10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended March 31, 2006

OR

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

For the transition period                                          to                                            

Commission	Registrant, State of Incorporation,	I.R.S. Employer
File Number	Address and Telephone Number	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

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES o      NO þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
YES o      NO þ

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 þ      NO o

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. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a nonaccelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o           Accelerated filer o           Non-accelerated filer þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o      NO þ
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 20, 2006
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

		PAGE
	PART I
Item 1.	Business		4
Item 1A.	Risk Factors		6
Item 1B.	Unresolved Staff Comments		8
Item 2.	Properties		8
Item 3.	Legal Proceedings		9
Item 4.	Submission of Matters to a Vote of Security Holders		9
	PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities		9
Item 6.	Selected Consolidated Financial Data		9
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		10
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		20
Item 8.	Financial Statements and Supplementary Data		24
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		59
Item 9A.	Controls and Procedures		59
Item 9B.	Other Information		59
	PART III
Item 10.	Directors and Executive Officers of the Registrant		60
Item 11.	Executive Compensation		62
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		67
Item 13.	Certain Relationships and Related Transactions		68
Item 14.	Principal Accountant Fees and Services		68
	PART IV
Item 15.	Exhibits and Financial Statement Schedules		69
Signatures			71

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Cautionary Statement

This Annual Report on Form 10-K of Niagara Mohawk Power Corporation (the Company) contains certain statements that are neither reported financial results nor other historical information. These statements are 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. Because these forward-looking statements are subject to assumptions, risks and uncertainties, actual future results may differ materially from those expressed in or implied by such statements. 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)	changes in general economic conditions in New York;
(c)	federal and state regulatory developments and changes in law, including those governing municipalization and exit fees;
(d)	changes in accounting rules and interpretations, which may have an adverse impact on the Company’s statements of financial position, reported earnings and cash flows;
(e)	timing and adequacy of rate relief;
(f)	failure to achieve reductions in costs or to achieve operational efficiencies;
(g)	failure to retain key management;
(h)	adverse changes in electric load;
(i)	acts of terrorism;
(j)	unseasonable weather, climatic changes or unexpected changes in historical weather patterns; and
(k)	failure to recover costs currently deferred under the provisions of Statement of Financial Accounting Standards (SFAS) 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 (PSC).

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, Niagara Mohawk Power Corporation does not undertake any obligation to revise any statements in this report to reflect events or circumstances after the date of this report.

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NIAGARA MOHAWK POWER CORPORATION

PART I

ITEM 1. BUSINESS

Niagara Mohawk Power Corporation (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 1,600,000 electric customers in the areas of eastern, central, northern and western New York and sells, distributes, and transports natural gas to approximately 569,000 gas customers in areas of central, northern and eastern New York.

Niagara Mohawk Holdings, Inc. (Holdings), the parent company of the Company, is a wholly owned subsidiary of National Grid USA (National Grid). National Grid is a wholly owned subsidiary of National Grid plc (formerly known as National Grid Transco plc).

Regulation and Rates: In conjunction with the closing of the merger with National Grid, a new rate plan (the Merger Rate Plan) that had been approved by the PSC went into effect, superseding the prior rate plan. Since then, 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.

Merger Rate Plan: The Company’s delivery rates are governed by a ten-year rate plan that began on February 1, 2002. Under the plan, after reflecting the Company’s share of savings related to the acquisition, it may earn a threshold return on equity for the electricity distribution business of 10.6%, up to 11.75% without any sharing with customers (12.0% if certain customer outreach, education, competition-related and low income incentive targets are met). Half of any amounts in excess of 12%, up to 14%, 25% of any earnings in excess of that up to 16% and 10% beyond that are retained by the Company. This effectively offers the Company the potential to achieve a return on equity in excess of the regulatory allowed return of 10.6%. The return on equity is calculated cumulatively from inception to December 31, 2005 and annually thereafter for the prior two calendar years. The earnings calculation used to determine the regulated returns excludes half of the synergy savings, net of the cost to achieve them, that were assumed in the rate plan based on the Company’s merger with National Grid. Under the plan, gas delivery rates were frozen until the end of the 2004 calendar year, after which the Company has the right to request an increase at any time, if needed. The Company may earn a threshold return on equity ranging from 10.6% to 12.6% depending on the achievement of certain customer migration levels and customer awareness and understanding of gas competitive opportunities. Above this threshold, the revenue equivalent of gas earnings must be shared equally between shareholders and customers. The Company collects the transmission business revenues under several Federal Energy Regulatory Commission (FERC) rate schedules and the state energy delivery rates discussed above. Total transmission business revenues are determined by the state-approved 10-year rate plan.

The Company resets its Competitive Transition Charges (CTC) in electricity rates every two years under its Merger Rate Plan (the Plan). The CTC reset is intended to account for changes in forecasted electricity and natural gas commodity prices, and the effects those changes have on the Company’s above-market payments under legacy power contracts that otherwise would be stranded. In addition, the Merger Rate Plan allows the Company to recover amounts exceeding $100 million in its deferral accounts (as projected through the end of each two-year CTC reset period). In accordance with the Merger Rate Plan, deferral accounts were established to track changes in specified cost and revenue items that have occurred since the Plan was established. These changes include costs or revenues related to changes in tax, accounting, and regulatory requirements, changes

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from the levels of pension and post-retirement benefit expenses from the levels specified in the Plan, and various other items, including storms, environmental remediation costs, and various rate discounts. On July 29, 2005, the Company filed its bi-annual CTC reset and deferral account recovery filing to reset rates charged to customers beginning January 1, 2006. In the July 29, 2005 filing, the Company included a proposal to recover the excess balance of the deferral accounts as of June 30, 2005 of $196 million and a projection through the end of the two year period of $373 million. On December 27, 2005, the PSC approved the Company’s proposal for the new CTC effective January 1, 2006. The PSC also approved recovery of deferral account amounts of $100 million in calendar year 2006 and $200 million in calendar year 2007. For 2006, the actual deferral-related surcharge began in April 2006 and the full $100 million will be collected over the last nine months of the 2006 calendar year. An audit of the deferral amount by the Department of Public Service Staff (DPS Staff) is ongoing. A formal hearing process has been established before a hearing officer at the PSC to litigate the levels in the deferral account. Under the hearing schedule, the Staff will be filing testimony setting forth its initial adjustments in early August. The Company will continue to defer costs and revenues, as applicable, through the end of the Merger Rate Plan on December 31, 2011. The Company’s future filings for recovery of deferred amounts are subject to regulatory review and approval.

Electric Supply: 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. As such the Company will provide electricity to its customers who are unable or unwilling to obtain an alternative supplier which accounts for approximately 92% of the Company’s customers and 59% of its deliveries. The Company purchases energy from various suppliers under long-term Purchase Power Agreements (PPAs) and purchases any additional power needs on the open market through the New York Independent System Operator (NYISO). The Company also enters into financial swaps in order to hedge the price of electricity. 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 D – Commitments and Contingencies and Note L – Derivatives and Hedging Activities.

Electric Delivery: As of March 31, 2006, the Company had approximately 52,000 pole miles of transmission and distribution lines for electricity delivery. Evaluation of these facilities relative to the requirements of the New York State Reliability Council, Northeast Power Coordinating Council, North American Electric Reliability Council, NYISO and PSC, their orders, operating and planning guides and criteria, security considerations, and anticipated Company internal and external electrical demands is an ongoing process intended to maintain the reliability of electric service. The Company continually reviews the adequacy of its electric delivery facilities and establishes capital requirements to support (within the above processes) its asset renewal, existing load and new load growth needs.

Gas Supply: The majority of the Company’s gas sales are for residential and commercial space heating. 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. The gas distribution system is served by 3 interstate natural gas pipelines regulated by the FERC and one intrastate pipeline regulated by the PSC. The Company has nineteen direct connections with Dominion Transmission, Inc., two with Iroquois Gas Transmission, one with Tennessee Gas Pipeline and one with Empire State Pipeline (intrastate).

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Compliance with Environmental Requirements: The Company’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 and water quality; wetlands and flood plains; storage, transportation and disposal of hazardous wastes and substances; storage tanks; and site remediation. The Company believes it is handling identified wastes and by-products in a manner consistent with applicable requirements. The environmental management systems for the Company’s distribution, transmission and investment recovery facilities are certified to the International Organization for Standardization (ISO) 14001 standard. Management believes it is probable that costs associated with environmental compliance will continue to be recovered through the ratemaking process. The Company’s compliance has no material effect on its capital expenditures, earnings or competitive position. For a discussion of the Company’s reserves for environmental liabilities and its 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.

The Company has implemented an environmental audit program to identify any potential areas of concern and aid in compliance with legal 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.

Employee Relations: The Company’s work force at March 31, 2006 numbered approximately 4,300 employees, of whom approximately 82% were union members. The Company also receives substantial support for its activities from employees of National Grid USA Service Company, Inc., an affiliate that provides administrative services support to all National Grid companies. The Company reimburses the Service Company for the costs associated with those services.

The Company believes relations with employees are good.

Seasonality: There is seasonal variation in electric customer load, usually peaking in the winter and summer months. The seasonality is correlated with the colder or warmer temperature because 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 with colder temperatures when more gas is used for heating.

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

ITEM 1A. RISK FACTORS

This Annual Report on Form 10-K contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Because these forward-looking statements are subject to assumptions, risks and uncertainties, actual future results may differ materially from those expressed in or implied by such statements. We have identified the following risk factors that could have a material adverse effect on our business, financial condition, results of operations or future prospects, or your investment in our securities. Not all of these factors are within our control. In addition, other factors besides those listed below

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may have an adverse effect on the Company. Any forward-looking statements should be considered in light of these risk factors and the cautionary statement set out at the beginning of this report.

Regulatory and environmental risks

Changes in law or regulation could have an adverse effect on our results of operations.

Our business is heavily regulated, and changes in law or regulation could adversely affect us. Regulatory decisions concerning, for example, whether licenses or approvals to operate are renewed and the level of permitted revenues could have an adverse impact on our results of operations, cash flows and financial condition. Our rate plan provides for deferral and recovery of the effects of any externally imposed accounting changes, and changes in federal and state rates, laws, regulations and precedents governing taxes that increase or decrease our costs or revenues from electric operations by more than $2 million per year, or by an amount that exceeds 1% of annual gas earnings.

Breaches of or changes in environmental or health and safety laws or regulations could expose us to claims for financial compensation and adverse regulatory consequences, as well as damaging our reputation.

Aspects of our activities are potentially dangerous, such as the operation and maintenance of electricity lines and the transmission and distribution of natural gas. Energy delivery companies also typically use and generate in their operations hazardous and potentially hazardous products and by-products. In addition, there may be other aspects of our operations that are not currently regarded or proved to have adverse effects but could become so, for example, the effects of electric and magnetic fields. We are subject to laws and regulations relating to pollution, the protection of the environment and how we use and dispose of hazardous substances and waste materials. We are also subject to laws and regulations governing health and safety matters including air quality, water quality, waste management, natural resources and the health and safety of the public and our employees. Any breach of these obligations, or even incidents relating to the environment or health and safety that do not amount to a breach, could adversely affect the results of operations and our reputation.

Changes to the regulatory treatment of commodity costs may have an adverse effect on the results of operations.

Changes in commodity prices could potentially affect our energy delivery businesses. Our rate plan permits us to pass through virtually all of the increased costs related to commodity prices to consumers. However, if this ability were restricted, it could have an adverse effect on our operating results.

Operational risks

Network failure or the inability to carry out critical non-network operations may have significant adverse impacts on both our financial position and our reputation.

We may suffer a major network failure or may not be able to carry out critical non-network operations. Operational performance could be adversely affected by a failure to maintain the health of the system or network, inadequate forecasting of demand or inadequate record keeping. This could cause us to fail to meet agreed standards, and even incidents that do not amount to a breach could result in adverse regulatory action and financial consequences, as well as harming our reputation. In addition to these risks, we are subject to other risks that are largely outside of our control such as the impact of weather or unlawful acts of third parties. Weather conditions can affect financial performance, and severe weather that causes outages or damages infrastructure will adversely affect operational and potentially, business performance. Terrorist attack, sabotage or other intentional acts may also physically damage our infrastructure or otherwise significantly affect our activities and, as a consequence, affect the results of operations.

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Our reputation may be harmed if customers suffer a disruption to their energy supply even if this disruption is outside of our control.

We are responsible for transporting available electricity and gas and, for those customers that have not chosen another supplier; we are also responsible for acquiring and providing electricity and gas which we procure from commodity suppliers. However, where there is insufficient supply, no matter the cause, our role is to manage the system safely, which, in extreme circumstances, may require us to disconnect consumers.

Our results of operations depend on a number of factors including performance against regulatory targets and the delivery of anticipated cost and efficiency savings.

Earnings maintenance and growth will be affected by our ability to meet regulatory efficiency targets. To meet these targets, we must continue to improve managerial and operational performance. Under our rate plan, earnings will be affected by our ability to deliver integration and efficiency savings. Earnings also depend on meeting service quality standards. To meet these standards, we must improve service reliability and customer service. If we do not meet these targets and standards, both the results of operations and our reputation may be harmed.

ITEM 1B. UNRESOLVED STAFF COMMENTS

There are no unresolved SEC staff comments required to be reported under this Item 1B.

ITEM 2. PROPERTIES

Electric Transmission and Distribution: As of March 31, 2006, the Company’s electric transmission and distribution systems were composed of:

• 717 substations with a rated transformer capacity of approximately 23,090,000 kilo-volt-amperes;

• approximately 9,400 pole miles of overhead and underground transmission lines;

• approximately 36,000 conductor primary structure miles of overhead distribution lines; and

• about 6,500 cable primary structure miles of underground distribution cables.

A portion 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 Distribution: The Company distributes gas that it purchases from suppliers and transports gas owned by others. As of March 31, 2006, the Company’s natural gas delivery system was comprised of approximately 8,600 miles of pipelines. Only a small 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.

Native American Matters: The Company’s facilities are potentially affected by land claim litigation involving the Oneida, Mohawk and Onondaga Nations. Other than the Cayuga Nation’s and Seneca land claims, which have been dismissed by the courts, the land claim litigation has not been resolved. The Company continues to monitor the land claim litigation and, where necessary, defend its interests.

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Mortgage Liens: Substantially all of the Company’s operating properties are subject to mortgage liens securing its mortgage debt.

ITEM 3. LEGAL PROCEEDINGS
None.

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, 2006. On May 3, 2006, by unanimous written consent of the sole common stockholder,

o The following persons were elected as directors: William F. Edwards, Barbara A. Hassan, Michael E. Jesanis, Michael J. Kelleher, Cheryl A. LaFleur, Clement E. Nadeau, and Anthony C. Pini.

o PricewaterhouseCoopers LLP was appointed the Company’s independent registered public accounting firm for the fiscal year ending March 31, 2007.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

The common stock of the Company is held solely by Niagara Mohawk Holdings, Inc., and therefore indirectly by National Grid and National Grid plc. There is no public trading market for the Company’s common stock. The Company did not purchase any of its equity securities during the fourth quarter of fiscal 2006. For information about the Company’s payment of dividends and restrictions on those payments, see Item 6. Selected Consolidated Financial Data and Item 8. Financial Statements and Supplementary Data.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

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 parent company, National Grid. The Company’s first new full fiscal year began on April 1, 2002 and ended on March 31, 2003.

The following tables set forth selected financial information for the Company for the years ended March 31, 2006, 2005, 2004, 2003, the sixty day period ended March 31, 2002, the thirty day period ended January 30, 2002, the three months ended March 31, 2001, and the year ended December 31, 2001. These tables 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. 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.

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													60 Day			30 Day			Three
													Period			Period			months
	Year Ended			Year Ended			Year Ended			Year Ended			Ended			Ended			Ended			Year Ended
	March 31,			March 31,			March 31,			March 31,			March 31,			January 30,			March 31,			December 31,
(in 000’s except	2006			2005			2004			2003			2002			2002			2001			2001
per share data)	(Successor)			(Successor)			(Successor)			(Successor)			(Successor)			(Predecessor)			(Predecessor)			(Predecessor)
Operating revenues	$	4,344,023		$	3,925,171		$	4,063,617		$	4,019,450		$	689,705		$	362,622		$	1,179,706		$	4,114,713
Net income (loss)		317,076			263,249			139,690			125,871			30,646			(20,941	)		34,010			19,358
Income (loss) from continuing operations per average common share			*			*			*			*			*			*			*			*
Total assets		12,280,968			12,518,362			12,618,659			12,549,865			12,101,588				**		12,037,039			11,436,554
Long-term debt		2,648,934			2,923,569			3,473,467			3,953,989			4,146,642				**		4,674,004			4,419,822
Mandatorily redeemable preferred stock		—			—			—			—			—				**		53,750			50,700
Dividends paid per common share			*			*			*			*			*			*			*			*

*	As all of the Company’s shares of common stock are owned by its parent company, dividend information and per share data are 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

The Business: The Company’s primary business driver is the long-term rate plan with state regulators through which the Company can earn and retain certain amounts in excess of traditional regulatory allowed returns. The plan provides incentive returns and shared savings allowances which allow the Company an opportunity to benefit from efficiency gains identified within operations. Other main business drivers for the Company include the ability to streamline operations, enhance reliability and generate funds for investment in the Company’s infrastructure.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to apply policies and make estimates and assumptions that affect the results of operations and the reported amounts of assets and liabilities in the financial statements. Because of the inherent uncertainty in the nature of the matters where estimates are used, actual amounts could differ from estimated amounts. The following accounting policies represent those that management believes are particularly important to the financial statements and require the use of judgment in estimating matters that are inherently uncertain.

Regulatory Assets and Liabilities: Regulatory assets represent costs that have been deferred to future periods when it is probable that the regulator (namely, the FERC, PSC, or other regulatory body with jurisdiction) will allow future recovery of those costs through rates. The Company bases its assessment of recovery by either

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specific recovery measures (such as current rate agreements with the PSC) or historical precedents established by the regulatory body. Regulatory liabilities represent previous collections from customers to fund future expected costs or amounts received in rates that are expected to be refunded to customers in future periods. These regulatory assets and liabilities typically include deferral of under recovered or over recovered energy costs, environmental restoration costs and post retirement benefit costs, as well as the normalization of income taxes, and the deferral of losses incurred on debt retirements. The accounting for these regulatory assets and liabilities is in accordance with the provisions of SFAS No. 71, “Accounting for the Effects of Certain Types of Regulation.”

The Company continually assesses if its regulatory assets continue to meet the criteria for probability of future recovery. This assessment considers factors such as changes in the regulatory environment, recent rate orders to other regulated entities under the same jurisdiction, and the status of any pending or potential deregulation legislation. If future recovery of costs becomes no longer probable, the regulatory assets and liabilities would be recognized as current-period revenues or expenses.

Amortization of regulatory assets is provided over the recovery period as allowed in the related regulatory agreement. Under the Merger Rate Plan, a regulatory asset, called stranded costs, was established that included the costs of the Master Restructuring Agreement (MRA), the cost of any additional Independent Power Producer (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 February 1, 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. Amortization of the stranded cost regulatory asset is shown separately because it is the largest component of regulatory assets. Amortization of other regulatory assets are included in depreciation and amortization, purchased electricity & gas, and other operation and maintenance expense captions on the income statement depending on the origin of the regulatory asset.

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 (discussed below) delivered between the cycle billing date and the end of the accounting period.

Unbilled Revenues: Revenues from the sale of electricity and gas to customers are generally recorded when electricity and gas are delivered to those customers. The quantity of those sales is measured by customers’ meters. Meters are read on a systematic basis throughout the month based on established meter-reading schedules. Consequently, at the end of any month, there exists a quantity of electricity and gas that has been delivered to customers but has not been captured by the meter readings. As a result, management must estimate revenue related to electricity and gas delivered to customers between their meter read dates and the end of the period.

Pension and Other Post-retirement Benefit Plans: The Company maintains qualified and nonqualified pension plans. The Company also provides health care and life insurance benefits for its retired employees. The Company’s pensions are funded through an outside trust.

Several assumptions affect the pension and other post-retirement benefit expense and the measurement of these benefit obligations. The more significant assumptions include the return on assets, discount rate, and in the case of retiree healthcare benefits, medical trends. All ongoing costs of qualified pension and post-retirement healthcare benefits plans are recoverable from customers through reconciling provisions of the Merger Rate Plan. Special termination benefits paid in connection with employee separation programs and settlement and

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curtailment losses of pension and post-retirement benefit plans when incurred are only recoverable upon approval by the PSC.

The major assumptions are:

• Return on assets. The assumed rate of return for various passive asset classes is based on both analysis of historical rates of return and forward looking analysis of risk premiums and yields. Current market conditions, such as inflation and interest rates, are evaluated in connection with the setting of long-term assumptions. A small premium is added for active management of both equity and fixed income. The rates of return for each asset class are then weighted in accordance with the target asset allocation, and the resulting long-term return on asset rate is then applied to the market-related value of assets. For fiscal 2006, the Company used an 8% assumed return on assets for its pension plan and a weighted average of 8% assumed return on assets for its other post-retirement benefits plans.

• Discount rate. The Company bases its discount rate on two measures of rates specific to the yield curve applicable to the liabilities of the plans. The actuary calculates the present value of the projected cash flows of the plans utilizing derived zero coupon interest rates specific to the timing of each respective cash flow and calculates the single weighted average interest rate that equates the total present value with the stream of future cash flows. This results in a weighted average interest rate of 5.87% based on the Citigroup Pension Discount Curve, which is based on AA-rated corporate bonds, and an interest rate of 6.16% based on a yield curve of top quartile yielding Aa corporate bonds. A discount rate of 6%, the average between the two rates, was deemed appropriate for the plans.

• Medical trends. The health care cost trend rate is the assumed rate of increase in per-capita health care charges. In fiscal year 2006, the health care cost trend assumption was updated to include rates for the pre 65 and post 65 age groups. For 2006, the initial health trend was assumed to be 10% for the pre 65 age group and 11% for the post 65 age group. The ultimate trend of 5%, for both age groups, was assumed to be reached in 2011 for the pre 65 age group and 2012 for the post 65 age group.

Goodwill: The Company applies the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets.” In accordance with SFAS No. 142, goodwill must be reviewed for impairment at least annually and when events or circumstances indicate that the asset may be impaired. 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. As a result of a settled IRS audit of pre-merger years, the Company recorded a $9 million adjustment to goodwill related to a pre-merger tax contingency.

Tax Provision: The Company’s income tax provisions, including both current and deferred components, are based on estimates, assumptions, calculations, and interpretation of tax statutes for the current and future years in accordance with SFAS No. 109, “Accounting for Income Taxes.” Determination of current year federal and state income tax will not be settled until final approval of returns by taxing authorities.

Management regularly makes assessments of tax return outcomes relative to financial statement tax provisions and adjusts the tax provisions in the period when facts become final.

Accounting for Derivative Instruments: The Company accounts for derivative financial instruments under SFAS No. 133, “Accounting for Derivatives and Hedging Activities,” and SFAS No. 149, “Amendment of SFAS No. 133 on Derivative Instruments and Hedging Activities,” as amended. Under the provisions of SFAS No. 133, all derivatives except those qualifying for the normal purchase normal sale exception are recognized on the balance sheet at their fair value. Fair value is determined using current quoted market prices. If a

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contract is designated as a cash flow hedge, the change in its market value is generally deferred as a component of other comprehensive income until the transaction it is hedging is completed. Conversely, the change in the market value of a derivative not designated as a cash flow hedge is deferred as a regulatory asset or liability because the Company has received approval from the PSC to establish a regulatory asset or liability for derivative instruments that did not qualify for hedge accounting and were the result of regulatory rulings. A cash flow hedge is a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability. To qualify as a cash flow hedge, the fair value changes in the derivative must be expected to offset 80% to 120% of the changes in fair value or cash flows of the hedged item.

RESULTS OF OPERATIONS

The following discussion and analysis highlights items that significantly affected the Company’s operations during the fiscal years ended March 31, 2006 and 2005.

EARNINGS

Net income for the fiscal year ended March 31, 2006 increased by approximately $54 million over the prior fiscal year. This increase is primarily due to higher electric and gas margin of $48 million which is mostly attributable to favorable electric volume in delivery-only sales, reduced interest costs of approximately $21 million and a positive adjustment to electric revenues of $32 million stemming from the recognition of a regulatory asset reflecting our ability to recover a previously fully reserved account receivable. These were offset by increased income tax expense of $19 million, increased depreciation expense of $3 million, increased operating and maintenance expense of $9 million and increased other deductions of $16 million. See the following discussions of revenues and operating expenses for more detailed explanations.

Net income for the year ended March 31, 2005 increased by approximately $124 million over the prior fiscal year. This increase is primarily due to decreased retiree benefit expense of $54 million relating to one-time items, a decrease in bad debt expense of $19 million, and reduced interest costs of approximately $47 million. See the following discussions of revenues and operating expenses for more detailed explanations.

REVENUES

Electric revenues increased $190 million during the year ended March 31, 2006 from the prior fiscal year. Electric revenues decreased $167 million in the twelve months ended March 31, 2005 relative to the prior fiscal year. See the table below for the contributing factors.

Change in Electric Revenue for the fiscal year ended
(in millions of dollars)	March 31, 2006			March 31, 2005
Retail sales	$	52		$	(98	)
Delivery only sales and miscellaneous revenue		185			20
Sales for resale		(47	)		(89	)
Total	$	190		$	(167	)

Retail sales include distribution delivery charges and recovery of purchased power costs from customers who purchase their electric supply from the Company. Delivery only sales are charges for only the delivery of energy for customers who purchase their power from competitive electricity suppliers. The Company recovers all costs incurred to procure power for customers that do not receive power from competitive suppliers.

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The increase in retail sales, for the fiscal year ended March 31, 2006 is primarily due to the higher cost of electricity purchased which is being passed through to customers. The increase in delivery only sales is primarily due to the migration of retail electric customers to competitive suppliers for their commodity requirements which has been occurring since the start of electricity deregulation in the state of New York. The migration of customers is also a contributing factor to the decrease in retail kilowatt-hour (kWh) sales (see table below) in the fiscal years ended March 31, 2006 and 2005. Another contributing factor to the increase in revenue was a $32 million positive adjustment to electric revenues stemming from the recognition of a regulatory asset reflecting our ability to recover a previously fully reserved account receivable. Warmer summer and colder autumn weather than experienced in the previous fiscal year also contributed to the increase in revenue for the fiscal year ended March 31, 2006.

The migration of retail electric customers to competitive suppliers was a contributing factor for the decrease in retail sales revenues in the fiscal year ended March 31, 2005 partially offset by increases in the price of electricity that was passed on to customers.

Sales for resale represent sales of electricity to the NYISO at the market price of electricity. All electricity purchased under certain purchased power contracts is sold to the NYISO. The decreases in sales to the NYISO for the years ended March 31, 2006 and March 31, 2005 were due to the expiration of some of these contracts.

Electric kilowatt-hour sales were approximately 35.8 billion and 36.6 billion for the fiscal years ended March 31, 2006 and 2005, respectively. The table below details components of the 0.8 and 1.9 billion decrease in kWh sales for the 2006 and 2005 fiscal years, respectively:

Change in kWh Deliveries for the fiscal year ended
(kWh in billions)	March 31, 2006			March 31, 2005
Retail sales		(1.6	)		(1.4	)
Delivery only sales		2.3			1.6
Total deliveries to ultimate customers		0.7			0.2
Sales for resale		(1.5	)		(2.1	)
Total deliveries		(0.8	)		(1.9	)

Gas revenues increased $229 million in the fiscal year ended March 31, 2006 from the prior fiscal year. This increase is primarily a result of higher prices of gas purchases which are being passed through to customers.

Gas revenues increased $28 million for the fiscal year ended March 31, 2005 from the prior fiscal year primarily due to higher prices of gas purchases which are being passed through to customers. This increase was affected by the elimination of a $6 million adjustment related to state net income tax recorded in the fiscal year ended March 31, 2004 and reversed in the fiscal year ended March 31, 2005.

The table below details components of the gas revenue fluctuation:

Change in Gas Revenue for the fiscal year ended
(in millions of dollars)	March 31, 2006			March 31, 2005
Cost of purchased gas	$	232		$	31
Delivery revenue		(2	)		(4	)
Other		(1	)		1
Total	$	229		$	28

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The change in the 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 dollar-for-dollar basis.

Gas sales volumes for the fiscal year ended March 31, 2006, excluding transportation of customer-owned gas, decreased approximately 3.9 million Dekatherms (Dth), or a 6.4% decrease from the prior fiscal year. Gas sales for the fiscal year ended March 31, 2005, excluding transportation of customer-owned gas, decreased approximately 3.6 million Dth, or a 5.7% decrease from the fiscal year ended March 31, 2004. The decreased gas usage for the fiscal year ended March 31, 2006 compared with the fiscal year ended March 31, 2005 is partially due to the impacts of weather and to decreased use per customer as a result of higher natural gas prices, offset in part by the return of customers from alternate providers. The decreased gas usage for the fiscal year ended March 31, 2005 compared with the fiscal year ended March 31, 2004 is partially due to the impacts of weather and to the migration of customers to alternate providers.

OPERATING EXPENSES

Purchased electricity increased approximately $100 million for the fiscal year ended March 31, 2006 from the prior fiscal year. The volume of kWh purchased decreased 3.2 billion kWh, or 12% compared with the prior fiscal year, reflecting migration of customers to competitive electricity suppliers and the expiration of certain sales for resale purchased power contracts. This volume decrease was offset by a 22% increase in the price of electricity relative to the prior fiscal year.

Purchased electricity decreased approximately $227 million for the fiscal year ended March 31, 2005 from the prior fiscal year. The Company purchased less kWh of electricity versus the prior fiscal year because of the migration of customers to competitive electricity suppliers and the expiration of certain sales for resale purchased power contracts. This volume decrease was offset by a 2% increase in the price of electricity relative to the prior fiscal year.

Purchased gas expense increased approximately $232 million for the fiscal year ended March 31, 2006 from the prior fiscal year. This increase is primarily the result of increased gas prices during the year and an increase in the amount of gas sold off-system. The Company’s net cost per Dth, as charged to expense, including the effects of the gas cost deferral, increased to $9.92 in the fiscal year ended March 31, 2006 from $7.12 in the prior fiscal year. The increase due to price was slightly offset by decreased purchases.

Purchased gas expense increased approximately $31 million for the fiscal year ended March 31, 2005 compared with the fiscal year ended March 31, 2004. This increase is primarily a result of increased gas prices during the year. The Company’s net cost per Dth, as charged to expense, including the effects of the gas cost deferral, increased to $7.12 for the year ended March 31, 2005 from $6.61 in the prior fiscal year ended March 31, 2004.

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

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Other operation and maintenance expense increased $9 million for the year ended March 31, 2006 from the prior fiscal year. The table below details components of this fluctuation.

	For the year		For the year
	ended		Ended
(in millions of dollars)	March 31, 2006		March 31, 2005			Change
Storm costs	$	18	$	—		$	18
Bad debt expense		42		45			(3	)
Payroll costs		260		277			(17	)
Recovery of pension settlement loss		—		(14	)		14
Consultants & contractors		90		101			(11	)
Materials and supplies		30		27			3
Transportation costs		28		25			3
Rents		28		25			3
Service quality penalties		9		4			5
Loss on sale of facilities		—		8			(8	)
Other		213		211			2
Total	$	718	$	709		$	9

The increase for the fiscal year ended March 31, 2006 is primarily due to higher non-recoverable storm related costs of $18 million and a one-time $14 million pension settlement loss recovery recorded in the prior year reflecting the PSC’s July 2004 approval for the Company to recover a portion of the $30 million pension settlement loss incurred in fiscal year 2003. These were partially offset by a decrease in payroll costs of $17 million primarily attributable to ongoing headcount reductions and reduced consultant and contractor costs of $11 million mostly due to merger related efficiencies. Also offsetting the increase was a reduction in bad debt expense of $3 million reflecting the Company’s strong focus on managing bad debts despite increased commodity costs and increased accounts receivable.

The Company is also subject to service quality standards with respect to reliability and certain aspects of customer service and safety. The Company works toward service quality standards that the state regulators expect us to achieve. If the Company falls below a prescribed standard, a penalty is incurred. The Company missed targets for reliability in fiscal years ended March 31, 2006 and 2005, incurring penalties of $9 million and $4 million, respectively.

Other operation and maintenance expense decreased $84 million for the fiscal year ended March 31, 2005 from the prior fiscal year. The decrease was primarily due to a $54 million decrease relating to one-time retiree benefit expenses (which includes the pension settlement loss recovery of $14 million mentioned above), a reduction in bad debt expense of $19 million which resulted from improved collection practices and $8 million of storm expenses recorded in the 2004 fiscal year with no similar expense recorded in fiscal year 2005. These decreases were offset by an $8 million loss on the sale of facilities in fiscal year 2005.

Depreciation and amortization expense increased $3 million for the fiscal year ended March 31, 2006 from the prior fiscal year because capital projects went into service. For the fiscal year ended March 31, 2005, depreciation and amortization expense remained constant relative to the prior fiscal year.

Amortization of stranded costs increased $15 million and $57 million for the fiscal years ended March 31, 2006 and March 31, 2005, respectively, from the prior fiscal years in accordance with the Merger Rate Plan. Under the Merger Rate Plan the stranded cost regulatory asset amortization period was established for recovery over the ten year period ending December 31, 2011. This asset is being amortized unevenly on an increasing, graduated schedule. See Item 8. Financial Statements and Supplementary Data — Note B — Rate and Regulatory Issues — “Stranded Costs” for a further discussion of the ratemaking treatment related to this regulatory asset.

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Other taxes decreased approximately $8 million for the fiscal year ended March 31, 2006 from the prior fiscal year primarily due to reduced gross receipts tax (GRT). This reduction in GRT is primarily due to lower rates and reduced tax base, partially offset by a slight increase in property taxes.

Other taxes decreased approximately $9 million for the fiscal year ended March 31, 2005 from the prior fiscal year primarily due to reduced GRT. This reduction in GRT is primarily due to lower rates and reduced revenues.

Income taxes increased $19 million for the fiscal year ended March 31, 2006 from the prior fiscal year primarily due to higher pre-tax book income offset by a $4 million benefit related to prior years’ tax return true-ups and settlements of tax audits. Income taxes increased $32 million for the fiscal year ended March 31, 2005 relative to the prior fiscal year primarily due to higher pre-tax book income offset by a $20 million decrease in prior years’ tax return true-ups.

OTHER INCOME (DEDUCTIONS), INTEREST AND PREFERRED DIVIDENDS

Other income (deductions) decreased $16 million for the fiscal year ended March 31, 2006 from the prior fiscal year and increased by $16 million for the year ended March 31, 2005 relative to the prior fiscal year, primarily due to a $9 million settlement of an estimated liability and an $8 million favorable adjustment to non-utility related income taxes which were recorded in the 2005 fiscal year with no similar adjustments recorded in the 2006 or 2004 fiscal years.

Interest charges decreased $21 million for the fiscal year ended March 31, 2006 from the prior fiscal year. The decrease is primarily due to maturing long-term debt replaced with affiliated company debt at lower interest rates which were partially offset by increased interest payments on short term debt due to higher interest rates.

Interest charges decreased $47 million for the fiscal year ended March 31, 2005 from the prior fiscal year. The decrease is primarily due to maturing long-term debt and to the early redemption of third-party debt which were replaced with affiliated company debt at lower interest rates and which were partially offset by increased interest payments on short-term debt because of increased average short-term borrowings and higher interest rates.

EFFECTS OF CHANGING PRICES

The Company’s financial results and financial position are impacted by 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 financial statements are based on historical events and transactions. The effects of inflation on most utilities, including the Company, are most significant in the areas of depreciation and utility plant. In addition, the Company would not replace these assets with identical assets because of 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 Outlook” under “Liquidity and Capital Resources” below for a discussion of the Company’s future capital requirements.

LIQUIDITY AND CAPITAL RESOURCES

Short-Term Outlook: At March 31, 2006, the Company’s principal sources of liquidity included cash and cash equivalents of $11 million and accounts receivable of $654 million. The Company has a negative working

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capital balance of $461 million primarily due to $275 million of long-term debt due within one year and short-term debt due to affiliates of $579 million (see the intercompany money pool discussion below in Item 8). Cash is being generated from sales (via electric rates) to offset stranded cost amortization (non-cash expense). This excess cash is used to repay debt and for other operating needs. As discussed below, the Company believes it has sufficient cash flow and borrowing capacity to fund working capital deficits as necessary in the near term.

Net cash provided by operating activities decreased approximately $141 million for the fiscal year ended March 31, 2006 from the prior fiscal year. The primary reasons for the decrease in operating cash flow are:

• Decreased provision for deferred income taxes of $77 million primarily due to the expiration of federal bonus depreciation in December of 2004.

• Increased accounts receivable of $89 million primarily due to the higher cost of electricity and gas passed along to customers.

• Increased materials and supplies of $29 million primarily due to the higher cost of stored gas and the lower volume of gas sold relative to the prior fiscal year because of milder winter temperatures.

• Increased other regulatory assets of $128 million primarily due to higher commodity prices and timing differences between expenditures and their recovery from customers.

These were partially offset by:

• Increased net income (see income discussion above) of $54 million.

• Increased pension and other benefit plans expense of $7 million.

• Increased accounts payable and accrued expenses of $30 million.

• Increased accrued interest and tax expense of $60 million.

• Lower required funding of employee pension and other benefits of $14 million.

• Increased amortization of stranded costs of $15 million in accordance with the Merger Rate Plan.

• Increased depreciation and amortization expense of $3 million.

The Company’s net cash used in investing activities increased $119 million for the fiscal year ended March 31, 2006 from the comparable period in the prior fiscal year. This increase was primarily a result of increased restricted cash due to equity in hedge accounts related to the rise in the underlying commodity price.

The Company’s net cash used in financing activities decreased $258 million for the fiscal year ended March 31, 2006 from the comparable period in the prior fiscal year. This decrease resulted primarily from increased short-term debt to affiliates of $241 million.

Long-Term Outlook: The Company’s total capital requirements consist of amounts for its construction program, electricity and gas purchases, working capital needs and maturing debt issues. Generally, construction expenditure levels for the energy delivery business are consistent from year-to-year, however, the Company is embarking on a Reliability Enhancement Program, to improve performance and reliability, which will result in increased capital expenditures over the next five years.

The Company’s long-term debt due within one year is $275 million at March 31, 2006. In addition, construction expenditures planned within one year are estimated to be approximately $337 million. These capital requirements are planned to be financed primarily from internally generated funds and borrowings from other National Grid companies through the intercompany money pool.

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

			Contractual obligations due in
			Less than		1 - 3		4 - 5
($’s in millions)	Total		one year		years		years		Thereafter
Long-term debt	$	2,925	$	275	$	800	$	700	$	1,150
Short-term debt due to affiliates*		579		579		N/A		N/A		N/A
Interest on long-term debt**		509		147		232		130		N/A
Electric purchase power commitments		4,144		456		854		606		2,228
Gas supply commitments		557		295		247		11		4
Derivative swap commitments***		537		247		290		N/A		N/A
Construction expenditures****		337		337		N/A		N/A		N/A
Total contractual cash obligations	$	9,588	$	2,336	$	2,423	$	1,447	$	3,382

*	Classified as a current liability because all borrowings are payable on demand.
**	Forecasted and actual amounts could differ due to changes in market conditions. Amounts beyond 5 years are not forecasted and, therefore, are not included.
***	Forecasted and actual amounts could differ due to changes in market conditions.
****	Represents budgeted amounts for which substantial commitments have been made. Amounts beyond 1 year are not considered contractual obligations and are therefore not included.

Expected contributions to trusts of the Company’s pension and post-retirement benefit plans (as disclosed in Item 8. Financial Statements and Supplementary Data — Note H — Employee Benefits) are not included in the above table.

See Item 8. Financial Statements and Supplementary Data — Note D — Commitments and Contingencies, for a detailed discussion of the electric purchase power commitments and the gas supply, storage and pipeline commitments, Note L — 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.

The Company also has the ability to issue first mortgage bonds to the extent that there have been maturities or early redemptions of them since June 30, 1998. Through March 31, 2006, the Company had approximately $2.1 billion in such first mortgage bond maturities and early redemptions. This increased to $2.4 billion in May of 2006.

New Accounting Standards: In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of SFAS No. 123R, “Share-Based Payment.” SFAS No. 123R addresses the accounting for transactions in which a company receives employee services in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the company’s equity instruments or that may be settled by the issuance of such equity instruments. SFAS No. 123R also eliminates the ability to account for share-based compensation transactions using Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and requires that such transactions be accounted for using a fair-value-based method. SFAS No. 123R was originally effective for public companies for interim and annual periods beginning after June 15, 2005; however, in April 2005 the SEC delayed the effective date of SFAS No. 123R to annual, rather than interim, periods that begin after June 15, 2005. The SEC’s new rule resulted in a six-month deferral for the Company. The adoption of SFAS No. 123R on April 1, 2006 does not have a material impact on its results of operations or its financial position.

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In March 2005, the FASB issued Interpretation No. 47 (FIN 47), “Accounting for Conditional Asset Retirement Obligations.” FIN 47 will result in: (a) more consistent recognition of liabilities relating to asset retirement obligations, (b) more information about expected future cash outflows associated with those obligations and (c) more information about investments in long-lived assets because additional asset retirement costs will be recognized as part of the carrying amounts of the assets.

A conditional retirement obligation, which is referred to in SFAS No. 143, “Accounting for Asset Retirement Obligations,” is defined in FIN 47 as a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional upon a future event that may or may not be within the entity’s control. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. Uncertainty about the timing and (or) method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. FIN 47 also clarifies when an entity has sufficient information to make a reasonable estimate of the fair value of an asset retirement obligation. FIN 47 is effective for the Company as of its March 31, 2006 fiscal year end. The Company has a $10 million asset retirement obligation reserve as of March 31, 2006 which does not have a material impact on the Company’s results of operations or financial position.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3.” Previously, APB No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements,” defined the requirements for the accounting for and the reporting of a change in accounting principle. SFAS No. 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, SFAS No. 154 requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings for that period rather than being reported in an income statement. SFAS No. 154 becomes effective for fiscal years ending after December 15, 2005. The Company adopted it as of its March 31, 2006 fiscal year.

On March 31, 2006, the FASB issued an Exposure Draft of proposed rules on employers’ accounting for defined benefit pensions and other postretirement benefit plans that would require employers to fully recognize the plan’s funded status on the balance sheet. If adopted as proposed, the new rules would be applied retroactively to prior financial statements presented and be effective for fiscal years ending after December 15, 2006. The new rules, if adopted as proposed, may significantly increase the Company’s recorded pension and other postretirement liabilities. Under the current rate agreements with the PSC, the Company would recover the additional pension costs from customers and therefore the costs would be recognized as a regulatory asset upon adoption. The comment period on this Exposure Draft ended on May 31, 2006. The Company is currently evaluating the Exposure Draft, and at this time cannot determine the full impact that the potential requirements of the Exposure Draft may have on its financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to certain 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:

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§	Interest Rate Risk
§	Commodity Price Risk
§	Equity Price Risk
§	Foreign Currency Exchange Risk

An Energy Procurement Risk Management Committee (EPRMC) was established to monitor and control efforts to manage commodity risks. This committee issues and oversees the Financial Risk Management Policy (the Policy) which outlines the parameters within which corporate managers are to engage in, manage and report on various areas of commodity 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 an actual market exposure in terms and in volumes consistent with its core business. That core business is to deliver energy, in the form of electricity and natural gas, to customers within the Company’s service territory. 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.

Commodity Price Risk: The Company is exposed to commodity market price fluctuations related to: (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-Master Restructuring Agreement (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. Where possible, the Company takes positions to mitigate expected price volatility but only to the extent that the quantities involved are based on expectations of delivery. The Company attempts to mitigate exposure through a program that hedges risks as appropriate. The Company does not speculate on movements in the underlying commodity prices. 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 price movements in the contracts being hedged.

Large customers that continue to purchase electricity from the Company receive power from the NYISO at prevailing market prices and, in effect, assume the associated commodity price risk. For the remaining customers the Company meets a significant portion of its commodity supply responsibility through various physical and financial contracts. Some of these contracts are indexed to fuel prices, primarily natural gas. Although the current rate agreement allows for a pass-through of the commodity cost of power, the Company considers it prudent to perform certain hedging activities as a means of controlling cost volatility caused by the operation of these indexing mechanisms.

As part of the MRA, the Company entered into restated indexed swap contracts with eight IPPs. See Item 8. Financial Statements and Supplementary Data — Note L — Derivatives and Hedging Activities, for a more detailed discussion of these swap contracts.

The fair value of the liability under the swap contracts is based on 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 $537 million and $619 million at March 31, 2006 and 2005, respectively, and is recorded on the Company’s balance sheets under both current and noncurrent liabilities. The decrease is primarily due to the revaluation of the contracts at March 31, 2006 and to normal contract settlements. The discount rate is a market-based rate representing the yield curve through the life of the contracts. Based on the PSC’s approval of the restated contracts as part of the MRA, including the indexed swap contracts, and the opportunity to recover the estimated indexed swap liability from customers, the Company recorded a corresponding regulatory asset. The amounts of the recorded liability and regulatory asset

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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 increased or decreased by 1%, there would be a respective $11 million increase or decrease in the present value of the projected over-market exposure associated with these contracts. If the market prices increased or fell by 1%, there would be a respective $5 million decrease or increase in the projected over-market exposure associated with these contracts. If the discount rate was 0.5% higher or lower, the respective net present value of the projected over-market exposure associated with these contracts would decrease or increase by approximately $3.3 million.

The area of exposure to cash flow is in the indexing of the contract prices for the IPP indexed swaps and a non-MRA IPP where payments are based on gas prices. The contract payments under the IPP swaps and non-MRA IPP swaps are indexed to the costs of fuel, primarily natural gas. As fuel costs rise, the payments the Company makes under those contracts increase. The current rate plan allows the pass-through of the commodity cost of power to customers; however, the Company still considers it prudent to use 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 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 L — Derivatives and Hedging Activities for a more detailed discussion of these contracts. As of March 31, 2006, gas futures have been purchased to hedge approximately 50% of the estimated amount needed to offset gas price changes in the period ended March 31, 2007. At March 31, 2005, the open NYMEX futures the Company had in place to hedge the payments under these contracts had a fair value pre-tax gain of $27 million.

Activity for the fair value of the NYMEX futures and gas basis swaps for the fiscal year ended March 31, 2006 is as follows:

	Hedges of IPP Swaps						Hedges Non-MRA IPP
	NYMEX Futures						NYMEX Futures
(in thousands of Dths and dollars)	Dth			Fair Value			Dth			Fair Value
March 31, 2005 asset balance		20,046.9		$	25,013.5			1,593.1		$	2,006.1
New contracts		38,939.0			(722.0	)		3,241.0			(60.0	)
Settled during period		(38,398.9	)		(49,397.5	)		(3,121.1	)		(4,036.1	)
March 31, 2006 asset (liability) balance		20,587.0		$	(25,106.0	)		1,713.0		$	(2,090.0	)

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 mandated that the Company attempt to reduce the price volatility in the gas commodity portion of customers’ bills. In response to this mandate, the Company’s Board of Directors has authorized the use of futures, options, and swaps to hedge against gas price fluctuations. The hedging program is consistent with the Policy and is monitored by the EPRMC.

The Company attempts to hedge approximately 50% of its forecasted average demand for the October to April period through a program using in-ground storage and financial instruments. NYMEX gas futures are the

22

financial instruments used by the Company. Each NYMEX futures contract represents 10,000 Dth of gas. At March 31, 2006 and 2005 the mark-to-market net open position of cash flow hedges for gas supply was a loss of $5 million and a gain of $7 million, respectively. There were 671 and 593 open futures contracts at March 31, 2006 and March 31, 2005, respectively.

The following table details the fair value activity for gas cash flow hedges for the fiscal year ended March 31, 2006:

Hedges of Gas Supply
	NYMEX Futures
(in thousands of dths and dollars)	Dth			Fair Value
March 31, 2005 asset balance		5,930.0		$	7,233.4
New Contracts		13,980.0			—
Settled during the period		(13,200.0	)		(30,127.0	)
Mark-to-market adjustments		—			17,534.8
March 31, 2006 asset (liability) balance		6,710.0		$	(5,358.8	)

The above activity coupled with the in-ground storage hedged approximately 50% of the Company’s average gas demand for the October to April period. The rest of the gas needs are met through market-based purchases that are subject to price fluctuations and which are mitigated by regulatory rate recovery for the cost of gas purchased.

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 a substantial portion of its electricity requirements through a series of long-term physical and financial contracts. The remaining electricity requirements are purchased at market prices through the NYISO. If certain proscribed risk values are exceeded during a time when the Company forecasts a short power situation, the Company may use electricity swaps to lock in a price for electricity. In April 2003, the Company began utilizing NYMEX electricity swap contracts to hedge electricity purchases. The Company continues to evaluate the use of hedging instruments to manage the cost of electricity purchased. At March 31, 2006, the mark-to-market net open position of electricity swap contracts was a gain of $0.3 million.

