,000 aggregate principal amount of its Pollution Control Flexible Rate Revenue Bonds (Niagara Mohawk Power Corporation Project), 1987 Series B (which are being renamed as provided in Section 2.02 of the Amended and Restated Indenture (as defined below)) (the "Bonds"), under and pursuant to Resolution No. 667 of the Authority, adopted April 20, 1987, and an Indenture of Trust dated as of July 1, 1987 (the "Original Indenture"), between the Authority and The Bank of New York (as successor in interest to Irving Trust Company), as trustee (the "Trustee"), to provide funds for the financing or refinancing described in the preceding whereas clause; and

WHEREAS, the Original Participation Agreement was amended and supplemented by a First Supplemental Participation Agreement dated as of March 13, 1996 (collectively with the Original Participation Agreement, the "Agreement"), between the Authority and the Corporation, and was further amended and supplemented by a Supplemental Participation Agreement dated as of December 1, 2002 (together with the Original Participation Agreement and the First Supplemental Participation Agreement, the "Agreement"); and

WHEREAS, the Original Indenture was amended and supplemented by a First Supplemental Indenture of Trust dated as of March 13, 1996 (collectively with the Original Indenture, the "1987 Series B Indenture"), between the Authority and the Trustee; and

WHEREAS, the Bonds previously bore interest at a Daily Rate, and upon a change in the Interest Rate Determination Method to a Variable-Term Rate to be effective on May 1, 2003, all Bonds were subject to mandatory tender and purchase by the Corporation; and

WHEREAS, Section 7.04 of the Agreement and Section 4.02 of the 1987 Series B Indenture provide that the Authority and the Trustee may, in accordance with the terms thereof, modify, amend or supplement the Agreement; and

WHEREAS, the Corporation has requested that upon changing the Interest Rate Determination Method of the Bonds to a Variable-Term Rate to be effective on May 1, 2003, the 1987 Series B Indenture be amended and restated and that the Agreement be amended to (i) permit the Bonds to bear interest at various variable interest rates, including, without limitation, at daily, weekly, monthly, semi-annual, term, commercial paper and auction rates, (ii) provide for new provisions made necessary or desirable by the issuance of a municipal bond insurance policy and (iii) otherwise conform certain terms of the 1987 Series B Indenture relating to the Bonds while they bear interest at variable interest rates and certain other terms of the 1987 Series B Indenture with the current market standard for multi-modal bonds; and

WHEREAS, upon a change in the Interest Rate Determination Method to a Variable-Term Rate to be effective on May 1, 2003, the registered owners of all the Bonds consented to the amendments to the 1987 Series B Indenture and the Agreement requested by the Corporation, and waived any and all rights to any notification or filing procedures or requirements under the 1987 Series B Indenture in addition to the consent provided thereby; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, the Authority and the Trustee have executed and delivered an Amended and Restated Indenture of Trust, dated as of May 1, 2003 (the "Amended and Restated Indenture"), which amends and restates the 1987 Series B Indenture; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, an Opinion of Bond Counsel described in Section 4.01.3(C) of the Amended and Restated Indenture has been delivered to the Trustee; and

WHEREAS, simultaneously with the execution and delivery of the Amended and Restated Indenture, without any further notice, the Bonds will bear interest at an Auction Period Rate; and

WHEREAS, all acts, conditions and things necessary or required by the Constitution and statutes of the State of New York, or otherwise, to exist, happen, and be performed as prerequisites to the passage of this Supplemental Agreement, do exist, have happened, and have been performed; and

NOW, THEREFORE, for and in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the Authority agrees with the Corporation, with the written consent of the Trustee, as follows:

ARTICLE I

AUTHORIZATION; DEFINITIONS

Section 1.01. Supplemental Agreement. This Supplemental Agreement is amendatory and supplemental to the Agreement, and is entered into in accordance with Section 7.04 of the Agreement and Article IV of the 1987 Series B Indenture; and except as modified, amended and supplemented by this Supplemental Agreement, the provisions of the Agreement are in all respects ratified and confirmed and shall remain in full force and effect.

Section 1.02. Definitions. Capitalized terms used herein and not otherwise defined herein or in the Agreement shall have the meaning given to such terms in the Amended and Restated Indenture.

ARTICLE II

REPRESENTATIONS

Section 2.01. Representations of the Authority. The Authority represents and warrants as follows:

(a) The Authority is a body corporate and politic, constituting a public benefit corporation, established and existing under the laws of the State of New York;

(b) The Authority has full power and authority to execute and deliver this Supplemental Agreement and the Amended and Restated Indenture and to consummate the transactions contemplated hereby and thereby and perform its obligations hereunder and thereunder;

(c) The Authority is not in default under any of the provisions of the laws of the State of New York which would affect its existence or its powers referred to in the preceding paragraph (b); and

(d) The Authority has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Amended and Restated Indenture.

Section 2.02. Representations of the Corporation. The Corporation represents and warrants as follows:

(a) The Corporation is a corporation duly incorporated and in good standing under the laws of the State of New York, is duly qualified and authorized to engage in business as a public utility in the State of New York, has power to enter into, execute and deliver this Supplemental Agreement, the Supplemental Tax Regulatory Agreement, and the Corporation Obligation and by proper corporate action has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation;

(b) The execution, delivery and performance of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation and the consummation of the transactions herein contemplated will not conflict with or constitute a breach of or a default under the Corporation's Certificate of Consolidation or By-Laws or any judgment, decree, order, statute, rule or regulation applicable to the Corporation or any indenture, mortgage, loan agreement or other contract or instrument to which the Corporation is a party or by which it is bound;

(c) The execution and delivery of this Supplemental Agreement and the issuance of the Corporation Obligation by the Corporation in the manner and for the purposes herein set forth have been duly authorized by order of the Public Service Commission of the State of New York; and

(d) All necessary authorizations for or approvals of the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation have been obtained by the Corporation.