Interest Rate Risk: The Company is exposed to changes in interest rates through several series of adjustable rate promissory notes and short-term borrowings. See Item 8. Financial Statements and Supplementary Data — Note E — Long-Term Debt and Note F – Short-Term Debt. Total adjustable rate promissory notes are currently valued at $575 million. There was $567 million of short term borrowing at March 31, 2006 from the intercompany money pool maintained by National Grid. At March 31, 2005 these borrowings totaled $401 million.

There is no interest rate cap on the promissory notes. The interest rates on short-term money pool borrowings are tied to the published, 30 day commercial paper rate with the amount borrowed from the National Grid money pool adjusted daily.

The Company also maintains long-term debt at fixed interest rates. A controlling factor on the exposure to interest rate variations is the mix of fixed to variable rate instruments maintained by the Company. For March 31, 2006 and 2005, adjustable rate instruments comprise 33.3% and 19.7% of total long-term debt, respectively.

23

In the aggregate at March 31, 2006 and 2005, variable rate instruments do not constitute a significant portion of total capitalization and debt, thereby limiting the Company’s exposure to interest rate fluctuations.

If interest rates averaged 1% more in the next fiscal year versus the fiscal year ended March 31, 2006, the Company’s interest expense would increase and income before taxes would decrease by approximately $11 million. This figure was derived by applying a hypothetical 1% variance to the variable rate debt of $575 million plus the short-term variable borrowings of $567 million at March 31, 2006. Changes in the actual cost of capital from levels assumed in rates would create either exposure or opportunity for the Company until these changes could be reflected in future prices.

Equity Price Risk: The Company currently has no equity price risk.

Foreign Currency Exchange Risk: The Company currently has no foreign currency exchange risk.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

A. FINANCIAL STATEMENTS

• Report of Independent Registered Public Accounting Firm

• Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income and Consolidated Statements of Retained Earnings for each of the three years in the period ended March 31, 2006.

• Consolidated Balance Sheets at March 31, 2006 and 2005.

• Consolidated Statements of Cash Flows for each of the three years in the period ended March 31, 2006.

• Notes to Consolidated Financial Statements.

24

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Niagara Mohawk Power Corporation and its subsidiaries at March 31, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2006 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards 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

New York, New York
June 29, 2006

25

NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES

Consolidated Statements of Operations
(In thousands of dollars)

	For the			For the		For the
	year ended			year ended		year ended
	March 31,			March 31,		March 31,
	2006			2005		2004
Operating revenues:
Electric	$	3,306,942		$	3,117,156	$	3,284,017
Gas		1,037,081			808,015		779,600
Total operating revenues		4,344,023			3,925,171		4,063,617
Operating expenses:
Purchased electricity		1,464,626			1,364,813		1,591,652
Purchased gas		741,419			509,543		478,647
Other operation and maintenance		717,745			708,606		793,110
Depreciation and amortization		203,994			200,793		200,650
Amortization of stranded costs		266,816			251,499		194,114
Other taxes		209,553			217,993		227,006
Income taxes		190,194			171,230		138,843
Total operating expenses		3,794,347			3,424,477		3,624,022
Operating income		549,676			500,694		439,595
Other income (deductions), net		(7,758	)		8,347		(7,198	)
Operating and other income		541,918			509,041		432,397
Interest:
Interest on long-term debt		138,415			169,585		220,781
Interest on debt to associated companies		75,358			66,283		55,282
Other interest		11,069			9,924		16,644
Total interest expense		224,842			245,792		292,707
Net income		317,076			263,249		139,690
Dividends on preferred stock		1,626			2,928		4,430
Income available to common shareholder	$	315,450		$	260,321	$	135,260

Consolidated Statements of Comprehensive Income
(In thousands of dollars)

	For the			For the			For the
	year ended			year ended			year ended
	March 31,			March 31,			March 31,
	2006			2005			2004
Net income	$	317,076		$	263,249		$	139,690
Other comprehensive income (loss), net of taxes:
Unrealized gains (losses) on securities		(337	)		732			1,731
Hedging activity		4,009			14,557			2,425
Change in additional minimum pension liability		358			—			(1,557	)
Reclassification adjustment for gains included in net income		(21,807	)		(4,943	)		—
Total other comprehensive income (loss)		(17,777	)		10,346			2,599
Comprehensive income	$	299,299		$	273,595		$	142,289

     Per share data is not relevant because the Company’s common stock is wholly-owned by Niagara Mohawk Holdings, Inc.

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

26

NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES

Consolidated Statements of Retained Earnings
(In thousands of dollars)

	For the			For the			For the
	year ended			year ended			year ended
	March 31,			March 31,			March 31,
	2006			2005			2004
Retained earnings at beginning of period	$	473,287		$	220,966		$	85,706
Net income		317,076			263,249			139,690
Dividends on preferred stock		(1,626	)		(2,928	)		(4,430	)
Dividend to Niagara Mohawk Holdings, Inc.		—			(8,000	)		—
Retained earnings at end of period	$	788,737		$	473,287		$	220,966

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

27

NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES

Consolidated Balance Sheets
(In thousands of dollars)

	March 31,		March 31,
	2006		2005
ASSETS
Utility plant, at original cost:
Electric plant	$	5,658,705	$	5,399,412
Gas plant		1,580,204		1,532,441
Common plant		309,053		333,922
Total utility plant		7,547,962		7,265,775
Less: Accumulated depreciation and amortization		2,247,350		2,108,379
Net utility plant		5,300,612		5,157,396
Goodwill (Note A)		1,214,576		1,224,025
Pension intangible		36,885		40,339
Other property and investments		47,379		55,048
Current assets:
Cash and cash equivalents		10,847		19,922
Restricted cash (Note A)		66,393		7,367
Accounts receivable (less reserves of $123,310 and $126,084, respectively, and including receivables from associated companies of $10,238 and $6,654, respectively)		653,652		571,552
Materials and supplies, at average cost:
Gas storage		23,576		3,498
Other		21,356		17,739
Derivative instruments (Note A and L)		317		35,326
Prepaid taxes		—		44,273
Current deferred income taxes (Note G)		168,354		307,431
Regulatory asset — swap contracts		246,551		203,558
Other		13,662		9,772
Total current assets		1,204,708		1,220,438
Regulatory and other non-current assets:
Regulatory assets (Note B):
Merger rate plan stranded costs		2,486,590		2,765,392
Swap contracts regulatory asset		290,902		415,394
Regulatory tax asset		106,624		79,933
Deferred environmental restoration costs		399,630		431,000
Pension and postretirement benefit plans		527,829		501,358
Additional minimum pension liability		75,252		194,302
Loss on reacquired debt		59,521		67,162
Other		499,716		330,094
Total regulatory assets		4,446,064		4,784,635
Other non-current assets		30,744		36,481
Total regulatory and other non-current assets		4,476,808		4,821,116
Total assets	$	12,280,968	$	12,518,362

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

28

NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES

Consolidated Balance Sheets
(In thousands of dollars)

	March 31,			March 31,
	2006			2005
CAPITALIZATION AND LIABILITIES
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		2,929,501			2,929,501
Accumulated other comprehensive income (loss) (Note C)		(4,816	)		12,961
Retained earnings		788,737			473,287
Total common stockholder’s equity		3,900,787			3,603,114
Preferred equity (Note I):
Cumulative preferred stock ($100 par value, optionally redeemable)		41,170			41,170
Authorized - 3,400,000 shares
Issued and outstanding - 411,715 shares
Long-term debt (Note E)		1,448,934			1,723,569
Long-term debt to affiliates (Note E)		1,200,000			1,200,000
Total capitalization		6,590,891			6,567,853
Current liabilities:
Accounts payable (including payables to associated companies of $28,315 and $36,440, respectively)		275,223			271,275
Customers’ deposits		32,345			26,900
Accrued interest		65,952			82,945
Short-term debt to affiliates (Note F)		578,900			400,500
Current portion of liability for swap contracts (Note A and L)		246,551			203,558
Current portion of long-term debt (Note E)		275,000			550,420
Derivative instruments (Note A and L)		32,555			—
Accrued taxes		61,704			—
Other		97,284			107,871
Total current liabilities		1,665,514			1,643,469
Non-current liabilities:
Accumulated deferred income taxes (Note G)		1,687,360			1,711,630
Liability for swap contracts (Note A and L)		290,902			415,394
Employee pension and other benefits (Note H)		628,850			671,053
Liability for environmental remediation costs		399,630			431,000
Nuclear fuel disposal costs		150,642			145,562
Cost of removal regulatory liability (Note N)		337,995			318,455
Other		529,184			613,946
Total other non-current liabilities		4,024,563			4,307,040
Commitments and contingencies (Note D)		—			—
Total capitalization and liabilities	$	12,280,968		$	12,518,362

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

29

NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
Consolidated Statements of Cash Flows
(In thousands of dollars)

	Year			Year			Year
	ended			ended			ended
	March 31, 2006			March 31, 2005			March 31, 2004
Operating activities:
Net income	$	317,076		$	263,249		$	139,690
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		203,994			200,793			200,650
Amortization of stranded costs		266,816			251,499			194,114
Provision for deferred income taxes		103,474			180,722			148,435
Pension and other benefit plans expense		107,208			100,143			100,484
Cash paid to pension and postretirement benefit plan trusts		(95,500	)		(109,330	)		(266,139	)
Changes in operating assets and liabilities:
Net accounts receivable		(82,100	)		7,102			(35,374	)
Materials and supplies		(23,695	)		5,703			(5,744	)
Accounts payable and accrued expenses		(1,194	)		(31,513	)		(74,946	)
Accrued interest and tax		44,711			(15,276	)		(10,706	)
Other regulatory assets		(169,622	)		(41,667	)		(46,137	)
Other, net		72,431			73,565			5,044
Net cash provided by operating activities		743,599			884,990			349,371
Investing activities:
Construction additions		(269,941	)		(266,012	)		(317,302	)
Change in restricted cash		(59,026	)		4,796			13,187
Other investments		8,023			2,651			6,563
Other, net		(58,084	)		(1,640	)		(17,294	)
Net cash used in investing activities		(379,028	)		(260,205	)		(314,846	)
Financing activities:
Dividends paid on preferred stock		(1,626	)		(2,928	)		(4,430	)
Dividends paid on common stock to Holdings		—			(8,000	)		—
Reductions in long-term debt		(550,420	)		(532,620	)		(1,319,490	)
Proceeds from long-term debt		—			—			45,600
Proceeds from long-term debt to affiliates		—			—			700,000
Redemption of preferred stock		—			(25,155	)		(33,903	)
Net change in short-term debt to affiliates		178,400			(63,000	)		265,500
Equity contribution from parent		—			—			309,000
Net cash used in financing activities		(373,646	)		(631,703	)		(37,723	)
Net decrease in cash and cash equivalents		(9,075	)		(6,918	)		(3,198	)
Cash and cash equivalents at beginning of period		19,922			26,840			30,038
Cash and cash equivalents at end of period	$	10,847		$	19,922		$	26,840
Supplemental disclosures of cash flow information:
Interest paid	$	244,499		$	258,735		$	336,147
Income taxes received	$	(16,210	)	$	(54,940	)	$	(13,904	)

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

30

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 in the United States of America (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.

Niagara Mohawk Holdings, Inc. (Holdings), the parent company of the Company, is a wholly owned subsidiary of National Grid USA (National Grid). National Grid is a wholly owned subsidiary of National Grid plc (formerly known as National Grid Transco plc).

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.

Goodwill: The acquisition of the Company was accounted for by the purchase method, the application of which, including the recognition of goodwill, was 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 and when events or circumstances indicate that the asset may be impaired. 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. As a result of a settled IRS audit of pre-merger years, the Company recorded a $9 million adjustment to goodwill related to a pre-merger tax contingency.

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 AFUDC (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 (AFUDC): The Company capitalizes AFUDC as part of construction costs in amounts equivalent to the cost of funds devoted to plant under construction for its regulated business. AFUDC represents an allowance for the cost of funds used to finance

31

construction. AFUDC is capitalized in “Utility plant” with offsetting non-cash credits to “Other interest” and “Other income (deductions)” on the Consolidated Statement of Operations. This method is in accordance with an established rate-making practice under which a utility is permitted a return on, and the recovery of, prudently incurred capital costs through their ultimate inclusion in rate base and in the provision for depreciation. AFUDC rates are determined in accordance with FERC and PSC regulations. The AFUDC rates in effect at March 31, 2006 and 2005 were 3.49% and 1.59%, respectively. AFUDC is segregated into its two components, borrowed funds and other funds, and is reflected in the “Other interest” and “Other income (deductions)” sections, respectively, in the Company’s Consolidated Statements of Operations. The amounts of AFUDC credits were recorded as follows:

	Year Ended		Year Ended		Year Ended
	March 31,		March 31,		March 31,
(In thousands of dollars)	2006		2005		2004
Other income (deductions)	$	—	$	1	$	(9	)
Other interest		2,040		606		565

Depreciation: For accounting and regulatory purposes, the Company’s depreciation is computed on the straight-line basis using the average service lives. 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:

	Year Ended		Year Ended		Year Ended
	March 31,		March 31,		March 31,
	2006		2005		2004
Asset Category:
Electric		34		35		34
Gas		42		43		44
Common		20		21		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 March 31, 2006 and 2005 was approximately $133 million and $110 million, respectively.

The Company recognizes changes in accrued unbilled electric revenues in its results of operations. Pursuant to the Company’s 2000 multi-year gas settlement (which ended December 2004, with the Company having the right to request a change in rates at any time, if needed) changes in accrued unbilled gas revenues are deferred. At March 31, 2006 and 2005, approximately $6 million and $7 million, respectively, of unbilled gas revenues remain unrecognized in results of operations. The

32

Company cannot predict when unbilled gas revenues will be allowed to be recognized in results of operations.

In August 2001, the PSC approved certain rate plan changes. The changes allowed for certain commodity-related costs to be passed through to customers beginning September 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 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 (amended through the Company’s Merger Rate Plan and ended in December 2004 with the Company having the right to request a change in rates at any time, if needed) in July 2000 that includes a provision for the continuation of a full gas cost collection mechanism, effective August 2000. This gas cost collection mechanism was originally reinstated in an interim agreement that became effective November 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: Regulated federal and state income taxes are recorded under the provisions of Financial Accounting Standards Board (FASB) SFAS No. 109 “Accounting for Income Taxes”. Income taxes have been computed utilizing the asset and liability approach that requires the recognition of deferred tax assets and liabilities for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. Deferred investment tax credits are amortized over the useful life of the underlying property.

Service Company Charges: National Grid USA Service Company, Inc., an affiliated service company, has furnished services to the Company at the cost of such services since the merger with National Grid. These costs approximated $160 million and $138 million for the years ended March 31, 2006 and 2005, 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 and cash equivalents.

Restricted Cash: Restricted cash consists of margin accounts for hedging activity, health care claims deposits, New York State Department of Conservation securitization for certain site cleanup, and worker’s compensation premium deposits. The $59 million increase in restricted cash for the fiscal year ended March 31, 2006 was primarily due to increased equity in hedge accounts related to the rise in underlying commodity prices.

Derivatives: The Company accounts for derivative financial instruments under SFAS No. 133, “Accounting for Derivatives and Hedging Activities”, and SFAS No. 149, “Amendment of SFAS No. 133 on Derivative Instruments and Hedging Activities,” as amended. Under the provisions of SFAS No. 133, all derivatives except those qualifying for the normal purchase/normal sale exception are recognized on the balance sheet at their fair value. Fair value is determined using current quoted market prices. If a contract is designated as a cash flow hedge, the change in its market value is generally

33

deferred as a component of other comprehensive income until the transaction it is hedging is completed. Conversely, the change in the market value of a derivative not designated as a cash flow hedge is deferred as a regulatory asset or liability as the Company has received approval from the PSC to establish a regulatory asset or liability for derivative instruments that did not qualify for hedge accounting and were the result of regulatory rulings. A cash flow hedge is a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability. To qualify as a cash flow hedge, the fair value changes in the derivative must be expected to offset 80% to 120% of the changes in fair value or cash flows of the hedged item.

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 changes in additional minimum pension liability, deferred gains and losses associated with hedging activity, and unrealized gains and losses associated with certain investments held as available for sale. See Note C — Accumulated Other Comprehensive Income (Loss).

Additional Minimum Pension Liability: Additional minimum pension liability is recognized under SFAS No. 87, “Employers’ Accounting for Pensions”. Under current rate agreements with the PSC, the Company recovers pension costs from customers and therefore has recognized its additional minimum pension liability (AML) for its qualified plan as a regulatory asset. The additional minimum pension liability for its non-qualified plan is recognized as a component of accumulated other comprehensive income.

Power Purchase Agreements: The Company accounts for its power purchase agreements, which are not deemed to be derivatives or leases, as executory contracts. The Company assesses several factors in determining how to account for its power purchase contracts. These factors include:

• the term of the contract compared to the economic useful life of the facility generating the electricity;

• the involvement, if any, that the Company has in operating the facility;

• the amount of any fixed payments the Company must make, even if the facility does not generate electricity; and

• the level of control the Company has over the amount of electricity generated by the facility, and who bears the risk in the event the facility is unable to generate.

New Accounting Standards: In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment.” SFAS No. 123R addresses the accounting for transactions in which a company receives employee services in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the company’s equity instruments or that may be settled by the issuance of such equity instruments. SFAS No. 123R also eliminates the ability to account for share-based compensation transactions using APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and requires that such transactions be accounted for using a fair-value-based method. SFAS No. 123R was originally effective for public companies for interim and annual periods beginning after June 15, 2005; however, in

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April 2005 the SEC delayed the effective date of SFAS No. 123R to annual, rather than interim, periods that begin after June 15, 2005. The SEC’s new rule resulted in a six-month deferral for the Company. The adoption of SFAS No. 123R at April 1, 2006 does not have a material impact on its results of operations or its financial position.

In March 2005, the FASB issued Interpretation No. 47 (FIN 47), “Accounting for Conditional Asset Retirement Obligations.” FIN 47 will result in: (a) more consistent recognition of liabilities relating to asset retirement obligations, (b) more information about expected future cash outflows associated with those obligations and (c) more information about investments in long-lived assets because additional asset retirement costs will be recognized as part of the carrying amounts of the assets.

A conditional retirement obligation, which is referred to in SFAS No. 143, “Accounting for Asset Retirement Obligations,” is defined in FIN 47 as a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional upon a future event that may or may not be within the entity’s control. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. Uncertainty about the timing and (or) method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. FIN 47 also clarifies when an entity has sufficient information to make a reasonable estimate of the fair value of an asset retirement obligation. FIN 47 is effective for the Company as of its March 31, 2006 fiscal year end. The Company has a $10 million Asset Retirement Obligation reserve as of March 31, 2006 which does not have a material impact on the Company’s results of operations or financial position.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3.” Previously, APB No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements,” defined the requirements for the accounting for and the reporting of a change in accounting principle. SFAS No. 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, SFAS No. 154 requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings for that period rather than being reported in an income statement. SFAS No. 154 becomes effective for fiscal years ending after December 15, 2005 and the Company adopted it as of its March 31, 2006 fiscal year.

On March 31, 2006, the FASB issued an Exposure Draft of proposed rules on employers’ accounting for defined benefit pensions and other postretirement benefit plans that would require employers to fully recognize the plan’s funded status on the balance sheet. If adopted as proposed, the new rules would be applied retroactively to prior financial statements presented and be effective for fiscal years ending after December 15, 2006. The new rules, if adopted as proposed, may significantly increase the Company’s recorded pension and other postretirement liabilities. Under the current rate agreements with the PSC, the Company would recover the additional pension costs from customers and therefore the costs would be recognized as a regulatory asset upon adoption. The comment period on this Exposure Draft ended on May 31, 2006. The Company is currently evaluating the Exposure Draft, and at this time cannot

35

determine the full impact that the potential requirements of the Exposure Draft may have on its financial statements.

Reclassifications: Certain amounts from prior fiscal years have been reclassified on the accompanying consolidated financial statements to conform to the fiscal 2006 presentation.

NOTE B — RATE AND REGULATORY ISSUES

The Company’s financial statements conform to GAAP, including the accounting principles for rate-regulated entities that apply to its regulated operations. SFAS No. 71, “Accounting for the Effects of Certain Types of Regulation,” permits a public utility that is regulated on a cost-of-service basis to defer certain costs it would otherwise charge to expense, if authorized to do so by the regulator. These deferred costs are known as regulatory assets. The Company’s regulatory assets were approximately $4.7 billion as of March 31, 2006 and $5.0 billion as of March 31, 2005. These regulatory assets are probable of recovery under the Company’s rate plans. The Company believes the prices it will charge for electric service in the future, including the CTCs, will be sufficient to recover and earn a return on the Merger Rate Plan’s stranded regulatory assets over their planned amortization periods, assuming no unforeseen reduction in demand or bypass of the CTC exit fees. The Company’s ongoing electricity business continues to be rate-regulated on a cost-of-service basis under the Merger Rate Plan and, accordingly, the Company continues to apply SFAS No. 71 to it. In addition, the Company’s Independent Power Producer contracts, and the Purchased Power Agreements, which were entered into when the Company exited the power generation business, 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.

The Company is earning a return on most of its regulatory assets under its Merger Rate Plan.

On July 29, 2005, the Company filed its biannual CTC reset and deferral account recovery filing to reset rates charged to customers beginning January 1, 2006. The Company resets its CTC every two years under its Merger Rate Plan. The CTC reset is intended to account for changes in forecasted electricity and natural gas commodity prices, and the effects those changes have on the Company’s above market payments under legacy power contracts that otherwise would be stranded. In addition, the Merger Rate Plan allows the Company to recover amounts exceeding $100 million in its deferral accounts (as projected through the end of each two-year CTC reset period through the end of the Merger Rate Plan). In the July 29, 2005 filing, the Company included a proposal to recover the excess balance of the deferral accounts as of June 30, 2005 of $196 million and a projection through the end of the two year period of $373 million. On December 27, 2005 the PSC approved the Company’s proposal for the new CTC effective January 1, 2006. The PSC also approved recovery of deferral account amounts of $100 million in 2006 and $200 million in 2007. For 2006, the deferral-related surcharge was included in rates beginning in April and the $100 million will be collected over the last nine months of the 2006 calendar

36

year. An audit of the deferral amount by the DPS Staff is ongoing. A formal hearing process has been established before a hearing officer at the PSC to litigate the levels in the deferral account. Under the hearing schedule, the Staff will be filing testimony setting forth its initial adjustments in early August. The Company will continue to defer costs and revenues, as applicable, through the end of the Merger Rate Plan on December 31, 2011. The Company’s future filings for recovery of deferred amounts are subject to regulatory review and approval.

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 February 1, 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 basis and the tax basis 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.

Deferred Environmental Restoration Costs: This regulatory asset represents deferred costs associated with the Company’s share of the estimated costs to investigate and perform certain remediation activities at sites with which it may be associated. The Company’s rate plans provide for specific rate allowances for these costs, with variances deferred for future recovery or pass-back to customers. The Company believes future costs, beyond the expiration of current rate plans, will continue to be recovered through rates.

Pension and Post-retirement Benefit Plans: Excess costs of the Company’s pension and post-retirement benefits plans over amounts received in rates are deferred to a regulatory asset to be recovered in a future period.

Additional Minimum Pension Liability: The offset to any additional minimum pension liability associated with the Company’s qualified pension plan is applied to a regulatory asset on a pre-tax basis instead of being applied on an after-tax basis to other comprehensive income.

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 ratably as interest expense 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 New York Independent System Operator (NYISO) costs that were deferred for future recovery.

See Notes D, H and L for a discussion of regulatory asset accounts — Deferred environmental restoration costs, Pensions and post-retirement benefits plans and Derivatives, respectively.

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NOTE C — ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

	Unrealized
	Gains (Losses)									Total
	On			Additional						Accumulated
	Available-for-			Minimum						Other
	Sale			Pension			Cash Flow			Comprehensive
(in thousands of dollars)	Securities			Liability			Hedges			Income (Loss)
March 31, 2004 balance	$	1,147		$	(1,557	)	$	3,025		$	2,615
Unrealized gains (losses) on securities, net of tax		732									732
Hedging activity, net of tax								14,557			14,557
Reclassification adjustment for gain included in net income, net of tax		(173	)					(4,770	)		(4,943	)
March 31, 2005 balance	$	1,706		$	(1,557	)	$	12,812		$	12,961
Unrealized gains (losses) on securities, net of tax		(337	)								(337	)
Hedging activity, net of tax								4,009			4,009
Change in additional minimum pension liability, net of tax					358						358
Reclassification adjustment for gain included in net income, net of tax		(233	)					(21,574	)		(21,807	)
March 31, 2006 balance	$	1,136		$	(1,199	)	$	(4,753	)	$	(4,816	)

The deferred tax benefit (expense) on other comprehensive income for the following periods was:

	For the			For the			For the
	year ended			year ended			year ended
	March 31,			March 31,			March 31,
(in thousands of dollars)	2006			2005			2004
Investment activities	$	225		$	(488	)	$	(1,127	)
Hedging activities		(2,673	)		(9,705	)		42
Change in additional minimum pension liability		(239	)		—			1,038
Reclassification adjustment for gain included in net income		14,538			3,295			(1,685	)

NOTE D — COMMITMENTS AND CONTINGENCIES

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, 2006, are summarized in the table below. The Company did not enter into any new agreements in fiscal 2006 or 2005. For a detailed discussion of the financial swap agreements that the Company has entered into to hedge the costs of purchased electricity (which are not included in the table below), see Note L — Derivatives and Hedging Activities.

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(in thousands of dollars)
Fiscal Year
Ended	Estimated
March 31,	Payments
2007	$	455,823
2008		439,435
2009		414,523
2010		344,111
2011		262,021
Thereafter		2,228,199

If the Company needs any additional energy to meet its load, it can purchase the electricity from other IPPs, utilities, energy merchants or through the NYISO at market prices. Substantially all of these contracts require power to be delivered before the Company is obligated to make payment.

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, 2006 for each of the next five years and thereafter.

(in thousands of dollars)
Fiscal Year
Ended			Gas Storage/
March 31,	Gas Supply		Pipeline
2007	$	245,259	$	50,000
2008		195,036		46,600
2009		—		5,310
2010		—		5,310
2011		—		5,310
Thereafter		—		4,324

With respect to firm gas supply commitments, the amounts are based upon volumes specified in the contracts giving consideration to 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 in currently filed tariffs. At March 31, 2006, the Company’s firm gas supply commitments have varying expiration dates, the latest of which is March 2008. The gas storage and transportation commitments have varying expiration dates with the latest being October 2012.

Environmental Contingencies: The normal ongoing operations and historic activities of the Company are subject to various federal, state and local environmental laws and regulations. Like many other industrial companies, the Company’s transmission and distribution business uses or generates some hazardous and potentially hazardous wastes and by-products. Under federal and state Superfund laws, potential liability for the historic contamination of property may be imposed on responsible parties jointly and severally, without fault, even if the activities were lawful when they occurred.

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The Environmental Protection Agency (EPA), Department of Environmental Conservation (DEC), as well as private entities have alleged that the Company is a potentially responsible party under state or federal law for the remediation of an aggregate of approximately 100 sites, including 51 of which are Company owned. The Company’s most significant liabilities relate to manufactured gas plant (MGP) facilities formerly owned or operated by the Company’s previous owners. The Company is currently investigating and remediating, as necessary, those MGP sites and certain other properties under agreements with the EPA and DEC.

The Company believes that obligations imposed on the Company because of environmental laws will not have a material impact on its results of operations or its financial condition. The Company’s Merger Rate Plan provides for the continued application of deferral accounting for variations in spending from amounts provided in rates related to these environmental obligations. As a result, the Company has recorded a regulatory asset representing the investigation, remediation and monitoring obligations it expects to recover from ratepayers.

The Company is pursuing claims against other potentially responsible parties to recover investigation and remediation costs it believes are the obligations of those parties. The Company cannot predict the success of such claims, however. As of March 31, 2006 and 2005, the Company has accrued liabilities related to its environmental obligations of $400 million and $431 million, respectively, which is reflected in the Company’s Consolidated Balance Sheets. The decrease in the accrued liabilities was primarily due to the payments made for costs which were previously accrued. The potential high end of the range at March 31, 2006 is presently estimated at approximately $526 million.

Nuclear Contingencies: As of March 31, 2006 and 2005, the Company has a liability of $151 million and $146 million, respectively, in other non-current 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 Energy Group Inc., which 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.

Legal Matters:

Station Service Cases (Niagara Mohawk Power Corp. v. Huntley Power L.L.C. et al., FERC Docket No. EL03-27; AES Somerset, L.L.C. v. Niagara Mohawk Power Corp., FERC Docket No. EL03-204; Nine Mile Point Nuclear Station, L.L.C. v. Niagara Mohawk Power Corp., FERC Docket No. EL03-234; Keyspan-Ravenswood, Inc. v. NYISO, FERC Docket No. EL01-50-004.) A number of generators have complained or withheld payments associated with the Company’s delivery of station service to their generation facilities, arguing that they should be permitted to bypass its retail charges. The FERC issued two orders on complaints filed by the Company’s station service customers in December 2003, allowing two generators to net their station service electricity over a 30-day period and to avoid state-authorized charges for deliveries made over distribution facilities. A third order in January 2005

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involves affiliates of NRG Energy, Inc. These orders directly conflict with the Company’s state-approved tariffs and the orders of the PSC on station service rates. The orders, if finally upheld, will permit these generators to bypass the Company’s state-jurisdictional station service charges for electricity, including those set forth in the filing that was approved by the PSC on November 25, 2003. In the aggregate, the Company is owed approximately $58 million as of March 31, 2006. The Company appealed these orders to the U.S. Court of Appeals for the District of Columbia Circuit, and the matters were consolidated for appeal. Oral argument was heard on April 10, 2006, and on June 23, 2006, the Court issued a decision upholding the FERC’s orders. The Company is reviewing the decision and considering whether to seek rehearing or further review.

The Court’s order upholding the FERC orders has increased the risk that generators will be able to bypass local distribution company charges (including stranded cost recovery charges) when receiving service through the NYISO. Although the Staff and other parties may challenge the Company’s position, in the event the FERC orders are finally upheld, the Company believes that the provision in the rate plan that permits the Company to recover lost revenues resulting from a change in law or regulation would permit it to recover the lost revenues that result from the FERC orders. These amounts are subject to regulatory review and challenge as part of the ongoing audit of the Company’s deferral account balance in accordance with the Merger Rate Plan.

NOTE E — LONG-TERM DEBT

Long-term debt consisted of the following at March 31, 2006 and 2005:

(in thousands of dollars)
			March 31,			March 31,
Series		Due	2006			2005
First Mortgage Bonds:
6 5/8%		July 2005	$	—		$	110,000
9 3/4%		November 2005		—			137,981
7 3/4%	(1)	May 2006		275,000			275,000
5.15%	(2)	November 2025		75,000			75,000
Total First Mortgage Bonds				350,000			597,981
Senior Notes(3):
7.63%		October 2005		—			302,439
8.88%		May 2007		200,000			200,000
7.75%		October 2008		600,000			600,000
Total Senior Notes			$	800,000		$	1,102,439
Pollution Control Revenue Bonds-Variable Rate(4):
2004A		October 2013	$	45,600		$	45,600
1985A		July 2015		100,000			100,000
1988A		December 2023		69,800			69,800
1985B&C		December 2025		75,000			75,000
1986A		December 2026		50,000			50,000
1987A		March 2027		25,760			25,760
1987B		July 2027		93,200			93,200
1991A		July 2029		115,705			115,705
Total Pollution Control Revenue Bonds				575,065			575,065
Notes Payable to Holdings(3)
5.80%		November 2012		500,000			500,000
3.83%		June 2010		350,000			350,000
3.72%		July 2009		350,000			350,000
Total Notes Payable to Holdings				1,200,000			1,200,000
Unamortized discount				(1,131	)		(1,496	)
Total Long-Term Debt				2,923,934			3,473,989
Less long-term debt due within one year				275,000			550,420
Long-Term Debt due after one year			$	2,648,934		$	2,923,569

(1)	Not callable prior to maturity.
(2)	Fixed rate pollution control revenue bonds first callable November 1, 2008 at 102%.
(3)	Currently callable with make-whole provisions.
(4)	Currently callable at par.
(5)	Effective interest rate at March 31, 2006 and March 31, 2005 was 3.24% and 2.33%, respectively.

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Substantially all of the Company’s operating properties are subject to mortgage liens securing its mortgage debt. Several series of First Mortgage Bonds 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 $575 million of such securities bear interest at short-term adjustable interest rates (with an option to convert to other rates, including a fixed interest rate) which averaged 3.20% for the year ended March 31, 2006, 1.69% for the year ended March 31, 2005 and 1.24% for the year ended March 31, 2004. The bonds are currently in the auction rate mode and are backed by bond insurance. 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 (which the Company subsequently sold) or to refund outstanding tax-exempt bonds and notes.

The aggregate maturities of long-term debt for the five years subsequent to March 31, 2006, excluding capital leases, are approximately:

(in millions of dollars)
Fiscal Year	Amount
2007	$	275
2008		200
2009		600
2010		350
2011		350
Thereafter		1,150
Total	$	2,925

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 million at March 31, 2006 and 2005. The non-current portion of capital lease obligations is reflected in the “Other” line item on the Consolidated Balance Sheet and was approximately $4 million and $5 million at March 31, 2006 and 2005, respectively.

At March 31, 2006 and 2005, the Company’s long-term debt, excluding intercompany debt, had a fair value of approximately $1.8 billion and $2.4 billion, respectively. The fair market value of the Company’s long-term debt was estimated based on the debts’ coupons and remaining lives along with the current interest rate conditions.

NOTE F — SHORT-TERM DEBT

The Company has regulatory approval from the FERC to issue up to $1 billion of short-term debt. The Company had short-term debt outstanding of $579 million and $401 million at March 31, 2006 and 2005, respectively, from affiliated companies. The Company participates with National Grid, and certain other National Grid affiliates, in a system money pool. The money pool is administered by the Service Company as the agent for the participants. Short-term borrowing needs are met first by available funds of the money pool participants. Borrowings from the money pool bear interest at the higher of (i) the monthly average of the rate for high-grade, 30-day commercial paper sold through dealers by major corporations as published in The Wall Street Journal, or (ii) the monthly average of the

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rate then available to money pool depositors from an eligible investment in readily marketable money market funds or the existing short-term investment accounts maintained by money pool depositors or the Service Company during the period in question. In the event neither rate is one that is permissible for a transaction because of constraints imposed by the state regulatory commission having jurisdiction over a utility participating in the transaction, the rate is that which is permissible for the transaction as determined under the requirements of the state regulatory commission. Companies that invest in the money 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 money pool at any time without prior notice. The average interest rate for the money pool was 4.03%, 1.80 % and 1.11 % for fiscal years 2006, 2005 and 2004, respectively.

The Company had no short-term debt outstanding to third-parties at March 31, 2006 or 2005.

NOTE G — FEDERAL AND STATE 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 Operations and the computed amount at the statutory tax rate:

	Year Ended March 31,
(in thousands of dollars)	2006			2005			2004
Components of federal and state income taxes:
Current tax expense (benefit):
Federal	$	61,211		$	(30,229	)	$	(12,003	)
State		22,509			9,459			(474	)
		83,720			(20,770	)		(12,477	)
Deferred tax expense:
Federal		89,908			177,180			128,426
State		13,566			3,542			20,022
		103,474			180,722			148,448
Total	$	187,194		$	159,952		$	135,971
Total income taxes in the consolidated statements of operations:
Income taxes charged to operations	$	190,194		$	171,230		$	138,843
Income taxes credited to “Other income (deductions)”		(3,000	)		(11,278	)		(2,872	)
Total	$	187,194		$	159,952		$	135,971

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Shown below is the reconciliation between federal income taxes and the tax computed at prevailing U.S. statutory rate on income before income taxes:

	Year Ended March 31,
(in thousands of dollars)	2006			2005			2004
Computed tax	$	176,495		$	148,371		$	96,481
Increase (reduction) including those attributable to flow-through of certain tax adjustments:
Depreciation		10,225			16,982			21,397
Cost of removal		(7,298	)		(5,664	)		(6,857	)
Allowance for funds used during construction — (a)		—			(1	)		3
State income taxes		23,449			8,451			12,736
Accrual to return adjustment		(9,410	)		3,427			19,842
Debt premium and mortgage recording tax		3,298			487			(1,556	)
E.S.O.P. dividends		—			(1,307	)		—
Dividends exclusion — federal income tax returns		(148	)		(174	)		(149	)
Provided at other than statutory rate		—			(1	)		(2	)
Medicare Act		(7,489	)		(3,579	)		—
Subsidiaries		—			136			250
Deferred investment tax credit reversal		(2,866	)		(2,866	)		(2,872	)
Other		938			(4,310	)		(3,302	)
Total		10,699			11,581			39,490
Federal and state income taxes	$	187,194		$	159,952		$	135,971

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

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The deferred tax liabilities (assets) were comprised of the following:

as at March 31 (in thousands of dollars)	2006			2005
Alternative minimum tax	$	117,618		$	111,609
Unbilled revenues		26,205			23,458
Non-utilized NOL carryforward		—			105,212
Liability for environmental costs		191,307			198,621
Voluntary early retirement program		42,089			47,558
Bad debts		52,498			29,474
Pension and other post-retirement benefits		248,446			185,324
Other		268,092			209,550
Total deferred tax assets		946,255			910,806
Depreciation related		(979,936	)		(921,928	)
Investment tax credit related		(37,811	)		(40,677	)
Deferred environmental restoration costs		(186,842	)		(200,175	)
Merger rate plan stranded costs		(795,184	)		(848,182	)
Merger fair value pension and OPEB adjustment		(109,478	)		(128,188	)
Bond redemption and debt discount		(30,009	)		(25,056	)
Pension and other post-retirement benefits		(50,832	)		(88,830	)
Other		(275,169	)		(61,969	)
Total deferred tax liabilities		(2,465,261	)		(2,315,005	)
Net accumulated deferred income tax liability		(1,519,006	)		(1,404,199	)
Current portion (net deferred tax asset)		168,354			307,431
Net accumulated deferred income tax liability (non-current)	$	(1,687,360	)	$	(1,711,630	)

The Company has been audited and reported on by the Internal Revenue Service (IRS) through January 31, 2002.

The Company and other related subsidiaries of National Grid USA have participated with National Grid Holdings, Inc. (NGHI), a wholly owned subsidiary of National Grid plc, in filing consolidated US federal income tax returns since joining the NGHI consolidated filing group upon the Company’s January 31, 2002 acquisition by National Grid. The Company’s tax provisions and tax accounts are calculated on a separate company basis. Federal income tax returns have been examined and all appeals and issues have been agreed upon by the Internal Revenue Service (IRS) and the Company through January 31, 2002, the acquisition date and final tax return year end date of the Company’s former consolidated filing group prior to its acquisition by National Grid. In addition, federal income tax returns have been examined and all appeals and issues have been agreed upon by the IRS and the NGHI consolidated filing group through March 22, 2000. The IRS is currently reviewing the March 31, 2001 and March 31, 2002 tax returns of the NGHI consolidated filing group which the Company joined upon its acquisition. The IRS has issued a preliminary notice of deficiency disallowing certain tax deductions taken in these consolidated US federal income tax returns. These adjustments are being appealed. The Company has joint and several liability for any potential assessments against the consolidated group, for periods since it joined the group in February 2002. Management believes that the positions taken by the Company and its related subsidiaries and parent company are appropriate and the resolution of the tax matters will not have a material effect on the Company’s financial position, results of operations or cash flows.

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

45

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 net operating loss (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 Holdings, Inc. The consolidated tax filing group was able to utilize the remaining NOL carryforward, which was $301 million as of March 31, 2006, in the 2005 fiscal year. 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.

There were no valuation allowances for deferred tax assets at March 31, 2006 or 2005.

NOTE H — EMPLOYEE BENEFITS

Summary

The Company has a non-contributory defined benefit pension plan covering substantially all employees. The pension plan is a cash balance pension plan design and under that design, pay-based credits are applied based on service time, and interest credits are applied based on an average annual 30-year Treasury bond yield. In addition, a large number of employees hired by the Company prior to July 1998 are cash balance design participants who receive a larger benefit if so yielded under pre-cash balance conversion final average pay formula provisions. Employees hired by the Company following the August 1998 cash balance design conversion participate under cash balance design provisions only.

A supplemental nonqualified, non-contributory executive retirement program provides additional defined pension benefits for certain executives.

The Company provides post-retirement benefits other than pensions (PBOPs). PBOPs include health care and life insurance coverage to eligible retired employees. Eligibility is based on certain age and length of service requirements and in some cases retirees must contribute to the cost of their coverage.

Governed by the PSC’s “Statement of Policy Concerning the Accounting and Ratemaking Treatment for Pensions and Postretirement Benefits Other than Pensions” (SOP), the SOP dictates the accounting policy for the plans and requires amortization of unrecognized prior service costs and unrecognized gains and losses over a 10-year period calculated on a vintage year basis.

Funding Policy

Funding policy is determined largely by the Company’s settlement agreements with the PSC and what is recovered in rates. However, the contribution for any year will not be less than the minimum contribution required by federal law or greater than the maximum tax-deductible amount.

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Plan Assets

The target asset allocations for the benefit plans are:

	Pension Benefits						Non-Union PBOPs						Union PBOPs
	2006			2005			2006			2005			2006			2005
U.S. equities		42	%		47	%		30	%		50	%		49	%		45	%
Global equities (including U.S.)		6	%		7	%		—			—			—			—
Non-U.S. equities		12	%		11	%		20	%		5	%		21	%		15	%
Fixed income		35	%		35	%		50	%		45	%		30	%		40	%
Private equity and property		5	%		—			—			—			—			—
		100	%		100	%		100	%		100	%		100	%		100	%

The percentage of the fair value of total plan assets at March 31:

	Pension Benefits						Non-Union PBOPs						Union PBOPs
	2006			2005			2006			2005			2006			2005
U.S. equities		46	%		46	%		29	%		54	%		50	%		52	%
Global equities (including U.S.)		8	%		8	%		—			—			—			—
Non-U.S. equities		13	%		12	%		20	%		5	%		22	%		16	%
Fixed income		33	%		34	%		51	%		41	%		28	%		32	%
Private equity and property		—			—			—			—			—			—
		100	%		100	%		100	%		100	%		100	%		100	%

The Company manages benefit plan investments to minimize the long-term cost of operating the Plans, with a reasonable level of risk. Risk tolerance is determined as a result of a periodic asset/liability study which analyzes plan liabilities and plan funded status and results in the determination of the allocation of assets across equity and fixed income securities. Equity investments are broadly diversified across U.S. and non-U.S. stocks, as well as across growth, value, and small and large capitalization stocks. Likewise, the fixed income portfolio is broadly diversified across the various fixed income market segments. Small investments are also held in private equity, with the objective of enhancing long-term returns while improving portfolio diversification. For the PBOP plan, since the earnings on a portion of the assets are taxable, those investments are managed to maximize after tax returns consistent with the broad asset class parameters established by the asset allocation study. Investment risk and return is reviewed by the investment committee on a quarterly basis.

The estimated rate of return for various passive asset classes is based both on analysis of historical rates of return and forward looking analysis of risk premiums and yields. Current market conditions, such as inflation and interest rates, are evaluated in connection with the setting of the long-term assumption. A small premium is added for active management of both equity and fixed income. The rates of return for each asset class are then weighted in accordance with the target asset allocation, and the resulting long-term return on asset rate is then applied to the market-related value of assets.

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Assumptions used for Benefits Accounting

The following weighted average assumptions were used to determine the pension and PBOP benefit obligations and net periodic costs for the fiscal years ending March 31.

	Pension Benefits						PBOP
	2006			2005			2006			2005
Benefit obligations
Discount rate		6.00	%		5.75	%		6.00	%		5.75	%
Rate of compensation increase		3.90	%		3.90	%		n/a			n/a
Expected long-term rate of return		8.00	%		8.25	%		7.81	%		8.21	%
Health care cost trend rate
Initial		n/a			n/a			n/a			10.00	%
Pre 65*		n/a			n/a			10.00	%		n/a
Post 65*		n/a			n/a			11.00	%		n/a
Ultimate		n/a			n/a			5.00	%		5.00	%
Year ultimate rate is reached		n/a			n/a			n/a			2010
Pre 65*		n/a			n/a			2011			n/a
Post 65*		n/a			n/a			2012			n/a

* In fiscal year 2006, the health care cost trend assumption was updated to include rates for the pre 65 and post 65 age groups.

	Pension Benefits									PBOP
	2006			2005			2004			2006			2005			2004
Net periodic benefit cost
Discount rate		5.75	%		5.75	%		6.25	%		5.75	%		5.75	%		6.25	%
Rate of compensation increase		3.90	%		3.25	%		3.25	%		n/a			n/a			n/a
Expected long-term rate of return		8.25	%		8.50	%		8.50	%		8.16	%		8.26	%		8.00	%
Health care cost trend rate
Initial		n/a			n/a			n/a			10.00	%		10.00	%		10.00	%
Ultimate		n/a			n/a			n/a			5.00	%		5.00	%		5.00	%
Year ultimate rate reached		n/a			n/a			n/a			2010			2009			2008

The expected contributions to the Company’s pension and PBOP plans during fiscal year 2007 are approximately $75 million and $81 million, respectively.

For the calculation of fiscal year 2007 pension and PBOP expense, the expected long-term rates of return on plan assets will be changed to 8% for the qualified pension plan, 7% for the nonunion PBOP plan, and 8% for the union PBOP plan.

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Pension Benefits

The Company’s net periodic benefit cost for the years ended March 31, 2006, 2005 and 2004 included the following components:

(in thousands of dollars)	2006			2005			2004
Service cost	$	32,483		$	29,324		$	28,093
Interest cost		75,370			71,014			74,863
Expected return on plan assets		(67,431	)		(67,787	)		(71,391	)
Amortization of unrecognized prior service cost		3,454			1,851			1,160
Amortization of unrecognized loss		34,268			26,269			18,026
Net periodic benefit costs before settlement / curtailments		78,144			60,671			50,751
Special termination benefits		—			—			14,300
Settlement and curtailment loss		—			185			21,798
Net periodic benefit costs	$	78,144		$	60,856		$	86,849

The following table provides a reconciliation of the plans’ fair value of assets for the fiscal years 2006 and 2005.

(in thousands of dollars)	2006			2005
Fair value of plan assets at beginning of period	$	830,469		$	845,900
Actual return on plan assets		107,337			52,246
Company contributions		76,181			81,730
Benefits paid		(110,411	)		(148,350	)
Settlements		—			(1,057	)
Fair value of plan assets at end of period	$	903,576		$	830,469

The following table provides the changes in the Company’s pension plans’ benefit obligations, reconciliation of the benefit obligation, funded status and the amounts recognized in the balance sheet at March 31:

(in thousands of dollars)	2006			2005
Accumulated benefit obligation	$	1,218,180		$	1,265,181
Benefit obligation at beginning of period	$	1,379,059		$	1,298,548
Service cost		32,483			29,324
Interest cost		75,370			71,014
Actuarial (gain) loss		(35,141	)		98,380
Plan amendments		—			31,201
Benefits paid		(110,411	)		(148,350	)
Settlements		—			(1,058	)
Benefit obligation at end of period	$	1,341,360		$	1,379,059

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(in thousands of dollars)	2006			2005
Funded status	$	(437,784	)	$	(548,590	)
Unrecognized actuarial loss		200,422			309,737
Unrecognized prior service cost		36,885			40,339
Net amount recognized on the balance sheet	$	(200,477	)	$	(198,514	)

(in thousands of dollars)	2006			2005
Amounts recognized on the balance sheet consist of:
Employee pension liability	$	(314,604	)	$	(434,712	)
Intangible asset		36,885			40,339
Regulatory assets		75,252			194,302
Accumulated other comprehensive income, before taxes		1,990			1,557
Net amount recognized	$	(200,477	)	$	(198,514	)

The following pension benefit payments, which reflect expected future services, as appropriate, are expected to be paid from the Company’s pension plans:

(in millions of dollars)	Pension Benefits
2007		$	108
2008		$	110
2009		$	111
2010		$	115
2011		$	120
2012-2016		$	639

Additional Minimum Pension Liability

The Company has recorded an additional minimum pension liability of approximately $114 million and $236 million at March 31, 2006 and 2005, respectively, for its pension plans because the pension plans’ accumulated benefit obligation was in excess of the accrued pension liability on the balance sheet. While the offset to this entry would normally be an after-tax charge to other comprehensive income, due to the nature of its rate plan, the Company has instead recorded a pre-tax regulatory asset.

Defined contribution plan

The Company also has a defined contribution pension plan (employee savings fund plan) that covers substantially all employees. Employer matching contributions of approximately $7 million were expensed for the each of the fiscal years ended March 31, 2006, 2005 and 2004.