The Corporation additionally represents and warrants that the representations and warranties of the Corporation set forth in the Supplemental Tax Regulatory Agreement are true and correct in all material respects.

ARTICLE III

AMENDMENTS TO THE AGREEMENT

Section 3.01. Amendment to Section 1.01 of the Agreement. Section 1.01 of the Agreement is hereby amended and restated to read as follows:

Section 1.01. Definitions. Capitalized terms used in this Participation Agreement and not otherwise defined herein shall have the meanings set forth in Section 1.01 of the Amended and Restated Indenture. Capitalized terms used in this Participation Agreement and not otherwise defined herein or in Section 1.01 of the Amended and Restated Indenture shall have the meanings set forth in Section 1.01 of the 1987 Series B Indenture.

Section 3.02. Replacement of certain terms in the Agreement. The Agreement is hereby amended to replace throughout the Agreement any reference to a term set forth under the Old Term column below with a corresponding term set forth under the New Term column below.

Old Term	New Term
Letter of Credit	Support Facility
Bank	Support Facility Issuer
Tender Agent	Registrar and Paying Agent
Paying Agent	Registrar and Paying Agent
Registrar	Registrar and Paying Agent
Indenture	Amended and Restated Indenture
Placement Agent	Remarketing Agent
Placement Agreement	Remarketing Agreement
Pledge Agent	Remarketing Agent

Section 3.03. Amendment to Section 3.01 of the Agreement. Section 3.01 of the Agreement is hereby amended and restated to read as follows:

Section 3.01. Construction of the Project. The Corporation hereby represents that it has caused the Project to be completed and acknowledges that it shall not be entitled to any reimbursement for the cost of construction of the Project from the Authority, the Trustee or the Holders of the Bonds, nor shall it be entitled to any diminution or postponement of the payments required to be paid by the Corporation pursuant to this Participation Agreement or the Corporation Obligations.

Section 3.04. Amendment to Section 3.03 of the Agreement. Section 3.03 of the Agreement is hereby amended and restated to read as follows:

Section 3.03. Application of proceeds of the Bonds. The Corporation has applied the proceeds of sale of the Bonds in accordance with the Original Indenture and the Original Participation Agreement.

Section 3.05. Amendments to Sections 3.04, 3.05 and 3.06 of the Agreement. Sections 3.04, 3.05 and 3.06 of the Agreement are hereby deleted.

Section 3.06. Amendment to Section 3.07 of the Agreement. Section 3.07 of the Agreement is hereby amended and restated to read as follows:

Section 3.07. Sale of the Project . Pursuant to an Asset Purchase Agreement relating to Nine Mile Point Unit 2 Nuclear Generating Facility ("NMP2"), dated as of December 11, 2000, by and among the Corporation, New York State Electric & Gas Corporation, Rochester Gas and Electric Corporation, Central Hudson Gas & Electric Corporation, Constellation Energy Group, Inc. and Constellation Nuclear, LLC (the "NMP2 Purchaser"), the Corporation has sold its interest in NMP2 of which the Project is a part to the NMP2 Purchaser.

Section 3.07. Amendment to Section 3.09 of the Agreement. Section 3.09 of the Agreement is hereby amended and restated to read as follows:

Section 3.09. Investment of moneys in funds under the Amended and Restated Indenture. Any moneys held as part of any fund created under the Amended and Restated Indenture shall, at the direction of an Authorized Corporation Representative, be invested or reinvested by the Trustee as provided in Section 9.04 of the Amended and Restated Indenture.

Section 3.08. Amendment to Section 4.01 of the Agreement. Section 4.01 of the Agreement is hereby amended and restated to read as follows:

Section 4.01. Execution and delivery of Corporation Obligation to Trustee. In order to evidence the obligation of the Corporation to the Authority to repay the advance of the proceeds of the Bonds, the Authority hereby directs the Corporation, and the Corporation hereby agrees, to deliver or cause to be delivered the First Mortgage Bonds to the Trustee on the Effective Date in exchange for the cancellation of the Corporation Note. The First Mortgage Bonds shall be the amended and restated first mortgage bonds of the Corporation issued under the Corporation Indenture and relating to the Bonds in substantially the form included in the Supplemental Corporation Indenture attached hereto as Exhibit B, with only such changes, omissions and insertions thereto as shall have been approved by the Authority.

Section 3.09. Amendment to Section 4.04 of the Agreement. Section 4.04 of the Agreement is hereby amended to add the following paragraph between the first and second paragraph in such section:

In addition, the Corporation shall wire to the State of New York on the Effective Date a bond issuance charge fee applicable to the Bonds pursuant to Section 2976 of the Public Authorities Law of the State of New York in the amount specified by such section on the Effective Date. The Corporation shall also pay to the Authority on the Effective Date an additional Administration Fee in the amount of $233,000.00.

Section 3.10. Amendment to Section 4.06 of the Agreement. Section 4.06 of the Agreement is hereby deleted.