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Postretirement Benefit Plans Other than Pensions: The Company’s total cost of PBOPs for the fiscal years ended March 31, 2006, 2005 and 2004 included the following components:

(in thousands of dollars)	2006			2005			2004
Service cost	$	18,887		$	13,160		$	8,629
Interest cost		70,519			62,887			57,952
Expected return on plan assets		(45,819	)		(45,798	)		(34,578	)
Amortization of unrecognized prior service cost		14,568			5,915			—
Amortization of unrecognized net loss		30,516			24,310			22,996
Special termination benefits		—			—			641
Net periodic benefit costs	$	88,671		$	60,474		$	55,640

The following table provides a reconciliation of the PBOP plans’ fair value of assets for the fiscal years ended March 31, 2006 and 2005.

(in thousands of dollars)	2006			2005
Fair value of plan assets at beginning of period	$	589,917		$	589,478
Actual return on plan assets during year		69,721			31,836
Company contributions		19,700			27,600
Benefits paid from plan assets		(62,708	)		(58,997	)
Fair value of plan assets at end of period	$	616,630		$	589,917

The following tables provide the reconciliation of the benefit obligation and the funded status of the PBOP plans at March 31:

(in thousands of dollars)	2006			2005
Benefit obligation at beginning of period	$	1,268,233		$	1,059,003
Service cost		18,887			13,160
Interest cost		70,519			62,887
Actuarial loss		33,745			39,897
Plan amendments		—			152,967
Benefits paid		(65,651	)		(59,681	)
Benefit obligation at end of period	$	1,325,733		$	1,268,233

(in thousands of dollars)	2006			2005
Funded status	$	(709,103	)	$	(678,317	)
Unrecognized prior service cost		132,484			147,052
Unrecognized actuarial loss		247,986			268,659
Net amount recognized	$	(328,633	)	$	(262,606	)

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As a result of the Medicare Act of 2003, the Company receives a federal subsidy for sponsoring a retiree healthcare plan that provides a benefit that is actuarially equivalent to Medicare Part D. The following PBOP benefit payments and subsidies, which reflect expected future service, as appropriate, are expected to be paid and received:

(in millions of dollars)	Payments		Subsidies
2007	$	68	$	4
2008	$	71	$	4
2009	$	74	$	5
2010	$	77	$	5
2011	$	80	$	5
2012-2016	$	392	$	28

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

(in thousands of dollars)	2006			2005
Increase 1%
Total of service cost plus interest cost	$	17,330		$	13,985
Post-retirement benefit obligation	$	215,617		$	196,034
Decrease 1%
Total of service cost plus interest cost	$	(14,329	)	$	(11,629	)
Post-retirement benefit obligation	$	(185,317	)	$	(169,719	)

Settlement Losses

Under SFAS No. 88 “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” the Company must recognize a portion of unrecognized gains or losses immediately when payouts from the plans exceed a certain amount. The Company recognized a loss of approximately $22 million in fiscal 2004 relating to the re-measurement of the benefit plans from the voluntary early retirement offer.

In July 2004, the Company obtained PSC approval that would provide rate recovery for approximately $14 million of the $30 million pension settlement loss incurred in fiscal 2003. In addition, the agreement covers the funding of the entire settlement loss to benefit plan trust funds. The Company has filed a petition with the PSC seeking recovery of a $22 million pension settlement loss incurred in fiscal year 2004.

Regulatory treatment of pensions and PBOP 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 post-retirement benefit plans” includes certain other components. First, the Company is required under the Merger Rate Plan to defer the difference between pension and post-retirement benefit expense and the allowance in rates for these costs. Also, the regulatory asset account includes the unamortized portion of the merger related early retirement program costs, a post-retirement benefit phase-in deferral established in the mid-1990’s, and the offset to the additional minimum pension liability discussed above. The merger related early retirement program costs are being amortized unevenly over the 10 years of the Merger Rate Plan with larger amounts being amortized in the earlier years. This amortization in fiscal 2006 and 2005 was approximately $4

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million and $7 million, respectively. The phase-in deferral is being amortized at a rate of approximately $3 million per year.

NOTE I — 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 thousands of dollars)				per share
	March 31,		March 31,		March 31,		March 31,		(Before adding
Series	2006		2005		2006		2005		accumulated dividends)
Preferred $100 par value:
3.40%		57,536		57,536	$	5,754	$	5,754	$	103.50
3.60%		137,139		137,139		13,714		13,714		104.85
3.90%		94,967		94,967		9,496		9,496		106.00
4.10%		52,830		52,830		5,283		5,283		102.00
4.85%		35,128		35,128		3,513		3,513		102.00
5.25%		34,115		34,115		3,410		3,410		102.00
Total preferred stock		411,715		411,715	$	41,170	$	41,170

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NOTE J — SEGMENTS

Segmental information is presented in accordance with management responsibilities and the economic characteristics of the Company’s business activities. The Company is primarily engaged in the business of the purchase, transmission and distribution of electricity and the purchase, distribution, sale and transportation of natural gas in New York State. The Company’s reportable segments are electricity-transmission, electricity-distribution, and gas-distribution. Certain information regarding the Company’s segments is set forth in the following tables. Corporate assets consist primarily of other property and investments, cash, restricted cash, current deferred income taxes and unamortized debt expense. 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 amounts charged directly to certain operating expense accounts or certain plant accounts.

			Electricity-Distribution
					Electricity -		Total
	Electricity -		Electricity –		Stranded Cost		Electricity-		Gas –
(in millions of dollars)	Transmission		Distribution		Recoveries		Distribution		Distribution		Corporate		Total
Year ended March 31, 2006
Operating revenue	$	261	$	2,550	$	496	$	3,046	$	1,037	$	—	$	4,344
Operating income before income taxes		105		346		184		530		105		—		740
Depreciation and amortization		35		131		—		131		38		—		204
Amortization of stranded costs		—		—		267		267		—		—		267
Year ended March 31, 2005
Operating revenue	$	255	$	2,376	$	486	$	2,862	$	808	$	—	$	3,925
Operating income before income taxes		105		286		176		462		105		—		672
Depreciation and amortization		35		129		—		129		37		—		201
Amortization of stranded costs		—		—		251		251		—		—		251
Year ended March 31, 2004
Operating revenue	$	255	$	2,457	$	572	$	3,029	$	780	$	—	$	4,064
Operating income before income taxes		93		234		183		417		68		—		578
Depreciation and amortization		35		130		—		130		36		—		201
Amortization of stranded costs		—		—		194		194		—		—		194

			Electricity-Distribution
						Electricity -		Total
	Electricity -		Electricity –			Stranded Cost		Electricity -			Gas –
	Transmission		Distribution			Recoveries		Distribution			Distribution		Corporate		Total
Goodwill
Goodwill, at March 31, 2005	$	303	$	706		$	—	$	706		$	215	$	—	$	1,224
Change in goodwill		—		(9	)		—		(9	)		—		—		(9	)
Goodwill, at March 31, 2006	$	303	$	697		$	—	$	697		$	215	$	—	$	1,215
Total Assets
At March 31, 2006	$	1,595	$	5,302		$	3,051	$	8,353		$	1,931	$	402	$	12,281
At March 31, 2005	$	1,557	$	5,193		$	3,402	$	8,595		$	1,819	$	547	$	12,518

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NOTE K — STOCK BASED COMPENSATION

Prior to the Company’s merger with National Grid, stock appreciation rights (SARs) tied to the price of Holdings’ share price were granted to officers, key employees and directors. The table below sets forth the activity under the SARs program for the periods March 31, 2004 through March 31, 2006. Since SARs are payable in cash, the accounting under APB No. 25 and SFAS No. 123R is the same.

	SARs
	Shares
Outstanding at March 31, 2004		341,268
Exercised		(93,146	)
Outstanding at March 31, 2005		248,122
Exercised		(87,680	)
Outstanding at March 31, 2006		160,442

The Company’s SARs program 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, the acquisition of Holdings’ by National Grid was completed and outstanding Holdings’ SARs were converted to National Grid Group plc 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 the ADS price of National Grid Group plc over the vesting period of the award.

Included in the Company’s results of operations for years ended March 31, 2006 and 2005, is approximately $1 million of expense for each year related to the SARs program.

NOTE L — DERIVATIVES AND HEDGING ACTIVITIES

In the normal course of business, the Company is party to derivative financial instruments (derivatives) that are principally used to manage commodity prices 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 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 volumes consistent with its core business. The Company does not issue or intend to hold derivative instruments for speculative trading purposes. Derivatives are accounted for in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which requires derivatives to be reported at fair value as assets or liabilities on the balance sheet. The change in fair value of instruments that qualify for hedge accounting are deferred in Accumulated Other Comprehensive Income and will be reclassified through purchased electricity or purchased gas expense within the next twelve months. Other instruments are deferred in regulatory assets or liabilities according to current rate agreements and are reclassified through purchased electricity or gas expense in the hedge months. The Company’s rate agreements allow for the pass-through of the commodity costs of electricity and natural gas, including the costs of the hedging programs.

The Company has eight indexed swap contracts, expiring in fiscal year 2009 (June 2008), that resulted from the MRA. These derivatives are not designated as hedging instruments and are

55

covered by regulatory rulings that allow the gains and losses to be recorded as regulatory assets or regulatory liabilities. As of March 31, 2006 and 2005, the Company had recorded liabilities at net present value of $537 million and $619 million, respectively, for these swap contracts and had recorded a corresponding swap contracts regulatory asset. The asset and liability are amortized over the remaining term of the swaps as nominal energy quantities are settled and they are adjusted as periodic reassessments are made of energy price forecasts.

At March 31, 2006, the Company projects that it will make the following payments in connection with its swap contracts for the fiscal years 2007 through 2009, subject to changes in market prices and indexing provisions:

	Projected
	Payment
Year Ended	(in thousands
March 31,	of dollars)
2007	$	246,551
2008		246,173
2009		44,729
Thereafter		—
Total	$	537,453

The Company uses New York Mercantile Exchange (NYMEX) gas futures to hedge the gas commodity component of its indexed swap contracts. These instruments, as used, do not qualify for hedge accounting status under SFAS No. 133. Cash flow hedges that qualify under SFAS No. 133 are as follows: NYMEX gas futures for the purchases of natural gas and NYMEX electric swap contracts hedging the purchases of electricity.

The following table represents the open positions at March 31, 2006 and the results on operations of these instruments for the year ended March 31, 2006.

(In thousands of dollars)				Balances as of March 31, 2006
												Year Ended
									Accumulated			March 31, 2006
						Accumulated			Deferred			Gain/(Loss)
				Regulatory		OCI** ,			Income Tax			Reclass to
Derivative Instrument	Asset*			Deferral		net of tax			on OCI**			Commodity Costs
Qualified for Hedge Accounting
NYMEX futures — gas supply	$	(5,358.8	)	$	—	$	4,943.0		$	(3,296.0	)	$	35,956.6
NYMEX electric swaps — electric supply	$	317.5		$	—	$	(190.5	)	$	127.0		$	3,260.2
Non-Qualified for Hedge Accounting
NYMEX futures — IPP swaps/non-MRA IPP	$	(27,195.9	)	$	31,718.1	$	—		$	—		$	59,464.9

*	Differences between asset and regulatory or other comprehensive income deferral represent contracts settled for the following month.
**	Other Comprehensive Income (OCI)

At March 31, 2005, the Company in part recorded a deferred gain on the futures contracts hedging the IPP swaps and non-MRA IPP of $30 million, which partially offset the consolidated balance sheet item “Derivative instruments” for $27 million, with the resulting $3 million having

56

settled through cash for the hedge month of April 2005. For the twelve months ended March 31, 2005, settlement of NYMEX futures contracts resulted in a decrease to purchased power expense of $19 million.

The gains and losses on the derivatives that are deferred and reported in accumulated other comprehensive income will be reclassified as purchased energy expense in the periods in which expense is impacted by the variability of the cash flows of the hedged item. For the twelve months ended March 31, 2006, the realized net gain of $36 million from hedging instruments, as shown in the table above, was recorded to gas purchases and was offset by a corresponding increase in the cost of a comparable amount of gas. For the twelve months ended March 31, 2005, a realized net gain of $8 million was recorded to gas purchases and was offset by a corresponding decrease in the cost of a comparable amount of gas.

The actual amounts to be recorded in purchased energy expense are dependent on future changes in the contract values. The majority of these deferred amounts will be reclassified to expense within the next twelve months. A nominal amount of the hedging instruments extend into April 2007. There were no gains or losses recorded during the fiscal year ended March 31, 2006 from the discontinuance of gas futures or electric swap cash flow hedges.

At March 31, 2006, the deferred gain on NYMEX electric swap contracts to hedge electricity purchases was $0.3 million. There were no open electric swaps at March 31, 2005.

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% 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 SEC orders with respect to the amount of dividends it can make to Holdings. As long as the Company remains rated Investment Grade, it 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 — COST OF REMOVAL AND ASSET RETIREMENT OBLIGATION

In 2001, FASB issued SFAS No. 143. SFAS No. 143 provides accounting requirements for retirement obligations associated with tangible long-lived assets. The Company was required to adopt SFAS No. 143 as of April 1, 2003. Retirement obligations associated with long-lived assets included within the scope of SFAS No. 143 are those for which there is a legal obligation under existing or enacted law, statute, written or oral contract, or by legal construction under the doctrine of promissory estoppel.

Under the Company’s current and prior rate plans it has collected through rates an implied cost of removal for its plant assets. This cost of removal collected from customers differs from the SFAS No. 143 definition of an asset retirement obligation in that these collections are for costs to remove an asset when it is no longer deemed usable (i.e. it is broken or obsolete) and not necessarily from a legal obligation. For a vast majority of its electric and gas transmission and

57

distribution assets, the Company would use these funds to remove the asset so a new one could be installed in its place.

The cost of removal collections from customers has historically been embedded within accumulated depreciation (as these costs have been charged over time through depreciation expense). With the adoption of SFAS No. 143, the Company has reclassified these cost of removal collections to a regulatory liability account to more properly reflect the future usage of these collections. The Company estimates it has collected over time approximately $338 million and $318 million for cost of removal through March 31, 2006 and 2005, respectively.

In March 2005, the FASB issued FIN 47 that clarifies that the term ‘conditional asset retirement obligation’ used in SFAS No. 143 refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the Company. This statement is effective for the Company for its fiscal year ended March 31, 2006. The Company has a $10 million asset retirement obligation reserve as of March 31, 2006 which does not have a material impact on the Company’s results of operations or financial position.

NOTE O — QUARTERLY FINANCIAL DATA (UNAUDITED)

Operating revenues, operating income, and net income by quarter from April 1, 2004 through March 31, 2006 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. The Company’s consolidated financial statements for the fiscal year ended March 31, 2006 included out-of-period adjustments. The out-of-period adjustments had a positive impact of $7 million on reported net income for the fiscal year ended March 31, 2006 and an offsetting negative impact on several prior fiscal years. The adjustments were recorded in fiscal year 2006 because they did not meet the materiality threshold for prior period restatement.

		(In thousands of dollars)
		Operating		Operating		Net
Quarter Ended		Revenues		Income		Income
March 31,	2006	$	1,294,825	$	179,746	$	120,172
	2005		1,215,027		164,521		116,679
December 31,	2005		1,109,285		119,502		63,304
	2004		907,037		116,611		55,517
September 30,	2005		981,081		131,043		76,251
	2004		912,868		114,948		50,218
June 30,	2005		958,832		119,385		57,349
	2004		890,239		104,614		40,835

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

There is no disagreement or reportable event required to be reported under this Item 9.

ITEM 9A. CONTROLS AND PROCEDURES

The Company has carried out an evaluation under the supervision and with the participation of its management, including the Chief Financial Officer and President, of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can provide only reasonable assurance of achieving their control objectives. Based on and as of that evaluation, it was determined that these disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed in reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported as and when required.

During the most recent fiscal quarter, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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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		49	President and Director
John G. Cochrane		48	Chief Financial Officer
Joseph T. Ash, Jr.		57	Vice President, Energy Supply, Pricing and Regulatory Proceedings
Paul J. Bailey		48	Controller
Barbara A. Hassan		56	Senior Vice President and Director
Michael E. Jesanis		49	President and Chief Executive Officer of National Grid USA and Director
Michael J. Kelleher		48	Senior Vice President, Business Services, and Director
Clement E. Nadeau		54	Senior Vice President, Operations, and Director
Anthony C. Pini		53	Senior Vice President, Customer Service, and Director
Cheryl A. LaFleur		51	Executive Vice President, Chief Operating Officer of National Grid USA, and Director
Lawrence J. Reilly		50	Executive Vice President and General Counsel of National Grid USA
Masheed H. Saidi		51	Vice President, and Senior Vice President, Transmission, National Grid USA Service Company, Inc.
Steven W. Tasker		48	Senior Vice President and Treasurer

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. 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 or she was selected as an officer.

Mr. Edwards was elected President of the Company and appointed a director 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 an Executive Vice President of National Grid USA Service Company and is a director of the Service Company and of National Grid USA.

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 is its Treasurer, an Executive Senior Vice President and a director.

Mr. Ash has served as Vice President, Energy Supply, Pricing and Regulatory Proceedings since July 2003. He was Vice President, Gas Delivery, from December 1998 to April 2002.

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Mr. Bailey was elected Controller effective January 2006. He also serves as Controller of National Grid USA Service Company, Inc. Mr. Bailey was Vice President of Finance and Administration of Harvard Bioscience, Inc. from October 2003 until September 2005, when he joined National Grid. From 1998 to 2002, Mr. Bailey worked for Thermo Electron Corporation as the Controller of its analytical instruments business, formerly known as Thermo Instrument Systems, Inc.

Ms. Hassan was elected Senior Vice President and a director in April 2006. Since May 2000, she has served as Senior Vice President of the Company’s New England electricity distribution affiliates.

Mr. Jesanis was elected director of the Company in January 2002. He became President of National Grid USA in November 2003 having been its Chief Operating Officer and responsible for the day-to-day operations since January 2001. Mr. Jesanis is also a director of National Grid USA and an executive director of National Grid plc.

Mr. Kelleher was elected Senior Vice President of the Company effective May 1, 2004 and was elected a director in May 2006. He served as Vice President of National Grid USA from January 2002 to March 2004 and as its Treasurer from April 2002 to April 2003. Prior to that, he served as Vice President Financial Planning of Niagara Mohawk Power Corporation from 1999 to 2001.

Ms. LaFleur was elected director of the Company in April 2006. She also became Executive Vice President and Chief Operating Officer of National Grid USA in April 2006, having been a Senior Vice President since March 2000. She serves as a director of National Grid USA and the Company’s four New England electric distribution affiliates and was President of the four distribution affiliates from January 2001 until April 2006.

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

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. Reilly has been Secretary and General Counsel of National Grid USA since January 2001 and is a Director and Executive Vice President of National Grid USA.

Ms. Saidi has served as Vice President since November 2005, when she was also elected Senior Vice President of National Grid USA Service Company with responsibility for National Grid’s US transmission operations. From 1998 to 2004, Ms. Saidi was a Vice President of the Company’s transmission affiliate, New England Power Company, and from 2004 to 2005 she served as Senior Vice President and Chief Operating Officer of GridAmerica.

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.

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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 % 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 fiscal year ended March 31, 2004.

Senior Financial Officer Code of Ethics

The Company has adopted a code of ethics that applies to its principal executive officer, principal financial officer and principal accounting officer. This code is available on the National Grid plc website, at www.nationalgrid.com, where any amendments or waivers will also be posted. There were no amendments to, or waivers under, the Company’s Code of Ethics in the fiscal year ended March 31, 2006.

The inclusion of National Grid plc’s website address in this annual report does not, and is not intended to, incorporate the contents of its website into this report and such information does not constitute part of this annual report.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the compensation paid or accrued for services rendered to Niagara Mohawk in the fiscal years ended March 31, 2006, 2005 and 2004 by the president and the four most highly paid persons who were serving as executive officers on March 31, 2006 (the Named Executive Officers).

					Annual Compensation (a)
							Other Annual
Name and Principal							Compensation		All Other Compensation
Position	Year		Salary($)		Bonus($)(b)		($)(c)		($)(d)(e)
William F. Edwards		2006		435,000		665,637		6,850		540
President		2005		420,000		266,410		3,675		540
		2004		399,994		210,000		7,000		270
John G. Cochrane (f)		2006		193,737		108,533		8,409		4,336
Chief Financial Officer		2005		166,900		110,001		7,300		3,876
		2004		146,181		99,044		5,276		2,952
Michael E. Jesanis (f)		2006		358,646		294,162		7,177		3,886
President & CEO, National		2005		259,534		203,511		3,686		2728
Grid USA		2004		225,015		146,390		6,773		2,682
Michael J. Kelleher Senior Vice President		2006		205,000		108,191		6,997		1,590
Business Services		2005		203,333		108,352		130,640		9,540
Clement E. Nadeau		2006		230,917		121,855		6,325		1,008
Senior Vice President		2005		218,750		151,091		6,150		828
Operations		2004		210,000		120,250		11,096		5,889

(a) Includes deferred compensation in category and year earned.

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(b)	The bonus figure represents cash bonuses and the fair market value of unrestricted securities of National Grid plc awarded under an incentive compensation plan and cash bonuses awarded under the all-employees goals program. For Mr. Edwards, it also includes a special cash bonus associated with the completion of certain corporate objectives.
(c)	Includes amounts reimbursed for the payment of taxes on certain non-cash benefits and contributions to the incentive thrift plan that are not bonus contributions.
(d)	Includes Company contributions to life insurance. Also includes the value of financial services provided to Messrs. Jesanis, Cochrane and Kelleher.
(e)	No options or stock appreciation rights were awarded in fiscal 2004, 2005 or 2006.
(f)	Messrs. Cochrane and Jesanis perform service for affiliate companies. Compensation that is allocable to Niagara Mohawk is set forth in the table.

Long-Term Incentive Plans — Awards in Last Fiscal Year

The following table sets forth awards made under the National Grid Performance Share Plan to the Named Executive Officers during fiscal 2006.

				Estimated Future Payouts
	Number of			Threshold		Maximum
Name	Shares (#)		Performance Period	(#)		(#)
William F. Edwards		4,481	July 1, 2005 through June 30, 2008		1,344		4,481
John G. Cochrane		4,574	July 1, 2005 through June 30, 2008		1,372		4,574
Michael E. Jesanis		21,634	July 1, 2005 through June 30, 2008		6,490		21,634
Michael J. Kelleher		2,122	July 1, 2005 through June 30, 2008		637		2,122
Clement E. Nadeau		2,880	July 1, 2005 through June 30, 2008		864		2,880

Under the National Grid Performance Share Plan, executives receive notional allocations of American Depositary Shares of National Grid. Shares vest after three years, subject to the satisfaction of the relevant performance criteria which are set at the date of grant and measured over a three-year period. Shares must then be held for a further year, after which they are released. For the grants set forth above, the relevant criteria are total shareholder return (TSR) performance and earnings per share (EPS) growth . Vesting of fifty percent of the award is subject to TSR performance relative to the TSR performance of companies in the FTSE 100. Vesting of the other fifty percent of the award is subject to National Grid EPS growth versus the UK inflation rate as measured by the UK Retail Price Index (RPI). The proportion of the original award of shares that will transfer to participants will depend on National Grid’s performance against each of these measurements. For the TSR criterion, National Grid must achieve median TSR ranking relative to TSR performance of the FTSE 100 companies in order for participants to realize the threshold payout of 30% of the original award. It must achieve more than 7.5 percentage point above median relative to the FTSE 100 companies for participants to achieve the maximum payout of 100% of the original award. For the EPS criterion, National Grid’s EPS must exceed RPI by a minimum of 3 percentage points to realize the threshold of 30% of the original award. To achieve the maximum payout, National Grid’s EPS must exceed RPI growth by 6 percentage points.

Option/SAR Exercises in Fiscal Year 2005 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 2006, the realized value or spread (the difference

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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.

					Number of Securities
					Underlying Unexercised
					Options on March 31, 2006				Value of Unexercised Options
			Value		(#)				on March 31, 2006 ($)(a)(b)
	Options		Realized						Exercisable		Unexercisable
Name	Exercised (#)		($)		Exercisable		Unexercisable		(b)		(c)
William F. Edwards		0		0		56,206			$	88,997
John G. Cochrane		0		0		92,395		32,620	$	73,780		0
Michael E. Jesanis		0		0		143,960		51,169	$	112,790		0
Michael J. Kelleher		0		0		33,724			$	53,399
Clement E. Nadeau		0		0		29,508			$	46,723

(a)	Calculated based on the closing price on March 31, 2006 of National Grid plc ordinary shares traded on the London Stock Exchange (£5.725).
(b)	A conversion rate of $1.74/£1.00 was used to translate the option value, which is the exchange rate for the National Grid companies’ balance sheet at March 31, 2006.
(c)	The performance condition associated with grants of stock options made on June 18, 2001 to Messrs. Cochrane and Jesanis was tested in March 2006 and was not met. As a result, these options have lapsed and are no longer exercisable.

The following table sets forth, for the Named Executive Officers, exercises of SARs in fiscal year 2006, 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.

					Number of Securities
					Underlying Unexercised
	SARs		Value		SARs At Fiscal				Value of Unexercised SARs
	Exercised		Realized		Year-End (#)				At Fiscal Year-End ($)(a)
Name	(#)		($)		Exercisable		Unexercisable		Exercisable		Unexercisable
William F. Edwards		0		0		0		0		0		0
John G. Cochrane		0		0		0		0		0		0
Michael Jesanis		0		0		0		0		0		0
Michael J. Kelleher		0		0		0		0		0		0
Clement E. Nadeau		12,312	$	308,703		0		0		0		0

(a) SAR grants were made under Niagara Mohawk’s Long Term Incentive Plan which was terminated when its parent, Niagara Mohawk Holdings, Inc. merged with a subsidiary of National Grid USA. At that time, outstanding grants of SARs were converted to SARs over National Grid Group American Depositary Shares using a specified exchange ratio.

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Pension Plans

Executive Supplement Retirement Benefit Table

Five-Year
Average	Annual Annuity Value Based On Years of Service
Compensation	15 Years		20 Years		25 Years		30 Years		35 Years		40 Years
$150,000	$	42,874	$	56,166	$	69,082	$	81,999	$	90,040	$	94,540
$200,000	$	58,874	$	77,166	$	94,957	$	112,749	$	124,040	$	130,040
$250,000	$	74,874	$	98,166	$	120,832	$	143,499	$	158,040	$	165,540
$300,000	$	90,874	$	119,166	$	146,707	$	174,249	$	192,040	$	201,040
$350,000	$	106,874	$	140,166	$	172,582	$	204,999	$	226,040	$	236,540
$400,000	$	122,874	$	161,166	$	198,457	$	235,749	$	260,040	$	272,040
$450,000	$	138,874	$	182,166	$	224,332	$	266,499	$	294,040	$	307,540
$500,000	$	154,874	$	203,166	$	250,207	$	297,249	$	328,040	$	343,040
$550,000	$	160,124	$	210,166	$	258,957	$	307,749	$	340,290	$	355,290
$600,000	$	165,374	$	217,166	$	267,707	$	318,249	$	352,540	$	367,540
$650,000	$	170,624	$	224,166	$	276,457	$	328,749	$	364,790	$	379,790
$700,000	$	175,874	$	231,166	$	285,207	$	339,249	$	377,040	$	392,040
$750,000	$	181,124	$	238,166	$	293,957	$	349,749	$	389,290	$	404,290
$800,000	$	186,374	$	245,166	$	302,707	$	360,249	$	401,540	$	401,541
$850,000	$	191,624	$	252,166	$	311,457	$	370,749	$	413,790	$	428,790
$900,000	$	196,874	$	259,166	$	320,207	$	381,249	$	426,040	$	441,040
$1,000,000	$	207,374	$	273,166	$	337,707	$	402,249	$	450,540	$	465,540
$1,100,000	$	217,874	$	287,166	$	355,207	$	423,249	$	475,040	$	490,040
$1,200,000	$	228,374	$	301,166	$	372,707	$	444,249	$	499,540	$	514,540
$1,300,000	$	238,874	$	315,166	$	390,207	$	465,249	$	524,040	$	539,040
$1,400,000	$	249,374	$	329,166	$	407,707	$	486,249	$	548,540	$	563,540
$1,500,000	$	259,874	$	343,166	$	425,207	$	507,249	$	573,040	$	588,040
$1,600,000	$	270,374	$	357,166	$	442,707	$	528,249	$	597,540	$	612,540

The table above shows the maximum retirement benefit an executive officer can earn in aggregate under the applicable tax-qualified plan (described below) together with the ESRP. In developing the ESRP benefit, final compensation includes both base salary and annual incentive pay. The benefit calculations are made as of March 31, 2006 and assume the officer has selected a straight life annuity commencing at age 65. Annual compensation limits of $210,000 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.

For purposes of the pension program, the Named Executive Officers had approximately the following credited years of benefit service at March 31, 2006: William F. Edwards, 27 years; John G.Cochrane, 25 years; Michael E. Jesanis, 22 years; Michael J. Kelleher, 17 years; and Clement E. Nadeau, 33 years.

Tax-Qualified Pension Plans: National Grid USA Companies Final Average Pay Pension Plan and Niagara Mohawk Pension Plan.

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Depending on their company origin prior to the merger of Niagara Mohawk Holdings with a subsidiary of National Grid USA, the Named Executive Officers 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 (Nimo Plan). Both FAPP and the Nimo Plan are noncontributory, tax-qualified defined benefit plans which between them provide a retirement benefit to substantially all employees of the National Grid USA companies. Pension benefits are related to compensation, subject to the maximum annual limits noted in the table above.

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 Nimo 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 base salary) plus interest credits. Messrs. Edwards, Kelleher and Nadeau will receive the retirement benefit resulting from the higher of the two formulas.

Nonqualified Pension Plan: Executive Supplemental Retirement Plan

The Executive Supplemental Retirement Plan (ESRP) is a noncontributory, nonqualified defined benefit plan that provides additional retirement benefits to each of the Named Executive Officers and other members of management who are eligible to receive either a FAPP or Nimo Plan benefit and whose compensation exceeds legal limits under the applicable plan, whose deferred compensation is not eligible for inclusion under the FAPP or NiMo 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, enhance the qualified plan formula, give credit for more years of service, take into account certain deferred compensation, and/or award benefits not otherwise payable due to limits on benefits that can be provided under the qualified plan. Mr. Nadeau and other ESRP participants who formerly participated in the Niagara Mohawk Supplemental Executive Retirement Plan (Niagara Mohawk SERP) are entitled to the pension benefit paid under the NiMo Plan, plus the higher of the pension benefit paid under the ESRP or that paid under the Niagara Mohawk SERP. The SERP benefit paid under the Niagara Mohawk was frozen at the time of the merger of Niagara Mohawk Holdings with a subsidiary of National Grid USA. For Mr. Nadeau, that amount is frozen as an annual annuity of $45,770. Mr. Edwards and Mr. Kelleher received the Niagara Mohawk SERP benefit at the merger and are eligible to receive a pension benefit under the ESRP, to be offset by the SERP benefit already received.

Employment Contracts, Termination of Employment and Change-in-Control Arrangements

Employment contracts. Of the Named Executive Officers, only Mr. Jesanis has an employment contract. His agreement sets forth his salary and certain benefits, and provides for 12 months’ written notice for termination other than for cause or disability. There are no termination or change-in-control arrangements particular to Mr. Jesanis.

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Termination without cause. For termination without cause, each of the Named Executive Officers except for Mr. Jesanis is entitled to a lump sum equal to two times his annualized base pay and bonus under the National Grid USA Companies’ Executive Severance Plan. The plan also provides for a lump sum payment to cover the employer’s contribution toward health insurance premiums for 18 months, a pro-rated bonus if the executive worked at least six months that year and outplacement counseling for 18 months.

Change in control. Under the National Grid USA Companies’ Incentive 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.

Messrs. Edwards and Cochrane each have a change of control agreement with National Grid USA providing for severance payments and benefits in the event that employment is terminated without cause or the executive terminates with good reason within 36 months after a change in control or other qualifying transaction. In addition to any other compensation and benefits payable under executive plans, but subject to certain limits tied to applicable tax law, the executive will be entitled to a lump sum cash payment equal to three times the sum of his annual base salary plus bonus; a lump sum cash payment for the amount he would have accrued under each pension plan had he remained employed for an additional 36 months; and reimbursement of legal fees and expenses, if any, that he incurs in disputing in good faith any issue relating to the agreement.

Post-employment health and life insurance. At retirement, the Named Executive Officers may become eligible for post-retirement health and life insurance benefits determined based on their age and years of service. The executive may be required to contribute to the cost of benefits. Under a retiree health care plan applicable to Messrs. Cochrane and Jesanis, post-employment health care benefits are protected for three years following a change in control. Messrs. Cochrane, Edwards and Jesanis have agreements that provide for three times base pay life insurance coverage for life. Mr. Edwards has an agreement providing for health care benefits for him and his dependents for their lifetimes.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table indicates the number of ordinary shares of National Grid plc beneficially owned as of June 1, 2006 by: (a) each of the Named Executive Officers; (b) each director of the Company; 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. Niagara Mohawk Holdings, Inc. owns all of the common stock of the Company.

67

	Number of Shares
Name	Beneficially Owned*
William F. Edwards		98,921
John G. Cochrane		95,775
Michael E. Jesanis		147,240
Michael J. Kelleher		33,724
Clement E. Nadeau		45,753
Barbara A. Hassan		48,513
Cheryl A. LaFleur		76,664
Anthony C. Pini		76,007
All directors and executive officers as a group (13 persons) (a) (b)		889,317

*	This number is expressed in terms of ordinary shares. It includes American Depositary Shares listed on the New York Stock Exchange, each of which represents five ordinary shares.
(a)	The Company’s directors and executive officers are listed in Item 10.
(b)	Includes shares held by Mr. Reilly’s spouse.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

PricewaterhouseCoopers LLP served as an independent registered public accounting firm of the Company for the fiscal year ended March 31, 2006.

Audit Fees

The aggregate fees billed by PricewaterhouseCoopers LLP for the audit of the Company’s financial statements and regulatory filings for the fiscal year ended March 31, 2006, and the reviews of quarterly reports on Form 10-Q filed during the fiscal year ended March 31, 2006 were $815,360. Fees billed by PricewaterhouseCoopers LLP for the audit of the Company’s financial statements and regulatory filings for the fiscal year ended March 31, 2005, and the reviews of quarterly reports on Form 10-Q filed during the fiscal year ended March 31, 2005 were $749,900.

Audit-related fees

There were no fees billed by PricewaterhouseCoopers LLP for assurance and related services that were reasonably related to the performance of the audit or review of the Company’s financial statements and are not disclosed under “Audit Fees” above in fiscal 2006.

Tax Fees

Fees billed by PricewaterhouseCoopers LLP to the Company for tax compliance, tax advice and tax planning were $42,489 in fiscal year 2006. Aggregate fees billed by PricewaterhouseCoopers LLP for these fees were $1,600 in fiscal year 2005.

68

All Other Fees

During the fiscal year ended March 31, 2006, the Company was billed fees by PricewaterhouseCoopers LLP totaling $95,700 for Sarbanes-Oxley Section 404 related services.

The Company did not pay any other type of fee for any other services from PricewaterhouseCoopers LLP during the fiscal year ended March 31, 2006.

The Company’s stockholders appoint the Company’s independent registered public accounting firm, with the approval of the Audit Committee of the Company’s indirect parent company, National Grid plc. Subject to any relevant legal requirements and National Grid plc’s Articles of Association, the Audit Committee is solely and directly responsible for the approval of the appointment, re-appointment, compensation and oversight of the Company’s independent registered public accounting firm. The Audit Committee must approve in advance all non-audit work to be performed by the independent registered public accounting firm.

During the fiscal year ended March 31, 2006, all of the above-described services provided by PricewaterhouseCoopers LLP were pre-approved by the Audit Committee.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Financial Statements

• Report of Independent Registered Public Accounting Firm

• Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income, and Consolidated Statements of Retained Earnings for each of the three years in the period ended March 31, 2006.

• Consolidated Balance Sheets at March 31, 2006 and 2005.

• Consolidated Statements of Cash Flows for each of the three years in the period ended March 31, 2006.

• Notes to the Consolidated Financial Statements.

Exhibits

The exhibit index is incorporated herein by reference.

Financial Statement Schedule

Schedule II – Valuation and Qualifying Accounts and Reserves

69

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, 2006	$	126,084	$	41,308	$	44,082	$	123,310
Year ended March 31, 2005		124,231		44,779		42,926		126,084
Year ended March 31, 2004		100,223		64,102		40,094		124,231

(a) Uncollectible accounts written off net of recoveries.

70

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
Date: June 29, 2006	By:	/s/ William F. Edwards
		William F. Edwards
		President

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below on June 29, 2006 by the following persons on behalf of the registrant and 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	President and Director (Principal Executive Officer)
William F. Edwards
/s/ John G. Cochrane John G. Cochrane	Chief Financial Officer (Principal Financial Officer)
/s/ Paul J. Bailey Paul J. Bailey	Controller (Principal Accounting Officer)
/s/ Michael E. Jesanis Michael E. Jesanis	Director
/s/ Clement E. Nadeau Clement E. Nadeau	Director
/s/ Barbara A. Hassan Barbara A. Hassan	Director
/s/ Michael J. Kelleher Michael J. Kelleher	Director

71

Signature	Title
/s/ Cheryl A. LaFleur Cheryl A. LaFleur	Director
/s/ Anthony C. Pini Anthony C. Pini	Director

72

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

73

Reference	Name
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
DD	Niagara Mohawk Annual Report on Form 10-K for the fiscal year ended March 31, 2003
EE	Niagara Mohawk Annual Report on Form 10-K for the fiscal year ended March 31, 2004
FF	New England Electric System Annual Report on Form 10-K for the fiscal year ended December 31, 1997
GG	New England Electric System Annual Report on Form 10-K for the fiscal year ended December 31, 1998

74

Reference	Name
HH	New England Power Company Annual Report on Form 10-K for the fiscal year ended March 31, 2002
II	National Grid Group Registration Statement on Form S-8 filed July 26, 2001
JJ	National Grid Group Annual Report on Form 20-F for the fiscal year ended March 31, 2002
KK	National Grid Transco Annual Report on Form 20-F for the fiscal year ended March 31, 2004
LL	National Grid Transco Annual Report on Form 20-F for the fiscal year ended March 31, 2005
MM	Niagara Mohawk Annual Report on Form 10-K for the fiscal year ended March 31, 2005
NN	National Grid plc Annual Report on Form 20-F for the fiscal year ended March 31, 2006

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 % of the total consolidated assets of the Company and its subsidiaries.

75

	INCORPORATION BY REFERENCE
EXHIBIT	PREVIOUS	PREVIOUS EXHIBIT
NO.	FILING	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

76

	INCORPORATION BY REFERENCE
EXHIBIT	PREVIOUS	PREVIOUS EXHIBIT
NO.	FILING	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

77

	INCORPORATION BY REFERENCE
EXHIBIT	PREVIOUS	PREVIOUS EXHIBIT
NO.	FILING	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

78

	INCORPORATION BY REFERENCE
EXHIBIT	PREVIOUS	PREVIOUS EXHIBIT
NO.	FILING	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

79

	INCORPORATION BY REFERENCE
EXHIBIT	PREVIOUS	PREVIOUS EXHIBIT
NO.	FILING	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

80

	INCORPORATION BY REFERENCE
EXHIBIT	PREVIOUS	PREVIOUS EXHIBIT
NO.	FILING	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

81

	INCORPORATION BY REFERENCE
EXHIBIT	PREVIOUS	PREVIOUS EXHIBIT
NO.	FILING	DESIGNATION	DESCRIPTION
3(b)	U	3(i)	By-Laws of Niagara Mohawk, as amended March 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.

82

	INCORPORATION BY REFERENCE
EXHIBIT	PREVIOUS	PREVIOUS EXHIBIT
NO.	FILING	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)

83

	INCORPORATION BY REFERENCE
EXHIBIT	PREVIOUS	PREVIOUS EXHIBIT
NO.	FILING	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(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)	DD	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)	DD	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

84

	INCORPORATION BY REFERENCE
EXHIBIT	PREVIOUS	PREVIOUS EXHIBIT
NO.	FILING	DESIGNATION	DESCRIPTION
4(e)(3)	DD	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)	DD	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)	DD	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)	DD	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)	DD	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)	DD	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
4(e)(9)	EE	4(e)(9)	Supplemental Indenture , dated as of December 1, 2003, between Niagara Mohawk Power Corporation and HSBC Bank USA, as Trustee

85

	INCORPORATION BY REFERENCE
EXHIBIT	PREVIOUS	PREVIOUS EXHIBIT
NO.	FILING	DESIGNATION	DESCRIPTION
4(e)(10)	EE	4(e)(10)	First Supplemental Participation Agreement, dated as of December 1, 2003, between New York State Energy Research and Development Authority and Niagara Mohawk Power Corporation relating to $45,600,000 Pollution Control Refunding Revenue Bonds, 1991 Series A
4(e)(11)	EE	4(e)(11)	Supplemental Indenture, dated as of May 1, 2004, between Niagara Mohawk Corporation and HSBC Bank USA, as Trustee
4(e)(12)	EE	4(e)(12)	Participation Agreement, dated as of May 1, 2004, between New York State Energy Research and Development Authority and Niagara Mohawk Power Corporation relating to Pollution Control Revenue Bonds, 2004 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
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

86

	INCORPORATION BY REFERENCE
EXHIBIT	PREVIOUS	PREVIOUS EXHIBIT
NO.	FILING	DESIGNATION	DESCRIPTION
10(i)	GG	10(y)	Severance Protection Agreement between New England Electric System and John G. Cochrane dated March 1, 1998
	MM	10(i)	Amendment to Severance Protection Agreement dated December 9, 1998
			Amendment to Severance Protection Agreement dated March 15, 2003
			Amendment to Severance Protection Agreement dated September 1, 2003
10(j)	MM	10(j)	Letter Agreement between National Grid USA and William F. Edwards dated January 16, 2002
			Agreement between National Grid USA and William F. Edwards effective March 15, 2005
10(k)	LL	4.5	Service Agreement among National Grid Transco plc, National Grid USA and Michael E. Jesanis dated July 8, 2004
10(l)	GG	10(y)	Severance Protection Agreement between New England Electric System and Lawrence J. Reilly dated February 25, 1997
	MM	10(l)	Amendment to Severance Protection Agreement dated December 9, 1998
			Amendment to Severance Protection Agreement dated March 15, 2003
10(m)	HH	10(l)	National Grid USA Companies’ Deferred Compensation Plan Amended and Restated December 6, 2001
	MM	10(n)	Amendment to National Grid USA Companies’ Deferred Compensation Plan dated April 1, 2002
	MM	10(n)	Amendment to National Grid USA Companies’ Deferred Compensation Plan dated September 1, 2003
	*		Amendment to National Grid USA Companies’ Deferred Compensation Plan dated December 22, 2005

87

	INCORPORATION BY REFERENCE
EXHIBIT	PREVIOUS	PREVIOUS EXHIBIT
NO.	FILING	DESIGNATION	DESCRIPTION
10(n)	MM	10(o)	National Grid USA Companies’ Executive Severance Plan Amended and Restated March 1, 2003
			Amendment to National Grid USA Companies’ Executive Severance Plan dated September 1, 2003
10(o)	HH	10(n)	National Grid USA Companies’ Executive Supplemental Retirement Plan Revised and Restated December 21, 2001
	MM	10(p)	Amendment to National Grid USA Companies’ Executive Supplemental Retirement Plan dated February 1, 2002
			Amendment to National Grid USA Companies’ Executive Supplemental Retirement Plan dated August 1, 2003
			Amendment to National Grid USA Companies’ Executive Supplemental Retirement Plan dated September 1, 2003
10(p)	FF	10(o)	New England Electric Companies’ Executive Retirees Health and Life Insurance Plan as Amended and Restated January 1, 1996
10(q)	MM	10(r)	National Grid USA Companies’ Incentive Compensation Plan as Amended and Restated March 1, 2003
			Amendment to National Grid USA Companies’ Incentive Compensation Plan dated September 1, 2003
10(r)	KK	4.19	National Grid Transco Performance Share Plan 2002 (as approved July 23, 2002 by a resolution of the shareholders of National Grid Group plc, adopted October 17, 2002 by a resolution of the Board of National Grid Group plc, amended June 26, 2003 by the Share Schemes Sub-Committee of National Grid Transco plc, and amended May 5, 2004 by the Share Schemes Sub-Committee of National Grid Transco plc)
	JJ	4(c)	National Grid Executive Share Option Plan 2002
	JJ	4(c)	National Grid Group Share Matching Plan 2002
	II	4C	National Grid Executive Share Option Plan 2000
	II	4D	National Grid Executive Share Option Scheme
10(s)	MM	10(u)	Niagara Mohawk Long Term Incentive Plan as amended through September 28, 2000

88

	INCORPORATION BY REFERENCE
EXHIBIT	PREVIOUS	PREVIOUS EXHIBIT
NO.	FILING	DESIGNATION	DESCRIPTION
10(t)	Q	10-24	Niagara Mohawk Supplemental Executive Retirement Plan Amended and Restated as of January 1, 1999
	MM	10(v)	Amendment 1 to the Niagara Mohawk Supplemental Executive Retirement Plan dated December 17, 1999
			Amendment to Niagara Mohawk Supplemental Executive Retirement Plan dated August 17, 2001
10(u)	NN	4(c).16	National Grid plc Deferred Share Plan
10(v)	*		National Grid USA Companies’ Executive Life Insurance Plan
10(w)	*		Collateral Assignment Agreement between New England Power Service Company and John Cochrane
10(x)	*		Collateral Assignment Agreement between New England Power Service Company and Michael E. Jesanis dated March 23, 1993
10(y)	*		Collateral Assignment Agreement between National Grid USA Service Company, Inc. and Barbara A. Hassan dated July 1, 2000
10(z)	*		Collateral Assignment Agreement between New England Power Service Company and Cheryl A. LaFleur dated January 1, 1996
10(aa)	*		Collateral Assignment Agreement between Massachusetts Electric Company and Anthony C. Pini
10(bb)	*		Key Executive Plan of Eastern Utilities Associates, and First Amendment to the Eastern Utilities Associates Key Executive Plan
10(cc)	*		Split Dollar Assignment Insurance Agreement between EUA Service Corporation and Barbara A. Hassan effective as of February 1, 1995
21	*		Subsidiaries of the Registrant
31.1	*		Certifications of Principal Executive Officer
31.2	*		Certifications of Principal Financial Officer
32	*		Certifications furnished pursuant to 18 U.S.C. 1350

* Filed herewith.