Section 3.11. Amendment to Section 4.11 of the Agreement. Section 4.11 of the Agreement is hereby amended and restated to read as follows:

Section 4.11. Payment to Registrar and Paying Agent. The Corporation shall pay, or cause to be paid, to the Registrar and Paying Agent for deposit in the Bond Purchase Fund and credit to the Company Account therein an amount sufficient to provide for the payment of the Purchase Price of any Bond tendered for purchase pursuant to the Amended and Restated Indenture and the Bond Purchase Trust Agreement to the extent that sufficient moneys are not available for the payment of such Purchase Price from the other sources described therein.

Section 3.12. Amendment to Section 4.12 of the Agreement. Section 4.12 of the Agreement is hereby amended and restated to read as follows:

Section 4.12. Agreements of the Corporation relating to Support Facilities. The Corporation agrees not to request that the interest rate mode applicable to the Bonds be adjusted to an Adjustable Rate or a Fixed Rate unless on the effective date of the applicable Change in the Interest Rate Mode the Bonds shall be rated at least "A" by S&P or "A" by Moody's or an equivalent rating by any nationally recognized rating agency. Such rating of the Bonds may, but is not required to, be achieved by obtaining a Support Facility which meets the requirements of this Article VI of the Amended and Restated Indenture.

The Corporation further agrees that it will maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate, a Term Rate for a Calculation Period of greater than 13 months or a Fixed Rate. Notwithstanding the foregoing, so long as the conditions set forth in Section 6.05 of the Amended and Restated Indenture are met by the Bond Insurer and with respect to the Policy, and unless otherwise agreed by the Bond Insurer, the Corporation shall maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate or a Fixed Rate.

Section 3.13. Amendment of Section 4.13 of the Agreement. Section 4.13 of the Agreement is hereby amended and restated to read as follows:

Section 4.13. Corporation liable to owners of Bonds in the case of certain events of taxability. The Corporation confirms and agrees that if as result of action by the Corporation, the owner of the Project as of the date hereof, or any successor owner of the Project, the interest on the Bonds is determined to be included for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of section 147(a)(1) of the Code), as evidenced by a published or private ruling of the Internal Revenue Service or a final, nonappealable judicial decision by a court of competent jurisdiction, then the Corporation, in addition to its obligation to redeem the Bonds pursuant to Section 5.06 of the Amended and Restated Indenture, shall be liable to the affected owners of the Bonds for any taxes, penalties and interest assessed against such owners by the Internal Revenue Service and attributable to the Bonds.

The Authority and the Trustee agree not to object to the intervention in or participation by the Corporation at its own expense in any proceedings by or before the Internal Revenue Service or any court relating to whether interest on the Bonds is includable for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of Section 147(a)(1) of the Code).

Section 3.14. Addition of Section 5.08 to Article V of the Agreement. The Agreement is hereby amended to add the following Section 5.08 at the end of Article V of the Agreement:

Section 5.08. Recording and Filing. The Corporation hereby covenants that it will cause all financing statements related to the Amended and Restated Indenture and all supplements thereto and this Participation Agreement and all supplements thereto, as well as such other security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may from time to time be required by law in order to preserve and protect fully the security of Holders and the rights of the Trustee hereunder, and to take or cause to be taken any and all other action necessary to perfect the security interest created by the Amended and Restated Indenture and shall, within ten (10) days after such filing, cause there to be furnished to the Trustee an opinion of counsel as to the adequacy and details of such filing and specifying any re-filing to be effected in the future.

Section 3.15. Amendment to Section 6.01 of the Agreement. Section 6.01 of the Agreement is hereby amended to replace any reference to the "Corporation Note" with reference to "Corporation Obligation" throughout such Section 6.01. Section 6.01 of the Agreement is hereby further amended to replace any reference to "Section 10.01 of the Indenture" with reference to "Section 12.03 of the Amended and Restated Indenture" throughout such Section 6.01. Paragraph (b) of Section 6.01 of the Agreement is hereby amended and restated to read as follows:

(b) failure the Corporation to pay when due any amount required to be paid under Section 4.11 of this Participation Agreement, which failure causes an Event of Default to occur pursuant to paragraph (a) of Section 12.01 of the Amended and Restated Indenture; or

Section 3.16. Addition of Section 6.04 to Article VI of the Agreement. Article VI of the Agreement is hereby amended to add the following Section 6.04:

Section 6.04. Rights of the Credit Facility Issuer; Other rights of the Trustee to enforce this Participation Agreement. Notwithstanding anything herein to the contrary, any judicial proceedings of the Trustee under Section 6.03 may be instituted only with the written consent of the Credit Facility Issuer and shall be instituted by the Trustee at the written direction of the Credit Facility Issuer.
Nothing in this Participation Agreement shall limit any other rights of the Trustee to enforce this Participation Agreement.

Section 3.17. Amendment to Section 7.02 of the Agreement. Section 7.02 of the Agreement is hereby amended and restated to read as follows:

Section 7.02. Notices. All notices, certificates, requests or other communications between the Authority, the Corporation and the Trustee required to be given under this Participation Agreement or under the Amended and Restated Indenture shall be sufficiently given and shall be deemed given when delivered by hand or first class mail, postage prepaid, addressed as follows: if to the Authority, at 17 Columbia Circle, Albany, New York 12203, Attention: President; if to the Corporation, at 300 Erie Boulevard West, Syracuse, New York 13202, Attention: Treasurer, with a copy to Niagara Mohawk Power Corporation, 25 Research Drive, Westborough, Massachusetts 01582, Attention: Assistant Treasurer; and if to the Trustee or the Registrar and Paying Agent, at The Bank of New York, 101 Barclay Street - 21W, New York, New York 10286, Attention: Corporate Trust Administration. A duplicate copy of each notice, certificate, request or other communication given hereunder to the Authority, the Company or the Trustee shall also be given to the others. The Corporation, the Authority and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent.

Section 3.18. Amendment to Section 7.04 of the Agreement. Section 7.04 of the Agreement is hereby amended and restated to read as follows:

Section 7.04. Amendment of Participation Agreement. This Participation Agreement may not be amended except by an instrument in writing signed by the parties hereto and, if such amendment occurs after the issuance of the Bonds, upon compliance with the provisions of Article XIV of the Amended and Restated Indenture.

Section 3.19. Amendment to Exhibits B and C of the Agreement. Exhibits B and C of the Agreement are hereby deleted and replaced with Exhibit B to this Supplemental Agreement.

ARTICLE IV

MISCELLANEOUS

Section 4.01. Consent to Amended and Restated Indenture. The Corporation hereby consents to the execution and delivery of the Amended and Restated Indenture.

Section 4.02. Law and Place of Enforcement of this Supplemental Agreement. This Supplemental Agreement shall be construed and interpreted in accordance with the laws of the State of New York and all suits and actions arising out of this Supplemental Agreement shall be instituted in a court of competent jurisdiction in the State of New York.

Section 4.03. Effective Date; Counterparts. This Supplemental Agreement may be simultaneously executed in counterparts. Each such counterpart so executed shall be deemed to be an original, and all together shall constitute but one and the same instrument. This Supplemental Agreement shall become effective on the Effective Date. Notwithstanding the Effective Date, for convenience and purposes of reference this Supplemental Agreement shall be dated as of May 1, 2003 and may be cited and referred to as the "Second Supplemental Participation Agreement dated as of May 1, 2003."

None of the rights, covenants, interests, duties or obligations accruing to or required of any Bondholder, the Authority, the Corporation, the Trustee, or any Support Facility Issuer prior to the Effective Date shall be affected by the execution and delivery of this Supplemental Agreement.

[Signature Page of this Supplemental Agreement Follows]

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

NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY


By_______________________________________
       Acting President

(SEAL)

Attest:


__________________________________
       Assistant Secretary

NIAGARA MOHAWK POWER CORPORATION


By________________________________________
       Name:   Robert G. Seega
       Title:    Assistant Treasurer

(SEAL)

Attest:


___________________________________

[Signature Page of Supplemental Agreement relating to Pollution Control Revenue Bonds

(Niagara Mohawk Power Corporation Project), 1987 Series B]

EXHIBIT B

Corporation Supplemental Indenture

[See Item Number 30 of this Record of Proceedings]

EX-4

EXECUTION COPY

______________________________________________________________________________
______________________________________________________________________________

NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY


AND


NIAGARA MOHAWK POWER CORPORATION


_________________________________

SECOND SUPPLEMENTAL PARTICIPATION AGREEMENT


Dated as of May 1, 2003

to

PARTICIPATION AGREEMENT

Dated as of December 1, 1988

_________________________________

relating to

$69,800,000 Pollution Control Revenue Bonds

(Niagara Mohawk Power Corporation Project), 1988 Series A

______________________________________________________________________________
______________________________________________________________________________

THIS SECOND SUPPLEMENTAL PARTICIPATION AGREEMENT, made and dated as of May 1, 2003 (the "Supplemental Agreement") to the PARTICIPATION AGREEMENT made and dated as of December 1, 1988, by and between NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY (the "Authority"), a body corporate and politic, constituting a public benefit corporation, and NIAGARA MOHAWK POWER CORPORATION, a corporation duly organized and existing and qualified to do business as a public utility under the laws of the State of New York (the "Corporation"),

W I T N E S S E T H   T H A T:

WHEREAS, pursuant to special act of the Legislature of the State of New York (Title 9 of Article 8 of the Public Authorities Law of New York, as from time to time amended and supplemented, herein called the "Act"), the Authority has been established as a body corporate and politic, constituting a public benefit corporation; and

WHEREAS, pursuant to the Act, the Authority is empowered to contract with any power company to participate in the incorporation of features in power plants and the construction of associated facilities to the extent required by the public interest in development, health, recreation, safety, conservation of natural resources and aesthetics; and

WHEREAS, the Legislature of the State of New York has determined that, because interest costs incurred by public utilities are reflected in the rates paid by the customers of such utilities and because governmental action has mandated the installation of pollution control facilities, it is in the public interest to enable utilities to obtain the lowest possible interest rate on bonds sold to provide pollution control facilities; and

WHEREAS, pursuant to the Act, the Authority has also been empowered to extend credit and make loans from bond and note proceeds to any person for the construction, acquisition and installation of, or for the reimbursement to any person for costs in connection with, any special energy project (as defined in the Act), including, but not limited to, any land, works, system, building or other improvement, and all real and personal properties of any nature or any interest in any of them which are suitable for or related to the furnishing, generation or production of energy; and

WHEREAS, the Authority is also authorized under the Act to borrow money and issue its negotiable bonds and notes to provide sufficient monies for achieving its corporate purposes, including the refunding of outstanding obligations of the Authority; and

WHEREAS, the Authority is also authorized under the Act to enter into any contracts and to execute all instruments necessary or convenient for the exercise of its corporate powers and the fulfillment of its corporate purposes, including the refunding of outstanding bonds and notes of the Authority; and