89

EX-10.(M) 2 b61381nmexv10wxmy.txt EX-10.(M) AMENDMENT TO DEFERRED COMPENSATION PLAN Exhibit 10(m) LYDIA PASTUSZEK DECEMBER 22, 2005 NATIONAL GRID USA MICHAEL E. JESANIS - CEO DEFERRED COMPENSATION PLAN SUMMARY 1. This paper seeks approval for further amending the Deferred Compensation Plan (the Plan) as necessary for compliance with Section 409A of the Internal Revenue Code (added under the American Jobs Creation Act of 2004) and to reflect decisions made regarding Plan design since the Deferred Compensation Plan White Paper dated February 1, 2005 (the Previous White Paper). BACKGROUND 2. Authorization was obtained in February to modify the Plan in ways that would both deliver desirable design features and Section 409A requirements. Since that time (in October) the Department of Treasury issued further guidance on Section 409A in the form of proposed regulations. Further, Human Resources has undertaken the task of implementing certain transition re-elections and design modifications for which it now seeks amending authority and ratification of implementation. 3. The below reflects the final design that is recommended for approval, which approval is intended to supersede any inconsistent design elements approved in the Previous While Paper. PROPOSED AMENDMENTS 4. Plan Year As noted in the Previous While Paper, the plan will operate on a calendar year basis for base pay deferrals. Deferral deadlines for such deferrals as well as for other types of pay are set forth in Paragraph 9 below. 5. Types of Pay In clarification of the Previous White Paper, pay will be deferrable as follows: Base Pay From 1% to 75% ICP Cash Bonus* From 1% to 100% Incentive Share Award* All or none Performance Share Plan Award (grants**) All or none * Includes Group Executive Director cash and Deferred Share Plan awards made in lieu of ICP cash and share awards. ** Includes grants made in June 2005 and those made in future fiscal years. Deferrals of Group Performance Share Plan awards and Group Director Deferred Share Plan awards under the Plan will be administered to take into account the fact that those plan are subject to Section 409A. 6. Deferral duration As noted in the Previous While Paper, participants be given the following options with regard to duration of deferral: - 10 years - Separation from service* - ages 55 through 75 * In clarification of the Previous White Paper, all Section 409A covered deferrals payable upon Separation from Service will be delayed for 6 months following Separation from Service to comply with "Key Employee" provisions of Section 409A. 7. Distribution types As noted in the Previous While Paper, two distribution types will be offered: - Lump sum - Annual installments, 2 - 10 8. Distribution re-election In clarification of the Previous White Paper, participants will be permitted to re-elect the timing and type of distribution subject to applicable restrictions under Section 409A, including that the re-election: - must be made no less than 12 months prior to the date distributions were scheduled to commence under the original "initial" election; - will not be effective for 12 months; - must provide for the future payment date or commencement at least five years later than initially elected; and - may not accelerate the payment of distributions. For example, if a participant initially elected 10 annual installments, at re-election that participant would not be able to elect a lump sum payable in five years. However, the reelection may postpone the distribution. For example, if a participant elected a lump sum, he or she can re-elect a series of 10 installments commencing 5 years from the date the lump sum was otherwise payable. As a matter of plan design, a participant will not be permitted to change a series of annual payments to a lump sum payment. 9. Timing of Elections It is recommended that the Plan be amended to reflect the following: Base Pay - Elections are proposed to be based upon a calendar year commencing in 2006. As a transition matter, participants were solicited for deferral of base pay for the period April 1, 2005 through December 31, 2005 prior to March 15, 2005 in anticipation of the change in base pay deferral elections to a calendar year. ICP Cash Bonus and Incentive Share Award (ICP Bonus/Share Award) - Elections for the fiscal year ending March 31, 2006 ICP Bonus/Share Award (payable in June 2006) were made under the "performance based compensation" provisions of Section 409A in September 2005. It is recommended that elections for the fiscal year ending March 31, 2007 ICP Bonus/Share Award (payable in June 2007) be completed prior to the end of the preceding fiscal year (March 31, 2006) consistent with fiscal year bonus compensation provisions under Section 409A. Further, it is recommended that future ICP Bonus/Share Awards be solicited in the same manner. Performance Share Awards - Elections for grants made in a particular fiscal year (usually June) will be made prior to the end of the preceding fiscal year. New Participants - Elections for Base Pay, ICP Bonus/Share Awards and/or Performance Share Awards will be solicited consistent with the requirements of Section 409A for new entrants. 10. Transition Re-Elections - It is recommended that the Plan be amended to reflect the following: Base Pay - Consistent with Section 409A transition rules, participants who had outstanding base pay deferrals made on a fiscal year base in 2004 (which carried over from 2004 into 2005) were permitted to either (1) cancel the election for the period January 1, 2005 through March 31, 2005 (and were taxed accordingly) or (2) re-elect to defer the applicable compensation under deferral period and payment options designed to comply with Section 409A. That solicitation occurred prior to March 15, 2005 as required under then applicable Section 409A regulations. ICP Cash Bonus and Incentive Share Award - Consistent with Section 409A transition rules, participants who had outstanding deferral elections made in 2004 under prior plan provisions effective against cash bonus and/or share awards payable in June 2005 were permitted to either (1) cancel the deferral election or (2) re-elect to defer the applicable bonus and/or share award under deferral period and payment options designed to comply with Section 409A. That solicitation occurred prior to March 15, 2005 as required under applicable Section 409A transition rules. 11. Death, Disability, Unforeseeable Emergency, and Change in Control. A participant's deferrals will be paid out upon his or her death to the participant's beneficiary(ies) consistent with the beneficiary provisions adopted earlier in the year. Section 409A limits the circumstances under which initial deferral elections may be superseded on account of Disability, Unforeseeable Emergency or Change in Control as defined in Section 409A. Final recommendations have not been made on these features. 12. Termination. It is recommended that the right to terminate the plan and pay out a lump sum be reserved to the extent permitted under applicable provisions of Section 409A. 13. Executive Supplemental Retirement Plan (ESRP) Included in the types of plans to which these new requirements apply are supplemental executive retirement plans - our ESRP. Additional regulations are expected to be issued relative to ESRP accruals in early 2006. Recommendations regarding the ESRP will be made following the issuance of those regulations. 14. Executive Share Options. Options are not a permissible form of deferrable compensation under Section 409A and are therefore not included under the Plan. REQUESTED ACTION 15. Mike Jesanis is asked to NOTE this paper and APPROVE the requested amendments relative to deferrals made during 2005 as well as future deferrals, and to ratify all actions taken consistent therewith. APPROVAL I, Michael E. Jesanis, hereby approve the requested amendments to the National Grid USA Companies' Deferred Compensation Plan by White Paper from Lydia Pastuszek dated February 1, 2005 as further amended by this White Paper from Lydia Pastuszek dated December 21, 2005. /s/ Date: 12/22/05 - --------------------------------- Michael E. Jesanis Chief Executive Officer National Grid USA LYDIA PASTUSZEK FEBRUARY 1, 2005 NATIONAL GRID USA MICHAEL E. JESANIS - CEO DEFERRED COMPENSATION PLAN SUMMARY 1. This paper seeks approval for amendments to the Deferred Compensation Plan necessary for compliance with the American Jobs Creation Act of 2004. BACKGROUND 2. Due to a number of Internal Revenue Service (IRS) restrictions on the Incentive Thrift Plan (401k), our qualified tax favored retirement savings plan, National Grid USA provides a non-qualified tax deferred savings plan for executives in ICP I and II. The plan is called the Deferred Compensation Plan (DCP) and allows participants to defer from income taxation amounts that exceed IRS qualified plan limits. The Plan operates on a fiscal year basis, April 1 to March 31. Elections are made each March for the following fiscal year. By this schedule, executives are considering deferral treatment of bonuses to be paid 15 months in the future. 3. Types of pay Eligible Executives can elect to defer: - Base pay from 1% to 15% - Incentive Compensation Plan (ICP) bonuses from 1% to 100% - Incentive Share Awards all or none 4. Deferral period and distributions Eligible executives may elect to defer payment until: - 10 years - Lump sum only - Retirement - Lump sum - Three, five or ten annual installments Distributions prior to the elected time are permissible only upon death, disability, financial hardship or change in control. Distributions that are due upon "Retirement" may generally be changed to a new form of payment up to 6 months in advance of retirement. 5. Investment Options Participants elect to allocate their deferrals to any of three "phantom" investments. No actual securities are purchased or held for individual participants. Rather, these investments are used merely to determine account value from time to time. - Prime Rate of interest - S&P 500 Index - National Grid ADR's Participants are permitted to reallocate their account balances only during the last 10 trading days in each calendar quarter with the trade effective as of the closing price of investments on the final trading day. 6. Rabbi Trust The majority of the future payout liability to participants has been funded through a Rabbi Trust which protects participants from the unwillingness of the Company to pay, but not the inability to pay resulting from insolvency. In the event of insolvency, ail participants with an account balance become unsecured creditors of the Company. RECENT LEGISLATIVE CHANGES 7. American Jobs Creation Act of 2004 Recent corporate accounting scandals and high profile executive compensation abuses have resulted in the enactment of new Federal legislation relative to these plans effective January 1, 2005. In order to comply with the new requirements, several significant changes to our plan will be required. 8. Plan Year All of the terminology and timing references in both the law and the initial guidance speak to a calendar plan year operation. This is primarily due to the fact that individual participants all have a calendar year tax year regardless of the Company's fiscal year. While there were initial indications that allowance would be made for fiscal year plans, none was included in the initial guidance and it is not clear what, if any, guidance accommodating fiscal year plans may be forthcoming. 9. Initial Deferral Election The election to defer base pay must be made for a one year period, no later than the last day of the preceding year. Deferral election of bonus pay must be made no later than six months prior to the end of the bonus earned period. At the initial deferral election, participants must elect both the point in time at which distributions are to be made and the form those distributions will take. Permissible Timing Options 1. A fixed time period, i.e. 10 years 2. A specified date, i.e. 55th birthday 3. Separation from service - regardless of reason Once elected, the distribution may not be accelerated to an earlier date except in the case of death, disability, change in control or unforeseen emergency. For both the Change in Control and the unforeseen emergency, further regulations are required in order to understand the limitations. Further, for "Key Employees" which includes all Plan eliglbles for us, distributions that are scheduled to be paid out upon separation from service may not commence for at least 6 months following separation from service. 10. Distribution re-election No less than 12 months prior to the initially elected distribution date, participants will be permitted to re-elect the timing and type of distribution with the following two limitations: - The reelection must provide for the future payment date or commencement at least five years later than initially elected - The reelection cannot accelerate the payment of distributions. For example, if a participant initially elected 10 annual installments, at re-election that participant would not be able to elect a lump sum payable in five years. However, the reelection may postpone the distribution. For example, if a participant elected a lump sum, he she can re-elect a series of 10 installments commencing 5 years hence. PROPOSED AMENDMENTS 11. Plan Year We recommend that the plan be amended to operate on a calendar year basis. Base pay deferrals would be solicited each December for the upcoming calendar year and bonus deferral elections would be solicited each September for the bonus payable the following June. 12. Types of Pay We recommend the following pay types and percentages be deferrable: Base Pay From 1% to 75% ICP Cash Bonus From 1% to 100% Incentive Share Award All or none Option Exercise (future) All or none Performance Share Award (future) All or none (Under review) Additional work is needed to define the election timing for future option and performance share grants and to ensure that their inclusion will not create administrative or reporting problems in the UK. 13. Deferral duration We recommend that participants be given the following options with regard to duration of deferral: - 10 years - Separation from service - ages 55 through 75 This combination wiil provide maximum flexibility at both initial election and subsequent reelection to ensure the participant receives payments as he/she sees fit. 14. Distribution types As for the types of distribution, we recommend that two choices be offered as foliows: - Lump sum - Annual installments, 2 - 10 15. Investment Options While we do not recommend any change in the Plan's investment options, we do recommend that participants be permitted to reallocate their account balances on a daily basis just like the 401k. The current restrictive policy was implemented when a.) the Rabbi Trust held a large number of NEES Shares matched to the shares liability of the plan, and b.) there was a very close relationship maintained between the shares held in the trust and the shares allocated to participant accounts. There were concerns that allowing frequent reallocation rights would produce frequent and costly trading practices within the Rabbi Trust. Since the Rabbi Trust does not hold National Grid ADR's as an investment - due to the absence of favorable treatment on dividends - and the Trust is managed more on a global basis in support of all non-qualified benefit liabilities, there is no longer a need to worry about Trust transactions mirroring participant elections on a contemporaneous basis. The Trust's investment can be managed on a periodic basis and rebalanced if necessary to conform to participant investment elections. 16. Executive Supplemental Retirement Plan (ESRP) Included in the types of plans to which these new requirements apply are supplemental executive retirement plans - our ESRP. At this time, it is not clear how participation in or operation of the ESRP is affected by the law. Upon issuance of regulations that are expected later this year, we will apprise you of the impacts and seek any necessary amendments to ensure the plan remains in compliance. 17. Executive Share Options and Performance Share Awards All those eligible for the Deferred Compensation Plan have also been issued share option grants and/or performance share awards. At this time, it appears that it will not be possible to allow deferral of exercised options or receipt of performance shares for grants already made. Although it does appear that deferral of future performance share awards was anticipated by the law, it is not clear what impact such a deferral would have on NGT's books nor how it may affect Executive Director reporting/disclosures. We will resolve these issues in advance of the 2005 grant process so that the proper election process can be scheduled if approved by the UK. 18. Miscellaneous provisions The current "grandfathered" plan provisions that permit expedited payouts upon a "change in control" with a 10% haircut, upon dissolution of the participant's employer, or upon the failure of the company to make payments, will continue to be honored for prior deferrals but will not be permitted for new deferrals (although there will be some allowance for expedited payments upon an Act defined "change in control"). The Rabbi Trust document and operations will be amended to conform with applicable Act provisions as well. 19. Approach to amendments The new law restricts the Company from making any material modifications to existing deferred compensation arrangements. The consequences and penalties for violation of this are substantial and apply to plan participants. Therefore, we will not be permitted to adopt any of the favorable changes relative to amounts already deferred. Further, while many Companies are adopting entirely new plans to avoid any possible confusion or concerns, adoption of a new plan could raise many issues around UK listing authority rules and/or shareholder approval. To avoid those concerns, pending concurrence from the UK, we recommend that the current Deferred Compensation Plan be amended in a way that clearly isolates past deferrals from future deferrals. 20. REMCO review Since Mike Jesanis is a participant in the plan, REMCO review of these amendments will be required. We are also evaluating whether any additional approvals are required. REQUESTED ACTION 21. Mike Jesanis is asked to NOTE this paper and APPROVE the requested amendments. EX-10.(V) 3 b61381nmexv10wxvy.txt EX-10.(V) NATIONAL GRID USA EXECUTIVE LIFE INSURANCE PLAN Exhibit 10(v) NEW ENGLAND ELECTRIC SYSTEM COMPANIES LIFE INSURANCE PROGRAM FOR EXECUTIVES I FOR [_______________________] TABLE OF CONTENTS

Page ---- Section 1. The Program.................................................. 1 Section 2. Prior Insurance Program...................................... 2 Section 3. Vesting and Forfeiture....................................... 2 Section 4. Life Insurance Policy........................................ 2 Section 5. Death Benefit................................................ 4 Section 6. Termination of Agreement..................................... 4 Section 7. Benefits Upon Termination of Employment During the Executive's Lifetime......................................... 5 Section 8. Policy Premiums.............................................. 6 Section 9. Return of Premiums........................................... 7 Section 10. Withdrawals from Policy; Release of Assignment............... 7 Section 11. Liability and Limitation of Obligation....................... 7 Section 12. Named Fiduciary, Determination of Benefits, Claims Procedure and Administration........................................... 8 Section 13. Notices...................................................... 10 Section 14. Binding Effect............................................... 11 Section 15. Governing Law................................................ 11 Section 16. Further Documentation........................................ 11 Section 17. Amendments and Transfers Within the New England Electric System Companies............................................. 11 Section 18. Interpretation of Agreement.................................. 11 Section 19. No Implied Right to Employment............................... 12

COLLATERAL ASSIGNMENT LIFE INSURANCE PROGRAM I Agreement entered into as of the 1ST day of __________, between New England Power Service Company, a Commonwealth of Massachusetts corporation (the Company), and _______________ (the Executive). Section 1. The Program The program provides the Executive death benefits and post-retirement ownership of the cash assets of the related policy. The program is designed with a goal of three times the Executive's base pay (rounded up to the nearest even whole thousand) at the time of death (the Target Benefit). During employment, the first $50,000 of the coverage is to be provided by the Company's group term life insurance policy. For the purposes of this Agreement, "annual base pay" means the annualized compensation being paid to the Executive on the day of determination (or, if greater, the highest compensation paid to the Executive during any 12-month period of employment), including compensation deferred under other plans but excluding bonuses (such as NEES Goals and Incentive Compensation bonuses ) and contributions made by the Company to or under any form of employee benefit program and employer contributions under the New England Electric System Companies Incentive Thrift Plan, and "final annual base pay" means the Executive's annualized base pay on the last day of employment (or, if greater, the highest compensation paid to the Executive during any 12-month period of employment). Section 2. Prior Insurance Program 2 The Executive hereby waives the benefits under the Company's group term-life insurance policy, and the New England Electric System Companies Life Insurance Program for Executive II, to the extent that the benefit provided to the Executive's beneficiaries, in accordance with Section 5, from the Policy (as hereinafter defined) equals the Target Benefit. This waiver does not extend to any optional benefits under the group term-life policy. To the extent that such waiver is ineffective, the amount of the death benefit provided under the Policy and otherwise payable hereunder to the beneficiary or beneficiaries designated by the Executive shall be correspondingly reduced and the amount payable to the Company shall be correspondingly increased. Section 3. Vesting and Forfeiture Subject to the provisions of Section 6, the Executive is 100% vested in his benefits under this Program. Section 4. Life Insurance Policy One or more split-dollar life insurance policies listed in Exhibit A hereto (the Policy) have been or will be purchased on the life of the Executive by the Company. The issuer or issuers of the Policy are hereinafter referred to as the Insurer. Purchase of insurance policies either now or at later dates may require proof of insurability at that time. To the extent that necessary insurance policies are not reasonably available at a later date, benefits will be provided under the Company's group term-life insurance policy so that the total death benefit to the Executive's beneficiaries during his employment is three times base pay. (a) Interest in the Policy 3 The Executive shall be the sole owner of the Policy and may exercise all ownership rights granted to the owner thereof by the terms of the Policy, except as may otherwise be provided herein. Except as otherwise provided herein, the Executive shall not sell, assign, transfer, borrow against, surrender, or cancel the Policy, change the beneficiary designation provision, or terminate the dividend election without the express written consent of the Company. (b) Collateral Assignment To secure the right of the Company to the Excess Value and/or the Company's Cost (both as hereafter defined), the Executive will, contemporaneously herewith, assign the Policy to the Company as collateral, using a form substantially similar to that attached hereto as Exhibit B. The collateral assignment of the Policy to the Company hereunder shall not be terminated, altered, or amended by the Executive, without the express written consent of the Company. (c) Assignment of Executive's Interest The Executive shall have the right to make an absolute assignment of his entire interest, or any portion thereof, in the Policy at any time to any person or persons, subject to the collateral assignment of the policy to the Company pursuant to subsection (b) hereof. Upon delivery of a signed copy of such assignment to the Company, all, or such portion, of the rights, obligations, and duties of the Executive thereunder (subject to the collateral assignment of the Company) and hereunder shall pass to and be binding upon such assignee (including the right to make further assignments) and the Executive shall have no further interest whatsoever in the Policy, or such portions. (d) Company's Cost 4 For the purposes of this Agreement, the Company's Cost means the amount of the premiums on the Policy paid by it hereunder, less any withdrawals by the Company from the Policy in accordance with Section 10. (e) Dividends Any dividend declared on the Policy shall be applied to purchase paid-up additional insurance on the life of the Executive. The dividend election provisions of the Policy shall conform to the provisions hereof. Section 5. Death Benefit Upon the death of the Executive, the beneficiary or beneficiaries designated by the Executive shall be paid directly, in the manner and in the amount or amounts provided in the beneficiary designation provision of the Policy, a death benefit equal to the smaller of (a) the death benefit payable under the Policy or (b) the Target Benefit. After such payment to such beneficiary, the balance, if any, of the Policy death benefit (the Excess Value) shall be paid to the Company. Section 6. Termination of Agreement (a) This Agreement shall terminate during the Executive's lifetime, without notice, upon the occurrence of any of the following events: (i) total cessation of the Company's business; (ii) bankruptcy, receivership, or dissolution of the Company; (iii) termination for cause of the Executive's employment by the Company or by any direct or indirect subsidiary of the New England Electric System or 5 (iv) payment of the Company's Cost by the Executive to the Company. (b) After termination of this Agreement under this section 6, the Executive will not be permitted to re-enroll in the program. Upon such termination, the Company may immediately withdraw its Cost from the Policy. The Executive will receive no life insurance coverage under the New England Electric System companies' group life insurance plan. Section 7. Benefits Upon Termination of Employment During the Executive's Lifetime. (a) For sixty days after the date of the termination of this Agreement during the Executive's lifetime, the Executive shall have the option of obtaining the release of the collateral assignment of the policy to the Company. To obtain such release, the Executive shall repay to the Company Company's Cost. Upon receipt of such amount, the Company shall release the collateral assignment of the Policy. (b) If the Executive has terminated employment but has not Retired from the Company, the Company will continue to pay premiums on the Policy in accordance with Section 8 until the earlier of (i) the Policy can be kept in force with no future premiums due based upon the then current crediting of the Policy or (ii) the tenth anniversary of the Policy. Thereafter, the Company may withdraw from the Policy amounts equal to the Company's Costs. The Company may delay withdrawal from the Policy in order to preserve the Policy's tax treatment. Section 8. Policy Premiums During the Executive's employment and as provided in subsection 7(a), the Company shall promptly pay all premiums on the Policy when due until the Policy can be kept in force with no future premiums due based upon the then current crediting of the Policy. 6 The Company shall bill the Executive for an annual contribution to the policy premium, which contribution shall be equal to the value, for Federal income tax purposes, of the "economic benefit" of the life insurance protection the Executive then enjoys. The Executive shall transfer the contribution to the Company within thirty days of the bill. The Company will reimburse the Executive for such contribution and for the related federal and state taxes. This reimbursement is not a part of the Company's Cost. If the Executive fails to make such timely payment, the Company shall report the "economic benefit" of the life insurance protection as taxable income to the Executive for the period, and no additional reimbursement will be made to the Executive until payment has been made. Section 9. Return of Premiums Notwithstanding any provision hereof to the contrary, in the event that, for any reason whatsoever, no death benefit is payable under the Policy upon the death of the Executive and in lieu thereof the Insurer refunds all or any part of the premiums paid for the Policy, the Company and the Executive's beneficiary or beneficiaries shall have the unqualified right to share such premiums based on the respective cumulative contributions thereto. Section 10. Withdrawals from Policy; Release of Assignment While the Executive is employed, if no additional premiums are required to be paid under a Policy to maintain the death benefit to the Executive's beneficiaries, the Company may withdraw its Cost from that Policy at a time when such withdrawal will not cause the Policy to be terminated or to lose its tax treatment as life insurance. 7 After the Company has withdrawn from the Policy amounts equal in full to the Company's Cost (whether under section 6, 7, or 10), the Company will release the collateral assignments of the Policy to the Executive. Section 11. Liability and Limitation of Obligation The Company and the Insurer believe the assumptions used to determine the amount of insurance purchased are reasonable. However, the Executive recognizes that the goals of the Agreement may not be realized and there is no guaranty that the Target Benefit will actually be provided by the Policy and/or that additional premiums may not be required to keep the Policy from lapsing or to provide the Target Benefit. The Executive also recognizes that changes in the Internal Revenue Code or rulings or regulations thereunder could increase his tax liabilities or reduce his benefits. The Company has no responsibility, liability, or obligation for the benefits provided the Executive from the Policy. The Company may, upon 30 days' written notice to the Executive, limit its obligations hereunder to purchase, pay premiums on, or otherwise provide life insurance policies beyond the total death benefit, including all riders then in force, and all references herein to the annual base pay or final annual base pay of the Executive shall mean annual base pay at the time of such written notification. The Insurer shall have no liability except as set forth in the Policy and in any beneficiary designation and in any optional method of settlement election filed with it. The Insurer shall not be bound to inquire into or take notice of any of the covenants herein contained as to the Policy. In case of the Executive's death, the Insurer shall be discharged from all liability on payment of the proceeds in accordance with the Policy's provision, and any beneficiary designation and any 8 optional method of settlement election filed with it without regard to this Agreement or any amendment thereof. Section 12. Named Fiduciary, Determination of Benefits, Claims Procedure and Administration (a) The Company is hereby designated as the named fiduciary under this Agreement. The named fiduciary shall have authority to control and manage the operation and administration of this Agreement, and it shall be responsible for establishing and carrying out a funding policy and method consistent with the objectives of this Agreement. (b) (i) Claim A person who believes that he is being denied a benefit to which he is entitled under this Agreement (the Claimant) may file a written request for such benefit with the Company, setting forth his claim. The request must be addressed to the President of the Company at its then principal place of business. (ii) Claim Decision Upon receipt of a claim, the Company shall advise the Claimant that a reply will be forthcoming within ninety days and shall, in fact, deliver such reply within such period. The Company may, however, extend the reply period for an additional ninety days for reasonable cause. If the claim is denied in whole or in part, the Company shall adopt a written opinion, using language calculated to be understood by the Claimant, setting forth: (a) the specific reason or reasons for such denial; (b) the specific reference to pertinent provisions of this Agreement on which such denial is based; (c) a description of any additional material or 9 information necessary for the Claimant to perfect his claim and an explanation why such material or such information is necessary; (d) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; and (e) the time limits for requesting a review under subsection (iii) and for review under subsection (iv) hereof. (iii) Request for Review Within sixty days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Benefits Appeal Committee (as defined in the Final Average Pay Pension Plan I) review the determination of the Company. Such request must be addressed to the Secretary of the Committee, at its then principal place of business. The Claimant or his duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Committee. If the Claimant does not request a review of the Company's determination by the Committee within such sixty day period, he shall be barred and estopped from challenging the Company's determination. (iv) Review of Decision Within sixty days after the Secretary's receipt of a request for review, the Committee will review the Company's determination. After considering all materials presented by the Claimant, the Committee will render an opinion, setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Agreement on which the decision is based. If special circumstances require that the sixty day time period be extended, the Secretary will so notify the Claimant and the Committee will render the decision as soon as possible, but no later than one hundred twenty days after receipt of the request for review. 10 Section 13. Notices Any notice, consent, or demand required or permitted to be given under the provisions of this Agreement shall be in writing, and shall be signed by the party giving or making the same. If such notice, consent, or demand is mailed to a party hereto, it shall be sent to United States certified mail, postage prepaid, addressed to such party's last known address as shown on the records of the Company. The date of such mailing shall be deemed the date of notice, consent, or demand. Section 14. Binding Effect This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns, and the Executive, and the Executive's successors, assigns, heirs, executors, administrators, and beneficiaries. Section 15. Governing Law This Agreement shall be governed by the laws of the Commonwealth of Massachusetts. Section 16. Further Documentation The parties hereto agree to execute any documents which may be necessary or proper in the carrying out of the purpose and intent of this Agreement. Section 17. Amendments and Transfers Within the New England Electric System Companies This Agreement may be amended or altered in any of its provisions, and such changes shall become effective when reduced to writing and signed by the parties hereto. 11 The Company may, without any consent of the Insurer or the Executive, assign or reassign all of its rights and obligations hereunder to such other direct or indirect subsidiary of the New England Electric System by which the Executive may from time to time be employed. Section 18. Interpretation of Agreement Where appropriate in this Agreement, words used in the singular shall include the plural and words used in the masculine shall include the feminine and vice versa. The headings of sections and subsections of this Agreement are for convenience of reference only. Section 19. No Implied Right to Employment Neither this Agreement nor the payment of any premiums hereunder by the Company shall be construed to create any obligation to give the Executive any right to continue employment. ---------------------------------------- New England Power Service Company By: ------------------------------------ Name: ---------------------------------- Title: Treasurer 12 EXHIBIT A Insurance Policies Metropolitan Policy Number 13 EXHIBIT B Split-Dollar Collateral Assignment FOR VALUE RECEIVED, the undersigned owner (hereafter the Assignor) assigns, transfers, and sets over to New England Power Service Company (Assignee), its successors and assigns, certain rights in and to policy number ___________ (the Policy), and any and all supplemental benefit riders or agreements issued under the Policy, issued by Metropolitan Life Insurance Company (the Insurer), subject to all the terms and conditions of the Policy and this Assignment and to all superior liens, if any, which the Insurer or any prior Assignee may have against the Policy. The Assignor by this instrument and the Assignee by acceptance of the Assignment jointly and severally agree to the conditions and provisions hereof. This Assignment is made and the Policy is to be held as collateral security for any and all liabilities of the Assignor to the Assignee, either now existing or that may hereafter arise between the Assignor or any successors or assigns and the Assignee under the New England Electric System Companies Life Insurance Program for Executives I, dated ______, with regard to the Policy. 1. (a) It is expressly agreed that the Assignee shall have the following rights in the Policy: (i) the right to make and receive withdrawals from the Policy (from the Insurer or otherwise), to the extent of the aggregate premiums paid by the Assignee on the Policy; (ii) the right to release this Assignment to the Assignor or his assigns; 14 (iii) the right to surrender the Policy and to receive the Policy cash value and any dividend credits outstanding of the excess over the Target Benefit (as defined in the Program); and (iv) the right to receive from the death proceeds of the Policy, and to elect an income settlement option with respect thereto, an amount equal to the excess over the Target Benefit (as defined in the Program). (b) Except as provided in Paragraph (a) above, all other rights in the Policy, including but not limited to the right to designate and change the beneficiary of the Policy and the right to make loans against or withdrawals from the Policy and to receive any cash values and dividends credits outstanding in excess of aggregate premiums paid by the Assignee on the Policy, are expressly reserved to the Assignor and are, therefore, excluded from this Assignment. (c) For purposes of Paragraphs (a) and (b) above, the signature of either the Assignor or the Assignee shall be adequate. Both the Assignor and the Assignee acknowledge that, between themselves, they are bound by the limitations of this Assignment and that the Insurer will recognize the signature of either. 2. For purposes of this Assignment, aggregate premiums paid by the Assignee on the Policy shall exclude premiums for any extra benefit riders or agreements issues under the Policy. 15 3. All provisions of this Assignment shall be binding upon the successors, assigns, heirs, executors, administrators, or beneficiaries of the Assignor. 4. All Policy options and designations in effect as of the date of this Assignment shall remain in effect unless specifically changed by this Assignment or by action taken thereafter consistent with this Assignment. 5. The Insurer is hereby authorized to recognize the Assignee's claim of right hereunder without investigating the validity or amount thereof, the giving of any notice, or the existence or amount of any liabilities of the Assignor to the Assignee. Payment by the Insurer of any or all death proceeds of the Policy to the Assignee in reliance upon an affidavit of any officer of the Company as to the share of death proceeds due it shall be a full discharge of the Insurer for such share and shall be binding on all parties claiming any interest under the Policy. Signed at on . --------------------------- ------------------------ (City and State) (Date) - ------------------------------------- ---------------------------------------- Witness (Owner) 16 Accepted and Agreed to: New England Power Service Company - ------------------------------------- By: Witness ------------------------------------ Name: ---------------------------------- Title: Treasurer The Insurer hereby acknowledges receipt of a copy of this Collateral Assignment form. Insurer Date: By: ------------------------- ------------------------------------ EX-10.(W) 4 b61381nmexv10wxwy.txt EX-10.(W) AGREEMENT WITH JOHN COCHRANE Exhibit 10(w) (NEW ENGLAND POWER SERVICE LOGO) A NEES COMPANY MEMORANDUM To: John G. Cochrane Date: November 16, 1998 From: Don Goodwin Phone: 508 389 2125 Subject: Life Insurance Program for Executives I Agreement File: A review of the Life Insurance Program for Executives I agreements indicates that the coverage provided therein would cease after termination of employment other than at retirement. That is not in accordance with the Program as approved by the Compensation Committee of the Board. Accordingly, please append the attached "Corrected Section 7" to your copy of your agreement. A Corrected Section 7 will be added to the Company's and Insurer's copies of your agreement. /s/ Don F. Goodwin - ------------------------------------ Don F. Goodwin, Vice President Tel: 508 389-2125 Fax: 508 836-5487 e-mail: goodwi@neesnet.com LIFE INSURANCE PROGRAM FOR EXECUTIVES I CORRECTED SECTION 7 Section 7. Option on Termination During the Executive's Lifetime. (a) For sixty days after the date of the termination of this Agreement during the Executive's lifetime, the Executive shall have the option of obtaining the release of the collateral assignment of the policy to the Company. To obtain such release, the Executive shall repay to the Company Company's Cost. Upon receipt of such amount, the Company shall release the collateral assignment of the Policy. (b) If the Executive has terminated employment but has not Retired from the Company, the Company will continue to pay premiums on the Policy in accordance with Section 8 until the earlier of (i) the Policy can be kept in force with no future premiums due based upon the then current crediting of the Policy or (ii) the tenth anniversary of the Policy. Thereafter, the Company may withdraw from the Policy amounts equal to the Company's Costs. The Company may delay withdrawal from the Policy in order to preserve the Policy's tax treatment. NEW ENGLAND ELECTRIC SYSTEM COMPANIES LIFE INSURANCE PROGRAM FOR EXECUTIVES I FOR TABLE OF CONTENTS

Page ---- Section 1. The Program.................................................. 1 Section 2. Prior Insurance Program...................................... 2 Section 3. Vesting and Forfeiture....................................... 2 Section 4. Life Insurance Policy........................................ 2 Section 5. Death Benefit................................................ 4 Section 6. Termination of Agreement..................................... 4 Section 7. Benefits Upon Termination of Employment During the Executive's Lifetime..................................... 5 Section 8. Policy Premiums.............................................. 6 Section 9. Return of Premiums........................................... 7 Section 10. Withdrawals from Policy; Release of Assignment............... 7 Section 11. Liability and Limitation of Obligation....................... 7 Section 12. Named Fiduciary, Determination of Benefits, Claims Procedure and Administration................................. 8 Section 13. Notices...................................................... 10 Section 14. Binding Effect............................................... 11 Section 15. Governing Law................................................ 11 Section 16. Further Documentation........................................ 11 Section 17. Amendments and Transfers Within the New England Electric System Companies.................................... 11 Section 18. Interpretation of Agreement.................................. 11 Section 19. No Implied Right to Employment............................... 12

COLLATERAL ASSIGNMENT LIFE INSURANCE PROGRAM I Agreement entered into as of the 1ST day of __________, between New England Power Service Company, a Commonwealth of Massachusetts corporation (the Company), and _______________________________(the Executive). Section 1. The Program The program provides the Executive death benefits and post-retirement ownership of the cash assets of the related policy. The program is designed with a goal of three times the Executive's base pay (rounded up to the nearest even whole thousand) at the time of death (the Target Benefit). During employment, the first $50,000 of the coverage is to be provided by the Company's group term life insurance policy. For the purposes of this Agreement, "annual base pay" means the annualized compensation being paid to the Executive on the day of determination (or, if greater, the highest compensation paid to the Executive during any 12-month period of employment), including compensation deferred under other plans but excluding bonuses (such as NEES Goals and Incentive Compensation bonuses ) and contributions made by the Company to or under any form of employee benefit program and employer contributions under the New England Electric System Companies Incentive Thrift Plan, and "final annual base pay" means the Executive's annualized base pay on the last day of employment (or, if greater, the highest compensation paid to the Executive during any 12-month period of employment). Section 2. Prior Insurance Program 2 The Executive hereby waives the benefits under the Company's group term-life insurance policy, and the New England Electric System Companies Life Insurance Program for Executive II, to the extent that the benefit provided to the Executive's beneficiaries, in accordance with Section 5, from the Policy (as hereinafter defined) equals the Target Benefit. This waiver does not extend to any optional benefits under the group term-life policy. To the extent that such waiver is ineffective, the amount of the death benefit provided under the Policy and otherwise payable hereunder to the beneficiary or beneficiaries designated by the Executive shall be correspondingly reduced and the amount payable to the Company shall be correspondingly increased. Section 3. Vesting and Forfeiture Subject to the provisions of Section 6, the Executive is 100% vested in his benefits under this Program. Section 4. Life Insurance Policy One or more split-dollar life insurance policies listed in Exhibit A hereto (the Policy) have been or will be purchased on the life of the Executive by the Company. The issuer or issuers of the Policy are hereinafter referred to as the Insurer. Purchase of insurance policies either now or at later dates may require proof of insurability at that time. To the extent that necessary insurance policies are not reasonably available at a later date, benefits will be provided under the Company's group term-life insurance policy so that the total death benefit to the Executive's beneficiaries during his employment is three times base pay. (a) Interest in the Policy 3 The Executive shall be the sole owner of the Policy and may exercise all ownership rights granted to the owner thereof by the terms of the Policy, except as may otherwise be provided herein. Except as otherwise provided herein, the Executive shall not sell, assign, transfer, borrow against, surrender, or cancel the Policy, change the beneficiary designation provision, or terminate the dividend election without the express written consent of the Company. (b) Collateral Assignment To secure the right of the Company to the Excess Value and/or the Company's Cost (both as hereafter defined), the Executive will, contemporaneously herewith, assign the Policy to the Company as collateral, using a form substantially similar to that attached hereto as Exhibit B. The collateral assignment of the Policy to the Company hereunder shall not be terminated, altered, or amended by the Executive, without the express written consent of the Company. (c) Assignment of Executive's Interest The Executive shall have the right to make an absolute assignment of his entire interest, or any portion thereof, in the Policy at any time to any person or persons, subject to the collateral assignment of the policy to the Company pursuant to subsection (b) hereof. Upon delivery of a signed copy of such assignment to the Company, all, or such portion, of the rights, obligations, and duties of the Executive thereunder (subject to the collateral assignment of the Company) and hereunder shall pass to and be binding upon such assignee (including the right to make further assignments) and the Executive shall have no further interest whatsoever in the Policy, or such portions. (d) Company's Cost 4 For the purposes of this Agreement, the Company's Cost means the amount of the premiums on the Policy paid by it hereunder, less any withdrawals by the Company from the Policy in accordance with Section 10. (e) Dividends Any dividend declared on the Policy shall be applied to purchase paid-up additional insurance on the life of the Executive. The dividend election provisions of the Policy shall conform to the provisions hereof. Section 5. Death Benefit Upon the death of the Executive, the beneficiary or beneficiaries designated by the Executive shall be paid directly, in the manner and in the amount or amounts provided in the beneficiary designation provision of the Policy, a death benefit equal to the smaller of (a) the death benefit payable under the Policy or (b) the Target Benefit. After such payment to such beneficiary, the balance, if any, of the Policy death benefit (the Excess Value) shall be paid to the Company. Section 6. Termination of Agreement (a) This Agreement shall terminate during the Executive's lifetime, without notice, upon the occurrence of any of the following events: (i) total cessation of the Company's business; (ii) bankruptcy, receivership, or dissolution of the Company; (iii) termination for cause of the Executive's employment by the Company or by any direct or indirect subsidiary of the New England Electric System or 5 (iv) payment of the Company's Cost by the Executive to the Company. (b) After termination of this Agreement under this section 6, the Executive WILL not be permitted to re-enroli in the program. Upon such termination, the Company may immediately withdraw its Cost from the Policy. The Executive will receive no life insurance coverage under the New England Electric System companies' group life insurance plan. Section 7. Benefits Upon Termination of Employment During the Executive's Lifetime. (a) If the Executive has Retired from the Company before the tenth anniversary of a Policy, the Company will continue to pay premiums on that Policy in accordance with section 8 until such tenth anniversary. On or after such tenth anniversary, the Company may withdraw from the Policy amounts equal to the Company s Cost. The Company may delay withdrawals from the Policy in order to preserve the Policy' s tax treatment. For the purposes of this Agreement, the Executive will be considered to have Retired from the Company if the termination of employment occurs (i) at age 61 or older with a minimum of 10 years of service (as defined in Final Average Pay Pension Plan I) or (ii) at age 55 or older with age plus years of service equal to at least 85. (b) If the Executive terminated employment but has not Retired from the Company before the tenth anniversary of the first Policy, the Company may immediately withdraw its Cost from the Policy. The Executive will receive no life insurance coverage under the New England Electric System companies' group life insurance plan. (c) If the Executive terminated employment but has not Retired from the Company after the tenth anniversary of the first Policy, the Company may withdraw its Cost from the Policy 6 as soon as it may be withdrawn without causing the Policy to lose its tax treatment as life insurance. The Executive will receive no life insurance coverage under the New England Electric System companies' group life insurance plan. Section 8. Policy Premiums During the Executive's employment and as provided in subsection 7(a), the Company shall promptly pay all premiums on the Policy when due until the Policy can be kept in force with no future premiums due based upon the then current crediting of the Policy. The Company shall bill the Executive for an annual contribution to the policy premium, which contribution shall be equal to the value, for Federal income tax purposes, of the "economic benefit" of the life insurance protection the Executive then enjoys. The Executive shall transfer the contribution to the Company within thirty days of the bill. The Company will reimburse the Executive for such contribution and for the related federal and state taxes. This reimbursement is not a part of the Company s Cost. If the Executive fails to make such timely payment, the Company shall report the "economic benefit" of the life insurance protection as taxable income to the Executive for the period, and no additional reimbursement will be made to the Executive until payment has been made. Section 9. Return of Premiums Notwithstanding any provision hereof to the contrary, in the event that, for any reason whatsoever, no death benefit is payable under the Policy upon the death of the Executive and in lieu thereof the Insurer refunds all or any part of the premiums paid for the Policy, the Company 7 and the Executive's beneficiary or beneficiaries shall have the unqualified right to share such premiums based on the respective cumulative contributions thereto. Section 10. Withdrawals from Policy; Release of Assignment While the Executive is employed, if no additional premiums are required to be paid under a Policy to maintain the death benefit to the Executive' s beneficiaries, the Company may withdraw its Cost from that Policy at a time when such withdrawal will not cause the Policy to be terminated or to lose its tax treatment as life insurance. After the Company has withdrawn from the Policy amounts equal in full to the Company s Cost (whether under section 6, 7, or 10), the Company will release the collateral assignments of the Policy to the Executive. Section 11. Liability and Limitation of Obligation The Company and the Insurer believe the assumptions used to determine the amount of insurance purchased are reasonable. However, the Executive recognizes that the goals of the Agreement may not be realized and there is no guaranty that the Target Benefit will actually be provided by the Policy and/or that additional premiums may not be required to keep the Policy from lapsing or to provide the Target Benefit. The Executive also recognizes that changes in the Internal Revenue Code or rulings or regulations thereunder could increase his tax liabilities or reduce his benefits. The Company has no responsibility, liability, or obligation for the benefits provided the Executive from the Policy. The Company may, upon 30 days' written notice to the Executive, limit its obligations hereunder to purchase, pay premiums on, or otherwise provide life insurance policies beyond the total death benefit, including all riders then in force, and all references herein to the annual 8 base pay or final annual base pay of the Executive shall mean annual base pay at the time of such written notification. The Insurer shall have no liability except as set forth in the Policy and in any beneficiary designation and in any optional method of settlement election filed with it. The Insurer shall not be bound to inquire into or take notice of any of the covenants herein contained as to the Policy. In case of the Executive's death, the Insurer shall be discharged from all liability on payment of the proceeds in accordance with the Policy's provision, and any beneficiary designation and any optional method of settlement election filed with it without regard to this Agreement or any amendment thereof. Section 12. Named Fiduciary, Determination of Benefits. Claims Procedure and Administration (a) The Company is hereby designated as the named fiduciary under this Agreement. The named fiduciary shall have authority to control and manage the operation and administration of this Agreement, and it shall be responsible for establishing and carrying out a funding policy and method consistent with the objectives of this Agreement. (b) (i) Claim A person who believes that he is being denied a benefit to which he is entitled under this Agreement (the Claimant) may file a written request for such benefit with the Company, setting forth his claim. The request must be addressed to the President of the Company at its then principal place of business. 9 (ii) Claim Decision Upon receipt of a claim, the Company shall advise the Claimant that a reply will be forthcoming within ninety days and shall, in fact, deliver such reply within such period. The Company may, however, extend the reply period for an additional ninety days for reasonable cause. If the claim is denied in whole or in part, the Company shall adopt a written opinion, using language calculated to be understood by the Claimant, setting forth: (a) the specific reason or reasons for such denial; (b) the specific reference to pertinent provisions of this Agreement on which such denial is based; (c) a description of any additional material or information necessary for the Claimant to perfect his claim and an explanation why such material or such information is necessary; (d) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; and (e) the time limits for requesting a review under subsection (iii) and for review under subsection (iv) hereof. (iii) Request for Review Within sixty days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Benefits Appeal Committee (as defined in the Final Average Pay Pension Plan I) review the determination of the Company. Such request must be addressed to the Secretary of the Committee, at its then principal place of business. The Claimant or his duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Committee. If the Claimant does not request a review of the Company's determination by the Committee within such sixty day period, he shall be barred and estopped from challenging the Company's determination. 10 (iv) Review of Decision Within sixty days after the Secretary's receipt of a request for review, the Committee will review the Company's determination. After considering all materials presented by the Claimant, the Committee will render an opinion, setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Agreement on which the decision is based. If special circumstances require that the sixty day time period be extended, the Secretary will so notify the Claimant and the Committee will render the decision as soon as possible, but no later than one hundred twenty days after receipt of the request for review. Section 13. Notices Any notice, consent, or demand required or permitted to be given under the provisions of this Agreement shall be in writing, and shall be signed by the party giving or making the same. If such notice, consent, or demand is mailed to a party hereto, it shall be sent to United States certified mail, postage prepaid, addressed to such party's last known address as shown on the records of the Company. The date of such mailing shall be deemed the date of notice, consent, or demand. Section 14. Binding Effect This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns, and the Executive, and the Executive's successors, assigns, heirs, executors, administrators, and beneficiaries. Section 15. Governing Law This Agreement shall be governed by the laws of the Commonwealth of Massachusetts. 11 Section 16. Further Documentation The parties hereto agree to execute any documents which may be necessary or proper in the carrying out of the purpose and intent of this Agreement. Section 17. Amendments and Transfers Within the New England Electric System Companies This Agreement may be amended or altered in any of its provisions, and such changes shall become effective when reduced to writing and signed by the parties hereto. The Company may, without any consent of the Insurer or the Executive, assign or reassign all of its rights and obligations hereunder to such other direct or indirect subsidiary of the New England Electric System by which the Executive may from time to time be employed. Section 18. Interpretation of Agreement Where appropriate in this Agreement, words used in the singular shall include the plural and words used in the masculine shall include the feminine and vice versa. The headings of sections and subsections of this Agreement are for convenience of reference only. Section 19. No Implied Right to Employment Neither this Agreement nor the payment of any premiums hereunder by the Company shall be construed to create any obligation to give the Executive any right to continue employment. 12 New England Power Service Company By: --------------------------------- Name: ------------------------------- Title: Treasurer 13 EXHIBIT A Insurance Policies Metropolitan Policy Number 14 EXHIBIT B Split-Dollar Collateral Assignment FOR VALUE RECEIVED, the undersigned owner (hereafter the Assignor) assigns, transfers, and sets over to New England Power Service Company (Assignee), its successors and assigns, certain rights in and to policy number _____________ (the Policy), and any and all supplemental benefit riders or agreements issued under the Policy, issued by Metropolitan Life Insurance Company (the Insurer), subject to all the terms and conditions of the Poiicy and this Assignment and to all superior liens, if any, which the Insurer or any prior Assignee may have against the Policy. The Assignor by this instrument and the Assignee by acceptance of the Assignment jointly and severally agree to the conditions and provisions hereof. This Assignment is made and the Policy is to be held as collateral security for any and all liabilities of the Assignor to the Assignee, either now existing or that may hereafter arise between the Assignor or any successors or assigns and the Assignee under the New England Electric System Companies Life Insurance Program for Executives I, dated _____________, with regard to the Policy. 1. (a) It is expressly agreed that the Assignee shall have the following rights in the Policy: (i) the right to make and receive withdrawals from the Policy (from the Insurer or otherwise), to the extent of the aggregate premiums paid by the Assignee on the Policy; (ii) the right to release this Assignment to the Assignor or his assigns; 15 (iii) the right to surrender the Policy and to receive the Policy cash value and any dividend credits outstanding of the excess over the Target Benefit (as defined in the Program); and (iv) the right to receive from the death proceeds of the Policy, and to elect an income settlement option with respect thereto, an amount equal to the excess over the Target Benefit (as defined in the Program). (b) Except as provided in Paragraph (a) above, all other rights in the Policy, including but not limited to the right to designate and change the beneficiary of the Policy and the right to make loans against or withdrawals from the Policy and to receive any cash values and dividends credits outstanding in excess of aggregate premiums paid by the Assignee on the Policy, are expressly reserved to the Assignor and are, therefore, excluded from this Assignment. (c) For purposes of Paragraphs (a) and (b) above, the signature of either the Assignor or the Assignee shall be adequate. Both the Assignor and the Assignee acknowledge that, between themselves, they are bound by the limitations of this Assignment and that the Insurer will recognize the signature of either. 2. For purposes of this Assignment, aggregate premiums paid by the Assignee on the Policy shall exclude premiums for any extra benefit riders or agreements issues under the Policy. 16 3. All provisions of this Assignment shall be binding upon the successors, assigns, heirs, executors, administrators, or beneficiaries of the Assignor. 4. All Policy options and designations in effect as of the date of this Assignment shall remain in effect unless specifically changed by this Assignment or by action taken thereafter consistent with this Assignment. 5. The Insurer is hereby authorized to recognize the Assignee's claim of right hereunder without investigating the validity or amount thereof, the giving of any notice, or the existence or amount of any liabilities of the Assignor to the Assignee. Payment by the Insurer of any or all death proceeds of the Policy to the Assignee in reliance upon an affidavit of any officer of the Company as to the share of death proceeds due it shall be a full discharge of the Insurer for such share and shall be binding on all parties claiming any interest under the Policy. Signed at . --------------------------- on -------------------------------------- (City and State) (Date) - ------------------------------------- ---------------------------------------- Witness (Owner) 17 Accepted and Agreed to: New England Power Service Company - ------------------------------------- By: Witness ------------------------------------ Name: ---------------------------------- Title: Treasurer The Insurer hereby acknowledges receipt of a copy of this Coliateral Assignment form. Insurer Date: By: ------------------------------- ------------------------------------ EX-10.(X) 5 b61381nmexv10wxxy.txt EX-10.(X) AGREEMENT WITH MICHAEL JESANIS Exhibit 10(x) LIFE INSURANCE PROGRAM FOR MICHAEL E. JESANIS Revised Collateral Assignment TABLE OF CONTENTS

Page ---- Section 1. The Program.................................................. 1 Section 2. Prior Insurance Program .................................... 1 Section 3. Vesting and Forfeiture ...................................... 2 Section 4. Life Insurance Policy ...................................... 2 Section 5. Policy Death Benefit ........................................ 4 Section 6. Termination of Agreement During the Executive's Lifetime..... 5 Section 7. Options on Termination During the Executive's Lifetime....... 6 Section 8. Assignment by Executive .................................... 7 Section 9. Policy Premiums ............................................ 8 Section 10. Withdrawals from Policy .................................... 8 Section 11. Policy Loans ................................................ 9 Section 12. Limitation of Obligation .................................... 9 Section 13. Return of Premiums .......................................... 9 Section 14. Liability.................................................... 10 Section 15. Named Fiduciary, Determination of Benefits, Claims Procedure and Administration ................................ 10 Section 16. Notices...................................................... 13 Section 17. Binding Effect .............................................. 13 Section 18. Governing Law................................................ 13 Section 19. Further Documentation ...................................... 14 Section 20. Amendments .................................................. 14 Section 21. Interpretation of Agreement .... ........................... 14 Signatures............................................................... 14 Exhibit A. Insurance Policies Exhibit B. Collateral Assignment

LIFE INSURANCE PROGRAM (Collateral Assignment) Agreement entered into as of the 23rd day of March, 1993, between New England Power Service Company, a Massachusetts corporation (the Company), and Michael E. Jesanis (the Executive). Section 1. The Program The program provides the Executive death benefits. The program is designed with a goal of three times the Executive's annual base pay at the time of death (or if the Executive has retired, three times his final annual base pay) (the Target Benefit). Section 2. Prior Insurance Program The Executive hereby reaffirms his waiver of benefits under the Company's group term-life insurance policy, to the extent that the benefit provided to the Executive's beneficiaries, in accordance with Section 5, from the Policy (as hereinafter defined) plus the group term-life insurance equals the Target Benefit. For the purposes of this Agreement, "annual base pay" means the annualized compensation being paid to the Executive on the day of determination (or, if greater, the highest compensation paid to the Executive during any 12-month period of employment), including compensation deferred under other plans but excluding bonuses and contributions made by the Company to or -2- under any form of employee benefit program including NEES Goals Program and employer contributions under the New England Electric System Companies Incentive Thrift Plan, and "final annual base pay" means the Executive's annualized base pay on the last day of employment (or, if greater, the highest compensation paid to the Executive during any 12-month period of employment). To the extent that such waiver is ineffective, the amount of the death benefit provided under the Policy and otherwise payable hereunder to the beneficiary or beneficiaries designated by the Executive shall be correspondingly reduced and the amount payable to the Company shall be correspondingly increased. Section 3. Vesting and Forfeiture Subject to the provisions of Section 6, the Executive is 100% vested in his benefits under this Program. Section 4. Life Insurance Policy One or more split-dollar life insurance policies listed in Exhibit A hereto (the Policy) have been or will be purchased on the life of the Executive by the Company. The issuer or issuers of the Policy are hereinafter referred to as the Insurer. (a) Interest in the Policy The Executive shall be the sole owner of the Policy and may exercise all ownership rights granted to the owner thereof by the terms of the Policy, except as may otherwise be provided herein. -3- Except as otherwise provided herein, the Executive shall not sell, assign, transfer, borrow against, surrender, or cancel the Policy, change the beneficiary designation provision, or terminate the dividend election without the express written consent of the Company. (b) Collateral Assignment To secure the repayment to the company of the Company's Cost and the right of the Company to the Excess Value (as hereafter defined), the Executive will, contemporaneously herewith, assign the Policy to the Company as collateral, using a form substantially similar to that attached hereto as Exhibit B. The collateral assignment of the Policy to the Company hereunder shall not be terminated, altered, or amended by the Executive, without the express written consent of the Company. (c) Company's cost For the purposes of this Agreement, the Company's Cost means the amount of the premiums on the Policy paid by it hereunder, plus the after-tax interest accrued on premium payments made by the Company, plus the after-tax interest accrued on any Policy loans to the extent paid by the Company, less any withdrawals by the Company from the Policy in accordance with Section 10 and loans to the Company in accordance with Section 11 remaining outstanding on the date of determination. -4- (d) Dividends Any dividend declared on the Policy shall be applied to purchase paid-up additional insurance on the life of the Executive. The dividend election provisions of the Policy shall conform to the provisions hereof. Section 5. Policy Death Benefit Upon the death of the Executive, the Company shall have the unqualified right to receive a portion of the Policy death benefit equal to the Company's Cost. In no event shall the amount payable to the Company hereunder exceed the Policy proceeds payable at the death of the Executive. No amount shall be paid from the Policy death benefit to the beneficiary or beneficiaries designated by the Executive until the full amount due the Company under this paragraph has been paid. The beneficiary or beneficiaries designated by the Executives shall be paid directly, in the manner and in the amount or amounts provided in the beneficiary designation provision of the Policy, a death benefit equal to the smaller of (a) the balance of the death benefit payable under the Policy or (b) the Target Benefit. After such payment to such beneficiary, the balance, if any, of the Policy death benefit (the Excess Value) shall be paid to the Company. -5- Section 6. Termination of Agreement During the Executive's Lifetime. (a) This Agreement shall terminate during the Executive's lifetime, without notice, upon the occurrence of any of the following events: (i) total cessation of the Company's business; (ii) bankruptcy, receivership, or dissolution of the Company; (iii) the Executive's employment by the Company or by any direct or indirect subsidiary of the New England Electric System terminates for cause; or (iv) failure of the Executive to timely pay to the Company the Executive's portion of the premium, if any, due hereunder, unless the Company elects to make such payment on behalf of the Executive, as provided herein. (b) In addition, the Executive may terminate this Agreement, while no premium under the Policy is overdue, by written notice to the Company. Such termination shall be effective as of the date of such notice. -6- Section 7. Options on Termination During the Executive's Lifetime. (a) For sixty days after the date of the termination of this Agreement during the Executive's lifetime, the Executive shall have the option of reducing the policy death benefit to the (i) Company's Cost plus (ii) the Target Benefit (but substituting "time of termination" for "time of death") and obtaining the release of the collateral assignment of the Policy to the Company. To obtain such release, the Executive shall repay the Company's Cost to the Company; provided, if the net cash value of the Policy after withdrawal of the Company's Cost is in excess of that required to provide, at the date of termination, the Target Benefit on a paid up basis, the Executive shall pay such excess amount to the Company. Upon receipt of such Cost and any excess amount, the Company shall release the collateral assignment of the Policy. For the purposes of this Agreement "paid up" means having a cash surrender value, as of the calculation date, projected to age 100 with an 8% policy dividend rate and current expense and mortality assumptions, that will support the Target Benefit with no future premium payments. (b) If the Executive fails to exercise such option within such sixty day period, then, at the request of the Company, the Executive shall execute any document or documents required by the Insurer to transfer the interest of the Executive in the Policy to the Company. Alternatively, the Company may enforce its right -7- to be repaid the Company's Cost from the cash surrender value of the Policy under collateral assignment of the Policy; provided that in the event the cash surrender value of the Policy exceeds the amount due the Company, any excess up to the amount required to provide the Target Benefit, but substituting "time of termination" for "time of death" on a paid up basis shall be paid to the Executive. Thereafter, neither the Executive nor his heirs, assigns, or beneficiaries shall have any further interest in and to the Policy, either under the terms thereof or under this Agreement. Section 8. Assignment by Executive The Executive shall have the right to make an absolute assignment of his entire interest, or any portion thereof, in the Policy at any time to any person or persons, subject to the collateral assignment of the policy to the Company pursuant to Section 4(b). Upon delivery of a signed copy of such assignment to the Company, all, or such portion, of the rights, obligations, and duties of the Executive thereunder (subject to the collateral assignment of the Company) and hereunder shall pass to and be binding upon such assignee (including the right to make further assignments) and the Executive shall have no further interest whatsoever in the Policy, or such portions. -8- Section 9. Policy Premiums Until the Policy can be kept in force with no future premiums due based upon the then current crediting of the Policy, the Company shall promptly pay all premiums on the Policy when due. The Company shall bill the Executive for his annual contribution to the policy premium, which contribution shall be equal to the value, for Federal income tax purposes, of the "economic benefit" of the life insurance protection he then enjoys. The Executive shall transfer his contribution to the company within thirty days of the bill. If the Executive fails to make such timely payment, the Company, in its sole discretion, may elect to make the Executive's portion of the premium payment, which payment shall be recovered by the Company as provided herein. Section 10. Withdrawals from Policy If no additional premiums are then required to be paid under the policy to maintain the death benefit to the Executive's beneficiaries, the Company may withdraw from the Policy amounts equal to the Company's Cost at a time when such withdrawal will not cause the Policy to be terminated. -9- Section 11. Policy Loans The Company shall have the right, without the Executive's consent, at any time and from time to time, to withdraw premiums from the Policy, to obtain a loan against the Policy from the Insurer, or to effect a collateral assignment of its interest in the policy to any other party. The Company may not, however, obtain loans other than loans for premiums or interest payments. The Company shall pay the interest on any such loans as and when due. Section 12. Limitation of Obligation The Company may, upon 30 days' written notice to the Executive, limit its obligations hereunder to purchase, pay premiums on, or otherwise provide life insurance policies beyond the total death benefit, including all riders then in force, and all references herein to the annual base pay or final annual base pay of the Executive shall mean his annual base pay at the time of such written notification. Section 13. Return of Premiums Notwithstanding any provision hereof to the contrary, in the event that, for any reason whatsoever, no death benefit is payable under the Policy upon the death of the Executive and in lieu thereof the Insurer refunds all or any part of the premiums paid for the Policy, the Company and the Executive's beneficiary or beneficiaries shall have the unqualified right to share such -10- premiums based on the respective cumulative contributions thereto. Section 14. Liability The Insurer shall have no liability except as set forth in the Policy and in any beneficiary designation and in any optional method of settlement election filed with it. The Insurer shall not be bound to inquire into or take notice of any of the covenants herein contained as to the Policy. In case of the Executive's death, the Insurer shall be discharged from all liability on payment of the proceeds in accordance with the Policy's provision, and any beneficiary designation and any optional method of settlement election filed with it without regard to this Agreement or any amendment thereof. The Company has no responsibility, liability, or obligation for the benefits provided the Executive from the Policy. Section 15. Named Fiduciary, Determination of Benefits, Claims Procedure and Administration (a) The Company is hereby designated as the named fiduciary under this Agreement. The named fiduciary shall have authority to control and manage the operation and administration of this Agreement, and it shall be responsible for establishing and carrying out a funding policy and method consistent with the objectives of this Agreement. -11- (b) (i) Claim A person who believes that he is being denied a benefit to which he is entitled under this Agreement (the Claimant) may file a written request for such benefit with the Company, setting forth his claim. The request must be addressed to the President of the Company at its then principal place of business. (ii) Claim Decision Upon receipt of a claim, the Company shall advise the Claimant that a reply will be forthcoming within ninety days and shall, in fact, deliver such reply within such period. The Company may, however, extend the reply period for an additional ninety days for reasonable cause. If the claim is denied in whole or in part, the Company shall adopt a written opinion, using language calculated to be understood by the Claimant, setting forth: (a) the specific reason or reasons for such denial; (b) the specific reference to pertinent provisions of this Agreement on which such denial is based; (c) a description of any additional material or information necessary for the Claimant to perfect his claim and an explanation why such material or such information is necessary; (d) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; and -12- (e) the time limits for requesting a review under subsection (iii) and for review under subsection (iv) hereof. (iii) Request for Review Within sixty days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Benefits Appeal committee review the determination of the Company. Such request must be addressed to the Secretary of the Committee, at its then principal place of business. The Claimant or his duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Committee. If the Claimant does not request a review of the Company's determination by the Committee within such sixty day period, he shall be barred and estopped from challenging the Company's determination. (iv) Review of Decision Within sixty days after the Secretary's receipt of a request for review, the Committee will review the Company's determination. After considering all materials presented by the Claimant, the Committee will render an opinion, setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Agreement on which the decision is based. If special circumstances require that the sixty day time period be extended, the Secretary will so notify -13- the Claimant and the Committee will render the decision as soon as possible, but no later than one hundred twenty days after receipt of the request for review. Section 16. Notices Any notice, consent, or demand required or permitted to be given under the provisions of this Agreement shall be in writing, and shall be signed by the party giving or making the same. If such notice, consent, or demand is mailed to a party hereto, it shall be sent to United States certified mail, postage prepaid, addressed to such party's last known address as shown on the records of the Company. The date of such mailing shall be deemed the date of notice, consent, or demand. Section 17. Binding Effect This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns, and the Executive, his successors, assigns, heirs, executors, administrators, and beneficiaries. Section 18. Governing Law This Agreement shall be governed by the laws of The Commonwealth of Massachusetts. -14- Section 19, Further Documentation The parties hereto agree to execute any documents which may be necessary or proper in the carrying out of the purpose and intent of this Agreement. Section 20. Amendments This Agreement may be amended or altered in any of its provisions, and such changes shall become effective when reduced to writing and signed by the parties hereto. Section 21. Interpretation of Agreement Where appropriate in this Agreement, words used in the singular shall include the plural and words used in the masculine shall include the feminine and vice versa. /s/ Illegible ---------------------------------------- Executive NEW ENGLAND POWER SERVICE COMPANY By: /s/ Illegible ------------------------------------ EXHIBIT A Insurance Policies CONFEDERATION LIFE 5 177836 EXHIBIT B Split-Dollar Collateral Assignment FOR VALUE RECEIVED, the undersigned owner (hereafter the Assignor) assigns, transfers, and sets over to New England Power Service company (Assignee), its successors and assigns, certain rights in and to policy number 5-177-836 (the Policy), and any and all supplemental benefit riders or agreements issued under the Policy, issued by Confederation Life Insurance Company (the Insurer), subject to all the terms and conditions of the Policy and this Assignment and to all superior liens, if any, which the Insurer or any prior Assignee may have against the Policy. The Assignor by this instrument and the Assignee by acceptance of the Assignment jointly and severally agree to the conditions and provisions hereof. This Assignment is made and the Policy is to be held as collateral security for any and all liabilities of the Assignor to the Assignee, either now existing or that may hereafter arise between the Assignor or any successors or assigns and the Assignee under the Life Insurance Program, dated March 23, 1993, with regard to the Policy. 1. (a) It is expressly agreed that the Assignee shall have the following rights in the Policy: (i) the right to make and receive loans against and withdrawals from the Policy (from the Insurer or otherwise), to the extent of the aggregate premiums paid by the Assignee on the Policy plus the after-tax interest accrual on premium payments made by the Assignee, plus the after-tax interest accrual on said loans to the extent paid by the Assignee; (ii) the right to release this Assignment to the Assignor or his assigns; (iii) the right to surrender the Policy and to receive the Policy cash value and any dividend credits outstanding (but not in excess of (a) the aggregate premiums paid by the Assignee on the Policy plus (b) the excess over three times the Executive's annual base pay at the time of death (or if the Executive has retired, three times his final base pay)); and, (iv) the right to receive from the death proceeds of the Policy, and to elect an income settlement option with respect thereto, an amount equal to (a) the aggregate premiums paid by the Assignee on the Policy plus the after-tax interest accrued on the premium payments made by the Assignee plus the after-tax interest on any indebtedness incurred by the Assignee, but reduced by any indebtedness incurred by the Assignee on the Policy plus (b) the excess over three times the Executive's annual base pay at the time of death (or if the Executive has retired, three times his final base pay). (b) Except as provided in Paragraph (a) above, all other rights in the Policy, including but not limited to the right to designate and change the beneficiary of the Policy and the right to make loans against or withdrawals from the Policy and to receive any cash values and dividends credits outstanding in excess of aggregate premiums paid by the Assignee on the Policy, are expressly reserved to the Assignor and are, therefore, excluded from this Assignment. (c) For purposes of Paragraphs (a) and (b) above, the signature of either the Assignor or the Assignee shall be adequate. Both the Assignor and the Assignee acknowledge that, between themselves, they are bound by the limitations of this Assignment and that the Insurer will recognize the signature of either. 2. This Assignment does not change the Insurer's right under the "Policy Loan" provision of the Policy to charge interest on any Policy loan. If interest is not paid under the terms of the Policy, the Insurer has the right to add such interest to the unpaid loan from whatever cash value remains regardless of who is entitled to that cash value under the terms of this Assignment. 3. For purposes of this Assignment, aggregate premiums paid by the Assignee on the Policy shall exclude premiums for any extra benefit riders or agreements issues under the Policy. 4. Any death proceeds of the Policy in excess of the amount payable to the Assignee shall be paid by the Insurer directly to the beneficiary named under the Policy. 5. All provisions of this Assignment shall be binding upon the successors, assigns, heirs, executors, administrators, or beneficiaries of the Assignor. 6. All Policy options and designations in effect as of the date of this Assignment shall remain in effect unless specifically changed by this Assignment or by action taken thereafter consistent with this Assignment. 7. The Insurer is hereby authorized to recognize the Assignee's claim of right hereunder without investigating the validity or amount thereof, the giving of any notice, or the existence or amount of any liabilities of the Assignor to the Assignee. Payment by the Insurer of any or all death proceeds of the Policy to the Assignee in reliance upon an affidavit of any officer of the company as to the share of death proceeds due it shall be a full discharge of the Insurer for such share and shall be binding on all parties claiming any interest under the Policy. Signed at Illegible on March 23, 1993. (City and State) (Date) /s/ Illegible /s/ Illegible - ------------------------------------- ---------------------------------------- Witness Owner Accepted and Agreed to: New England Power Service Company /s/ Illegible By: /s/ Illegible - ------------------------------------- ------------------------------------ Witness The Insurer hereby acknowledges receipt of a copy of this Collateral Assignment form. Insurer Date: 4/13/93 By: /s/ Illegible ------------------------------------ Confideration Life EX-10.(Y) 6 b61381nmexv10wxyy.txt EX-10.(Y) AGREEMENT WITH BARBARA A. HASSAN Exhibit 10(y) NEW ENGLAND ELECTRIC SYSTEM COMPANIES LIFE INSURANCE PROGRAM FOR EXECUTIVES II FOR BARBARA A. HASSAN 1 TABLE OF CONTENTS

Page ---- Section 1. The Program ................................................. 1 Section 2. Prior Insurance Program ..................................... 2 Section 3. Vesting and Forfeiture ...................................... 2 Section 4. Life Insurance Policy ....................................... 2 Section 5. Death Benefit ............................................... 4 Section 6. Termination of Agreement .................................... 4 Section 7. Benefits Upon Termination of Employment During the Executive's Lifetime ........................................ 5 Section 8. Policy Premiums ............................................. 6 Section 9. Return of Premiums .......................................... 7 Section 10. Withdrawals from Policy; Release of Assignment .............. 7 Section 11. Liability and Limitation of Obligation ...................... 7 Section 12. Named Fiduciary, Determination of Benefits, Claims Procedure and Administration ................................ 8 Section 13. Notices ..................................................... 10 Section 14. Binding Effect .............................................. 11 Section 15. Governing Law ............................................... 11 Section 16. Further Documentation ....................................... 11 Section 17. Amendments and Transfers Within the National Grid USA Companies ................................................... 11 Section 18. Interpretation of Agreement ................................. 12 Section 19. No Implied Right to Employment .............................. 12

2 COLLATERAL ASSIGNMENT LIFE INSURANCE PROGRAM II Agreement entered into as of the 1ST day of July, 2000, between National Grid USA Service Company, Inc., a Commonwealth of Massachusetts corporation (the Company), and BARBARA A. HASSAN (the Executive). Section 1. The Program The program provides the Executive death benefits and post-retirement ownership of the cash assets of the related policy. The program is designed with a goal of two times the Executive's base pay (rounded up to the nearest even whole thousand) at the time of death (or if the Executive has terminated employment, two times final base pay, reduced to 1 1/2 times final base pay on the first anniversary of her termination of employment and to one times final base pay on the second anniversary)(the Target Benefit). During employment, the first $50,000 of the coverage is to be provided by the Company's group term life insurance policy. For the purposes of this Agreement, "annual base pay" means the annualized compensation being paid to the Executive on the day of determination (or, if greater, the highest compensation paid to the Executive during any 12-month period of employment), including compensation deferred under other plans but excluding bonuses (such as NEES Goals and Incentive Compensation bonuses) and contributions made by the Company to or under any form of employee benefit program and employer contributions under the National Grid USA Companies' Incentive Thrift Plan, and "final annual base pay" means the Executive's annualized base pay on the last day of employment (or, if greater, the highest compensation paid to the Executive during any 12-month period of employment). 1 Section 2. Prior Insurance Program The Executive hereby waives the benefits under the Company's group term-life insurance policy, to the extent that the benefit provided to the Executive's beneficiaries, in accordance with Section 5, from the Policy (as hereinafter defined) equals the Target Benefit. This waiver does not extend to any optional benefits under the group term-life policy. To the extent that such waiver is ineffective, the amount of the death benefit provided under the Policy and otherwise payable hereunder to the beneficiary or beneficiaries designated by the Executive shall be correspondingly reduced and the amount payable to the Company shall be correspondingly increased. Section 3. Vesting and Forfeiture Subject to the provisions of Section 6, the Executive is 100% vested in her benefits under this Program. Section 4. Life Insurance Policy One or more split-dollar life insurance policies listed in Exhibit A hereto (the Policy) have been or will be purchased on the life of the Executive by the Company. The issuer or issuers of the Policy are hereinafter referred to as the Insurer. Purchase of insurance policies either now or at later dates may require proof of insurability at that time. To the extent that necessary insurance policies are not reasonably available at a later date, benefits will be provided under the Company's group term-life insurance policy so that the total death benefit to the Executive's beneficiaries during her employment is twice base pay. 2 (a) Interest in the Policy The Executive shall be the sole owner of the Policy and may exercise all ownership rights granted to the owner thereof by the terms of the Policy, except as may otherwise be provided herein. Except as otherwise provided herein, the Executive shall not sell, assign, transfer, borrow against, surrender, or cancel the Policy, change the beneficiary designation provision, or terminate the dividend election without the express written consent of the Company. (b) Collateral Assignment To secure the right of the Company to the Excess Value and/or the Company's Cost (both as hereafter defined), the Executive will, contemporaneously herewith, assign the Policy to the Company as collateral, using a form substantially similar to that attached hereto as Exhibit B. The collateral assignment of the Policy to the Company hereunder shall not be terminated, altered, or amended by the Executive, without the express written consent of the Company. (c) Assignment of Executive's Interest The Executive shall have the right to make an absolute assignment of her entire interest, or any portion thereof, in the Policy at any time to any person or persons, subject to the collateral assignment of the policy to the Company pursuant to subsection (b) hereof. Upon delivery of a signed copy of such assignment to the Company, all, or such portion, of the rights, obligations, and duties of the Executive thereunder (subject to the collateral assignment of the Company) and hereunder shall pass to and be binding upon 3 such assignee (including the right to make further assignments) and the Executive shall have no further interest whatsoever in the Policy, or such portions. (d) Company's Cost For the purposes of this Agreement, the Company's Cost means the amount of the premiums on the Policy paid by it hereunder, less any withdrawals by the Company from the Policy in accordance with Section 10. (e) Dividends Any dividend declared on the Policy shall be applied to purchase paid-up additional insurance on the life of the Executive. The dividend election provisions of the Policy shall conform to the provisions hereof. Section 5. Death Benefit Upon the death of the Executive, the beneficiary or beneficiaries designated by the Executive shall be paid directly, in the manner and in the amount or amounts provided in the beneficiary designation provision of the Policy, a death benefit equal to the smaller of (a) the death benefit payable under the Policy or (b) the Target Benefit. After such payment to such beneficiary, the balance, if any, of the Policy death benefit (the Excess Value) shall be paid to the Company. Section 6. Termination of Agreement (a) This Agreement shall terminate during the Executive's lifetime, without notice, upon the occurrence of any of the following events: (i) total cessation of the Company's business; 4 (ii) bankruptcy, receivership, or dissolution of the Company; (iii) termination for cause of the Executive's employment by the Company or by any direct or indirect subsidiary of the National Grid USA or (iv) payment of the Company's Cost by the Executive to the Company. (b) After termination of this Agreement under this section 6, the Executive will not be permitted to re-enroll in the program. Upon such termination, the Company may immediately withdraw its Cost from the Policy. The Executive will receive no life insurance coverage under the National Grid USA Companies' Group Life Insurance Plan. Section 7. Benefits Upon Termination of Employment During the Executive's Lifetime. (a) If the Executive has Retired from the Company before the tenth anniversary of a Policy, the Company will continue to pay premiums on that Policy in accordance with section 8 until such tenth anniversary. On or after such tenth anniversary, the Company may withdraw from the Policy amounts equal to the Company's Cost. The Company may delay withdrawals from the Policy in order to preserve the Policy's tax treatment. For the purposes of this Agreement, the Executive will be considered to have Retired from the Company if the termination of employment occurs (i) at age 61 or older with a minimum of 10 years of service (as defined in Final Average Pay Pension Plan or (ii) at age 55 or older with age plus years of service equal to at least 85. (b) If the Executive terminated employment but has not Retired from the Company before the tenth anniversary of the first Policy, the Company may immediately 5 withdraw its Cost from the Policy. The Executive will receive no life insurance coverage under the National Grid USA Companies' Group Life insurance Plan. (c) If the Executive terminated employment but has not Retired from the Company after the tenth anniversary of the first Policy, the Company may withdraw its Cost from the Policy as soon as it may be withdrawn without causing the Policy to lose its tax treatment as life insurance. The Executive will receive no life insurance coverage under the National Grid USA Companies' Group Life Insurance Plan. Section 8. Policy Premiums During the Executive's employment and as provided in subsection 7(a), the Company shall promptly pay all premiums on the Policy when due until the Policy can be kept in force with no future premiums due based upon the then current crediting of the Policy. The Company shall bill the Executive for an annual contribution to the policy premium, which contribution shall be equal to the value, for Federal income tax purposes, of the "economic benefit" of the life insurance protection the Executive then enjoys. The Executive shall transfer the contribution to the Company within thirty days of the bill. The Company will reimburse the Executive for such contribution and for the estimated related federal and state taxes. This reimbursement is not a part of the Company's Cost. If the Executive fails to make such timely payment, the Company shall report the "economic benefit" of the life insurance protection as taxable income to the Executive for the period, and no additional reimbursement will be made to the Executive until payment has been made. 6 Section 9. Return of Premiums Notwithstanding any provision hereof to the contrary, in the event that, for any reason whatsoever, no death benefit is payable under the Policy upon the death of the Executive and in lieu thereof the Insurer refunds all or any part of the premiums paid for the Policy, the Company and the Executive's beneficiary or beneficiaries shall have the unqualified right to share such premiums based on the respective cumulative contributions thereto. Section 10. Withdrawals from Policy; Release of Assignment While the Executive is employed, if no additional premiums are required to be paid under a Policy to maintain the death benefit to the Executive's beneficiaries, the Company may withdraw its Cost from that Policy at a time when such withdrawal will not cause the Policy to be terminated or to lose its tax treatment as life insurance. After the Company has withdrawn from the Policy amounts equal in full to the Company's Cost (whether under section 6, 7, or 10), the Company will release the collateral assignments of the Policy to the Executive. Section 11. Liability and Limitation of Obligation The Company and the Insurer believe the assumptions used to determine the amount of insurance purchased are reasonable. However, the Executive recognizes that the goals of the Agreement may not be realized and there is no guaranty that the Target Benefit will actually be provided by the Policy and/or that additional premiums may not be required to keep the Policy from lapsing or to provide the Target Benefit. The Executive also 7 recognizes that changes in the Internal Revenue Code or rulings or regulations thereunder could increase his tax liabilities or reduce his benefits. The Company has no responsibility, liability, or obligation for the benefits provided the Executive from the Policy. The Company may, upon 30 days' written notice to the Executive, limit its obligations hereunder to purchase, pay premiums on, or otherwise provide life insurance policies beyond the total death benefit, including all riders then in force, and all references herein to the annual base pay or final annual base pay of the Executive shall mean annual base pay at the time of such written notification. The Insurer shall have no liability except as set forth in the Policy and in any beneficiary designation and in any optional method of settlement election filed with it. The Insurer shall not be bound to inquire into or take notice of any of the covenants herein contained as to the Policy. In case of the Executive's death, the insurer shall be discharged from all liability on payment of the proceeds in accordance with the Policy's provision, and any beneficiary designation and any optional method of settlement election filed with it without regard to this Agreement or any amendment thereof. Section 12. Named Fiduciary, Determination of Benefits, Claims Procedure and Administration (a) The Company is hereby designated as the named fiduciary under this Agreement. The named fiduciary shall have authority to control and manage the operation and administration of this Agreement, and it shall be responsible for establishing and carrying out a funding policy and method consistent with the objectives of this Agreement. 8 (b) (i) Claim A person who believes that she is being denied a benefit to which she is entitled under this Agreement (the Claimant) may file a written request for such benefit with the Company, setting forth his claim. The request must be addressed to the President of the Company at its then principal place of business. (ii) Claim Decision Upon receipt of a claim, the Company shall advise the Claimant that a reply will be forthcoming within ninety days and shall, in fact, deliver such reply within such period. The Company may, however, extend the reply period for an additional ninety days for reasonable cause. If the claim is denied in whole or in part, the Company shall adopt a written opinion, using language calculated to be understood by the Claimant, setting forth: (a) the specific reason or reasons for such denial; (b) the specific reference to pertinent provisions of this Agreement on which such denial is based; (c) a description of any additional material or information necessary for the Claimant to perfect her claim and an explanation why such material or such information is necessary; (d) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; and (e) the time limits for requesting a review under subsection (iii) and for review under subsection (iv) hereof. (iii) Request for Review Within sixty days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Benefits Appeal Committee (as defined in the Final Average Pay Pension Plan) review the determination of the 9 Company. Such request must be addressed to the Secretary of the Committee, at its then principal place of business. The Claimant or his duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Committee. If the Claimant does not request a review of the Company's determination by the Committee within such sixty day period, he shall be barred and estopped from challenging the Company's determination. (iv) Review of Decision Within sixty days after the Secretary's receipt of a request for review, the Committee will review the Company's determination. After considering all materials presented by the Claimant, the Committee will render an opinion, setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Agreement on which the decision is based. If special circumstances require that the sixty day time period be extended, the Secretary will so notify the Claimant and the Committee will render the decision as soon as possible, but no later than one hundred twenty days after receipt of the request for review. Section 13. Notices Any notice, consent, or demand required or permitted to be given under the provisions of this Agreement shall be in writing, and shall be signed by the party giving or making the same. If such notice, consent, or demand is mailed to a party hereto, it shall be sent to United States certified mail, postage prepaid, addressed to such party's last known address as shown on the records of the Company. The date of such mailing shall be deemed the date of notice, consent, or demand. 10 Section 14. Binding Effect This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns, and the Executive, and the Executive's successors, assigns, heirs, executors, administrators, and beneficiaries. Section 15. Governing Law This Agreement shall be governed by the laws of the Commonwealth of Massachusetts. Section 16. Further Documentation The parties hereto agree to execute any documents which may be necessary or proper in the carrying out of the purpose and intent of this Agreement. Section 17. Amendments and Transfers Within the National Grid USA Companies This Agreement may be amended or altered in any of its provisions, and such changes shall become effective when reduced to writing and signed by the parties hereto. The Company may, without any consent of the Insurer or the Executive, assign or reassign all of its rights and obligations hereunder to such other direct or indirect subsidiary of National Grid USA by which the Executive may from time to time be employed. 11 Section 18. Interpretation of Agreement Where appropriate in this Agreement, words used in the singular shall include the plural and words used in the masculine shall include the feminine and vice versa. The headings of sections and subsections of this Agreement are for convenience of reference only. Section 19. No Implied Right to Employment Neither this Agreement nor the payment of any premiums hereunder by the Company shall be construed to create any obligation to give the Executive any right to continue employment. /s/ Barbara A. Hassan ---------------------------------------- Barbara A. Hassan National Grid USA Service Company, Inc. By: /s/ William F. Dowd ------------------------------------ William F. Dowd Vice President 12 EXHIBIT A Insurance Policies Metropolitan Policy Number 200 951 994 U 13 EXHIBIT B Split-Dollar Collateral Assignment FOR VALUE RECEIVED, the undersigned owner (hereafter the Assignor) assigns, transfers, and sets over to National Grid USA Service Company, Inc. (Assignee), its successors and assigns, certain rights in and to policy number 200 951 994 U (the Policy), and any and all supplemental benefit riders or agreements issued under the Policy, issued by Metropolitan Life Insurance Company (the Insurer), subject to all the terms and conditions of the Policy and this Assignment and to all superior liens, if any, which the Insurer or any prior Assignee may have against the Policy. The Assignor by this instrument and the Assignee by acceptance of the Assignment jointly and severally agree to the conditions and provisions hereof. This Assignment is made and the Policy is to be held as collateral security for any and all liabilities of the Assignor to the Assignee, either now existing or that may hereafter arise between the Assignor or any successors or assigns and the Assignee under the National Grid USA Companies Life Insurance Program for Executives II, dated July 1, 2000, with regard to the Policy. 1. (a) It is expressly agreed that the Assignee shall have the following rights in the Policy: (i) the right to make and receive withdrawals from the Policy (from the insurer or otherwise), to the extent of the aggregate premiums paid by the Assignee on the Policy; (ii) the right to release this Assignment to the Assignor or her assigns; 14 (iii) the right to surrender the Policy and to receive the Policy cash value and any dividend credits outstanding of the excess over the Target Benefit (as defined in the Program); and (iv) the right to receive from the death proceeds of the Policy, and to elect an income settlement option with respect thereto, an amount equal to the excess over the Target Benefit (as defined in the Program). (b) Except as provided in Paragraph (a) above, all other rights in the Policy, including but not limited to the right to designate and change the beneficiary of the Policy and the right to make loans against or withdrawals from the Policy and to receive any cash values and dividends credits outstanding in excess of aggregate premiums paid by the Assignee on the Policy, are expressly reserved to the Assignor and are, therefore, excluded from this Assignment. (c) For purposes of Paragraphs (a) and (b) above, the signature of either the Assignor or the Assignee shall be adequate. Both the Assignor and the Assignee acknowledge that, between themselves, they are bound by the limitations of this Assignment and that the Insurer will recognize the signature of either. 2. For purposes of this Assignment, aggregate premiums paid by the Assignee on the Policy shall exclude premiums for any extra benefit riders or agreements issues under the Policy. 15 3. All provisions of this Assignment shall be binding upon the successors, assigns, heirs, executors, administrators, or beneficiaries of the Assignor. 4. All Policy options and designations in effect as of the date of this Assignment shall remain in effect unless specifically changed by this Assignment or by action taken thereafter consistent with this Assignment. 5. The Insurer is hereby authorized to recognize the Assignee's claim of right hereunder without investigating the validity or amount thereof, the giving of any notice, or the existence or amount of any liabilities of the Assignor to the Assignee. Payment by the Insurer of any or all death proceeds of the Policy to the Assignee in reliance upon an affidavit of any officer of the Company as to the share of death proceeds due it shall be a full discharge of the Insurer for such share and shall be binding on all parties claiming any interest under the Policy. Signed at Illegible on 10/3/00. (City and State) (Date) Witness /s/ Illegible /s/ Barbara A. Hassan ------------------------------ ---------------------------------------- Barbara A. Hassan (Owner) 16 Accepted and Agreed to: National Grid USA Service Company, Inc. /s/ Illegible By: /s/ William F. Dowd - ------------------------------------- ------------------------------------ Witness Name: William F. Dowd Title: Vice President The Insurer hereby acknowledges receipt of a copy of this Collateral Assignment form. Insurer Date: By: -------------------------------- ------------------------------------ Recorded and Filed at the Office of Metropolitan The company assumes no obligation as to the validity and sufficiency of this agreement and does not pass upon its legality on OCT 17 2000 By: /s/ Louis J. Raguaa ------------------------------------ Louis J. Raguaa Vice-President and Secretary 17 EX-10.(Z) 7 b61381nmexv10wxzy.txt EX-10.(Z) AGREEMENT WITH CHERYL A. LEFLEUR Exhibit 10(z) NEW ENGLAND ELECTRIC SYSTEM COMPANIES LIFE INSURANCE PROGRAM FOR EXECUTIVES I FOR CHERYL A. LAFLEUR TABLE OF CONTENTS

Page ---- Section 1. The Program.................................................. 1 Section 2. Prior Insurance Program...................................... 2 Section 3. Vesting and Forfeiture....................................... 2 Section 4. Life Insurance Policy........................................ 2 Section 5. Death Benefit................................................ 4 Section 6. Termination of Agreement..................................... 4 Section 7. Benefits Upon Termination of Employment During the Executive's Lifetime..................................... 5 Section 8. Policy Premiums.............................................. 6 Section 9. Return of Premiums........................................... 7 Section 10. Withdrawals from Policy; Release of Assignment............... 7 Section 11. Liability and Limitation of obligation....................... 7 Section 12. Named Fiduciary, Determination of Benefits, Claims Procedure and Administration........................................... 8 Section 13. Notices...................................................... 10 Section 14. Binding Effect............................................... 11 Section 15. Governing Law................................................ 11 Section 16. Further Documentation........................................ 11 Section 17. Amendments and Transfers Within the New England Electric System-Companies.................................... 11 Section 18. Interpretation of Agreement.................................. 11 Section 19. No Implied Right to Employment............................... 12

COLLATERAL ASSIGNMENT LIFE INSURANCE PROGRAM Agreement entered into as of the 1st day of January, 1996, between New England Power Service Company, a Massachusetts corporation (the Company), and Cheryl A. LaFleur (the Executive). Section 1. The Program The program provides the Executive death benefits and post-retirement ownership of the cash assets of the related policy. The program is designed with a goal of three times the Executive's base pay (rounded up to the nearest even whole thousand) at the time of death (the Target Benefit). During employment, the first $50,000 of the coverage is to be provided by the Company's group term life insurance policy. For the purposes of this Agreement, "annual base pay" means the annualized compensation being paid to the Executive on the day of determination (or, if greater, the highest compensation paid to the Executive during any 12-month period of employment), including compensation deferred under other plans but excluding bonuses (including NEES Goals) and contributions made by the Company to or under any form of employee benefit program and employer contributions under the New England Electric System Companies incentive Thrift Plan, and "final annual base pay" means the Executive's annualized base pay on the last day of employment (or, if greater, the highest compensation paid to the Executive during any 12-month period of employment). Section 2. Prior Insurance Program 2 The Executive hereby waives the benefits under the Company's group term-life insurance policy, and the New England Electric System Companies Life Insurance Program for Executive II to the extent that the benefit provided to the Executive's beneficiaries, in accordance with Section 5, from the Policy (as hereinafter defined) equals the Target Benefit. This waiver does not extend to any optional benefits under the group term-life policy. To the extent that such waiver is ineffective, the amount of the death benefit provided under the Policy and otherwise payable hereunder to the beneficiary or beneficiaries designated by the Executive shall be correspondingly reduced and the amount payable to the Company shall be correspondingly increased. Section 3. Vesting and Forfeiture Subject to the provisions of Section 6, the Executive is 100% vested in his benefits under this Program. Section 4. Life Insurance Policy One or more split-dollar life insurance policies listed in Exhibit A hereto (the Policy) have been or will be purchased on the life of the Executive by the Company. The issuer or issuers of the Policy are hereinafter referred to as the Insurer. Purchase of insurance policies either now or at later dates may require proof of insurability at that time. To the extent that necessary insurance policies are not reasonably available at a later date, benefits will be provided under the Company's group term-life insurance policy so that the total death benefit to the Executive's beneficiaries during his employment is three times base pay. 3 (a) Interest in the Policy The Executive shall be the sole owner of the Policy and may exercise all ownership rights granted to the owner thereof by the terms of the Policy, except as may otherwise be provided herein. Except as otherwise provided herein, the Executive shall not sell, assign, transfer, borrow against, surrender, or cancel the Policy, change the beneficiary designation provision, or terminate the dividend election without the express written consent of the Company. (b) Collateral Assignment To secure the right of the Company to the Excess Value and/or the Company's Cost (both as hereafter defined), the Executive will, contemporaneously herewith, assign the Policy to the Company as collateral, using a form substantially similar to that attached hereto as Exhibit B. The collateral assignment of the Policy to the Company hereunder shall not be terminated, altered, or amended by the Executive, without the express written consent of the Company. (c) Assignment of Executive's Interest The Executive shall have the right to make an absolute assignment of his entire interest, or any portion thereof, in the Policy at any time to any person or persons, subject to the collateral assignment of the policy to the Company pursuant to subsection (b) hereof. Upon delivery of a signed copy of such assignment to the Company, all, or such portion, of the rights, obligations, and duties of the Executive thereunder (subject to the collateral assignment of the Company) and hereunder shall pass to and be binding upon such assignee 4 (including the right to make further assignments) and the Executive shall have no further interest whatsoever in the Policy, or such portions. (d) Company's Cost For the purposes of this Agreement, the Company's Cost means the amount of the premiums on the Policy paid by it hereunder, less any withdrawals by the Company from the Policy in accordance with Section 10. (e) Dividends Any dividend declared on the Policy shall be applied to purchase paid-up additional insurance on the life of the Executive. The dividend election provisions of the Policy shall conform to the provisions hereof. Section 5. Death Benefit Upon the death of the Executive, the beneficiary or beneficiaries designated by the Executive shall be paid directly, in the manner and in the amount or amounts provided in the beneficiary designation provision of the Policy, a death benefit equal to the smaller of (a) the death benefit payable under the Policy or (b) the Target Benefit. After such payment to such beneficiary, the balance, if any, of the Policy death benefit (the Excess Value) shall be paid to the Company. Section 6. Termination of Agreement (a) This Agreement shall terminate during the Executive's lifetime, without notice, upon the occurrence of any of the following events: 5 (i) total cessation of the Company's business; (ii) bankruptcy, receivership, or dissolution of the Company; (iii) termination for cause of the Executive's employment by the Company or by any direct or indirect subsidiary of the New England Electric System or (iv) payment of the Company's Cost by the Executive to the Company. (b) After termination of this Agreement under this section 6, the Executive will not be permitted to re-enroll in the program. Upon such termination, the Company may immediately withdraw its Cost from the Policy. The Executive will receive no life insurance coverage under the New England Electric System companies' group life insurance plan. Section 7. Benefits Upon Termination of Employment During the Executive's Lifetime. (a) If the Executive has Retired from the Company before the tenth anniversary of a Policy, the Company will continue to pay premiums on that Policy in accordance with section 8 until such tenth anniversary. On or after such tenth anniversary, the Company may withdraw from the Policy amounts equal to the Company's Cost. The Company may delay withdrawals from the Policy in order to preserve the Policy's tax treatment. For the purposes of this Agreement, the Executive will be considered to have Retired from the Company if the termination of employment occurs (i) at age 61 or older with a minimum of 10 years of service (as defined in Final Average Pay Pension Plan I) or (ii) at age 55 or older with age plus years of service equal to at least 85. 6 (b) If the Executive terminated employment but has not Retired from the Company before the tenth anniversary of the first Policy, the Company may immediately withdraw its Cost from the Policy. The Executive will receive no life insurance coverage under the New England Electric System companies' group life insurance plan. (c) If the Executive terminated employment but has not Retired from the Company after the tenth anniversary of the first Policy, the Company may withdraw its Cost from the Policy as soon as it may be withdrawn without causing the Policy to lose its tax treatment as life insurance. The Executive will receive no life insurance coverage under the New England Electric System companies' group life insurance plan. Section 8. Policy Premiums During the Executive's employment and as provided in subsection 7(a), the Company shall promptly pay all premiums on the Policy when due until the Policy can be kept in force with no future premiums due based upon the then current crediting of the Policy. The Company shall bill the Executive for an annual contribution to the policy premium, which contribution shall be equal to the value, for Federal income tax purposes, of the "economic benefit" of the life insurance protection the Executive then enjoys. The Executive shall transfer the contribution to the Company within thirty days of the bill. The Company will reimburse the Executive for such contribution and for the related federal and state taxes. This reimbursement is not a part of the Company's Cost. If the Executive fails to make such timely payment, the Company shall report the "economic benefit" of the life insurance protection as taxable income to the Executive for 7 the period, and no additional reimbursement will be made to the Executive until payment has been made. Section 9. Return of Premiums Notwithstanding any provision hereof to the contrary, in the event that, for any reason whatsoever, no death benefit is payable under the Policy upon the death of the Executive and in lieu thereof the Insurer refunds all or any part of the premiums paid for the Policy, the Company and the Executive's beneficiary or beneficiaries shall have the unqualified right to share such premiums based on the respective cumulative contributions thereto. Section 10. Withdrawals from Policy; Release of Assignment While the Executive is employed, if no additional premiums are required to be paid under a Policy to maintain the death benefit to the Executive's beneficiaries, the Company may withdraw its Cost from that Policy at a time when such withdrawal will not cause the Policy to be terminated or to lose its tax treatment as life insurance. After the Company has withdrawn from the Policy amounts equal in full to the Company's Cost (whether under section 6, 7, or 10), the Company will release the collateral assignments of the Policy to the Executive. Section 11. Liability and Limitation of Obligation The Company and the Insurer believe the assumptions used to determine the amount of insurance purchased are reasonable. However, the Executive recognizes that the goals of the Agreement may not be realized and there is no guaranty that the Target Benefit will actually be provided by the Policy and/or that additional premiums may not be required to 8 keep the Policy from lapsing or to provide the Target Benefit. The Executive also recognizes that changes in the Internal Revenue Code or rulings or regulations thereunder could increase his tax liabilities or reduce his benefits. The Company has no responsibility, liability, or obligation for the benefits provided the Executive from the Policy. The Company may, upon 30 days' written notice to the Executive, limit its obligations hereunder to purchase, pay premiums on, or otherwise provide life insurance policies beyond the total death benefit, including all riders then in force, and all references herein to the annual base pay or final annual base pay of the Executive shall mean annual base pay at the time of such written notification. The Insurer shall have no liability except as set forth in the Policy and in any beneficiary designation and in any optional method of settlement election filed with it. The Insurer shall not be bound to inquire into or take notice of any of the covenants herein contained as to the Policy. In case of the Executive's death, the Insurer shall be discharged from ail liability on payment of the proceeds in accordance with the Policy's provision, and any beneficiary designation and any optional method of settlement election filed with it without regard to this Agreement or any amendment thereof. Section 12. Named Fiduciary, Determination of Benefits, Claims Procedure and Administration (a) The Company is hereby designated as the named fiduciary under this Agreement. The named fiduciary shall have authority to control and manage the operation and administration of this Agreement, and it shall be responsible for establishing and carrying out a funding policy and method consistent with the objectives of this Agreement. 9 (b) (i) Claim A person who believes that he is being denied a benefit to which he is entitled under this Agreement (the Claimant) may file a written request for such benefit with the Company, setting forth his claim. The request must be addressed to the President of the Company at its then principal place of business. (ii) Claim Decision Upon receipt of a claim, the Company shall advise the Claimant that a reply will be forthcoming within ninety days and shall, in fact, deliver such reply within such period. The Company may, however, extend the reply period for an additional ninety days for reasonable cause. If the claim is denied in whole or in part, the Company shall adopt a written opinion, using language calculated to be understood by the Claimant, setting forth: (a) the specific reason or reasons for such denial; (b) the specific reference to pertinent provisions of this Agreement on which such denial is based; (c) a description of any additional material or information necessary for the Claimant to perfect his claim and an explanation why such material or such information is necessary; (d) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; and (e) the time limits for requesting a review under subsection (iii) and for review under subsection (iv) hereof. (iii) Request for Review Within sixty days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Benefits Appeal Committee (as defined in the Final Average Pay Pension Plan I) review the determination of the 10 Company. Such request must be addressed to the Secretary of the Committee, at its then principal place of business. The Claimant or his duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Committee. If the Claimant does not request a review of the Company's determination by the Committee within such sixty day period, he shall be barred and estopped from challenging the Company's determination. (iv) Review of Decision Within sixty days after the Secretary's receipt of a request for review, the Committee will review the Company's determination. After considering all materials presented by the Claimant, the Committee will render an opinion, setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Agreement on which the decision is based. If special circumstances require that the sixty day time period be extended, the Secretary will so notify the Claimant and the Committee will render the decision as soon as possible, but no later than one hundred twenty days after receipt of the request for review. Section 13. Notices Any notice, consent, or demand required or permitted to be given under the provisions of this Agreement shall be in writing, and shall be signed by the party giving or making the same. If such notice, consent, or demand is mailed to a party hereto, it shall be sent to United States certified mail, postage prepaid, addressed to such party's last known address as shown on the records of the Company. The date of such mailing shall be deemed the date of notice, consent, or demand. 11 Section 14. Binding Effect This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns, and the Executive, and the Executive's successors, assigns, heirs, executors, administrators, and beneficiaries. Section 15. Governing Law This Agreement shall be governed by the laws of the Commonwealth of Massachusetts. Section 16. Further Documentation The parties hereto agree to execute any documents which may be necessary or proper in the carrying out of the purpose and intent of this Agreement. Section 17. Amendments and Transfers Within the New England Electric System Companies This Agreement may be amended or altered in any of its provisions, and such changes shall become effective when reduced to writing and signed by the parties hereto. The Company may, without any consent of the insurer or the Executive, assign or reassign all of its rights and obligations hereunder to such other direct or indirect subsidiary of the New England Electric System by which the Executive may from time to time be employed. 12 Section 18. Interpretation of Agreement Where appropriate in this Agreement, words used in the singular shall include the plural and words used in the masculine shall include the feminine and vice versa. The headings of sections and subsections of this Agreement are for convenience of reference only. Section 19. No implied Right to Employment Neither this Agreement nor the payment of any premiums hereunder by the Company shall be construed to create any obligation to give the Executive any right to continue employment. /s/ Cheryl A. LaFleur ---------------------------------------- Cheryl A. LaFleur New England Power Service Company By: /s/ Illegible ------------------------------------ Name: ---------------------------------- Title: --------------------------------- 13 EXHIBIT A Insurance Policies 14 EXHIBIT B Split-Dollar Collateral Assignment FOR VALUE RECEIVED, the undersigned owner (hereafter the Assignor) assigns, transfers, and sets over to New England Power Service Company (Assignee), its successors and assigns, certain rights in and to policy number ______________ (the Policy), and any and all supplemental benefit riders or agreements issued under the Policy, issued by Metropolitan Life Insurance Company (the Insurer), subject to all the terms and conditions of the Policy and this Assignment and to all superior liens, if any, which the Insurer or any prior Assignee may have against the Policy. The Assignor by this instrument and the Assignee by acceptance of the Assignment jointly and severally agree to the conditions and provisions hereof. This Assignment is made and the Policy is to be held as cotlateral security for any and all liabilities of the Assignor to the Assignee, either now existing or that may hereafter arise between the Assignor or any successors or assigns and the Assignee under the New England Electric System Companies Life Insurance Program for Executives I, dated January 1, 1996, with regard to the Policy. 1. (a) it is expressly agreed that the Assignee shall have the following rights in the Policy: (i) the right to make and receive withdrawals from the Policy (from the insurer or otherwise), to the extent of the aggregate premiums paid by the Assignee on the Policy; (ii) the right to release this Assignment to the Assignor or his assigns; 15 (iii) the right to surrender the Policy and to receive the Policy cash value and any dividend credits outstanding of the excess over the Target Benefit (as defined in the Program); and (iv) the right to receive from the death proceeds of the Policy, and to elect an income settlement option with respect thereto, an amount equal to the excess over the Target Benefit (as defined in the Program). (b) Except as provided in Paragraph (a) above, all other rights in the Policy, including but not limited to the right to designate and change the beneficiary of the Poilcy and the right to make loans against or withdrawals from the Policy and to receive any cash values and dividends credits outstanding in excess of aggregate premiums paid by the Assignee on the Policy, are expressly reserved to the Assignor and are, therefore, excluded from this Assignment. (c) For purposes of Paragraphs (a) and (b) above, the signature of either the Assignor or the Assignee shall be adequate. Both the Assignor and the Assignee acknowledge that, between themselves, they are bound by the limitations of this Assignment and that the Insurer will recognize the signature of either. 2. For purposes of this Assignment, aggregate premiums paid by the Assignee on the Policy shall exclude premiums for any extra benefit riders or agreements issues under the Policy. 16 3. All provisions of this Assignment shall be binding upon the successors, assigns, heirs, executors, administrators, or beneficiaries of the Assignor. 4. All Policy options and designations in effect as of the date of this Assignment shall remain in effect unless specifically changed by this Assignment or by action taken thereafter consistent with this Assignment. 5. The Insurer is hereby authorized to recognize the Assignee's claim of right hereunder without investigating the validity or amount thereof, the giving of any notice, or the existence or amount of any liabilities of the Assignor to the Assignee. Payment by the insurer of any or all death proceeds of the Policy to the Assignee in reliance upon an affidavit of any officer of the Company as to the share of death proceeds due it shall be a full discharge of the Insurer for such share and shall be binding on all parties claiming any interest under the Policy. Signed at Illegible on March 5, 1996. (City and State) (Date) /s/ Illegible /s/ Illegible - ------------------------------------- ---------------------------------------- Witness Owner 17 Accepted and Agreed to: New England Power Service Company /s/ Illegible By: /s/ Illegible - ------------------------------------- ------------------------------------ Witness Name: ---------------------------------- Title: --------------------------------- The Insurer hereby acknowledges receipt of a copy of this Collateral Assignment form. Insurer Date: By: ------------------------------- ------------------------------------ Recorded and Filed at the Office of Metropolitan The company assumes no obligation as to the validity and sufficiency of this agreement and does not pass upon its legality on Mar. 14 1996 /s/ Joseph A. Reali ---------------------------------------- Joseph A. Reali Vice-President and Secretary \ (NEW ENGLAND POWER SERVICE A NEES COMPANY LOGO) MEMORANDUM To: Cheryl A. LaFleur Date: November 16, 1998 From: Don Goodwin Phone: 508 389 2125 Subject: Life Insurance Program for Executives I Agreement File: A review of the Life Insurance Program for Executives I agreements indicates that the coverage provided therein would cease after termination of employment other than at retirement. That is not in accordance with the Program as approved by the Compensation Committee of the Board. Accordingly, please append the attached "Corrected Section 7" to your copy of your agreement. A Corrected Section 7 will be added to the Company's and Insurer's copies of your agreement. /s/ Don F. Goodwin - --------------------------------------- Don F. Goodwin, Vice President Tel: 508 389-2125 Fax: 508 836-5487 e-mail: goodwi@neesnet.com Life Insurance Program for Executives I Corrected Section 7 Section 7. Option on Termination During the Executive's Lifetime. (a) For sixty days after the date of the termination of this Agreement during the Executive's lifetime, the Executive shall have the option of obtaining the release of the collateral assignment of the policy to the Company. To obtain such release, the Executive shall repay to the Company Company's Cost. Upon receipt of such amount, the Company shall release the collateral assignment of the Policy. (b) If the Executive has terminated employment but has not Retired from the Company, the Company will continue to pay premiums on the Policy in accordance with Section 8 until the earlier of (i) the Policy can be kept in force with no future premiums due based upon the then current crediting of the Policy or (ii) the tenth anniversary of the Policy. Thereafter, the Company may withdraw from the Policy amounts equal to the Company's Costs. The Company may delay withdrawal from the Policy in order to preserve the Policy's tax treatment. EX-10.(AA) 8 b61381nmexv10wxaay.txt EX-10.(AA) AGREEMENT WITH ANTHONY C. PINI Exhibit 10(aa) NEW ENGLAND ELECTRIC SYSTEM COMPANIES LIFE INSURANCE PROGRAM FOR EXECUTIVES II FOR ANTHONY C. PINI TABLE OF CONTENTS