WHEREAS, the Authority and the Corporation have entered into a Participation Agreement, dated as of December 1, 1988 (herein referred to as the "Original Participation Agreement"), providing for the financing or refinancing of certain costs related to the acquisition, construction, and installation of certain pollution control, solid waste, sewage disposal facilities and other facilities identified and described in Exhibit A to the Original Participation Agreement, and, as part of such participation, that the Authority issue bonds pursuant to the Act to provide funds for such financing or refinancing; and

WHEREAS, on December 28, 1988, the Authority issued $69,800,000 aggregate principal amount of its Adjustable Rate Pollution Control Revenue Bonds (Niagara Mohawk Power Corporation Project), 1988 Series A (which are being renamed as provided in Section 2.02 of the Amended and Restated Indenture (as defined below)) (the "Bonds"), under and pursuant to Resolution No. 697 of the Authority, adopted October 7, 1988, and an Indenture of Trust dated as of December 1, 1988 (the "Original Indenture"), between the Authority and The Bank of New York (as successor in interest to Irving Trust Company), as trustee (the "Trustee"), to provide funds for the financing or refinancing described in the preceding whereas clause; and

WHEREAS, the Original Participation Agreement was amended and supplemented by a First Supplemental Participation Agreement dated as of March 13, 1996 (collectively with the Original Participation Agreement, the "Agreement"), between the Authority and the Corporation, and was further amended and supplemented by a Supplemental Participation Agreement dated as of December 1, 2002 (together with the Original Participation Agreement and the First Supplemental Participation Agreement, the "Agreement"); and

WHEREAS, the Original Indenture was amended and supplemented by a First Supplemental Indenture of Trust dated as of November 12, 1991 (the "First Supplemental Indenture"), between the Authority and the Trustee, and was further amended and supplemented by a Second Supplemental Indenture of Trust dated as of March 13, 1996 (collectively with the Original Indenture and the First Supplemental Indenture of Trust, the "1988 Series A Indenture"), between the Authority and the Trustee; and

WHEREAS, the Bonds previously bore interest at a Daily Rate, and upon a change in the Interest Rate Determination Method to a Variable-Term Rate to be effective on May 1, 2003, all Bonds were subject to mandatory tender and purchase by the Corporation; and

WHEREAS, Section 7.04 of the Agreement and Section 4.02 of the 1988 Series A Indenture provide that the Authority and the Trustee may, in accordance with the terms thereof, modify, amend or supplement the Agreement; and

WHEREAS, the Corporation has requested that upon changing the Interest Rate Determination Method of the Bonds to a Variable-Term Rate to be effective on May 1, 2003, the 1988 Series A Indenture be amended and restated and that the Agreement be amended to (i) permit the Bonds to bear interest at various variable interest rates, including, without limitation, at daily, weekly, monthly, semi-annual, term, commercial paper and auction rates, (ii) provide for new provisions made necessary or desirable by the issuance of a municipal bond insurance policy and (iii) otherwise conform certain terms of the 1988 Series A Indenture relating to the Bonds while they bear interest at variable interest rates and certain other terms of the 1988 Series A Indenture with the current market standard for multi-modal bonds; and

WHEREAS, upon a change in the Interest Rate Determination Method to a Variable-Term Rate to be effective on May 1, 2003, the registered owners of all the Bonds consented to the amendments to the 1988 Series A Indenture and the Agreement requested by the Corporation, and waived any and all rights to any notification or filing procedures or requirements under the 1988 Series A Indenture in addition to the consent provided thereby; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, the Authority and the Trustee have executed and delivered an Amended and Restated Indenture of Trust, dated as of May 1, 2003 (the "Amended and Restated Indenture"), which amends and restates the 1988 Series A Indenture; and

WHEREAS, simultaneously with the execution and delivery of this Supplemental Agreement, an Opinion of Bond Counsel described in Section 4.01.3(C) of the Amended and Restated Indenture has been delivered to the Trustee; and

WHEREAS, simultaneously with the execution and delivery of the Amended and Restated Indenture, without any further notice, the Bonds will bear interest at an Auction Period Rate; and

WHEREAS, all acts, conditions and things necessary or required by the Constitution and statutes of the State of New York, or otherwise, to exist, happen, and be performed as prerequisites to the passage of this Supplemental Agreement, do exist, have happened, and have been performed; and

NOW, THEREFORE, for and in consideration of the premises and of the mutual covenants and agreements hereinafter set forth, the Authority agrees with the Corporation, with the written consent of the Trustee, as follows:

ARTICLE I

AUTHORIZATION; DEFINITIONS

Section 1.01. Supplemental Agreement. This Supplemental Agreement is amendatory and supplemental to the Agreement, and is entered into in accordance with Section 7.04 of the Agreement and Article IV of the 1988 Series A Indenture; and except as modified, amended and supplemented by this Supplemental Agreement, the provisions of the Agreement are in all respects ratified and confirmed and shall remain in full force and effect.

Section 1.02. Definitions. Capitalized terms used herein and not otherwise defined herein or in the Agreement shall have the meaning given to such terms in the Amended and Restated Indenture.