Page ---- Section 1. The Program.................................................. 1 Section 2. Prior Insurance Program...................................... 2 Section 3. Vesting and Forfeiture....................................... 2 Section 4. Life Insurance Policy........................................ 2 Section 5. Death Benefit................................................ 4 Section 6. Termination of Agreement..................................... 4 Section 7. Benefits Upon Termination of Employment During the Executive Lifetime........................................... 5 Section 8. Policy Premiums.............................................. 6 Section 9. Return of Premiums........................................... 7 Section 10. Withdrawals from Policy; Release of Assignment............... 7 Section 11. Liability and limitation of obligation....................... 7 Section 12. Named Fiduciary, Determination of Benefits, Claims Procedure and Administration .......................................... 8 Section 13. Notices...................................................... 10 Section 14. Binding Effect............................................... 11 Section 15. Governing Law................................................ 11 Section 16. Further Documentation........................................ 11 Section 17. Amendments and Transfers Within the New England Electric System Companies............................................. 11 Section 18. Interpretation of Agreement.................................. 11 Section 19. No Implied Right to Employment............................... 12

COLLATERAL ASSIGNMENT LIFE INSURANCE PROGRAM II Agreement entered into as of the 1st day of July, 1995, between Massachusetts Electric Company, a Massachusetts corporation (the Company), and Anthony C. Pini (the Executive). Section 1. The Program The program provides the Executive death benefits and post-retirement ownership of the cash assets of the related policy. The program is designed with a goal of two times the Executive's base pay (rounded up to the nearest even whole thousand) at the time of death (or if the Executive has terminated employment, two times final base pay, reduced to 1 1/2 times final base pay on the first anniversary of his termination of employment and to one times final base pay on the second anniversary) (the Target Benefit)). During employment, the first $50,000 of the coverage is to be provided by the Company's group term life insurance policy. For the purposes of this Agreement, "annual base pay" means the annualized compensation being paid to the Executive on the day of determination (or, if greater, the highest compensation paid to the Executive during any 12-month period of employment), including compensation deferred under other plans but excluding bonuses (including NEES Goals) and contributions made by the Company to or under any form of employee benefit program and employer contributions under the New England Electric System Companies Incentive Thrift Plan, and "final annual base pay" means the Executive's annualized base pay on the last day of employment (or, if greater, the highest compensation paid to the Executive during any 12-month period of employment). 2 Section 2. Prior Insurance Program The Executive hereby waives the benefits under the Company's group term-life insurance policy, to the extent that the benefit provided to the Executive's beneficiaries, in accordance with Section 5, from the Policy (as hereinafter defined) equals the Target Benefit. This waiver does not extend to any optional benefits under the group term-life policy. To the extent that such waiver is ineffective, the amount of the death benefit provided under the Policy and otherwise payable hereunder to the beneficiary or beneficiaries designated by the Executive shall be correspondingly reduced and the amount payable to the Company shall be correspondingly increased. Section 3. Vesting and Forfeiture Subject to the provisions of Section 6, the Executive is 100% vested in his benefits under this Program. Section 4. Life Insurance Policy One or more split-dollar life insurance policies listed in Exhibit A hereto (the Policy) have been or will be purchased on the life of the Executive by the Company. The issuer or issuers of the Policy are hereinafter referred to as the Insurer. Purchase of insurance policies either now or at later dates may require proof of insurability at that time. To the extent that necessary insurance policies are not reasonably available at a later date, benefits will be provided under the Company's group term-life insurance policy so that the total death benefit to the Executive's beneficiaries during his employment is twice base pay. 3 (a) Interest in the Policy The Executive shall be the sole owner of the Policy and may exercise all ownership rights granted to the owner thereof by the terms of the Policy, except as may otherwise be provided herein. Except as otherwise provided herein, the Executive shall not sell, assign, transfer, borrow against, surrender, or cancel the Policy, change the beneficiary designation provision, or terminate the dividend election without the express written consent of the Company. (b) Collateral Assignment To secure the right of the Company to the Excess Value and/or the Company's Cost (both as hereafter defined), the Executive will, contemporaneously herewith, assign the Policy to the Company as collateral, using a form substantially similar to that attached hereto as Exhibit B. The collateral assignment of the Policy to the Company hereunder shall not be terminated, altered, or amended by the Executive, without the express written consent of the Company. (c) Assignment of Executive's Interest The Executive shall have the right to make an absolute assignment of his entire interest, or any portion thereof, in the Policy at any time to any person or persons, subject to the collateral assignment of the policy to the Company pursuant to subsection (b) hereof. Upon delivery of a signed copy of such assignment to the Company, all, or such portion, of the rights, obligations, and duties of the Executive thereunder (subject to the collateral assignment of the Company) and hereunder shall pass to and be binding upon such assignee 4 (including the right to make further assignments) and the Executive shall have no further interest whatsoever in the Policy, or such portions. (d) Company's Cost For the purposes of this Agreement, the Company's Cost means the amount of the premiums on the Policy paid by it hereunder, less any withdrawals by the Company from the Policy in accordance with Section 10. (e) Dividends Any dividend declared on the Policy shall be applied to purchase paid-up additional insurance on the life of the Executive. The dividend election provisions of the Policy shall conform to the provisions hereof. Section 5. Death Benefit Upon the death of the Executive, the beneficiary or beneficiaries designated by the Executive shall be paid directly, in the manner and in the amount or amounts provided in the beneficiary designation provision of the Policy, a death benefit equal to the smaller of (a) the death benefit payable under the Policy or (b) the Target Benefit. After such payment to such beneficiary, the balance, if any, of the Policy death benefit (the Excess Value) shall be paid to the Company. Section 6. Termination of Agreement (a) This Agreement shall terminate during the Executive's lifetime, without notice, upon the occurrence of any of the following events: 5 (i) total cessation of the Company's business; (ii) bankruptcy, receivership, or dissolution of the Company; (iii) termination for cause of the Executive's employment by the Company or by any direct or indirect subsidiary of the New England Electric System or (iv) payment of the Company's Cost by the Executive to the Company. (b) After termination of this Agreement under this section 6, the Executive will not be permitted to re-enroll in the program. Upon such termination, the Company may immediately withdraw its Cost from the Policy. The Executive will receive no life insurance coverage under the New England Electric System companies' group life insurance plan. Section 7. Benefits Upon Termination of Employment During the Executive's Lifetime. (a) If the Executive has Retired from the Company before the tenth anniversary of a Policy, the Company will continue to pay premiums on that Policy in accordance with section 8 until such tenth anniversary. On or after such tenth anniversary, the Company may withdraw from the Policy amounts equal to the Company's Cost. The Company may delay withdrawals from the Policy in order to preserve the Policy's tax treatment. For the purposes of this Agreement, the Executive will be considered to have Retired from the Company if the termination of employment occurs (i) at age 61 or older with a minimum of 10 years of service (as defined in Final Average Pay Pension Plan I) or (ii) at age 55 or older with age plus years of service equal to at least 85. 6 (b) If the Executive terminated employment but has not Retired from the Company before the tenth anniversary of the first Policy, the Company may immediately withdraw its Cost from the Policy. The Executive will receive no life insurance coverage under the New England Electric System companies' group life insurance plan. (c) If the Executive terminated employment but has not Retired from the Company after the tenth anniversary of the first Policy, the Company may withdraw its Cost from the Policy as soon as it may be withdrawn without causing the Policy to lose its tax treatment as life insurance. The Executive will receive no life insurance coverage under the New England Electric System companies' group life insurance plan. Section 8. Policy Permiums During the Executive's employment and as provided in subsection 7(a), the Company shall promptly pay all premiums on the Policy when due until the Policy can be kept in force with no future premiums due based upon the then current crediting of the Policy. The Company shall bill the Executive for an annual contribution to the policy premium, which contribution shall be equal to the value, for Federal income tax purposes, of the "economic benefit" of the life insurance protection the Executive then enjoys. The Executive shall transfer the contribution to the Company within thirty days of the bill. The Company will reimburse the Executive for such contribution and for the related federal and state taxes. This reimbursement is not a part of the Company's Cost. If the Executive fails to make such timely payment, the Company shall report the "economic benefit" of the life insurance protection as taxable income to the Executive for 7 the period, and no additional reimbursement will be made to the Executive until payment has been made. Section 9. Return of Premiums Notwithstanding any provision hereof to the contrary, in the event that, for any reason whatsoever, no death benefit is payable under the Policy upon the death of the Executive and in lieu thereof the insurer refunds all or any part of the premiums paid for the Policy, the Company and the Executive's beneficiary or beneficiaries shall have the unqualified right to share such premiums based on the respective cumulative contributions thereto. Section 10. Withdrawals from Policy; Release of Assignment While the Executive is employed, if no additional premiums are required to be paid under a Policy to maintain the death benefit to the Executive's beneficiaries, the Company may withdraw its Cost from that Policy at a time when such withdrawal will not cause the Policy to be terminated or to lose its tax treatment as life insurance. After the Company has withdrawn from the Policy amounts equal in full to the Company's Cost (whether under section 6, 7, or 10), the Company will release the collateral assignments of the Policy to the Executive. Section 11. Liability and Limitation of Obligation The Company and the Insurer believe the assumptions used to determine the amount of insurance purchased are reasonable. However, the Executive recognizes that the goals of the Agreement may not be realized and there is no guaranty that the Target Benefit will actually be provided by the Policy and/or that additional premiums may not be required to 8 keep the Policy from lapsing or to provide the Target Benefit. The Executive also recognizes that changes in the Internal Revenue Code or rulings or regulations thereunder could increase his tax liabilities or reduce his benefits. The Company has no responsibility, liability, or obligation for the benefits provided the Executive from the Policy. The Company may, upon 30 days' written notice to the Executive, limit its obligations hereunder to purchase, pay premiums on, or otherwise provide life insurance policies beyond the total death benefit, including all riders then in force, and all references herein to the annual base pay or final annual base pay of the Executive shall mean annual base pay at the time of such written notification. The Insurer shall have no liability except as set forth in the Policy and in any beneficiary designation and in any optional method of settlement election filed with it. The Insurer shall not be bound to inquire into or take notice of any of the covenants herein contained as to the Policy. In case of the Executive's death, the Insurer shall be discharged from all liability on payment of the proceeds in accordance with the Policy's provision, and any beneficiary designation and any optional method of settlement election filed with it without regard to this Agreement or any amendment thereof. Section 12. Named Fiduciary, Determination of Benefits, Claims Procedure and Administration (a) The Company is hereby designated as the named fiduciary under this Agreement. The named fiduciary shall have authority to control and manage the operation and administration of this Agreement, and it shall be responsible for establishing and carrying out a funding policy and method consistent with the objectives of this Agreement. 9 (b) (i) Claim A person who believes that he is being denied a benefit to which he is entitled under this Agreement (the Claimant) may file a written request for such benefit with the Company, setting forth his claim. The request must be addressed to the President of the Company at its then principal place of business. (ii) Claim Decision Upon receipt of a claim, the Company shall advise the Claimant that a reply will be forthcoming within ninety days and shall, in fact, deliver such reply within such period. The Company may, however, extend the reply period for an additional ninety days for reasonable cause. If the claim is denied in whole or in part, the Company shall adopt a written opinion, using language calculated to be understood by the Claimant, setting forth: (a) the specific reason or reasons for such denial; (b) the specific reference to pertinent provisions of this Agreement on which such denial is based; (c) a description of any additional material or information necessary for the Claimant to perfect his claim and an explanation why such material or such information is necessary; (d) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; and (e) the time limits for requesting a review under subsection (iii) and for review under subsection (iv) hereof. (iii) Request for Review Within sixty days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Benefits Appeal Committee (as defined in the Final Average Pay Pension Plan I) review the determination of the 10 Company. Such request must be addressed to the Secretary of the Committee, at its then principal place of business. The Claimant or his duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Committee. If the Claimant does not request a review of the Company's determination by the Committee within such sixty day period, he shall be barred and estopped from challenging the Company's determination. (iv) Review of Decision Within sixty days after the Secretary's receipt of a request for review, the Committee will review the Company's determination. After considering all materials presented by the Claimant, the Committee will render an opinion, setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Agreement on which the decision is based. If special circumstances require that the sixty day time period be extended, the Secretary will so notify the Claimant and the Committee will render the decision as soon as possible, but no later than one hundred twenty days after receipt of the request for review. Section 13. Notices Any notice, consent, or demand required or permitted to be given under the provisions of this Agreement shall be in writing, and shall be signed by the party giving or making the same. If such notice, consent, or demand is mailed to a party hereto, it shall be sent to United States certified mail, postage prepaid, addressed to such party's last known address as shown on the records of the Company. The date of such mailing shall be deemed the date of notice, consent, or demand. 11 Section 14. Binding Effect This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns, and the Executive, and the Executive's successors, assigns, heirs, executors, administrators, and beneficiaries. Section 15. Governing Law This Agreement shall be governed by the laws of Massachusetts. Section 16. Further Documentation The parties hereto agree to execute any documents which may be necessary or proper in the carrying out of the purpose and intent of this Agreement. Section 17. Amendments and Transfers Within the New England Electric System Companies This Agreement may be amended or altered in any of its provisions, and such changes shall become effective when reduced to writing and signed by the parties hereto. The Company may, without any consent of the Insurer or the Executive, assign or reassign all of its rights and obligations hereunder to such other direct or indirect subsidiary of the New England Electric System by which the Executive may from time to time be employed. Section 18. Interpretation of Agreement Where appropriate in this Agreement, words used in the singular shall include the plural and words used in the masculine shall include the feminine and vice versa. The 12 headings of sections and subsections of this Agreement are for convenience of reference only. Section 19. No Implied Right to Employment Neither this Agreement nor the payment of any premiums hereunder by the Company shall be construed to create any obligation to give the Executive any right to continue employment. /s/ Anthony C. Pini ---------------------------------------- Anthony C. Pini Massachusetts Electric Company By: /s/ Illegible ------------------------------------ Name: ---------------------------------- Title: --------------------------------- 13 EXHIBIT A Insurance Policies 14 EXHIBIT B SPLIT-DOLLAR COLLATERAL ASSIGNMENT FOR VALUE RECEIVED, the undersigned owner (hereafter the Assignor) assigns, transfers, and sets over to Massachusetts Electric Company (Assignee), its successors and assigns, certain rights in and to policy number _________________ (the Policy), and any and all supplemental benefit riders or agreements issued under the Policy, issued by Metropolitan Life Insurance Company (the Insurer), subject to all the terms and conditions of the Policy and this Assignment and to all superior liens, if any, which the Insurer or any prior Assignee may have against the Policy. The Assignor by this instrument and the Assignee by acceptance of the Assignment jointly and severally agree to the conditions and provisions hereof. This Assignment is made and the Policy is to be held as collateral security for any and all liabilities of the Assignor to the Assignee, either now existing or that may hereafter arise between the Assignor or any successors or assigns and the Assignee under the New England Electric System Companies Life Insurance Program for Executives II, dated JULY 1, 1995, with regard to the Policy. 1. (a) It is expressly agreed that the Assignee shall have the following rights in the Policy: (i) the right to make and receive withdrawals from the Policy (from the insurer or otherwise), to the extent of the aggregate premiums paid by the Assignee on the Policy; (ii) the right to release this Assignment to the Assignor or his assigns; 15 (iii) the right to surrender the Policy and to receive the Policy cash value and any dividend credits outstanding of the excess over the Target Benefit (as defined in the Program); and (iv) the right to receive from the death proceeds of the Policy, and to elect an income settlement option with respect thereto, an amount equal to the excess over the Target Benefit (as defined in the Program). (b) Except as provided in Paragraph (a) above, all other rights in the Policy, including but not limited to the right to designate and change the beneficiary of the Policy and the right to make loans against or withdrawals from the Policy and to receive any cash values and dividends credits outstanding in excess of aggregate premiums paid by the Assignee on the Policy, are expressly reserved to the Assignor and are, therefore, excluded from this Assignment. (c) For purposes of Paragraphs (a) and (b) above, the signature of either the Assignor or the Assignee shall be adequate. Both the Assignor and the Assignee acknowledge that, between themselves, they are bound by the limitations of this Assignment and that the Insurer will recognize the signature of either. 2. For purposes of this Assignment, aggregate premiums paid by the Assignee on the Policy shall exclude premiums for any extra benefit riders or agreements issues under the Policy. 16 3. All provisions of this Assignment shall be binding upon the successors, assigns, heirs, executors, administrators, or beneficiaries of the Assignor. 4. All Policy options and designations in effect as of the date of this Assignment shall remain in effect unless specifically changed by this Assignment or by action taken thereafter consistent with this Assignment. 5. The Insurer is hereby authorized to recognize the Assignee's claim of right hereunder without investigating the validity or amount thereof, the giving of any notice, or the existence or amount of any liabilities of the Assignor to the Assignee. Payment by the Insurer of any or all death proceeds of the Policy to the Assignee in reliance upon an affidavit of any officer of the Company as to the share of death proceeds due it shall be a full discharge of the Insurer for such share and shall be binding on all parties claiming any interest under the Policy. Signed at WESTBORO, MA on 9/6/95 (City and State) (date) /s/ Illegible /s/ Illegible - ------------------------------------- ---------------------------------------- Witness Owner 17 Accepted And Agreed To: Massachusetts Electric Company /s/ Illegible BY: /s/ Illegible - ------------------------------------- ------------------------------------ Witness Name: ---------------------------------- Title: --------------------------------- THE INSURER HEREBY ACKNOWLEDGES RECEIPT OF A COPY OF THIS COLLATERAL ASSIGNMENT FORM. Insurer Date: By: ------------------------------- ------------------------------------ Recorded and Filed at the Office of Metropolitan The company assumes no obligation as to the validity and sufficiency of this agreement and does not pass upon its legality. on OCT 18 1995 /s/ Joseph A. Reali ---------------------------------------- Joseph A. Reali Vice-President and Secretary EX-10.(BB) 9 b61381nmexv10wxbby.txt EX-10.(BB) KEY EXECUTIVE PLAN Exhibit 10(bb) FIRST AMENDMENT TO THE EASTERN UTILITIES ASSOCIATES KEY EXECUTIVE PLAN WHEREAS, Eastern Utilities Associates (the "Association") previously adopted the Eastern Utilities Associates Key Executive Plan (the "Plan") effective July 1984; WHEREAS, the Association amended and restated the Plan effective January 1, 1995; WHEREAS, the Association has resolved to enhance the benefits for Donald G. Pardus and John R. Stevens; and WHEREAS, the Association has reserved the right to amend the Plan from time to time under Section 10 of the Plan; NOW, THEREFORE, in accordance with and pursuant to the foregoing, the Plan is amended, effective January 1,1999, as follows: 1. Section 4(b) is hereby amended by deleting the same in its entirety and by substituting therefore the following: "The Supplemental Pension Benefit provided by this Plan shall consist of the monthly payment of twenty-five percent of the Key Executive's Salary to the Key Executive for the fifteen year period beginning on the first day of the month following the termination of Key Executive's employment with the Association; providing, however, that the Supplemental Pension Benefit payment period shall be twenty years instead of fifteen years in the case of Donald G. Pardus and John R. Stevens. 2. Section 8(b) is hereby amended by deleting the same in its entirety and by substituting therefore the following: "Notwithstanding anything to the contrary in Section 8(a) above, the benefits payable under this Plan shall be offset by the excess cash surrender value or death benefits in any insurance policy or policies owned by the Key Executive over the amount payable to the Association (or any of its affiliates) under any split-dollar insurance agreement between the Association (or any of its affiliates) and the Key Executive, after such excess cash value or death benefits have been further reduced by any amounts used to offset benefits due under the Supplemental Retirement Plan for Certain Officers of Eastern Utilities Association and Its Affiliates. In determining the benefits that could be paid with such excess cash value, (i) the amount of excess cash surrender value under this paragraph (b) shall be determined effective as of the date that the split-dollar insurance arrangement between the participant and EUA Service Corporation terminates; and (ii) discounting for present value shall be performed using the 83-Group Annuity Mortality table and an interest rate equal to the then-prevailing 30 year Treasury Note rate on the date the participant commenced benefits under the Plan; provided, however, that the interest rate shall in no event exceed 5.19% when discounting the Plan benefits payable to Donald G. Pardus and John R. Stevens." IN WITNESS WHEREOF, EASTERN UTILITIES ASSOCIATES has caused this instrument to be executed and delivered on its behalf by the undersigned on this 30th day of September 1999. ATTEST: EASTERN UTILITIES ASSOCIATES /s/ Illegible /s/ Paul J. Choquette, Jr. - ------------------------------------- ---------------------------------------- Secretary By: Paul J. Choquette, Jr. Its: Compensation and Nominating Committee Chairman -2- KEY EXECUTIVE PLAN OF EASTERN UTILITIES ASSOCIATES Amended and Restated Effective January 1, 1995 The undersigned officer of Eastern Utilities Associates hereby certifies that this is a true and complete copy of the Key Executive Plan of Eastern Utilities Associates, amended and restated effective January 1, 1995 and as in full force and effect on the date hereof. KEY EXECUTIVE PLAN OF EASTERN UTILITIES ASSOCIATES 1. PURPOSE The purpose of the Key Executive Plan of Eastern Utilities Associates (the "Plan") is to advance the interests of Eastern Utilities Associates (the "Association") by providing supplemental pension benefits and death benefit coverage to those key employees who contribute significantly to the performance of the Association and its affiliates (the "Key Executives"). The Plan is intended to enhance the ability of the Association to attract and retain individuals of superior managerial ability and to motivate such individuals to exert their best efforts towards future progress and profitability of the Association. This amendment and restatement of the Plan is intended to supersede the Key Executive Insurance Plan as originally adopted by the Association in July 1984. 2. ADMINISTRATION AND INTERPRETATION (a) Administration. The Plan is administered by the Association. The Association, from time to time, may adopt such rules and regulations as may be necessary or desirable for the proper and efficient administration of the Plan and as are consistent with the terms of the Plan, The Association, from time to time, may also appoint such individuals to act as the Association's representatives as the Association considers necessary or desirable for the effective administration of the Plan. Any notice or document required to be given or filed with the Association will be properly given or filed if delivered or mailed, by certified or registered mail, postage prepaid, to the Association at One Liberty Square, P.O. Box 2333, Boston, MA 02107. (b) Top Hat Exemption. It is the Association's intent that this Plan, as set forth herein, constitute an unfunded plan for a "select group of management and highly compensated employees" within the meaning of U.S. Department of Labor Regulation Section 2520.104-23, and comply with the applicable requirements of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). (c) Interpretation. The interpretation and construction by the Association of any provisions of the Plan and any determination by the Association under any provision of the Plan shall be final and conclusive for all purposes. -1- (d) Limitation on Liability. Neither the Association, the trustees of the Association (collectively, the "Trustees") or any individual authorized to act on behalf of the Association shall be liable for any act, omission, interpretation construction or determination made in connection with the Plan in good faith. The Trustees and any individuals authorized to act on behalf of the Association shall be entitled to indemnification and reimbursement by the Association in respect of any claim, loss, damage or expense (including counsel fees) arising therefrom to the full extent permitted by law and under any liability insurance coverage that may be in effect from time to time. 3. PARTICIPATION The individuals eligible to participate in this Plan shall be those Key Executives as the Association from time to time shall determine. A list of the Key Executives is attached hereto as Appendix A. The Association shall update Exhibit A from time to time as the Association adds additional individuals as Key Executives under the Plan. 4. SUPPLEMENTAL PENSION BENEFIT (a) Eligibility. A Key Executive shall be entitled to receive payment of a Supplemental Pension Benefit (as defined in Section 4(b) below) upon Retirement (as defined in Section 4(c) below) or Termination without Cause (as defined in Section 4(d) below). (b) Amount and Payment of Supplemental Pension Benefit. The Supplemental Pension Benefit provided by this Plan shall consist of the monthly payment of twenty-five percent of the Key Executive's Salary to the Key Executive for the fifteen year period beginning on the first day of the month following the termination of Key Executive's employment with the Association. For purposes of this Plan, the Key Executive's Salary shall equal the highest annualized rate of salary paid to the Key Executive at any time prior to the Key Executive's sixty-fifth birthday. (c) Retirement. A Key Executive may retire at any time on or after the first day of any month coincident with or next following the earlier of the date on which the Key Executive (i) attains sixty-one years of age and completes ten or more years of vesting service under the Employees' Retirement Plan of Eastern Utilities Associates and its Affiliated Companies (the "Tax-Qualified Pension Plan") or (ii) qualifies for Special Early Retirement under Section 4.4 of the Tax-Qualified Pension Plan. (d) Termination without Cause. Termination without Cause shall consist of any termination of the Key Executive's employment by the Association -2- without Cause (as defined in Section 6 below) and any termination of the Key Executive's employment by the Key Executive under circumstances which entitle the Key Executive to severance benefits under any plan, agreement or arrangement with the Association or its affiliates. 5. DEATH BENEFITS (a) Death Benefit After Commencement of the Supplemental Pension Benefit. In the event of the Key Executive's death after the Supplemental Pension Benefit has commenced but before the expiration of the fifteen year payment period for such benefit, the Association shall continue to pay the Key Executive's Supplemental Pension Benefit for the remainder of such period to the Beneficiary (as defined in Section 5(c) below) of such Key Executive. If the Beneficiary dies after the death of the Key Executive, but prior to receiving the full death benefit under this Section 5(a), any remaining benefit shall be paid to the Beneficiary's estate. No death benefit shall be payable under this Plan in the event that the Key Executive dies after receiving his entire Supplemental Pension Benefit. (b) Death Benefit Before Commencement of the Supplemental Pension Benefit. In the event of the Key Executive's death before the Supplemental Pension Benefit has commenced, the Association shall pay an amount equal to two times the Key Executive's Salary in a single lump sum to the Beneficiary (as defined in Section 5(c) below) of such executive. Such payment shall be made within ninety days of the Key Executive's death. If the Beneficiary dies after the death of the Key Executive, but prior to receiving the benefit under this Section 5(b), such benefit shall be paid to the Beneficiary's estate. (c) Beneficiary. The Beneficiary shall mean the person or persons designated by the Key Executive to receive a death benefit under the Plan in the event of the Key Executive's death. If the Key Executive is married and designates someone other than his legal spouse, the designation by such executive must include the written consent of such spouse at the time the designation is made in order to be valid. A former spouse's consent shall not be binding on a subsequent spouse. A Beneficiary designation must be filed with the Association prior to the Key Executive's death to be effective. In addition, the designation of a Beneficiary will not be effective if the Beneficiary dies before the Key Executive. If there is no Beneficiary designation in effect immediately prior to the Key Executive's death, the Beneficiary shall be (i) the Key Executive's surviving spouse, in the case of a married Key Executive, or (ii) the estate of the Key Executive, in the case of a Key Executive who is not married. -3- 6. TERMINATION FOR CAUSE For purposes of this Plan, "Cause" shall exist for the Association to terminate the Key Executive's employment if, and only if, the Key Executive has committed theft, embezzlement or other serious and substantial crimes against the Association. For purposes of this definition, no act or omission shall be considered to have been "willful" unless it was not in good faith and the Key Executive had knowledge at the time that the act or omission was not in the best interests of the Association. The Key Executive must be notified in writing by the Association of any termination of his employment for Cause, which writing shall set forth in reasonable detail the facts and circumstances relied upon therefor. The Key Executive will then have the right, within ten days of receipt of such notice, to file a written request for review. In such case, the Key Executive will be given the opportunity to be heard, personally or by counsel, by the Trustees who are not then executives of the Association (the "Independent Trustees") and a majority of the Independent Trustees must thereafter confirm that such termination is for Cause. If the Independent Trustees do not provide such confirmation, the termination shall be treated under this Plan as a termination by the Association without Cause. 7. FINANCING OF PLAN BENEFITS All amounts due and benefits provided under this Plan shall constitute a general obligation of the Association. The Association shall not be required to segregate on their books any amount to be used for the payment of benefits under this Plan or maintain any life insurance policy on behalf of a Key Executive. 8. EFFECT ON OTHER PLANS AND AGREEMENTS (a) Benefits provided to a Key Executive hereunder shall be in addition to any benefits the Key Executive is entitled to under any employer stock, deferred compensation, savings, retirement, severance or other employee benefit plan, agreement, arrangement or understanding, including but not limited to the Tax-Qualified Pension Plan, the Supplemental Retirement Plan for Certain Officers of Eastern Utilities Associates and its Affiliated Companies, the Retirement and Savings Restoration Plan for Members of The Employees' Retirement Plan of Eastern Utilities Associates and its Affiliated Companies, the Eastern Utilities Associates Employees' Savings Plan and any severance agreement with the Association or its affiliates. (b) Notwithstanding anything to the contrary in Section 8(a) above, the benefits payable under this Plan shall be offset by the excess cash value or death benefits in any insurance policy or policies owned by the Key Executive over the amount payable to the Association (or any of its affiliates) under any split-dollar -4- insurance agreement between the Association (or any of its affiliates) and the Key Executive, after such excess cash value or death benefits have been further reduced by any amounts used to offset benefits due under the Supplemental Retirement Plan for Certain Officers of Eastern Utilities Associates and Its Affiliates. The value of benefits under such plans shall be determined on the date the Key Executive or Beneficiary, as the case may be, would begin receiving benefits under this Plan. To the extent that the benefit due under this Plan is offset by excess amounts under such a split-dollar life insurance agreement, no benefit shall be due under this Plan. For purposes of determining the benefit which could be paid with such excess amounts, discounting shall be calculated using the 83-Group Annuity Mortality table and an interest rate equal to the then prevailing thirty year Treasury Note rate on the date such determination is made. 9. CLAIMS PROCEDURE The procedure for all claims under this Plan is set forth in Appendix B hereto. 10. AMENDMENT AND TERMINATION The Association reserves the right to amend or terminate the Plan in whole or in part at any time. No amendment or termination of the Plan may deprive any Key Executive without his consent of any benefit to which the Key Executive was previously entitled to based on the Key Executive's Salary prior to such amendment and termination. The Plan shall survive any acquisition by or merger or consolidation into any other corporation. In the event of a reorganization, consolidation, dissolution or merger of the Association, the Plan shall be continued by the successor, and in such event the successor shall be substituted for the Association and shall assume all of the Plan liabilities and all of the powers, duties and responsibilities of the Association under the Plan. 11. MISCELLANEOUS a. No Employment Contract. Nothing contained in the Plan shall be construed as conferring upon any Key Executive the right to continue in the employ of the Association and its affiliates. b. Employment with Affiliates. Employment by the Association for the purposes of this Plan shall be deemed to include employment by any affiliate or subsidiary of the Association. c. Withholding. The Association will withhold from any amounts payable under this Plan all federal, state, city and local taxes as shall be legally required. -5- d. Action by Association. Any action required of or permitted by the Association under the Plan shall be by resolution of its Board of Trustees, by resolution of a duly authorized committee of its Board of Trustees, or by a person or persons authorized by resolutions of its Board of Trustees or such committee. e. Nonassignability. A Key Executive shall not have the power or right to sell, exchange, pledge, transfer, assign or encumber or dispose of such executive's interest in any benefit under this Plan nor shall such interest be subject to seizure for the payment of a Key Executive's debts, judgments, alimony or separate maintenance or be transferable by operation of law in the event of a Key Executive's bankruptcy or insolvency. f. Severability. In the event any provision of the Plan shall be held to be illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if such illegal or invalid provisions had never been contained in the Plan. g. Governing Law; Construction. All rights and obligations under the Plan shall be governed by, and the Plan shall be construed in accordance with, the laws of the Commonwealth of Massachusetts to the extent not preempted by ERISA. Titles and headings to Sections herein are for purposes of reference only, and shall in no way limit, define or otherwise affect the meaning or interpretation of any provisions of the Plan. h. Gender and Number. Where the context admits, words in the masculine gender shall include the feminine and neuter genders, the plural shall include the singular and the singular shall include the plural. -6- APPENDIX A - KEY EXECUTIVES COVERED UNDER THE PLAN The following is a list of each Key Executive covered under the Plan as of January 1, 1995: -7- APPENDIX B - CLAIMS PROCEDURE a. Filing of a Claim for Benefits. All claims for benefits under the Plan shall be in writing and shall be submitted to the Treasurer of the Association or such other person as the Association may designate from time to time for the processing of claims. Upon receipt of a claim for benefits, the Association may require the claimant to complete such forms and provide such additional information as may be reasonably necessary to establish the claimant's right to benefits under the Plan. b. Notification to Claimant of Decision. If a claim for benefits is wholly or partially denied, the Association shall furnish to the claimant a notice of the decision, meeting the requirements of paragraph (c) below, within ninety (90) days after receipt of the claim. If the special circumstances require more than ninety (90) days to process the claim, this period may be extended for up to an additional ninety (90) days by giving written notice to the claimant before the end of the initial 90-day period stating the special circumstances requiring the extension and the date by which a final decision is expected. Failure to provide a notice of decision in the time specified shall constitute a denial of the claim and the claimant shall be entitled to require a review of the denial under the review procedures specified in paragraphs (d) and (e) below. c. Content of Notice. The notice to be provided to every claimant who is denied a claim for benefits under paragraph (b) above shall be in writing and shall set forth, in a manner calculated to be understood by the claimant, the following: (1) The specific reason or reasons for the denial; (2) Specific reference to pertinent Plan provisions on which the denial is based; (3) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (4) An explanation of the Plan's claim review procedure describing the steps to be taken by a claimant who wishes to submit his or her claim for review. d. Review Procedure. The purpose of the review procedure set forth in this paragraph and in paragraph (e) below is to provide a procedure by which a claimant may have a reasonable opportunity to appeal a denial of a claim to the -8- Association for a full and fair review. To accomplish that purpose, the claimant or his duly authorized representative: (1) May request a review upon written application to the Association; (2) May review pertinent Plan documents; and (3) May submit issues and comments in writing. A claimant (or his duly authorized representative) shall request a review by filing a written application for review with the Association at any time within sixty (60) days after receipt by the claimant of written notice of the denial of his or her claim. e. Decision on Review. The decision on review of a denied claim shall be made in the following manner: (1) The decision on review shall be made by the Association, which may in its discretion hold a hearing on the denied claim. The Association shall make its decision promptly, which shall ordinarily be not later than sixty (60) days after the Plan's receipt of the request for review, unless special circumstances (such as the need for holding a hearing) require an extension of time for processing. In that case a decision shall be rendered as soon as possible, but not later than one hundred twenty (120) days after receipt of the request for review. If an extension of time is required due to special circumstances, written notice of the extension shall be furnished to the claimant prior to the time the extension commences. (2) The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, as well as specific references to the pertinent Plan provisions on which the decision is based. (3) In the event the decision on review is not furnished to the claimant within the time required, the claim shall be deemed denied on review. -9- EX-10.(CC) 10 b61381nmexv10wxccy.txt EX-10.(CC) SPLIT DOLLAR ASSIGNMENT INSURANCE AGREEMENT Exhibit 10(cc) SPLIT DOLLAR ASSIGNMENT INSURANCE AGREEMENT THIS AGREEMENT made effective as of February 1, 1995, by and between EUA Service Corporation, a Massachusetts corporation having its principal place of business in Boston, Massachusetts (the "Corporation"), and Barbara A. Hassan (the "Employee"). WHEREAS, the Employee is a valued employee of the Corporation; and WHEREAS, the Corporation wishes to assist the Employee with a life insurance program in recognition of the Employee's ongoing valuable contribution to the business success of the Corporation; and WHEREAS, the Employee is the owner of an insurance policy on his or her life, including all supplemental riders or endorsements to such insurance policy, which policy the Employee and Corporation wish to make subject to a life insurance plan pursuant to the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants hereinafter set forth, the Parties hereto agree as follows: ARTICLE I OWNERSHIP OF THE POLICY 1.1 Employee as Owner. The Employee shall be the owner of the policy (which term shall include all supplemental riders or endorsements thereto) (hereinafter the "Policy") and may exercise all ownership rights granted to the owner thereof by the terms of the Policy, except as may otherwise be provided herein. If the Employee transfers ownership of the Plan to a trustee or other third party owner, such trustee or owner shall be treated as the Employee throughout this Agreement where appropriate. The Employee and the Corporation agree that the Policy shall be subject to the terms and conditions of this Agreement. 1.2 Assignment. The Employee agrees to execute an assignment (the "Assignment") to the Corporation to secure the Corporation's rights under this Agreement, in the form required by or acceptable to the issuer of the Policy (the "Issuer"), a copy of which is attached hereto. The Assignment shall set forth the rights of the Corporation in and with respect to the Policy pursuant to the terms and conditions of this Agreement. The Employee and the Corporation agree to be bound by the terms of the Assignment. AGREEMENT PAGE TWO (a) Corporation's Rights. The Corporation's rights with respect to the Policy shall be limited to: (i) The right to realize up to the Corporate Interest (See Sec. 4.3) of the fund value of the Policy on the full or partial surrender of the Policy; (ii) The right to realize the proceeds of the Policy as set forth in Section 3.2 of Article 3, below (the "Corporation's Death Benefit Portion"), in the event of the death of the Employee; and (iii) The right to release the Assignment upon receipt of the Corporate Interest. (b) Employee's Rights. The Employee shall retain all other rights as owner of the Policy, including, but not limited to, the following: (i) The right to cause the full or partial surrender of the Policy; provided, however, that the Employee shall give the Corporation thirty (30) days advance written notice of his exercise of such right; and (ii) The right to exercise all non-forfeiture or lapse option rights permitted by the terms of the Policy; and (iii) The right to designate and to change the beneficiary or beneficiaries of the portion of the proceeds of the Policy payable, upon the death of the Employee, to the Employee's beneficiary, pursuant to Subsection 3.1 of Article 3, below (the "Employee's Death Benefit Portion"); and (iv) The right to assign the Employee's rights in and with respect to the Policy. (v) The right to elect any optional form of settlement available with respect to the Employee's Death Benefit Portion; and, (vi) The right to obtain, directly or indirectly, one or more loans or advances against the fund value of the Policy and the right to pledge or assign the Policy as security for such loans or advances; provided, however, that any such actions by the Employee shall in no way diminish the Corporation's right to receive the Corporate Interest or the Corporation's Death Benefit Portion, or an equivalent amount pursuant to Subsection 1.2(a). The Employee agrees to exercise this right only with the written consent of the Corporation. AGREEMENT PAGE THREE ARTICLE II PAYMENT OF PREMIUMS AND APPLICATION OF DIVIDENDS 2.1 Premium. As used herein, the term "premium" shall mean the planned yearly amount agreed upon between the Corporation and the Employee as the contribution toward the Policy for any year; provided, however, that such amount shall never be less than the Policy's minimum required premium for such year. "Premium" shall also include all costs associated with all supplemental riders and endorsements to the Policy. 2.2 Premium Payment: Timing. Effective February 1, 1995, the Corporation shall pay the premium on the Policy to the Issuer on or before the due date of each premium payment, and in any event, not later than the expiration of the grace period under the Policy for such premium payment. Within the policy year, the Corporation shall furnish the Employee with written notice of such timely payment. ARTICLE III RIGHTS UPON DEATH OF EMPLOYEE 3.1 Employee's Death Benefit Portion. The Employee's designated beneficiary or beneficiaries, as set forth in the Policy, shall be entitled to receive (a) if the Employee dies while actively employed by the Corporation, four times the Employee's then current annual salary, or (b) if the Employee dies after retirement from the Corporation but prior to the termination of this Agreement, one-half (0.5) times the Employee's salary at time of retirement. 3.2 Corporation's Death Benefit Portion. Upon the death of the Employee, the Corporation shall be entitled to receive directly from the Insurer an amount equal to the net death benefit remaining after satisfaction of the Employee's Death Benefit Portion under Section 3.1. ARTICLE IV RIGHTS UPON TERMINATION OF AGREEMENT OR SURRENDER OF POLICY 4.1 Termination Defined. This Agreement shall automatically terminate upon the occurrence of any of the following events: (a) the bankruptcy, receivership or dissolution of the Corporation; (b) the termination of employment of the Employee with the Corporation (other than by reason of death, retirement, or disability); AGREEMENT PAGE FOUR (c) the Employee's notice of her intent to exercise her right to surrender the Policy, pursuant to Subsection 1.2(b)(i) of Article 1, above; (d) the mutual written Agreement of the Employee and the Corporation; or (e) the payment to the Corporation of the Corporate Interest determined pursuant to Section 4.3 below and in the manner so described. 4.2 Rights Upon Termination. Upon the termination of this Agreement as specified above, the Employee shall instruct the Insurer to pay to the Corporation the amount determined pursuant to Section 4.3 of Article 4, below. Upon receipt of such amount from the Employee, the Corporation shall take all steps necessary to release the Assignment so that the Employee shall own the Policy free of all encumbrances thereon in favor of the Corporation required by this Agreement. 4.3 Corporate Interest. The Corporation shall be entitled to receive either (a) from the Employee, as specified in Section 4.2, above, or (b) from the Insurer upon surrender, from the cash value of the Policy, an amount equal to A + B - C where: A. is the cumulative value of all premiums paid by the Corporation (or its agent) immediately prior to such termination or surrender; B. is the cash value remaining under the Policy after application of Subparagraph 4.3A, if any, which exceeds the amount required to pay the then remaining benefits due to the Employee under any non-qualified benefit program maintained by Eastern Utilities Associates, the Corporation or their respective affiliates in which the Employee is a participant; C. is the surrender charges, if any, imposed by the Issuer. ARTICLE V ADMINISTRATIVE PROVISIONS 5.1 Issuer's Responsibility. The Issuer shall not be considered a party to this Agreement and shall not be bound hereby. No provision of this Agreement, or any amendment hereof, shall in any way enlarge, change, vary or affect the obligations of the Issuer as expressly provided in the Policy, except as the same may become a part of the Policy by acceptance by the Issuer of the Assignment. AGREEMENT PAGE FIVE 5.2 Amendment. This Agreement may be amended only by express written Agreement signed by both the Employee and a duly authorized representative of the Corporation. 5.3 Notice. Any and all notices required to be given under the terms of this Agreement shall be given in writing and signed by the appropriate party, and shall be sent by certified mail, postage prepaid, to the appropriate address set forth below: (a) to the Employee at: Barbara A. Hassan 596 Harvard Street Fall River, Massachusetts 02720 (b) to the Corporation at: EUA Service Corporation One Liberty Square Boston, Massachusetts 02109 5.4 Heirs. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Employee, his or her successors, heirs and the executors or administrators of the estate of the Employee, and to the Corporation and its successors. The Employee and the Corporation agree that either party may assign its interest under this Agreement upon the prior written consent of the other party hereto, and any assignee shall be bound by the terms and conditions of this Agreement as if an original party hereto. 5.5 Interpretation. This Agreement and the interests of the Employee and the Corporation hereunder shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. Venue shall lie in Suffolk County, Massachusetts. 5.6 Terms. This Agreement shall be effective as of the date first above written, and shall continue until terminated as herein provided or until all covenants herein activated by the death of the Employee are fully carried out. 5.7 Headings. Any headings or captions in this Agreement are for reference purposes only, and shall not expand, limit, change or affect the meaning of any provision of this Agreement. 5.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same Agreement. AGREEMENT PAGE SIX 5.9 Fiduciary. The Treasurer of Eastern Utilities Associates shall serve as the named fiduciary and administrator (hereinafter the "Fiduciary") of the split-dollar arrangement established pursuant to this Agreement. The Fiduciary shall have full power to administer this Agreement, and the Fiduciary's actions with respect hereto shall be binding and conclusive upon all persons for all purposes; subject to Section 5.10 of this Article 5. The Fiduciary shall not be liable to any person for any action taken or omitted in connection with its responsibilities, rights and duties under this Agreement unless attributable to willful misconduct or lack of good faith. 5.10 Claims Procedure. Any controversy or claim arising out of or relating to this Agreement shall be filed with the Fiduciary which shall make all determinations concerning such claim. Any decision by the Fiduciary denying such claim shall be in writing and shall be delivered to all parties in interest in accordance with the notice provisions of Section 5.3 hereof. Such decision shall set forth the reasons for denial in plain language. Pertinent provisions of the Agreement shall be cited and, where appropriate, an explanation as to how the Employee can perfect the claim will be provided. This notice of denial of benefits will be provided within 90 days of the Fiduciary's receipt of the Employee's claim for benefits. If the Fiduciary fails to notify the Employee of his decision regarding his claim, the claim shall be considered denied, and the Employee shall then be permitted to proceed with his appeal as provided in this Section. An Employee who has been completely or partially denied a benefit shall be entitled to appeal this denial of his claim by filing a written statement of his position with the Fiduciary no later than sixty (60) days after receipt of the written notification of such claim denial. The Fiduciary shall schedule an opportunity for a full and fair review of the issue within thirty (30) days of receipt of the appeal. The decision on review shall set forth specific reasons for the decision, and shall cite specific references to the pertinent Agreement provisions on which the decision is based. Following his review of any additional information submitted by the Employee, either through the hearing process or otherwise, the Fiduciary shall render a decision on his review of the denied claim in the following manner: (a) The Fiduciary shall make his decision regarding the merits of the denied claim within 60 days following his receipt of the request for review (or within 120 days after such receipt, in a case where there are special circumstances requiring extension of time for reviewing the appealed claim). He shall deliver the decision to the claimant in writing. If an extension of time for reviewing the appealed claim is required because of special circumstances, written notice of the extension shall be furnished to the Employee prior to the commencement of the extension. If the decision on review is not furnished within the prescribed time, the claim shall be deemed denied on review. AGREEMENT PAGE SEVEN (b) The decision on review shall set forth specific reasons for the decision, and shall cite specific references to the pertinent Agreement provisions on which the decision is based. IN WITNESS WHEREOF, the parties hereto have hereto set their hands and seals as of the day and year first above written. EUA Service Corporation By /s/ Illegible --------------------------------- Its: Vice President The Employee /s/ Barbara A. Hassan - ------------------------------------ Barbara A. Hassan (Name of Employee) EX-21 11 b61381nmexv21.txt EX-21 SUBSIDIARIES OF THE REGISTRANT . . . 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 Salmon Shores, Inc. Salmon Shores Partnership Riverview, Inc. Riverview Galusha LLC Landwest, Inc. Hudson Pointe, Inc. Upper Hudson Development Inc. OPropCo., Inc. Moreau Park, Inc. Land Management & Development, Inc. Port of the Islands North, LLC Salmon Shores Partnership Second Street Associates, LLC

1 EX-31.1 12 b61381nmexv31w1.txt EX-31.1 CERTIFICATION OF PRINICPAL EXECUTIVE OFFICER EXHIBIT 31.1 CERTIFICATION REQUIRED BY RULE 13A-14(A) OR 15D-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934 I, William F. Edwards, certify that: 1. I have reviewed this annual report on Form 10-K of Niagara Mohawk Power Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 29, 2006 /s/ William F. Edwards ---------------------------------------- William F. Edwards President EX-31.2 13 b61381nmexv31w2.txt EX-31.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER EXHIBIT 31.2 CERTIFICATION REQUIRED BY RULE 13A-14(A) OR 15D-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934 I, John G. Cochrane, certify that: 1. I have reviewed this annual report on Form 10-K of Niagara Mohawk Power Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: June 29, 2006 /s/ John G. Cochrane ---------------------------------------- John G. Cochrane Chief Financial Officer EX-32 14 b61381nmexv32.txt EX-32 SECTION 906 CERTIFICATIONS EXHIBIT 32 CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350 In connection with the Annual Report of Niagara Mohawk Power Corporation (the "Company") on Form 10-K for the fiscal year ended March 31, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned certifies, to the best of his knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: June 29, 2006 /s/ William F. Edwards ---------------------------------------- William F. Edwards President Date: June 29, 2006 /s/ John G. Cochrane ---------------------------------------- John G. Cochrane Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.(M)

                                                                   Exhibit 10(m)

LYDIA PASTUSZEK                                                DECEMBER 22, 2005

                                NATIONAL GRID USA
                            MICHAEL E. JESANIS - CEO

                           DEFERRED COMPENSATION PLAN

SUMMARY

1. This paper seeks approval for further amending the Deferred Compensation Plan
(the Plan) as necessary for compliance with Section 409A of the Internal Revenue
Code (added under the American Jobs Creation Act of 2004) and to reflect
decisions made regarding Plan design since the Deferred Compensation Plan White
Paper dated February 1, 2005 (the Previous White Paper).

BACKGROUND

2. Authorization was obtained in February to modify the Plan in ways that would
both deliver desirable design features and Section 409A requirements. Since that
time (in October) the Department of Treasury issued further guidance on Section
409A in the form of proposed regulations. Further, Human Resources has
undertaken the task of implementing certain transition re-elections and design
modifications for which it now seeks amending authority and ratification of
implementation.

3. The below reflects the final design that is recommended for approval, which
approval is intended to supersede any inconsistent design elements approved in
the Previous While Paper.

PROPOSED AMENDMENTS

4. Plan Year As noted in the Previous While Paper, the plan will operate on a
calendar year basis for base pay deferrals. Deferral deadlines for such
deferrals as well as for other types of pay are set forth in Paragraph 9 below.

5. Types of Pay In clarification of the Previous White Paper, pay will be
deferrable as follows:

     Base Pay                                From 1% to 75%
     ICP Cash Bonus*                         From 1% to 100%
     Incentive Share Award*                  All or none
     Performance Share Plan Award (grants**) All or none

*    Includes Group Executive Director cash and Deferred Share Plan awards made
     in lieu of ICP cash and share awards.

**   Includes grants made in June 2005 and those made in future fiscal years.

Deferrals of Group Performance Share Plan awards and Group Director Deferred
Share Plan awards under the Plan will be administered to take into account the
fact that those plan are subject to Section 409A.

6. Deferral duration As noted in the Previous While Paper, participants be given
the following options with regard to duration of deferral:

          - 10 years

          - Separation from service*



          - ages 55 through 75

*    In clarification of the Previous White Paper, all Section 409A covered
     deferrals payable upon Separation from Service will be delayed for 6 months
     following Separation from Service to comply with "Key Employee" provisions
     of Section 409A.

7. Distribution types As noted in the Previous While Paper, two distribution
types will be offered:

          - Lump sum

          - Annual installments, 2 - 10

8. Distribution re-election In clarification of the Previous White Paper,
participants will be permitted to re-elect the timing and type of distribution
subject to applicable restrictions under Section 409A, including that the
re-election:

     - must be made no less than 12 months prior to the date distributions were
scheduled to commence under the original "initial" election;

     - will not be effective for 12 months;

     - must provide for the future payment date or commencement at least five
years later than initially elected; and

     - may not accelerate the payment of distributions. For example, if a
participant initially elected 10 annual installments, at re-election that
participant would not be able to elect a lump sum payable in five years.
However, the reelection may postpone the distribution. For example, if a
participant elected a lump sum, he or she can re-elect a series of 10
installments commencing 5 years from the date the lump sum was otherwise
payable. As a matter of plan design, a participant will not be permitted to
change a series of annual payments to a lump sum payment.

9. Timing of Elections It is recommended that the Plan be amended to reflect the
following:

Base Pay - Elections are proposed to be based upon a calendar year commencing in
2006. As a transition matter, participants were solicited for deferral of base
pay for the period April 1, 2005 through December 31, 2005 prior to March 15,
2005 in anticipation of the change in base pay deferral elections to a calendar
year.

ICP Cash Bonus and Incentive Share Award (ICP Bonus/Share Award) - Elections for
the fiscal year ending March 31, 2006 ICP Bonus/Share Award (payable in June
2006) were made under the "performance based compensation" provisions of Section
409A in September 2005. It is recommended that elections for the fiscal year
ending March 31, 2007 ICP Bonus/Share Award (payable in June 2007) be completed
prior to the end of the preceding fiscal year (March 31, 2006) consistent with
fiscal year bonus compensation provisions under Section 409A. Further, it is
recommended that future ICP Bonus/Share Awards be solicited in the same manner.

Performance Share Awards - Elections for grants made in a particular fiscal year
(usually June) will be made prior to the end of the preceding fiscal year.

New Participants - Elections for Base Pay, ICP Bonus/Share Awards and/or
Performance Share Awards will be solicited consistent with the requirements of
Section 409A for new entrants.

10. Transition Re-Elections - It is recommended that the Plan be amended to
reflect the following:

Base Pay - Consistent with Section 409A transition rules, participants who had
outstanding base pay deferrals made on a fiscal year base in 2004 (which carried
over from 2004 into 2005) were permitted to either (1) cancel the election for
the period January 1, 2005 through March 31,



2005 (and were taxed accordingly) or (2) re-elect to defer the applicable
compensation under deferral period and payment options designed to comply with
Section 409A. That solicitation occurred prior to March 15, 2005 as required
under then applicable Section 409A regulations.

ICP Cash Bonus and Incentive Share Award - Consistent with Section 409A
transition rules, participants who had outstanding deferral elections made in
2004 under prior plan provisions effective against cash bonus and/or share
awards payable in June 2005 were permitted to either (1) cancel the deferral
election or (2) re-elect to defer the applicable bonus and/or share award under
deferral period and payment options designed to comply with Section 409A. That
solicitation occurred prior to March 15, 2005 as required under applicable
Section 409A transition rules.

11. Death, Disability, Unforeseeable Emergency, and Change in Control. A
participant's deferrals will be paid out upon his or her death to the
participant's beneficiary(ies) consistent with the beneficiary provisions
adopted earlier in the year. Section 409A limits the circumstances under which
initial deferral elections may be superseded on account of Disability,
Unforeseeable Emergency or Change in Control as defined in Section 409A. Final
recommendations have not been made on these features.

12. Termination. It is recommended that the right to terminate the plan and pay
out a lump sum be reserved to the extent permitted under applicable provisions
of Section 409A.

13. Executive Supplemental Retirement Plan (ESRP) Included in the types of plans
to which these new requirements apply are supplemental executive retirement
plans - our ESRP. Additional regulations are expected to be issued relative to
ESRP accruals in early 2006. Recommendations regarding the ESRP will be made
following the issuance of those regulations.

14. Executive Share Options. Options are not a permissible form of deferrable
compensation under Section 409A and are therefore not included under the Plan.

REQUESTED ACTION

15. Mike Jesanis is asked to NOTE this paper and APPROVE the requested
amendments relative to deferrals made during 2005 as well as future deferrals,
and to ratify all actions taken consistent therewith.

APPROVAL

I, Michael E. Jesanis, hereby approve the requested amendments to the National
Grid USA Companies' Deferred Compensation Plan by White Paper from Lydia
Pastuszek dated February 1, 2005 as further amended by this White Paper from
Lydia Pastuszek dated December 21, 2005.


/s/                                 Date: 12/22/05
- ---------------------------------
Michael E. Jesanis
Chief Executive Officer
National Grid USA



LYDIA PASTUSZEK                                                 FEBRUARY 1, 2005

                               NATIONAL GRID USA
                            MICHAEL E. JESANIS - CEO

                           DEFERRED COMPENSATION PLAN

SUMMARY

1. This paper seeks approval for amendments to the Deferred Compensation Plan
necessary for compliance with the American Jobs Creation Act of 2004.

BACKGROUND

2. Due to a number of Internal Revenue Service (IRS) restrictions on the
Incentive Thrift Plan (401k), our qualified tax favored retirement savings plan,
National Grid USA provides a non-qualified tax deferred savings plan for
executives in ICP I and II. The plan is called the Deferred Compensation Plan
(DCP) and allows participants to defer from income taxation amounts that exceed
IRS qualified plan limits. The Plan operates on a fiscal year basis, April 1 to
March 31. Elections are made each March for the following fiscal year. By this
schedule, executives are considering deferral treatment of bonuses to be paid 15
months in the future.

3. Types of pay Eligible Executives can elect to defer:

     - Base pay from 1% to 15%

     - Incentive Compensation Plan (ICP) bonuses from 1% to 100%

     - Incentive Share Awards all or none

4. Deferral period and distributions Eligible executives may elect to defer
payment until:

     - 10 years

          - Lump sum only

     - Retirement

          - Lump sum

          - Three, five or ten annual installments

Distributions prior to the elected time are permissible only upon death,
disability, financial hardship or change in control. Distributions that are due
upon "Retirement" may generally be changed to a new form of payment up to 6
months in advance of retirement.

5. Investment Options Participants elect to allocate their deferrals to any of
three "phantom" investments. No actual securities are purchased or held for
individual participants. Rather, these investments are used merely to determine
account value from time to time.

     - Prime Rate of interest

     - S&P 500 Index

     - National Grid ADR's

Participants are permitted to reallocate their account balances only during the
last 10 trading days in each calendar quarter with the trade effective as of the
closing price of investments on the final trading day.

6. Rabbi Trust The majority of the future payout liability to participants has
been funded through a Rabbi Trust which protects participants from the
unwillingness of the Company to pay, but not the inability to pay resulting from
insolvency. In the event of insolvency, ail participants with an account balance
become unsecured creditors of the Company.



RECENT LEGISLATIVE CHANGES

7. American Jobs Creation Act of 2004 Recent corporate accounting scandals and
high profile executive compensation abuses have resulted in the enactment of new
Federal legislation relative to these plans effective January 1, 2005. In order
to comply with the new requirements, several significant changes to our plan
will be required.

8. Plan Year All of the terminology and timing references in both the law and
the initial guidance speak to a calendar plan year operation. This is primarily
due to the fact that individual participants all have a calendar year tax year
regardless of the Company's fiscal year. While there were initial indications
that allowance would be made for fiscal year plans, none was included in the
initial guidance and it is not clear what, if any, guidance accommodating fiscal
year plans may be forthcoming.

9. Initial Deferral Election The election to defer base pay must be made for a
one year period, no later than the last day of the preceding year. Deferral
election of bonus pay must be made no later than six months prior to the end of
the bonus earned period. At the initial deferral election, participants must
elect both the point in time at which distributions are to be made and the form
those distributions will take.

     Permissible Timing Options

          1. A fixed time period, i.e. 10 years

          2. A specified date, i.e. 55th birthday

          3. Separation from service - regardless of reason

Once elected, the distribution may not be accelerated to an earlier date except
in the case of death, disability, change in control or unforeseen emergency. For
both the Change in Control and the unforeseen emergency, further regulations are
required in order to understand the limitations. Further, for "Key Employees"
which includes all Plan eliglbles for us, distributions that are scheduled to be
paid out upon separation from service may not commence for at least 6 months
following separation from service.

10. Distribution re-election No less than 12 months prior to the initially
elected distribution date, participants will be permitted to re-elect the timing
and type of distribution with the following two limitations:

     - The reelection must provide for the future payment date or commencement
at least five years later than initially elected

     - The reelection cannot accelerate the payment of distributions. For
example, if a participant initially elected 10 annual installments, at
re-election that participant would not be able to elect a lump sum payable in
five years. However, the reelection may postpone the distribution. For example,
if a participant elected a lump sum, he she can re-elect a series of 10
installments commencing 5 years hence.

PROPOSED AMENDMENTS

11. Plan Year We recommend that the plan be amended to operate on a calendar
year basis. Base pay deferrals would be solicited each December for the upcoming
calendar year and bonus deferral elections would be solicited each September for
the bonus payable the following June.

12. Types of Pay We recommend the following pay types and percentages be
deferrable:



     Base Pay                           From 1% to 75%
     ICP Cash Bonus                     From 1% to 100%
     Incentive Share Award              All or none
     Option Exercise (future)           All or none
     Performance Share Award (future)   All or none (Under review)

Additional work is needed to define the election timing for future option and
performance share grants and to ensure that their inclusion will not create
administrative or reporting problems in the UK.

13. Deferral duration We recommend that participants be given the following
options with regard to duration of deferral:

          - 10 years

          - Separation from service

          - ages 55 through 75

This combination wiil provide maximum flexibility at both initial election and
subsequent reelection to ensure the participant receives payments as he/she sees
fit.

14. Distribution types As for the types of distribution, we recommend that two
choices be offered as foliows:

          - Lump sum

          - Annual installments, 2 - 10

15. Investment Options While we do not recommend any change in the Plan's
investment options, we do recommend that participants be permitted to reallocate
their account balances on a daily basis just like the 401k. The current
restrictive policy was implemented when a.) the Rabbi Trust held a large number
of NEES Shares matched to the shares liability of the plan, and b.) there was a
very close relationship maintained between the shares held in the trust and the
shares allocated to participant accounts. There were concerns that allowing
frequent reallocation rights would produce frequent and costly trading practices
within the Rabbi Trust. Since the Rabbi Trust does not hold National Grid ADR's
as an investment - due to the absence of favorable treatment on dividends - and
the Trust is managed more on a global basis in support of all non-qualified
benefit liabilities, there is no longer a need to worry about Trust transactions
mirroring participant elections on a contemporaneous basis. The Trust's
investment can be managed on a periodic basis and rebalanced if necessary to
conform to participant investment elections.

16. Executive Supplemental Retirement Plan (ESRP) Included in the types of plans
to which these new requirements apply are supplemental executive retirement
plans - our ESRP. At this time, it is not clear how participation in or
operation of the ESRP is affected by the law. Upon issuance of regulations that
are expected later this year, we will apprise you of the impacts and seek any
necessary amendments to ensure the plan remains in compliance.

17. Executive Share Options and Performance Share Awards All those eligible for
the Deferred Compensation Plan have also been issued share option grants and/or
performance share awards. At this time, it appears that it will not be possible
to allow deferral of exercised options or receipt of performance shares for
grants already made. Although it does appear that deferral of future performance
share awards was anticipated by the law, it is not clear what impact such a
deferral would have on NGT's books nor how it may affect Executive Director
reporting/disclosures. We will resolve these issues in advance of the 2005 grant
process so that the proper election process can be scheduled if approved by the
UK.



18. Miscellaneous provisions The current "grandfathered" plan provisions that
permit expedited payouts upon a "change in control" with a 10% haircut, upon
dissolution of the participant's employer, or upon the failure of the company to
make payments, will continue to be honored for prior deferrals but will not be
permitted for new deferrals (although there will be some allowance for expedited
payments upon an Act defined "change in control"). The Rabbi Trust document and
operations will be amended to conform with applicable Act provisions as well.

19. Approach to amendments The new law restricts the Company from making any
material modifications to existing deferred compensation arrangements. The
consequences and penalties for violation of this are substantial and apply to
plan participants. Therefore, we will not be permitted to adopt any of the
favorable changes relative to amounts already deferred. Further, while many
Companies are adopting entirely new plans to avoid any possible confusion or
concerns, adoption of a new plan could raise many issues around UK listing
authority rules and/or shareholder approval. To avoid those concerns, pending
concurrence from the UK, we recommend that the current Deferred Compensation
Plan be amended in a way that clearly isolates past deferrals from future
deferrals.

20. REMCO review Since Mike Jesanis is a participant in the plan, REMCO review
of these amendments will be required. We are also evaluating whether any
additional approvals are required.

REQUESTED ACTION

21. Mike Jesanis is asked to NOTE this paper and APPROVE the requested
amendments.

EX-10.(V)

                                                                   Exhibit 10(v)

                      NEW ENGLAND ELECTRIC SYSTEM COMPANIES

                     LIFE INSURANCE PROGRAM FOR EXECUTIVES I
                                       FOR
                            [_______________________]



                                TABLE OF CONTENTS



                                                                            Page
                                                                            ----
                                                                         
Section 1.  The Program..................................................     1
Section 2.  Prior Insurance Program......................................     2
Section 3.  Vesting and Forfeiture.......................................     2
Section 4.  Life Insurance Policy........................................     2
Section 5.  Death Benefit................................................     4
Section 6.  Termination of Agreement.....................................     4
Section 7.  Benefits Upon Termination of Employment During the
            Executive's Lifetime.........................................     5
Section 8.  Policy Premiums..............................................     6
Section 9.  Return of Premiums...........................................     7
Section 10. Withdrawals from Policy; Release of Assignment...............     7
Section 11. Liability and Limitation of Obligation.......................     7
Section 12. Named Fiduciary, Determination of Benefits, Claims Procedure
            and Administration...........................................     8
Section 13. Notices......................................................    10
Section 14. Binding Effect...............................................    11
Section 15. Governing Law................................................    11
Section 16. Further Documentation........................................    11
Section 17. Amendments and Transfers Within the New England Electric
            System Companies.............................................    11
Section 18. Interpretation of Agreement..................................    11
Section 19. No Implied Right to Employment...............................    12




                              COLLATERAL ASSIGNMENT

                            LIFE INSURANCE PROGRAM I

     Agreement entered into as of the 1ST day of __________, between New England
Power Service Company, a Commonwealth of Massachusetts corporation (the
Company), and _______________ (the Executive).

     Section 1. The Program

     The program provides the Executive death benefits and post-retirement
ownership of the cash assets of the related policy. The program is designed with
a goal of three times the Executive's base pay (rounded up to the nearest even
whole thousand) at the time of death (the Target Benefit). During employment,
the first $50,000 of the coverage is to be provided by the Company's group term
life insurance policy.

     For the purposes of this Agreement, "annual base pay" means the annualized
compensation being paid to the Executive on the day of determination (or, if
greater, the highest compensation paid to the Executive during any 12-month
period of employment), including compensation deferred under other plans but
excluding bonuses (such as NEES Goals and Incentive Compensation bonuses ) and
contributions made by the Company to or under any form of employee benefit
program and employer contributions under the New England Electric System
Companies Incentive Thrift Plan, and "final annual base pay" means the
Executive's annualized base pay on the last day of employment (or, if greater,
the highest compensation paid to the Executive during any 12-month period of
employment).

     Section 2. Prior Insurance Program



                                        2


     The Executive hereby waives the benefits under the Company's group
term-life insurance policy, and the New England Electric System Companies Life
Insurance Program for Executive II, to the extent that the benefit provided to
the Executive's beneficiaries, in accordance with Section 5, from the Policy (as
hereinafter defined) equals the Target Benefit. This waiver does not extend to
any optional benefits under the group term-life policy. To the extent that such
waiver is ineffective, the amount of the death benefit provided under the Policy
and otherwise payable hereunder to the beneficiary or beneficiaries designated
by the Executive shall be correspondingly reduced and the amount payable to the
Company shall be correspondingly increased.

     Section 3. Vesting and Forfeiture

     Subject to the provisions of Section 6, the Executive is 100% vested in his
benefits under this Program.

     Section 4. Life Insurance Policy

     One or more split-dollar life insurance policies listed in Exhibit A hereto
(the Policy) have been or will be purchased on the life of the Executive by the
Company. The issuer or issuers of the Policy are hereinafter referred to as the
Insurer. Purchase of insurance policies either now or at later dates may require
proof of insurability at that time.

     To the extent that necessary insurance policies are not reasonably
available at a later date, benefits will be provided under the Company's group
term-life insurance policy so that the total death benefit to the Executive's
beneficiaries during his employment is three times base pay.

     (a) Interest in the Policy



                                        3


     The Executive shall be the sole owner of the Policy and may exercise all
ownership rights granted to the owner thereof by the terms of the Policy, except
as may otherwise be provided herein.

     Except as otherwise provided herein, the Executive shall not sell, assign,
transfer, borrow against, surrender, or cancel the Policy, change the
beneficiary designation provision, or terminate the dividend election without
the express written consent of the Company.

     (b) Collateral Assignment

     To secure the right of the Company to the Excess Value and/or the Company's
Cost (both as hereafter defined), the Executive will, contemporaneously
herewith, assign the Policy to the Company as collateral, using a form
substantially similar to that attached hereto as Exhibit B. The collateral
assignment of the Policy to the Company hereunder shall not be terminated,
altered, or amended by the Executive, without the express written consent of the
Company.

     (c) Assignment of Executive's Interest

     The Executive shall have the right to make an absolute assignment of his
entire interest, or any portion thereof, in the Policy at any time to any person
or persons, subject to the collateral assignment of the policy to the Company
pursuant to subsection (b) hereof. Upon delivery of a signed copy of such
assignment to the Company, all, or such portion, of the rights, obligations, and
duties of the Executive thereunder (subject to the collateral assignment of the
Company) and hereunder shall pass to and be binding upon such assignee
(including the right to make further assignments) and the Executive shall have
no further interest whatsoever in the Policy, or such portions.

     (d) Company's Cost



                                        4


     For the purposes of this Agreement, the Company's Cost means the amount of
the premiums on the Policy paid by it hereunder, less any withdrawals by the
Company from the Policy in accordance with Section 10.

     (e) Dividends

     Any dividend declared on the Policy shall be applied to purchase paid-up
additional insurance on the life of the Executive. The dividend election
provisions of the Policy shall conform to the provisions hereof.

     Section 5. Death Benefit

     Upon the death of the Executive, the beneficiary or beneficiaries
designated by the Executive shall be paid directly, in the manner and in the
amount or amounts provided in the beneficiary designation provision of the
Policy, a death benefit equal to the smaller of (a) the death benefit payable
under the Policy or (b) the Target Benefit. After such payment to such
beneficiary, the balance, if any, of the Policy death benefit (the Excess Value)
shall be paid to the Company.

     Section 6. Termination of Agreement

     (a) This Agreement shall terminate during the Executive's lifetime, without
notice, upon the occurrence of any of the following events:

          (i)  total cessation of the Company's business;

          (ii) bankruptcy, receivership, or dissolution of the Company;

          (iii) termination for cause of the Executive's employment by the
               Company or by any direct or indirect subsidiary of the New
               England Electric System or



                                        5


          (iv) payment of the Company's Cost by the Executive to the Company.

     (b) After termination of this Agreement under this section 6, the Executive
will not be permitted to re-enroll in the program. Upon such termination, the
Company may immediately withdraw its Cost from the Policy. The Executive will
receive no life insurance coverage under the New England Electric System
companies' group life insurance plan.

     Section 7. Benefits Upon Termination of Employment During the Executive's
          Lifetime.

     (a) For sixty days after the date of the termination of this Agreement
during the Executive's lifetime, the Executive shall have the option of
obtaining the release of the collateral assignment of the policy to the Company.
To obtain such release, the Executive shall repay to the Company Company's Cost.
Upon receipt of such amount, the Company shall release the collateral assignment
of the Policy.

     (b) If the Executive has terminated employment but has not Retired from the
Company, the Company will continue to pay premiums on the Policy in accordance
with Section 8 until the earlier of (i) the Policy can be kept in force with no
future premiums due based upon the then current crediting of the Policy or (ii)
the tenth anniversary of the Policy. Thereafter, the Company may withdraw from
the Policy amounts equal to the Company's Costs. The Company may delay
withdrawal from the Policy in order to preserve the Policy's tax treatment.

     Section 8. Policy Premiums

     During the Executive's employment and as provided in subsection 7(a), the
Company shall promptly pay all premiums on the Policy when due until the Policy
can be kept in force with no future premiums due based upon the then current
crediting of the Policy.



                                        6


     The Company shall bill the Executive for an annual contribution to the
policy premium, which contribution shall be equal to the value, for Federal
income tax purposes, of the "economic benefit" of the life insurance protection
the Executive then enjoys. The Executive shall transfer the contribution to the
Company within thirty days of the bill. The Company will reimburse the Executive
for such contribution and for the related federal and state taxes. This
reimbursement is not a part of the Company's Cost.

     If the Executive fails to make such timely payment, the Company shall
report the "economic benefit" of the life insurance protection as taxable income
to the Executive for the period, and no additional reimbursement will be made to
the Executive until payment has been made.

     Section 9. Return of Premiums

     Notwithstanding any provision hereof to the contrary, in the event that,
for any reason whatsoever, no death benefit is payable under the Policy upon the
death of the Executive and in lieu thereof the Insurer refunds all or any part
of the premiums paid for the Policy, the Company and the Executive's beneficiary
or beneficiaries shall have the unqualified right to share such premiums based
on the respective cumulative contributions thereto.

     Section 10. Withdrawals from Policy; Release of Assignment

     While the Executive is employed, if no additional premiums are required to
be paid under a Policy to maintain the death benefit to the Executive's
beneficiaries, the Company may withdraw its Cost from that Policy at a time when
such withdrawal will not cause the Policy to be terminated or to lose its tax
treatment as life insurance.



                                        7


     After the Company has withdrawn from the Policy amounts equal in full to
the Company's Cost (whether under section 6, 7, or 10), the Company will release
the collateral assignments of the Policy to the Executive.

     Section 11. Liability and Limitation of Obligation

     The Company and the Insurer believe the assumptions used to determine the
amount of insurance purchased are reasonable. However, the Executive recognizes
that the goals of the Agreement may not be realized and there is no guaranty
that the Target Benefit will actually be provided by the Policy and/or that
additional premiums may not be required to keep the Policy from lapsing or to
provide the Target Benefit. The Executive also recognizes that changes in the
Internal Revenue Code or rulings or regulations thereunder could increase his
tax liabilities or reduce his benefits.

     The Company has no responsibility, liability, or obligation for the
benefits provided the Executive from the Policy.

     The Company may, upon 30 days' written notice to the Executive, limit its
obligations hereunder to purchase, pay premiums on, or otherwise provide life
insurance policies beyond the total death benefit, including all riders then in
force, and all references herein to the annual base pay or final annual base pay
of the Executive shall mean annual base pay at the time of such written
notification.

     The Insurer shall have no liability except as set forth in the Policy and
in any beneficiary designation and in any optional method of settlement election
filed with it. The Insurer shall not be bound to inquire into or take notice of
any of the covenants herein contained as to the Policy. In case of the
Executive's death, the Insurer shall be discharged from all liability on payment
of the proceeds in accordance with the Policy's provision, and any beneficiary
designation and any



                                        8


optional method of settlement election filed with it without regard to this
Agreement or any amendment thereof.

     Section 12. Named Fiduciary, Determination of Benefits, Claims Procedure
          and Administration

     (a) The Company is hereby designated as the named fiduciary under this
Agreement. The named fiduciary shall have authority to control and manage the
operation and administration of this Agreement, and it shall be responsible for
establishing and carrying out a funding policy and method consistent with the
objectives of this Agreement.

     (b)  (i) Claim

          A person who believes that he is being denied a benefit to which he is
entitled under this Agreement (the Claimant) may file a written request for such
benefit with the Company, setting forth his claim. The request must be addressed
to the President of the Company at its then principal place of business.

          (ii) Claim Decision

          Upon receipt of a claim, the Company shall advise the Claimant that a
reply will be forthcoming within ninety days and shall, in fact, deliver such
reply within such period. The Company may, however, extend the reply period for
an additional ninety days for reasonable cause.

          If the claim is denied in whole or in part, the Company shall adopt a
written opinion, using language calculated to be understood by the Claimant,
setting forth: (a) the specific reason or reasons for such denial; (b) the
specific reference to pertinent provisions of this Agreement on which such
denial is based; (c) a description of any additional material or



                                        9


information necessary for the Claimant to perfect his claim and an explanation
why such material or such information is necessary; (d) appropriate information
as to the steps to be taken if the Claimant wishes to submit the claim for
review; and (e) the time limits for requesting a review under subsection (iii)
and for review under subsection (iv) hereof.

          (iii) Request for Review

          Within sixty days after the receipt by the Claimant of the written
opinion described above, the Claimant may request in writing that the Benefits
Appeal Committee (as defined in the Final Average Pay Pension Plan I) review the
determination of the Company. Such request must be addressed to the Secretary of
the Committee, at its then principal place of business. The Claimant or his duly
authorized representative may, but need not, review the pertinent documents and
submit issues and comments in writing for consideration by the Committee. If the
Claimant does not request a review of the Company's determination by the
Committee within such sixty day period, he shall be barred and estopped from
challenging the Company's determination.

          (iv) Review of Decision

          Within sixty days after the Secretary's receipt of a request for
review, the Committee will review the Company's determination. After considering
all materials presented by the Claimant, the Committee will render an opinion,
setting forth the specific reasons for the decision and containing specific
references to the pertinent provisions of this Agreement on which the decision
is based. If special circumstances require that the sixty day time period be
extended, the Secretary will so notify the Claimant and the Committee will
render the decision as soon as possible, but no later than one hundred twenty
days after receipt of the request for review.



                                       10


     Section 13. Notices

     Any notice, consent, or demand required or permitted to be given under the
provisions of this Agreement shall be in writing, and shall be signed by the
party giving or making the same. If such notice, consent, or demand is mailed to
a party hereto, it shall be sent to United States certified mail, postage
prepaid, addressed to such party's last known address as shown on the records of
the Company. The date of such mailing shall be deemed the date of notice,
consent, or demand.

     Section 14. Binding Effect

     This Agreement shall be binding upon and inure to the benefit of the
Company and its successors and assigns, and the Executive, and the Executive's
successors, assigns, heirs, executors, administrators, and beneficiaries.

     Section 15. Governing Law

     This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.

     Section 16. Further Documentation

     The parties hereto agree to execute any documents which may be necessary or
proper in the carrying out of the purpose and intent of this Agreement.

     Section 17. Amendments and Transfers Within the New England Electric System
          Companies

     This Agreement may be amended or altered in any of its provisions, and such
changes shall become effective when reduced to writing and signed by the parties
hereto.



                                       11


     The Company may, without any consent of the Insurer or the Executive,
assign or reassign all of its rights and obligations hereunder to such other
direct or indirect subsidiary of the New England Electric System by which the
Executive may from time to time be employed.

     Section 18. Interpretation of Agreement

     Where appropriate in this Agreement, words used in the singular shall
include the plural and words used in the masculine shall include the feminine
and vice versa. The headings of sections and subsections of this Agreement are
for convenience of reference only.

     Section 19. No Implied Right to Employment

     Neither this Agreement nor the payment of any premiums hereunder by the
Company shall be construed to create any obligation to give the Executive any
right to continue employment.


                                        ----------------------------------------
                                        New England Power Service Company


                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title: Treasurer



                                       12


                                    EXHIBIT A

                               Insurance Policies

Metropolitan Policy Number



                                       13


                                    EXHIBIT B

                       Split-Dollar Collateral Assignment

     FOR VALUE RECEIVED, the undersigned owner (hereafter the Assignor) assigns,
transfers, and sets over to New England Power Service Company (Assignee), its
successors and assigns, certain rights in and to policy number ___________ (the
Policy), and any and all supplemental benefit riders or agreements issued under
the Policy, issued by Metropolitan Life Insurance Company (the Insurer), subject
to all the terms and conditions of the Policy and this Assignment and to all
superior liens, if any, which the Insurer or any prior Assignee may have against
the Policy. The Assignor by this instrument and the Assignee by acceptance of
the Assignment jointly and severally agree to the conditions and provisions
hereof. This Assignment is made and the Policy is to be held as collateral
security for any and all liabilities of the Assignor to the Assignee, either now
existing or that may hereafter arise between the Assignor or any successors or
assigns and the Assignee under the New England Electric System Companies Life
Insurance Program for Executives I, dated ______, with regard to the Policy.

     1.   (a)  It is expressly agreed that the Assignee shall have the following
               rights in the Policy:

               (i)  the right to make and receive withdrawals from the Policy
                    (from the Insurer or otherwise), to the extent of the
                    aggregate premiums paid by the Assignee on the Policy;

               (ii) the right to release this Assignment to the Assignor or his
                    assigns;



                                       14


               (iii) the right to surrender the Policy and to receive the Policy
                    cash value and any dividend credits outstanding of the
                    excess over the Target Benefit (as defined in the Program);
                    and

               (iv) the right to receive from the death proceeds of the Policy,
                    and to elect an income settlement option with respect
                    thereto, an amount equal to the excess over the Target
                    Benefit (as defined in the Program).

          (b)  Except as provided in Paragraph (a) above, all other rights in
               the Policy, including but not limited to the right to designate
               and change the beneficiary of the Policy and the right to make
               loans against or withdrawals from the Policy and to receive any
               cash values and dividends credits outstanding in excess of
               aggregate premiums paid by the Assignee on the Policy, are
               expressly reserved to the Assignor and are, therefore, excluded
               from this Assignment.

          (c)  For purposes of Paragraphs (a) and (b) above, the signature of
               either the Assignor or the Assignee shall be adequate. Both the
               Assignor and the Assignee acknowledge that, between themselves,
               they are bound by the limitations of this Assignment and that the
               Insurer will recognize the signature of either.

     2. For purposes of this Assignment, aggregate premiums paid by the Assignee
on the Policy shall exclude premiums for any extra benefit riders or agreements
issues under the Policy.



                                       15


     3. All provisions of this Assignment shall be binding upon the successors,
assigns, heirs, executors, administrators, or beneficiaries of the Assignor.

     4. All Policy options and designations in effect as of the date of this
Assignment shall remain in effect unless specifically changed by this Assignment
or by action taken thereafter consistent with this Assignment.

     5. The Insurer is hereby authorized to recognize the Assignee's claim of
right hereunder without investigating the validity or amount thereof, the giving
of any notice, or the existence or amount of any liabilities of the Assignor to
the Assignee. Payment by the Insurer of any or all death proceeds of the Policy
to the Assignee in reliance upon an affidavit of any officer of the Company as
to the share of death proceeds due it shall be a full discharge of the Insurer
for such share and shall be binding on all parties claiming any interest under
the Policy.


Signed at                               on                         .
          ---------------------------      ------------------------
          (City and State)                 (Date)


- -------------------------------------   ----------------------------------------
Witness                                 (Owner)



                                       16


Accepted and Agreed to:                 New England Power Service Company


- -------------------------------------   By:
Witness                                     ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title: Treasurer

     The Insurer hereby acknowledges receipt of a copy of this Collateral
Assignment form.

Insurer


Date:                                   By:
      -------------------------             ------------------------------------

EX-10.(W)

                                                                   Exhibit 10(w)

(NEW ENGLAND POWER SERVICE LOGO)

A NEES COMPANY

MEMORANDUM

To: John G. Cochrane                                     Date: November 16, 1998

From: Don Goodwin                                        Phone: 508 389 2125

Subject: Life Insurance Program for
Executives I Agreement                                   File:

A review of the Life Insurance Program for Executives I agreements indicates
that the coverage provided therein would cease after termination of employment
other than at retirement. That is not in accordance with the Program as approved
by the Compensation Committee of the Board. Accordingly, please append the
attached "Corrected Section 7" to your copy of your agreement. A Corrected
Section 7 will be added to the Company's and Insurer's copies of your agreement.


/s/ Don F. Goodwin
- ------------------------------------
Don F. Goodwin, Vice President

Tel: 508 389-2125 Fax: 508 836-5487
e-mail: goodwi@neesnet.com



                    LIFE INSURANCE PROGRAM FOR EXECUTIVES I

                               CORRECTED SECTION 7

     Section 7. Option on Termination During the Executive's Lifetime.

     (a) For sixty days after the date of the termination of this Agreement
during the Executive's lifetime, the Executive shall have the option of
obtaining the release of the collateral assignment of the policy to the Company.
To obtain such release, the Executive shall repay to the Company Company's Cost.
Upon receipt of such amount, the Company shall release the collateral assignment
of the Policy.

     (b) If the Executive has terminated employment but has not Retired from the
Company, the Company will continue to pay premiums on the Policy in accordance
with Section 8 until the earlier of (i) the Policy can be kept in force with no
future premiums due based upon the then current crediting of the Policy or (ii)
the tenth anniversary of the Policy. Thereafter, the Company may withdraw from
the Policy amounts equal to the Company's Costs. The Company may delay
withdrawal from the Policy in order to preserve the Policy's tax treatment.



                      NEW ENGLAND ELECTRIC SYSTEM COMPANIES

                    LIFE INSURANCE PROGRAM FOR EXECUTIVES I
                                       FOR



                                TABLE OF CONTENTS



                                                                            Page
                                                                            ----
                                                                         
Section 1.  The Program..................................................     1
Section 2.  Prior Insurance Program......................................     2
Section 3.  Vesting and Forfeiture.......................................     2
Section 4.  Life Insurance Policy........................................     2
Section 5.  Death Benefit................................................     4
Section 6.  Termination of Agreement.....................................     4
Section 7.  Benefits Upon Termination of Employment During
            the Executive's Lifetime.....................................     5
Section 8.  Policy Premiums..............................................     6
Section 9.  Return of Premiums...........................................     7
Section 10. Withdrawals from Policy; Release of Assignment...............     7
Section 11. Liability and Limitation of Obligation.......................     7
Section 12. Named Fiduciary, Determination of Benefits, Claims
            Procedure and Administration.................................     8
Section 13. Notices......................................................    10
Section 14. Binding Effect...............................................    11
Section 15. Governing Law................................................    11
Section 16. Further Documentation........................................    11
Section 17. Amendments and Transfers Within the New England
            Electric System Companies....................................    11
Section 18. Interpretation of Agreement..................................    11
Section 19. No Implied Right to Employment...............................    12




                              COLLATERAL ASSIGNMENT

                            LIFE INSURANCE PROGRAM I

     Agreement entered into as of the 1ST day of __________, between New
England Power Service Company, a Commonwealth of Massachusetts corporation (the
Company), and _______________________________(the Executive).

     Section 1. The Program

     The program provides the Executive death benefits and post-retirement
ownership of the cash assets of the related policy. The program is designed with
a goal of three times the Executive's base pay (rounded up to the nearest even
whole thousand) at the time of death (the Target Benefit). During employment,
the first $50,000 of the coverage is to be provided by the Company's group term
life insurance policy.

     For the purposes of this Agreement, "annual base pay" means the annualized
compensation being paid to the Executive on the day of determination (or, if
greater, the highest compensation paid to the Executive during any 12-month
period of employment), including compensation deferred under other plans but
excluding bonuses (such as NEES Goals and Incentive Compensation bonuses ) and
contributions made by the Company to or under any form of employee benefit
program and employer contributions under the New England Electric System
Companies Incentive Thrift Plan, and "final annual base pay" means the
Executive's annualized base pay on the last day of employment (or, if greater,
the highest compensation paid to the Executive during any 12-month period of
employment).

     Section 2. Prior Insurance Program



                                        2


     The Executive hereby waives the benefits under the Company's group
term-life insurance policy, and the New England Electric System Companies Life
Insurance Program for Executive II, to the extent that the benefit provided to
the Executive's beneficiaries, in accordance with Section 5, from the Policy (as
hereinafter defined) equals the Target Benefit. This waiver does not extend to
any optional benefits under the group term-life policy. To the extent that such
waiver is ineffective, the amount of the death benefit provided under the Policy
and otherwise payable hereunder to the beneficiary or beneficiaries designated
by the Executive shall be correspondingly reduced and the amount payable to the
Company shall be correspondingly increased.

     Section 3. Vesting and Forfeiture

     Subject to the provisions of Section 6, the Executive is 100% vested in his
benefits under this Program.

     Section 4. Life Insurance Policy

     One or more split-dollar life insurance policies listed in Exhibit A hereto
(the Policy) have been or will be purchased on the life of the Executive by the
Company. The issuer or issuers of the Policy are hereinafter referred to as the
Insurer. Purchase of insurance policies either now or at later dates may require
proof of insurability at that time.

     To the extent that necessary insurance policies are not reasonably
available at a later date, benefits will be provided under the Company's group
term-life insurance policy so that the total death benefit to the Executive's
beneficiaries during his employment is three times base pay.

     (a) Interest in the Policy



                                        3


     The Executive shall be the sole owner of the Policy and may exercise all
ownership rights granted to the owner thereof by the terms of the Policy, except
as may otherwise be provided herein.

     Except as otherwise provided herein, the Executive shall not sell, assign,
transfer, borrow against, surrender, or cancel the Policy, change the
beneficiary designation provision, or terminate the dividend election without
the express written consent of the Company.

     (b) Collateral Assignment

     To secure the right of the Company to the Excess Value and/or the Company's
Cost (both as hereafter defined), the Executive will, contemporaneously
herewith, assign the Policy to the Company as collateral, using a form
substantially similar to that attached hereto as Exhibit B. The collateral
assignment of the Policy to the Company hereunder shall not be terminated,
altered, or amended by the Executive, without the express written consent of the
Company.

     (c) Assignment of Executive's Interest

     The Executive shall have the right to make an absolute assignment of his
entire interest, or any portion thereof, in the Policy at any time to any person
or persons, subject to the collateral assignment of the policy to the Company
pursuant to subsection (b) hereof. Upon delivery of a signed copy of such
assignment to the Company, all, or such portion, of the rights, obligations, and
duties of the Executive thereunder (subject to the collateral assignment of the
Company) and hereunder shall pass to and be binding upon such assignee
(including the right to make further assignments) and the Executive shall have
no further interest whatsoever in the Policy, or such portions.

     (d) Company's Cost



                                        4


     For the purposes of this Agreement, the Company's Cost means the amount of
the premiums on the Policy paid by it hereunder, less any withdrawals by the
Company from the Policy in accordance with Section 10.

     (e) Dividends

     Any dividend declared on the Policy shall be applied to purchase paid-up
additional insurance on the life of the Executive. The dividend election
provisions of the Policy shall conform to the provisions hereof.

     Section 5. Death Benefit

     Upon the death of the Executive, the beneficiary or beneficiaries
designated by the Executive shall be paid directly, in the manner and in the
amount or amounts provided in the beneficiary designation provision of the
Policy, a death benefit equal to the smaller of (a) the death benefit payable
under the Policy or (b) the Target Benefit. After such payment to such
beneficiary, the balance, if any, of the Policy death benefit (the Excess Value)
shall be paid to the Company.

     Section 6. Termination of Agreement

     (a) This Agreement shall terminate during the Executive's lifetime, without
notice, upon the occurrence of any of the following events:

          (i)  total cessation of the Company's business;

          (ii) bankruptcy, receivership, or dissolution of the Company;

          (iii) termination for cause of the Executive's employment by the
               Company or by any direct or indirect subsidiary of the New
               England Electric System or



                                        5


          (iv) payment of the Company's Cost by the Executive to the Company.

     (b) After termination of this Agreement under this section 6, the Executive
WILL not be permitted to re-enroli in the program. Upon such termination, the
Company may immediately withdraw its Cost from the Policy. The Executive will
receive no life insurance coverage under the New England Electric System
companies' group life insurance plan.

     Section 7. Benefits Upon Termination of Employment During the Executive's
          Lifetime.

     (a) If the Executive has Retired from the Company before the tenth
anniversary of a Policy, the Company will continue to pay premiums on that
Policy in accordance with section 8 until such tenth anniversary. On or after
such tenth anniversary, the Company may withdraw from the Policy amounts equal
to the Company s Cost. The Company may delay withdrawals from the Policy in
order to preserve the Policy' s tax treatment.

          For the purposes of this Agreement, the Executive will be considered
to have Retired from the Company if the termination of employment occurs (i) at
age 61 or older with a minimum of 10 years of service (as defined in Final
Average Pay Pension Plan I) or (ii) at age 55 or older with age plus years of
service equal to at least 85.

     (b) If the Executive terminated employment but has not Retired from the
Company before the tenth anniversary of the first Policy, the Company may
immediately withdraw its Cost from the Policy. The Executive will receive no
life insurance coverage under the New England Electric System companies' group
life insurance plan.

     (c) If the Executive terminated employment but has not Retired from the
Company after the tenth anniversary of the first Policy, the Company may
withdraw its Cost from the Policy



                                        6


as soon as it may be withdrawn without causing the Policy to lose its tax
treatment as life insurance. The Executive will receive no life insurance
coverage under the New England Electric System companies' group life insurance
plan.

     Section 8. Policy Premiums

     During the Executive's employment and as provided in subsection 7(a), the
Company shall promptly pay all premiums on the Policy when due until the Policy
can be kept in force with no future premiums due based upon the then current
crediting of the Policy.