ARTICLE II

REPRESENTATIONS

Section 2.01. Representations of the Authority. The Authority represents and warrants as follows:

(a) The Authority is a body corporate and politic, constituting a public benefit corporation, established and existing under the laws of the State of New York;

(b) The Authority has full power and authority to execute and deliver this Supplemental Agreement and the Amended and Restated Indenture and to consummate the transactions contemplated hereby and thereby and perform its obligations hereunder and thereunder;

(c) The Authority is not in default under any of the provisions of the laws of the State of New York which would affect its existence or its powers referred to in the preceding paragraph (b); and

(d) The Authority has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Amended and Restated Indenture.

Section 2.02. Representations of the Corporation. The Corporation represents and warrants as follows:

(a) The Corporation is a corporation duly incorporated and in good standing under the laws of the State of New York, is duly qualified and authorized to engage in business as a public utility in the State of New York, has power to enter into, execute and deliver this Supplemental Agreement, the Supplemental Tax Regulatory Agreement, and the Corporation Obligation and by proper corporate action has duly authorized the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation;

(b) The execution, delivery and performance of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation and the consummation of the transactions herein contemplated will not conflict with or constitute a breach of or a default under the Corporation's Certificate of Consolidation or By-Laws or any judgment, decree, order, statute, rule or regulation applicable to the Corporation or any indenture, mortgage, loan agreement or other contract or instrument to which the Corporation is a party or by which it is bound;

(c) The execution and delivery of this Supplemental Agreement and the issuance of the Corporation Obligation by the Corporation in the manner and for the purposes herein set forth have been duly authorized by order of the Public Service Commission of the State of New York; and

(d) All necessary authorizations for or approvals of the execution and delivery of this Supplemental Agreement, the Supplemental Tax Regulatory Agreement and the Corporation Obligation have been obtained by the Corporation.

The Corporation additionally represents and warrants that the representations and warranties of the Corporation set forth in the Supplemental Tax Regulatory Agreement are true and correct in all material respects.

ARTICLE III

AMENDMENTS TO THE AGREEMENT

Section 3.01. Amendment to Section 1.01 of the Agreement. Section 1.01 of the Agreement is hereby amended and restated to read as follows:

Section 1.01. Definitions. Capitalized terms used in this Participation Agreement and not otherwise defined herein shall have the meanings set forth in Section 1.01 of the Amended and Restated Indenture. Capitalized terms used in this Participation Agreement and not otherwise defined herein or in Section 1.01 of the Amended and Restated Indenture shall have the meanings set forth in Section 1.01 of the 1988 Series A Indenture.

Section 3.02. Replacement of certain terms in the Agreement. The Agreement is hereby amended to replace throughout the Agreement any reference to a term set forth under the Old Term column below with a corresponding term set forth under the New Term column below.

Old Term	New Term
Letter of Credit	Support Facility
Bank	Support Facility Issuer
Tender Agent	Registrar and Paying Agent
Paying Agent	Registrar and Paying Agent
Registrar	Registrar and Paying Agent
Indenture	Amended and Restated Indenture

Section 3.03. Amendment to Section 3.01 of the Agreement. Section 3.01 of the Agreement is hereby amended and restated to read as follows:

Section 3.01. Construction of the Project. The Corporation hereby represents that it has caused the Project to be completed and acknowledges that it shall not be entitled to any reimbursement for the cost of construction of the Project from the Authority, the Trustee or the Holders of the Bonds, nor shall it be entitled to any diminution or postponement of the payments required to be paid by the Corporation pursuant to this Participation Agreement or the Corporation Obligations.

Section 3.04. Amendment to Section 3.03 of the Agreement. Section 3.03 of the Agreement is hereby amended and restated to read as follows:

Section 3.03. Application of proceeds of the Bonds. The Corporation has applied the proceeds of sale of the Bonds in accordance with the Original Indenture and the Original Participation Agreement.

Section 3.05. Amendment to Section 3.04 of the Agreement. Sections 3.04 of the Agreement are hereby deleted.

Section 3.06. Amendment to Section 3.05 of the Agreement. Section 3.05 of the Agreement is hereby amended and restated to read as follows:

Section 3.05. Sale of the Project . Pursuant to an Asset Purchase Agreement relating to Nine Mile Point Unit 2 Nuclear Generating Facility ("NMP2"), dated as of December 11, 2000, by and among the Corporation, New York State Electric & Gas Corporation, Rochester Gas and Electric Corporation, Central Hudson Gas & Electric Corporation, Constellation Energy Group, Inc. and Constellation Nuclear, LLC (the "NMP2 Purchaser"), the Corporation has sold its interest in NMP2 of which the Project is a part to the NMP2 Purchaser.

Section 3.07. Amendment to Section 3.07 of the Agreement. Section 3.07 of the Agreement is hereby amended and restated to read as follows:

Section 3.07. Investment of moneys in funds under the Amended and Restated Indenture. Any moneys held as part of any fund created under the Amended and Restated Indenture shall, at the direction of an Authorized Corporation Representative, be invested or reinvested by the Trustee as provided in Section 9.04 of the Amended and Restated Indenture.

Section 3.08. Amendment to Section 4.01 of the Agreement. Section 4.01 of the Agreement is hereby amended and restated to read as follows:

Section 4.01. Execution and delivery of Corporation Obligation to Trustee. In order to evidence the obligation of the Corporation to the Authority to repay the advance of the proceeds of the Bonds, the Authority hereby directs the Corporation, and the Corporation hereby agrees, to deliver or cause to be delivered the First Mortgage Bonds to the Trustee on the Effective Date in exchange for the cancellation of the Corporation Note. The First Mortgage Bonds shall be the amended and restated first mortgage bonds of the Corporation issued under the Corporation Indenture and relating to the Bonds in substantially the form included in the Supplemental Corporation Indenture attached hereto as Exhibit B, with only such changes, omissions and insertions thereto as shall have been approved by the Authority.

Section 3.09. Amendment to Section 4.04 of the Agreement. Section 4.04 of the Agreement is hereby amended to add the following paragraph between the first and second paragraph in such section:

In addition, the Corporation shall wire to the State of New York on the Effective Date a bond issuance charge fee applicable to the Bonds pursuant to Section 2976 of the Public Authorities Law of the State of New York in the amount specified by such section on the Effective Date. The Corporation shall also pay to the Authority on the Effective Date an additional Administration Fee in the amount of $174,500.00.

Section 3.10. Amendment to Section 4.06 of the Agreement. Section 4.06 of the Agreement is hereby deleted.

Section 3.11. Amendment to Section 4.11 of the Agreement. Section 4.11 of the Agreement is hereby amended and restated to read as follows:

Section 4.11. Payment to Registrar and Paying Agent. The Corporation shall pay, or cause to be paid, to the Registrar and Paying Agent for deposit in the Bond Purchase Fund and credit to the Company Account therein an amount sufficient to provide for the payment of the Purchase Price of any Bond tendered for purchase pursuant to the Amended and Restated Indenture and the Bond Purchase Trust Agreement to the extent that sufficient moneys are not available for the payment of such Purchase Price from the other sources described therein.

Section 3.12. Amendment to Section 4.12 of the Agreement. Section 4.12 of the Agreement is hereby amended and restated to read as follows:

Section 4.12. Agreements of the Corporation relating to Support Facilities. The Corporation agrees not to request that the interest rate mode applicable to the Bonds be adjusted to an Adjustable Rate or a Fixed Rate unless on the effective date of the applicable Change in the Interest Rate Mode the Bonds shall be rated at least "A" by S&P or "A" by Moody's or an equivalent rating by any nationally recognized rating agency. Such rating of the Bonds may, but is not required to, be achieved by obtaining a Support Facility which meets the requirements of this Article VI of the Amended and Restated Indenture.

The Corporation further agrees that it will maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate, a Term Rate for a Calculation Period of greater than 13 months or a Fixed Rate. Notwithstanding the foregoing, so long as the conditions set forth in Section 6.05 of the Amended and Restated Indenture are met by the Bond Insurer and with respect to the Policy, and unless otherwise agreed by the Bond Insurer, the Corporation shall maintain a Liquidity Facility issued by a financial institution rated not less than "A" by at least one nationally recognized rating agency in effect with respect to the Bonds at all times, except with respect to Bonds bearing an Auction Period Rate or a Fixed Rate.

Section 3.13. Addition of Section 4.13 to Article IV of the Agreement. The Agreement is hereby amended to add the following Section 4.13 at the end of Article IV of the Agreement:

Section 4.13. Corporation liable to owners of Bonds in the case of certain events of taxability. The Corporation confirms and agrees that if as result of action by the Corporation, the owner of the Project as of the date hereof, or any successor owner of the Project, the interest on the Bonds is determined to be included for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of section 147(a)(1) of the Code), as evidenced by a published or private ruling of the Internal Revenue Service or a final, nonappealable judicial decision by a court of competent jurisdiction, then the Corporation, in addition to its obligation to redeem the Bonds pursuant to Section 5.06 of the Amended and Restated Indenture, shall be liable to the affected owners of the Bonds for any taxes, penalties and interest assessed against such owners by the Internal Revenue Service and attributable to the Bonds.

The Authority and the Trustee agree not to object to the intervention in or participation by the Corporation at its own expense in any proceedings by or before the Internal Revenue Service or any court relating to whether interest on the Bonds is includable for federal income tax purposes in the gross income of any owner of a Bond (other than a "substantial user" of the Project or a "related person" within the meaning of Section 147(a)(1) of the Code).

Section 3.14. Addition of Section 5.08 to Article V of the Agreement. The Agreement is hereby amended to add the following Section 5.08 at the end of Article V of the Agreement:

Section 5.08. Recording and Filing. The Corporation hereby covenants that it will cause all financing statements related to the Amended and Restated Indenture and all supplements thereto and this Participation Agreement and all supplements thereto, as well as such other security agreements, financing statements and all supplements thereto and other instruments as may be required from time to time to be kept, to be recorded and filed in such manner and in such places as may from time to time be required by law in order to preserve and protect fully the security of Holders and the rights of the Trustee hereunder, and to take or cause to be taken any and all other action necessary to perfect the security interest created by the Amended and Restated Indenture and shall, within ten (10) days after such filing, cause there to be furnished to the Trustee an opinion of counsel as to the adequacy and details of such filing and specifying any re-filing to be effected in the future.

Section 3.15. Amendment to Section 6.01 of the Agreement. Section 6.01 of the Agreement is hereby amended to replace any reference to the "Corporation Note" with reference to "Corporation Obligation" throughout such Section 6.01. Section 6.01 of the Agreement is hereby further amended to replace any reference to "Section 10.01 of the Indenture" with reference to "Section 12.03 of the Amended and Restated Indenture" throughout such Section 6.01. Paragraph (b) of Section 6.01 of the Agreement is hereby amended and restated to read as follows:

(b) failure the Corporation to pay when due any amount required to be paid under Section 4.11 of this Participation Agreement, which failure causes an Event of Default to occur pursuant to paragraph (a) of Section 12.01 of the Amended and Restated Indenture; or

Section 3.16. Addition of Section 6.04 to Article VI of the Agreement. Article VI of the Agreement is hereby amended to add the following Section 6.04:

Section 6.04. Rights of the Credit Facility Issuer; Other rights of the Trustee to enforce this Participation Agreement. Notwithstanding anything herein to the contrary, any judicial proceedings of the Trustee under Section 6.03 may be instituted only with the written consent of the Credit Facility Issuer and shall be instituted by the Trustee at the written direction of the Credit Facility Issuer.
Nothing in this Participation Agreement shall limit any other rights of the Trustee to enforce this Participation Agreement.

Section 3.17. Amendment to Section 7.02 of the Agreement. Section 7.02 of the Agreement is hereby amended and restated to read as follows:

Section 7.02. Notices. All notices, certificates, requests or other communications between the Authority, the Corporation and the Trustee required to be given under this Participation Agreement or under the Amended and Restated Indenture shall be sufficiently given and shall be deemed given when delivered by hand or first class mail, postage prepaid, addressed as follows: if to the Authority, at 17 Columbia Circle, Albany, New York 12203, Attention: President; if to the Corporation, at 300 Erie Boulevard West, Syracuse, New York 13202, Attention: Treasurer, with a copy to Niagara Mohawk Power Corporation, 25 Research Drive, Westborough, Massachusetts 01582, Attention: Assistant Treasurer; and if to the Trustee or the Registrar and Paying Agent, at The Bank of New York, 101 Barclay Street - 21W, New York, New York 10286, Attention: Corporate Trust Administration. A duplicate copy of each notice, certificate, request or other communication given hereunder to the Authority, the Company or the Trustee shall also be given to the others. The Corporation, the Authority and the Trustee may, by notice given hereunder, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent.

Section 3.18. Amendment to Section 7.04 of the Agreement. Section 7.04 of the Agreement is hereby amended and restated to read as follows:

Section 7.04. Amendment of Participation Agreement. This Participation Agreement may not be amended except by an instrument in writing signed by the parties hereto and, if such amendment occurs after the issuance of the Bonds, upon compliance with the provisions of Article XIV of the Amended and Restated Indenture.

Section 3.19. Amendment to Exhibits B and C of the Agreement. Exhibits B and C of the Agreement are hereby deleted and replaced with Exhibit B to this Supplemental Agreement.

ARTICLE IV

MISCELLANEOUS

Section 4.01. Consent to Amended and Restated Indenture. The Corporation hereby consents to the execution and delivery of the Amended and Restated Indenture.

Section 4.02. Law and Place of Enforcement of this Supplemental Agreement. This Supplemental Agreement shall be construed and interpreted in accordance with the laws of the State of New York and all suits and actions arising out of this Supplemental Agreement shall be instituted in a court of competent jurisdiction in the State of New York.

Section 4.03. Effective Date; Counterparts. This Supplemental Agreement may be simultaneously executed in counterparts. Each such counterpart so executed shall be deemed to be an original, and all together shall constitute but one and the same instrument. This Supplemental Agreement shall become effective on the Effective Date. Notwithstanding the Effective Date, for convenience and purposes of reference this Supplemental Agreement shall be dated as of May 1, 2003 and may be cited and referred to as the "Second Supplemental Participation Agreement dated as of May 1, 2003."

None of the rights, covenants, interests, duties or obligations accruing to or required of any Bondholder, the Authority, the Corporation, the Trustee, or any Support Facility Issuer prior to the Effective Date shall be affected by the execution and delivery of this Supplemental Agreement.

[Signature Page of this Supplemental Agreement Follows]

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

NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY


By________________________________________
      Acting President

(SEAL)

Attest:


_______________________________
       Assistant Secretary

NIAGARA MOHAWK POWER CORPORATION


By________________________________________
       Name:    Robert G. Seega
       Title:    Assistant Treasurer

(SEAL)

Attest:


________________________________

[Signature Page of Supplemental Agreement relating to Pollution Control Revenue Bonds

(Niagara Mohawk Power Corporation Project), 1988 Series A]

EXHIBIT B

Corporation Supplemental Indenture

[See Item Number 30 of this Record of Proceedings]

EX-21

EXHIBIT 21

NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES

SUBSIDIARIES OF THE REGISTRANT

Name of Company	State of Organization
NM Uranium, Inc.	Texas
NM Properties, Inc. (Note 1)	New York
NM Receivables Corp. II	New York
NM Receivables LLC	New York

1. 1: At March 31, 2003, NM Properties, Inc. owns Salmon Shores, Inc.; Moreau Park, Inc.; Riverview, Inc.; Hudson Pointe, Inc.; Upper Hudson Development, Inc.; Land Management & Development, Inc.; Oprop Co., Inc.; and Landwest, Inc.

EX-99

Exhibit 99.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Niagara Mohawk Power Corporation (the “Company”) on Form 10-K for the fiscal year ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William F. Edwards, President and Chief Executive Officer of the Company, certify, to the best of my 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: June 30, 2003	/s/ William F. Edwards
	William F. Edwards
	President and Chief Executive Officer

EX-99

Exhibit 99.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Niagara Mohawk Power Corporation (the “Company”) on Form 10-K for the fiscal year ended March 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John G. Cochrane, Chief Financial Officer of the Company, certify, to the best of my 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: June 30, 2003	/s/ John G. Cochrane
	John G. Cochrane
	Chief Financial Officer