     The Company shall bill the Executive for an annual contribution to the
policy premium, which contribution shall be equal to the value, for Federal
income tax purposes, of the "economic benefit" of the life insurance protection
the Executive then enjoys. The Executive shall transfer the contribution to the
Company within thirty days of the bill. The Company will reimburse the Executive
for such contribution and for the related federal and state taxes. This
reimbursement is not a part of the Company s Cost.

     If the Executive fails to make such timely payment, the Company shall
report the "economic benefit" of the life insurance protection as taxable income
to the Executive for the period, and no additional reimbursement will be made to
the Executive until payment has been made.

     Section 9. Return of Premiums

     Notwithstanding any provision hereof to the contrary, in the event that,
for any reason whatsoever, no death benefit is payable under the Policy upon the
death of the Executive and in lieu thereof the Insurer refunds all or any part
of the premiums paid for the Policy, the Company



                                        7


and the Executive's beneficiary or beneficiaries shall have the unqualified
right to share such premiums based on the respective cumulative contributions
thereto.

     Section 10. Withdrawals from Policy; Release of Assignment

     While the Executive is employed, if no additional premiums are required to
be paid under a Policy to maintain the death benefit to the Executive' s
beneficiaries, the Company may withdraw its Cost from that Policy at a time when
such withdrawal will not cause the Policy to be terminated or to lose its tax
treatment as life insurance.

     After the Company has withdrawn from the Policy amounts equal in full to
the Company s Cost (whether under section 6, 7, or 10), the Company will release
the collateral assignments of the Policy to the Executive.

     Section 11. Liability and Limitation of Obligation

     The Company and the Insurer believe the assumptions used to determine the
amount of insurance purchased are reasonable. However, the Executive recognizes
that the goals of the Agreement may not be realized and there is no guaranty
that the Target Benefit will actually be provided by the Policy and/or that
additional premiums may not be required to keep the Policy from lapsing or to
provide the Target Benefit. The Executive also recognizes that changes in the
Internal Revenue Code or rulings or regulations thereunder could increase his
tax liabilities or reduce his benefits.

     The Company has no responsibility, liability, or obligation for the
benefits provided the Executive from the Policy.

     The Company may, upon 30 days' written notice to the Executive, limit its
obligations hereunder to purchase, pay premiums on, or otherwise provide life
insurance policies beyond the total death benefit, including all riders then in
force, and all references herein to the annual



                                        8


base pay or final annual base pay of the Executive shall mean annual base pay at
the time of such written notification.

     The Insurer shall have no liability except as set forth in the Policy and
in any beneficiary designation and in any optional method of settlement election
filed with it. The Insurer shall not be bound to inquire into or take notice of
any of the covenants herein contained as to the Policy. In case of the
Executive's death, the Insurer shall be discharged from all liability on payment
of the proceeds in accordance with the Policy's provision, and any beneficiary
designation and any optional method of settlement election filed with it without
regard to this Agreement or any amendment thereof.

     Section 12. Named Fiduciary, Determination of Benefits. Claims Procedure
          and Administration

     (a) The Company is hereby designated as the named fiduciary under this
Agreement. The named fiduciary shall have authority to control and manage the
operation and administration of this Agreement, and it shall be responsible for
establishing and carrying out a funding policy and method consistent with the
objectives of this Agreement.

     (b) (i) Claim

          A person who believes that he is being denied a benefit to which he is
entitled under this Agreement (the Claimant) may file a written request for such
benefit with the Company, setting forth his claim. The request must be addressed
to the President of the Company at its then principal place of business.



                                        9


          (ii) Claim Decision

          Upon receipt of a claim, the Company shall advise the Claimant that a
reply will be forthcoming within ninety days and shall, in fact, deliver such
reply within such period. The Company may, however, extend the reply period for
an additional ninety days for reasonable cause.

          If the claim is denied in whole or in part, the Company shall adopt a
written opinion, using language calculated to be understood by the Claimant,
setting forth: (a) the specific reason or reasons for such denial; (b) the
specific reference to pertinent provisions of this Agreement on which such
denial is based; (c) a description of any additional material or information
necessary for the Claimant to perfect his claim and an explanation why such
material or such information is necessary; (d) appropriate information as to the
steps to be taken if the Claimant wishes to submit the claim for review; and (e)
the time limits for requesting a review under subsection (iii) and for review
under subsection (iv) hereof.

          (iii) Request for Review

          Within sixty days after the receipt by the Claimant of the written
opinion described above, the Claimant may request in writing that the Benefits
Appeal Committee (as defined in the Final Average Pay Pension Plan I) review the
determination of the Company. Such request must be addressed to the Secretary of
the Committee, at its then principal place of business. The Claimant or his duly
authorized representative may, but need not, review the pertinent documents and
submit issues and comments in writing for consideration by the Committee. If the
Claimant does not request a review of the Company's determination by the
Committee within such sixty day period, he shall be barred and estopped from
challenging the Company's determination.



                                       10


          (iv) Review of Decision

          Within sixty days after the Secretary's receipt of a request for
review, the Committee will review the Company's determination. After considering
all materials presented by the Claimant, the Committee will render an opinion,
setting forth the specific reasons for the decision and containing specific
references to the pertinent provisions of this Agreement on which the decision
is based. If special circumstances require that the sixty day time period be
extended, the Secretary will so notify the Claimant and the Committee will
render the decision as soon as possible, but no later than one hundred twenty
days after receipt of the request for review.

     Section 13. Notices

     Any notice, consent, or demand required or permitted to be given under the
provisions of this Agreement shall be in writing, and shall be signed by the
party giving or making the same. If such notice, consent, or demand is mailed to
a party hereto, it shall be sent to United States certified mail, postage
prepaid, addressed to such party's last known address as shown on the records of
the Company. The date of such mailing shall be deemed the date of notice,
consent, or demand.

     Section 14. Binding Effect

     This Agreement shall be binding upon and inure to the benefit of the
Company and its successors and assigns, and the Executive, and the Executive's
successors, assigns, heirs, executors, administrators, and beneficiaries.

     Section 15. Governing Law

     This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.



                                       11


     Section 16. Further Documentation

     The parties hereto agree to execute any documents which may be necessary or
proper in the carrying out of the purpose and intent of this Agreement.

     Section 17. Amendments and Transfers Within the New England Electric System
          Companies

     This Agreement may be amended or altered in any of its provisions, and such
changes shall become effective when reduced to writing and signed by the parties
hereto.

     The Company may, without any consent of the Insurer or the Executive,
assign or reassign all of its rights and obligations hereunder to such other
direct or indirect subsidiary of the New England Electric System by which the
Executive may from time to time be employed.

     Section 18. Interpretation of Agreement

     Where appropriate in this Agreement, words used in the singular shall
include the plural and words used in the masculine shall include the feminine
and vice versa. The headings of sections and subsections of this Agreement are
for convenience of reference only.

     Section 19. No Implied Right to Employment

     Neither this Agreement nor the payment of any premiums hereunder by the
Company shall be construed to create any obligation to give the Executive any
right to continue employment.



                                       12


New England Power Service Company


By:
    ---------------------------------
Name:
      -------------------------------
Title: Treasurer



                                       13


                                    EXHIBIT A

                               Insurance Policies

Metropolitan Policy Number



                                       14


                                    EXHIBIT B

                       Split-Dollar Collateral Assignment

     FOR VALUE RECEIVED, the undersigned owner (hereafter the Assignor) assigns,
transfers, and sets over to New England Power Service Company (Assignee), its
successors and assigns, certain rights in and to policy number _____________
(the Policy), and any and all supplemental benefit riders or agreements issued
under the Policy, issued by Metropolitan Life Insurance Company (the Insurer),
subject to all the terms and conditions of the Poiicy and this Assignment and to
all superior liens, if any, which the Insurer or any prior Assignee may have
against the Policy. The Assignor by this instrument and the Assignee by
acceptance of the Assignment jointly and severally agree to the conditions and
provisions hereof. This Assignment is made and the Policy is to be held as
collateral security for any and all liabilities of the Assignor to the Assignee,
either now existing or that may hereafter arise between the Assignor or any
successors or assigns and the Assignee under the New England Electric System
Companies Life Insurance Program for Executives I, dated _____________, with
regard to the Policy.

     1.   (a)  It is expressly agreed that the Assignee shall have the following
               rights in the Policy:

               (i)  the right to make and receive withdrawals from the Policy
                    (from the Insurer or otherwise), to the extent of the
                    aggregate premiums paid by the Assignee on the Policy;

               (ii) the right to release this Assignment to the Assignor or his
                    assigns;



                                       15


               (iii) the right to surrender the Policy and to receive the Policy
                    cash value and any dividend credits outstanding of the
                    excess over the Target Benefit (as defined in the Program);
                    and

               (iv) the right to receive from the death proceeds of the Policy,
                    and to elect an income settlement option with respect
                    thereto, an amount equal to the excess over the Target
                    Benefit (as defined in the Program).

          (b)  Except as provided in Paragraph (a) above, all other rights in
               the Policy, including but not limited to the right to designate
               and change the beneficiary of the Policy and the right to make
               loans against or withdrawals from the Policy and to receive any
               cash values and dividends credits outstanding in excess of
               aggregate premiums paid by the Assignee on the Policy, are
               expressly reserved to the Assignor and are, therefore, excluded
               from this Assignment.

          (c)  For purposes of Paragraphs (a) and (b) above, the signature of
               either the Assignor or the Assignee shall be adequate. Both the
               Assignor and the Assignee acknowledge that, between themselves,
               they are bound by the limitations of this Assignment and that the
               Insurer will recognize the signature of either.

     2. For purposes of this Assignment, aggregate premiums paid by the Assignee
on the Policy shall exclude premiums for any extra benefit riders or agreements
issues under the Policy.



                                       16


     3. All provisions of this Assignment shall be binding upon the successors,
assigns, heirs, executors, administrators, or beneficiaries of the Assignor.

     4. All Policy options and designations in effect as of the date of this
Assignment shall remain in effect unless specifically changed by this Assignment
or by action taken thereafter consistent with this Assignment.

     5. The Insurer is hereby authorized to recognize the Assignee's claim of
right hereunder without investigating the validity or amount thereof, the giving
of any notice, or the existence or amount of any liabilities of the Assignor to
the Assignee. Payment by the Insurer of any or all death proceeds of the Policy
to the Assignee in reliance upon an affidavit of any officer of the Company as
to the share of death proceeds due it shall be a full discharge of the Insurer
for such share and shall be binding on all parties claiming any interest under
the Policy.


Signed at                                                                      .
          --------------------------- on --------------------------------------
          (City and State)               (Date)


- -------------------------------------   ----------------------------------------
Witness                                 (Owner)



                                       17


Accepted and Agreed to:                 New England Power Service Company


- -------------------------------------   By:
Witness                                     ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title: Treasurer

     The Insurer hereby acknowledges receipt of a copy of this Coliateral
Assignment form.

Insurer


Date:                                   By:
      -------------------------------       ------------------------------------

EX-10.(X)

                                                                   Exhibit 10(x)

                             LIFE INSURANCE PROGRAM
                                       FOR
                               MICHAEL E. JESANIS

                                                   Revised Collateral Assignment



                                TABLE OF CONTENTS



                                                                            Page
                                                                            ----
                                                                         
Section 1.  The Program..................................................     1
Section 2.  Prior Insurance Program  ....................................     1
Section 3.  Vesting and Forfeiture ......................................     2
Section 4.  Life Insurance Policy  ......................................     2
Section 5.  Policy Death Benefit ........................................     4
Section 6.  Termination of Agreement During the Executive's Lifetime.....     5
Section 7.  Options on Termination During the Executive's Lifetime.......     6
Section 8.  Assignment by Executive  ....................................     7
Section 9.  Policy Premiums  ............................................     8
Section 10. Withdrawals from Policy  ....................................     8
Section 11. Policy Loans ................................................     9
Section 12. Limitation of Obligation ....................................     9
Section 13. Return of Premiums ..........................................     9
Section 14. Liability....................................................    10
Section 15. Named Fiduciary, Determination of Benefits, Claims
            Procedure and Administration ................................    10
Section 16. Notices......................................................    13
Section 17. Binding Effect ..............................................    13
Section 18. Governing Law................................................    13
Section 19. Further Documentation  ......................................    14
Section 20. Amendments ..................................................    14
Section 21. Interpretation of Agreement  .... ...........................    14
Signatures...............................................................    14
Exhibit A.  Insurance Policies
Exhibit B.  Collateral Assignment




                             LIFE INSURANCE PROGRAM

                            (Collateral Assignment)

     Agreement entered into as of the 23rd day of March, 1993, between New
England Power Service Company, a Massachusetts corporation (the Company), and
Michael E. Jesanis (the Executive).

     Section 1. The Program

     The program provides the Executive death benefits. The program is designed
with a goal of three times the Executive's annual base pay at the time of death
(or if the Executive has retired, three times his final annual base pay) (the
Target Benefit).

     Section 2. Prior Insurance Program

     The Executive hereby reaffirms his waiver of benefits under the Company's
group term-life insurance policy, to the extent that the benefit provided to the
Executive's beneficiaries, in accordance with Section 5, from the Policy (as
hereinafter defined) plus the group term-life insurance equals the Target
Benefit. For the purposes of this Agreement, "annual base pay" means the
annualized compensation being paid to the Executive on the day of determination
(or, if greater, the highest compensation paid to the Executive during any
12-month period of employment), including compensation deferred under other
plans but excluding bonuses and contributions made by the Company to or



                                       -2-


under any form of employee benefit program including NEES Goals Program and
employer contributions under the New England Electric System Companies Incentive
Thrift Plan, and "final annual base pay" means the Executive's annualized base
pay on the last day of employment (or, if greater, the highest compensation paid
to the Executive during any 12-month period of employment). To the extent that
such waiver is ineffective, the amount of the death benefit provided under the
Policy and otherwise payable hereunder to the beneficiary or beneficiaries
designated by the Executive shall be correspondingly reduced and the amount
payable to the Company shall be correspondingly increased.

     Section 3. Vesting and Forfeiture

     Subject to the provisions of Section 6, the Executive is 100% vested in his
benefits under this Program.

     Section 4. Life Insurance Policy

     One or more split-dollar life insurance policies listed in Exhibit A hereto
(the Policy) have been or will be purchased on the life of the Executive by the
Company. The issuer or issuers of the Policy are hereinafter referred to as the
Insurer.

     (a) Interest in the Policy

     The Executive shall be the sole owner of the Policy and may exercise all
ownership rights granted to the owner thereof by the terms of the Policy, except
as may otherwise be provided herein.



                                       -3-


     Except as otherwise provided herein, the Executive shall not sell, assign,
transfer, borrow against, surrender, or cancel the Policy, change the
beneficiary designation provision, or terminate the dividend election without
the express written consent of the Company.

     (b) Collateral Assignment

     To secure the repayment to the company of the Company's Cost and the right
of the Company to the Excess Value (as hereafter defined), the Executive will,
contemporaneously herewith, assign the Policy to the Company as collateral,
using a form substantially similar to that attached hereto as Exhibit B. The
collateral assignment of the Policy to the Company hereunder shall not be
terminated, altered, or amended by the Executive, without the express written
consent of the Company.

     (c) Company's cost

     For the purposes of this Agreement, the Company's Cost means the amount of
the premiums on the Policy paid by it hereunder, plus the after-tax interest
accrued on premium payments made by the Company, plus the after-tax interest
accrued on any Policy loans to the extent paid by the Company, less any
withdrawals by the Company from the Policy in accordance with Section 10 and
loans to the Company in accordance with Section 11 remaining outstanding on the
date of determination.



                                       -4-


     (d) Dividends

     Any dividend declared on the Policy shall be applied to purchase paid-up
additional insurance on the life of the Executive. The dividend election
provisions of the Policy shall conform to the provisions hereof.

     Section 5. Policy Death Benefit

     Upon the death of the Executive, the Company shall have the unqualified
right to receive a portion of the Policy death benefit equal to the Company's
Cost. In no event shall the amount payable to the Company hereunder exceed the
Policy proceeds payable at the death of the Executive. No amount shall be paid
from the Policy death benefit to the beneficiary or beneficiaries designated by
the Executive until the full amount due the Company under this paragraph has
been paid.

     The beneficiary or beneficiaries designated by the Executives shall be paid
directly, in the manner and in the amount or amounts provided in the beneficiary
designation provision of the Policy, a death benefit equal to the smaller of (a)
the balance of the death benefit payable under the Policy or (b) the Target
Benefit. After such payment to such beneficiary, the balance, if any, of the
Policy death benefit (the Excess Value) shall be paid to the Company.



                                       -5-


     Section 6. Termination of Agreement During the Executive's Lifetime.

     (a) This Agreement shall terminate during the Executive's lifetime, without
notice, upon the occurrence of any of the following events:

          (i)  total cessation of the Company's business;

          (ii) bankruptcy, receivership, or dissolution of the Company;

          (iii) the Executive's employment by the Company or by any direct or
               indirect subsidiary of the New England Electric System terminates
               for cause; or

          (iv) failure of the Executive to timely pay to the Company the
               Executive's portion of the premium, if any, due hereunder, unless
               the Company elects to make such payment on behalf of the
               Executive, as provided herein.

     (b) In addition, the Executive may terminate this Agreement, while no
premium under the Policy is overdue, by written notice to the Company. Such
termination shall be effective as of the date of such notice.



                                       -6-


     Section 7. Options on Termination During the Executive's Lifetime.

     (a) For sixty days after the date of the termination of this Agreement
during the Executive's lifetime, the Executive shall have the option of reducing
the policy death benefit to the (i) Company's Cost plus (ii) the Target Benefit
(but substituting "time of termination" for "time of death") and obtaining the
release of the collateral assignment of the Policy to the Company. To obtain
such release, the Executive shall repay the Company's Cost to the Company;
provided, if the net cash value of the Policy after withdrawal of the Company's
Cost is in excess of that required to provide, at the date of termination, the
Target Benefit on a paid up basis, the Executive shall pay such excess amount to
the Company. Upon receipt of such Cost and any excess amount, the Company shall
release the collateral assignment of the Policy. For the purposes of this
Agreement "paid up" means having a cash surrender value, as of the calculation
date, projected to age 100 with an 8% policy dividend rate and current expense
and mortality assumptions, that will support the Target Benefit with no future
premium payments.

     (b) If the Executive fails to exercise such option within such sixty day
period, then, at the request of the Company, the Executive shall execute any
document or documents required by the Insurer to transfer the interest of the
Executive in the Policy to the Company. Alternatively, the Company may enforce
its right



                                       -7-


to be repaid the Company's Cost from the cash surrender value of the Policy
under collateral assignment of the Policy; provided that in the event the cash
surrender value of the Policy exceeds the amount due the Company, any excess up
to the amount required to provide the Target Benefit, but substituting "time of
termination" for "time of death" on a paid up basis shall be paid to the
Executive. Thereafter, neither the Executive nor his heirs, assigns, or
beneficiaries shall have any further interest in and to the Policy, either under
the terms thereof or under this Agreement.

     Section 8. Assignment by Executive

     The Executive shall have the right to make an absolute assignment of his
entire interest, or any portion thereof, in the Policy at any time to any person
or persons, subject to the collateral assignment of the policy to the Company
pursuant to Section 4(b). Upon delivery of a signed copy of such assignment to
the Company, all, or such portion, of the rights, obligations, and duties of the
Executive thereunder (subject to the collateral assignment of the Company) and
hereunder shall pass to and be binding upon such assignee (including the right
to make further assignments) and the Executive shall have no further interest
whatsoever in the Policy, or such portions.



                                       -8-


     Section 9. Policy Premiums

     Until the Policy can be kept in force with no future premiums due based
upon the then current crediting of the Policy, the Company shall promptly pay
all premiums on the Policy when due.

     The Company shall bill the Executive for his annual contribution to the
policy premium, which contribution shall be equal to the value, for Federal
income tax purposes, of the "economic benefit" of the life insurance protection
he then enjoys. The Executive shall transfer his contribution to the company
within thirty days of the bill.

     If the Executive fails to make such timely payment, the Company, in its
sole discretion, may elect to make the Executive's portion of the premium
payment, which payment shall be recovered by the Company as provided herein.

     Section 10. Withdrawals from Policy

     If no additional premiums are then required to be paid under the policy to
maintain the death benefit to the Executive's beneficiaries, the Company may
withdraw from the Policy amounts equal to the Company's Cost at a time when such
withdrawal will not cause the Policy to be terminated.



                                       -9-


     Section 11. Policy Loans

     The Company shall have the right, without the Executive's consent, at any
time and from time to time, to withdraw premiums from the Policy, to obtain a
loan against the Policy from the Insurer, or to effect a collateral assignment
of its interest in the policy to any other party. The Company may not, however,
obtain loans other than loans for premiums or interest payments. The Company
shall pay the interest on any such loans as and when due.

     Section 12. Limitation of Obligation

     The Company may, upon 30 days' written notice to the Executive, limit its
obligations hereunder to purchase, pay premiums on, or otherwise provide life
insurance policies beyond the total death benefit, including all riders then in
force, and all references herein to the annual base pay or final annual base pay
of the Executive shall mean his annual base pay at the time of such written
notification.

     Section 13. Return of Premiums

     Notwithstanding any provision hereof to the contrary, in the event that,
for any reason whatsoever, no death benefit is payable under the Policy upon the
death of the Executive and in lieu thereof the Insurer refunds all or any part
of the premiums paid for the Policy, the Company and the Executive's beneficiary
or beneficiaries shall have the unqualified right to share such



                                      -10-


premiums based on the respective cumulative contributions thereto.

     Section 14. Liability

     The Insurer shall have no liability except as set forth in the Policy and
in any beneficiary designation and in any optional method of settlement election
filed with it. The Insurer shall not be bound to inquire into or take notice of
any of the covenants herein contained as to the Policy. In case of the
Executive's death, the Insurer shall be discharged from all liability on payment
of the proceeds in accordance with the Policy's provision, and any beneficiary
designation and any optional method of settlement election filed with it without
regard to this Agreement or any amendment thereof.

     The Company has no responsibility, liability, or obligation for the
benefits provided the Executive from the Policy.

     Section 15. Named Fiduciary, Determination of Benefits, Claims Procedure
          and Administration

     (a) The Company is hereby designated as the named fiduciary under this
Agreement. The named fiduciary shall have authority to control and manage the
operation and administration of this Agreement, and it shall be responsible for
establishing and carrying out a funding policy and method consistent with the
objectives of this Agreement.



                                      -11-


     (b)  (i) Claim

          A person who believes that he is being denied a benefit to which he is
entitled under this Agreement (the Claimant) may file a written request for such
benefit with the Company, setting forth his claim. The request must be addressed
to the President of the Company at its then principal place of business.

          (ii) Claim Decision

          Upon receipt of a claim, the Company shall advise the Claimant that a
reply will be forthcoming within ninety days and shall, in fact, deliver such
reply within such period. The Company may, however, extend the reply period for
an additional ninety days for reasonable cause.

          If the claim is denied in whole or in part, the Company shall adopt a
written opinion, using language calculated to be understood by the Claimant,
setting forth: (a) the specific reason or reasons for such denial; (b) the
specific reference to pertinent provisions of this Agreement on which such
denial is based; (c) a description of any additional material or information
necessary for the Claimant to perfect his claim and an explanation why such
material or such information is necessary; (d) appropriate information as to the
steps to be taken if the Claimant wishes to submit the claim for review; and



                                      -12-


(e) the time limits for requesting a review under subsection (iii) and for
review under subsection (iv) hereof.

          (iii) Request for Review

          Within sixty days after the receipt by the Claimant of the written
opinion described above, the Claimant may request in writing that the Benefits
Appeal committee review the determination of the Company. Such request must be
addressed to the Secretary of the Committee, at its then principal place of
business. The Claimant or his duly authorized representative may, but need not,
review the pertinent documents and submit issues and comments in writing for
consideration by the Committee. If the Claimant does not request a review of the
Company's determination by the Committee within such sixty day period, he shall
be barred and estopped from challenging the Company's determination.

          (iv) Review of Decision

          Within sixty days after the Secretary's receipt of a request for
review, the Committee will review the Company's determination. After considering
all materials presented by the Claimant, the Committee will render an opinion,
setting forth the specific reasons for the decision and containing specific
references to the pertinent provisions of this Agreement on which the decision
is based. If special circumstances require that the sixty day time period be
extended, the Secretary will so notify



                                      -13-


the Claimant and the Committee will render the decision as soon as possible, but
no later than one hundred twenty days after receipt of the request for review.

     Section 16. Notices

     Any notice, consent, or demand required or permitted to be given under the
provisions of this Agreement shall be in writing, and shall be signed by the
party giving or making the same. If such notice, consent, or demand is mailed to
a party hereto, it shall be sent to United States certified mail, postage
prepaid, addressed to such party's last known address as shown on the records of
the Company. The date of such mailing shall be deemed the date of notice,
consent, or demand.

     Section 17. Binding Effect

     This Agreement shall be binding upon and inure to the benefit of the
Company and its successors and assigns, and the Executive, his successors,
assigns, heirs, executors, administrators, and beneficiaries.

     Section 18. Governing Law

     This Agreement shall be governed by the laws of The Commonwealth of
Massachusetts.



                                      -14-

     Section 19, Further Documentation

     The parties hereto agree to execute any documents which may be necessary or
proper in the carrying out of the purpose and intent of this Agreement.

     Section 20. Amendments

     This Agreement may be amended or altered in any of its provisions, and such
changes shall become effective when reduced to writing and signed by the parties
hereto.

     Section 21. Interpretation of Agreement

     Where appropriate in this Agreement, words used in the singular shall
include the plural and words used in the masculine shall include the feminine
and vice versa.


                                        /s/ Illegible
                                        ----------------------------------------
                                        Executive


                                        NEW ENGLAND POWER SERVICE COMPANY


                                        By: /s/ Illegible
                                            ------------------------------------



                                    EXHIBIT A

                               Insurance Policies

                          CONFEDERATION LIFE 5 177836



                                    EXHIBIT B

                       Split-Dollar Collateral Assignment

     FOR VALUE RECEIVED, the undersigned owner (hereafter the Assignor) assigns,
transfers, and sets over to New England Power Service company (Assignee), its
successors and assigns, certain rights in and to policy number 5-177-836 (the
Policy), and any and all supplemental benefit riders or agreements issued under
the Policy, issued by Confederation Life Insurance Company (the Insurer),
subject to all the terms and conditions of the Policy and this Assignment and to
all superior liens, if any, which the Insurer or any prior Assignee may have
against the Policy. The Assignor by this instrument and the Assignee by
acceptance of the Assignment jointly and severally agree to the conditions and
provisions hereof. This Assignment is made and the Policy is to be held as
collateral security for any and all liabilities of the Assignor to the Assignee,
either now existing or that may hereafter arise between the Assignor or any
successors or assigns and the Assignee under the Life Insurance Program, dated
March 23, 1993, with regard to the Policy.

     1.   (a)  It is expressly agreed that the Assignee shall have the following
               rights in the Policy:

               (i)  the right to make and receive loans against and withdrawals
                    from the Policy (from the Insurer or otherwise), to the
                    extent of the aggregate premiums paid by




                    the Assignee on the Policy plus the after-tax interest
                    accrual on premium payments made by the Assignee, plus the
                    after-tax interest accrual on said loans to the extent paid
                    by the Assignee;

               (ii) the right to release this Assignment to the Assignor or his
                    assigns;

               (iii) the right to surrender the Policy and to receive the Policy
                    cash value and any dividend credits outstanding (but not in
                    excess of (a) the aggregate premiums paid by the Assignee on
                    the Policy plus (b) the excess over three times the
                    Executive's annual base pay at the time of death (or if the
                    Executive has retired, three times his final base pay));
                    and,

               (iv) the right to receive from the death proceeds of the Policy,
                    and to elect an income settlement option with respect
                    thereto, an amount equal to (a) the aggregate premiums paid
                    by the Assignee on the Policy plus the after-tax interest
                    accrued on the premium payments made by the Assignee plus
                    the after-tax interest on any indebtedness incurred by the
                    Assignee, but reduced by any indebtedness incurred by the
                    Assignee on the Policy




                    plus (b) the excess over three times the Executive's annual
                    base pay at the time of death (or if the Executive has
                    retired, three times his final base pay).

          (b)  Except as provided in Paragraph (a) above, all other rights in
               the Policy, including but not limited to the right to designate
               and change the beneficiary of the Policy and the right to make
               loans against or withdrawals from the Policy and to receive any
               cash values and dividends credits outstanding in excess of
               aggregate premiums paid by the Assignee on the Policy, are
               expressly reserved to the Assignor and are, therefore, excluded
               from this Assignment.

          (c)  For purposes of Paragraphs (a) and (b) above, the signature of
               either the Assignor or the Assignee shall be adequate. Both the
               Assignor and the Assignee acknowledge that, between themselves,
               they are bound by the limitations of this Assignment and that the
               Insurer will recognize the signature of either.

     2. This Assignment does not change the Insurer's right under the "Policy
Loan" provision of the Policy to charge interest on any Policy loan. If interest
is not paid under the terms of the Policy, the Insurer has the right to add such
interest to the unpaid loan from whatever cash value remains



regardless of who is entitled to that cash value under the terms of this
Assignment.

     3. For purposes of this Assignment, aggregate premiums paid by the Assignee
on the Policy shall exclude premiums for any extra benefit riders or agreements
issues under the Policy.

     4. Any death proceeds of the Policy in excess of the amount payable to the
Assignee shall be paid by the Insurer directly to the beneficiary named under
the Policy.

     5. All provisions of this Assignment shall be binding upon the successors,
assigns, heirs, executors, administrators, or beneficiaries of the Assignor.

     6. All Policy options and designations in effect as of the date of this
Assignment shall remain in effect unless specifically changed by this Assignment
or by action taken thereafter consistent with this Assignment.

     7. The Insurer is hereby authorized to recognize the Assignee's claim of
right hereunder without investigating the validity or amount thereof, the giving
of any notice, or the existence or amount of any liabilities of the Assignor to
the Assignee. Payment by the Insurer of any or all death proceeds of the Policy
to the Assignee in reliance upon an affidavit of any officer of the company as
to the share of death proceeds due it



shall be a full discharge of the Insurer for such share and shall be binding on
all parties claiming any interest under the Policy.

Signed at    Illegible    on March 23, 1993.
         (City and State)        (Date)


/s/ Illegible                           /s/ Illegible
- -------------------------------------   ----------------------------------------
Witness                                 Owner


Accepted and Agreed to:                 New England Power Service
Company


/s/ Illegible                           By: /s/ Illegible
- -------------------------------------       ------------------------------------
Witness

The Insurer hereby acknowledges receipt of a copy of this Collateral Assignment
form.

                                        Insurer


Date: 4/13/93                           By: /s/ Illegible
                                            ------------------------------------
                                            Confideration Life

EX-10.(Y)

                                                                   Exhibit 10(y)

                      NEW ENGLAND ELECTRIC SYSTEM COMPANIES

                    LIFE INSURANCE PROGRAM FOR EXECUTIVES II

                                       FOR

                                BARBARA A. HASSAN


                                                                               1



                                TABLE OF CONTENTS



                                                                            Page
                                                                            ----
                                                                         
Section 1.  The Program .................................................     1
Section 2.  Prior Insurance Program .....................................     2
Section 3.  Vesting and Forfeiture ......................................     2
Section 4.  Life Insurance Policy .......................................     2
Section 5.  Death Benefit ...............................................     4
Section 6.  Termination of Agreement ....................................     4
Section 7.  Benefits Upon Termination of Employment During the
            Executive's Lifetime ........................................     5
Section 8.  Policy Premiums .............................................     6
Section 9.  Return of Premiums ..........................................     7
Section 10. Withdrawals from Policy; Release of Assignment ..............     7
Section 11. Liability and Limitation of Obligation ......................     7
Section 12. Named Fiduciary, Determination of Benefits, Claims
            Procedure and Administration ................................     8
Section 13. Notices .....................................................    10
Section 14. Binding Effect ..............................................    11
Section 15. Governing Law ...............................................    11
Section 16. Further Documentation .......................................    11
Section 17. Amendments and Transfers Within the National Grid USA
            Companies ...................................................    11
Section 18. Interpretation of Agreement .................................    12
Section 19. No Implied Right to Employment ..............................    12



                                                                               2



                              COLLATERAL ASSIGNMENT

                            LIFE INSURANCE PROGRAM II

     Agreement entered into as of the 1ST day of July, 2000, between National
Grid USA Service Company, Inc., a Commonwealth of Massachusetts corporation (the
Company), and BARBARA A. HASSAN (the Executive).

     Section 1. The Program

     The program provides the Executive death benefits and post-retirement
ownership of the cash assets of the related policy. The program is designed with
a goal of two times the Executive's base pay (rounded up to the nearest even
whole thousand) at the time of death (or if the Executive has terminated
employment, two times final base pay, reduced to 1 1/2 times final base pay on
the first anniversary of her termination of employment and to one times final
base pay on the second anniversary)(the Target Benefit). During employment,
the first $50,000 of the coverage is to be provided by the Company's group term
life insurance policy.

     For the purposes of this Agreement, "annual base pay" means the annualized
compensation being paid to the Executive on the day of determination (or, if
greater, the highest compensation paid to the Executive during any 12-month
period of employment), including compensation deferred under other plans but
excluding bonuses (such as NEES Goals and Incentive Compensation bonuses) and
contributions made by the Company to or under any form of employee benefit
program and employer contributions under the National Grid USA Companies'
Incentive Thrift Plan, and "final annual base pay" means the Executive's
annualized base pay on the last day of employment (or, if greater, the highest
compensation paid to the Executive during any 12-month period of employment).


                                                                               1



     Section 2. Prior Insurance Program

     The Executive hereby waives the benefits under the Company's group
term-life insurance policy, to the extent that the benefit provided to the
Executive's beneficiaries, in accordance with Section 5, from the Policy (as
hereinafter defined) equals the Target Benefit. This waiver does not extend to
any optional benefits under the group term-life policy. To the extent that such
waiver is ineffective, the amount of the death benefit provided under the Policy
and otherwise payable hereunder to the beneficiary or beneficiaries designated
by the Executive shall be correspondingly reduced and the amount payable to the
Company shall be correspondingly increased.

     Section 3. Vesting and Forfeiture

     Subject to the provisions of Section 6, the Executive is 100% vested in her
benefits under this Program.

     Section 4. Life Insurance Policy

     One or more split-dollar life insurance policies listed in Exhibit A hereto
(the Policy) have been or will be purchased on the life of the Executive by the
Company. The issuer or issuers of the Policy are hereinafter referred to as the
Insurer. Purchase of insurance policies either now or at later dates may require
proof of insurability at that time.

     To the extent that necessary insurance policies are not reasonably
available at a later date, benefits will be provided under the Company's group
term-life insurance policy so that the total death benefit to the Executive's
beneficiaries during her employment is twice base pay.


                                                                               2



     (a) Interest in the Policy

     The Executive shall be the sole owner of the Policy and may exercise all
ownership rights granted to the owner thereof by the terms of the Policy, except
as may otherwise be provided herein.

     Except as otherwise provided herein, the Executive shall not sell, assign,
transfer, borrow against, surrender, or cancel the Policy, change the
beneficiary designation provision, or terminate the dividend election without
the express written consent of the Company.

     (b) Collateral Assignment

     To secure the right of the Company to the Excess Value and/or the Company's
Cost (both as hereafter defined), the Executive will, contemporaneously
herewith, assign the Policy to the Company as collateral, using a form
substantially similar to that attached hereto as Exhibit B. The collateral
assignment of the Policy to the Company hereunder shall not be terminated,
altered, or amended by the Executive, without the express written consent of the
Company.

     (c) Assignment of Executive's Interest

     The Executive shall have the right to make an absolute assignment of her
entire interest, or any portion thereof, in the Policy at any time to any person
or persons, subject to the collateral assignment of the policy to the Company
pursuant to subsection (b) hereof. Upon delivery of a signed copy of such
assignment to the Company, all, or such portion, of the rights, obligations, and
duties of the Executive thereunder (subject to the collateral assignment of the
Company) and hereunder shall pass to and be binding upon


                                                                               3



such assignee (including the right to make further assignments) and the
Executive shall have no further interest whatsoever in the Policy, or such
portions.

     (d) Company's Cost

     For the purposes of this Agreement, the Company's Cost means the amount of
the premiums on the Policy paid by it hereunder, less any withdrawals by the
Company from the Policy in accordance with Section 10.

     (e) Dividends

     Any dividend declared on the Policy shall be applied to purchase paid-up
additional insurance on the life of the Executive. The dividend election
provisions of the Policy shall conform to the provisions hereof.

     Section 5. Death Benefit

     Upon the death of the Executive, the beneficiary or beneficiaries
designated by the Executive shall be paid directly, in the manner and in the
amount or amounts provided in the beneficiary designation provision of the
Policy, a death benefit equal to the smaller of (a) the death benefit payable
under the Policy or (b) the Target Benefit. After such payment to such
beneficiary, the balance, if any, of the Policy death benefit (the Excess Value)
shall be paid to the Company.

     Section 6. Termination of Agreement

     (a) This Agreement shall terminate during the Executive's lifetime, without
notice, upon the occurrence of any of the following events:

          (i)  total cessation of the Company's business;


                                                                               4



          (ii) bankruptcy, receivership, or dissolution of the Company;

          (iii) termination for cause of the Executive's employment by the
               Company or by any direct or indirect subsidiary of the National
               Grid USA or

          (iv) payment of the Company's Cost by the Executive to the Company.

     (b) After termination of this Agreement under this section 6, the Executive
will not be permitted to re-enroll in the program. Upon such termination, the
Company may immediately withdraw its Cost from the Policy. The Executive will
receive no life insurance coverage under the National Grid USA Companies' Group
Life Insurance Plan.

     Section 7. Benefits Upon Termination of Employment During the Executive's
          Lifetime.

     (a) If the Executive has Retired from the Company before the tenth
anniversary of a Policy, the Company will continue to pay premiums on that
Policy in accordance with section 8 until such tenth anniversary. On or after
such tenth anniversary, the Company may withdraw from the Policy amounts equal
to the Company's Cost. The Company may delay withdrawals from the Policy in
order to preserve the Policy's tax treatment.

          For the purposes of this Agreement, the Executive will be considered
to have Retired from the Company if the termination of employment occurs (i) at
age 61 or older with a minimum of 10 years of service (as defined in Final
Average Pay Pension Plan or (ii) at age 55 or older with age plus years of
service equal to at least 85.

     (b) If the Executive terminated employment but has not Retired from the
Company before the tenth anniversary of the first Policy, the Company may
immediately


                                                                               5



withdraw its Cost from the Policy. The Executive will receive no life insurance
coverage under the National Grid USA Companies' Group Life insurance Plan.

     (c) If the Executive terminated employment but has not Retired from the
Company after the tenth anniversary of the first Policy, the Company may
withdraw its Cost from the Policy as soon as it may be withdrawn without causing
the Policy to lose its tax treatment as life insurance. The Executive will
receive no life insurance coverage under the National Grid USA Companies' Group
Life Insurance Plan.

     Section 8. Policy Premiums

     During the Executive's employment and as provided in subsection 7(a), the
Company shall promptly pay all premiums on the Policy when due until the Policy
can be kept in force with no future premiums due based upon the then current
crediting of the Policy.

     The Company shall bill the Executive for an annual contribution to the
policy premium, which contribution shall be equal to the value, for Federal
income tax purposes, of the "economic benefit" of the life insurance protection
the Executive then enjoys. The Executive shall transfer the contribution to the
Company within thirty days of the bill. The Company will reimburse the Executive
for such contribution and for the estimated related federal and state taxes.
This reimbursement is not a part of the Company's Cost.

     If the Executive fails to make such timely payment, the Company shall
report the "economic benefit" of the life insurance protection as taxable income
to the Executive for the period, and no additional reimbursement will be made to
the Executive until payment has been made.


                                                                               6



     Section 9. Return of Premiums

     Notwithstanding any provision hereof to the contrary, in the event that,
for any reason whatsoever, no death benefit is payable under the Policy upon the
death of the Executive and in lieu thereof the Insurer refunds all or any part
of the premiums paid for the Policy, the Company and the Executive's beneficiary
or beneficiaries shall have the unqualified right to share such premiums based
on the respective cumulative contributions thereto.

     Section 10. Withdrawals from Policy; Release of Assignment

     While the Executive is employed, if no additional premiums are required to
be paid under a Policy to maintain the death benefit to the Executive's
beneficiaries, the Company may withdraw its Cost from that Policy at a time when
such withdrawal will not cause the Policy to be terminated or to lose its tax
treatment as life insurance.

     After the Company has withdrawn from the Policy amounts equal in full to
the Company's Cost (whether under section 6, 7, or 10), the Company will release
the collateral assignments of the Policy to the Executive.

     Section 11. Liability and Limitation of Obligation

     The Company and the Insurer believe the assumptions used to determine the
amount of insurance purchased are reasonable. However, the Executive recognizes
that the goals of the Agreement may not be realized and there is no guaranty
that the Target Benefit will actually be provided by the Policy and/or that
additional premiums may not be required to keep the Policy from lapsing or to
provide the Target Benefit. The Executive also


                                                                               7



recognizes that changes in the Internal Revenue Code or rulings or regulations
thereunder could increase his tax liabilities or reduce his benefits.

     The Company has no responsibility, liability, or obligation for the
benefits provided the Executive from the Policy.

     The Company may, upon 30 days' written notice to the Executive, limit its
obligations hereunder to purchase, pay premiums on, or otherwise provide life
insurance policies beyond the total death benefit, including all riders then in
force, and all references herein to the annual base pay or final annual base pay
of the Executive shall mean annual base pay at the time of such written
notification.

     The Insurer shall have no liability except as set forth in the Policy and
in any beneficiary designation and in any optional method of settlement election
filed with it. The Insurer shall not be bound to inquire into or take notice of
any of the covenants herein contained as to the Policy. In case of the
Executive's death, the insurer shall be discharged from all liability on payment
of the proceeds in accordance with the Policy's provision, and any beneficiary
designation and any optional method of settlement election filed with it without
regard to this Agreement or any amendment thereof.

     Section 12. Named Fiduciary, Determination of Benefits, Claims Procedure
          and Administration

     (a) The Company is hereby designated as the named fiduciary under this
Agreement. The named fiduciary shall have authority to control and manage the
operation and administration of this Agreement, and it shall be responsible for
establishing and carrying out a funding policy and method consistent with the
objectives of this Agreement.


                                                                               8



     (b) (i) Claim

          A person who believes that she is being denied a benefit to which she
is entitled under this Agreement (the Claimant) may file a written request for
such benefit with the Company, setting forth his claim. The request must be
addressed to the President of the Company at its then principal place of
business.

          (ii) Claim Decision

          Upon receipt of a claim, the Company shall advise the Claimant that a
reply will be forthcoming within ninety days and shall, in fact, deliver such
reply within such period. The Company may, however, extend the reply period for
an additional ninety days for reasonable cause.

          If the claim is denied in whole or in part, the Company shall adopt a
written opinion, using language calculated to be understood by the Claimant,
setting forth: (a) the specific reason or reasons for such denial; (b) the
specific reference to pertinent provisions of this Agreement on which such
denial is based; (c) a description of any additional material or information
necessary for the Claimant to perfect her claim and an explanation why such
material or such information is necessary; (d) appropriate information as to the
steps to be taken if the Claimant wishes to submit the claim for review; and (e)
the time limits for requesting a review under subsection (iii) and for review
under subsection (iv) hereof.

          (iii) Request for Review

          Within sixty days after the receipt by the Claimant of the written
opinion described above, the Claimant may request in writing that the Benefits
Appeal Committee (as defined in the Final Average Pay Pension Plan) review the
determination of the


                                                                               9



Company. Such request must be addressed to the Secretary of the Committee, at
its then principal place of business. The Claimant or his duly authorized
representative may, but need not, review the pertinent documents and submit
issues and comments in writing for consideration by the Committee. If the
Claimant does not request a review of the Company's determination by the
Committee within such sixty day period, he shall be barred and estopped from
challenging the Company's determination.

          (iv) Review of Decision

          Within sixty days after the Secretary's receipt of a request for
review, the Committee will review the Company's determination. After considering
all materials presented by the Claimant, the Committee will render an opinion,
setting forth the specific reasons for the decision and containing specific
references to the pertinent provisions of this Agreement on which the decision
is based. If special circumstances require that the sixty day time period be
extended, the Secretary will so notify the Claimant and the Committee will
render the decision as soon as possible, but no later than one hundred twenty
days after receipt of the request for review.

     Section 13. Notices

     Any notice, consent, or demand required or permitted to be given under the
provisions of this Agreement shall be in writing, and shall be signed by the
party giving or making the same. If such notice, consent, or demand is mailed to
a party hereto, it shall be sent to United States certified mail, postage
prepaid, addressed to such party's last known address as shown on the records of
the Company. The date of such mailing shall be deemed the date of notice,
consent, or demand.


                                                                              10



     Section 14. Binding Effect

     This Agreement shall be binding upon and inure to the benefit of the
Company and its successors and assigns, and the Executive, and the Executive's
successors, assigns, heirs, executors, administrators, and beneficiaries.

     Section 15. Governing Law

     This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.

     Section 16. Further Documentation

     The parties hereto agree to execute any documents which may be necessary or
proper in the carrying out of the purpose and intent of this Agreement.

     Section 17. Amendments and Transfers Within the National Grid USA Companies

     This Agreement may be amended or altered in any of its provisions, and such
changes shall become effective when reduced to writing and signed by the parties
hereto.

     The Company may, without any consent of the Insurer or the Executive,
assign or reassign all of its rights and obligations hereunder to such other
direct or indirect subsidiary of National Grid USA by which the Executive may
from time to time be employed.


                                                                              11



     Section 18. Interpretation of Agreement

     Where appropriate in this Agreement, words used in the singular shall
include the plural and words used in the masculine shall include the feminine
and vice versa. The headings of sections and subsections of this Agreement are
for convenience of reference only.

     Section 19. No Implied Right to Employment

     Neither this Agreement nor the payment of any premiums hereunder by the
Company shall be construed to create any obligation to give the Executive any
right to continue employment.


                                        /s/ Barbara A. Hassan
                                        ----------------------------------------
                                        Barbara A. Hassan


National Grid USA Service Company, Inc.


                                        By: /s/ William F. Dowd
                                            ------------------------------------
                                            William F. Dowd
                                            Vice President


                                                                              12



                                    EXHIBIT A

                               Insurance Policies

Metropolitan Policy Number 200 951 994 U


                                                                              13



                                    EXHIBIT B

                       Split-Dollar Collateral Assignment

     FOR VALUE RECEIVED, the undersigned owner (hereafter the Assignor) assigns,
transfers, and sets over to National Grid USA Service Company, Inc. (Assignee),
its successors and assigns, certain rights in and to policy number 200 951 994 U
(the Policy), and any and all supplemental benefit riders or agreements issued
under the Policy, issued by Metropolitan Life Insurance Company (the Insurer),
subject to all the terms and conditions of the Policy and this Assignment and to
all superior liens, if any, which the Insurer or any prior Assignee may have
against the Policy. The Assignor by this instrument and the Assignee by
acceptance of the Assignment jointly and severally agree to the conditions and
provisions hereof. This Assignment is made and the Policy is to be held as
collateral security for any and all liabilities of the Assignor to the Assignee,
either now existing or that may hereafter arise between the Assignor or any
successors or assigns and the Assignee under the National Grid USA Companies
Life Insurance Program for Executives II, dated July 1, 2000, with regard to the
Policy.

     1.   (a)  It is expressly agreed that the Assignee shall have the following
               rights in the Policy:

               (i)  the right to make and receive withdrawals from the Policy
                    (from the insurer or otherwise), to the extent of the
                    aggregate premiums paid by the Assignee on the Policy;

               (ii) the right to release this Assignment to the Assignor or her
                    assigns;


                                                                              14



               (iii) the right to surrender the Policy and to receive the Policy
                    cash value and any dividend credits outstanding of the
                    excess over the Target Benefit (as defined in the Program);
                    and

               (iv) the right to receive from the death proceeds of the Policy,
                    and to elect an income settlement option with respect
                    thereto, an amount equal to the excess over the Target
                    Benefit (as defined in the Program).

          (b)  Except as provided in Paragraph (a) above, all other rights in
               the Policy, including but not limited to the right to designate
               and change the beneficiary of the Policy and the right to make
               loans against or withdrawals from the Policy and to receive any
               cash values and dividends credits outstanding in excess of
               aggregate premiums paid by the Assignee on the Policy, are
               expressly reserved to the Assignor and are, therefore, excluded
               from this Assignment.

          (c)  For purposes of Paragraphs (a) and (b) above, the signature of
               either the Assignor or the Assignee shall be adequate. Both the
               Assignor and the Assignee acknowledge that, between themselves,
               they are bound by the limitations of this Assignment and that the
               Insurer will recognize the signature of either.

     2. For purposes of this Assignment, aggregate premiums paid by the Assignee
on the Policy shall exclude premiums for any extra benefit riders or agreements
issues under the Policy.


                                                                              15



     3. All provisions of this Assignment shall be binding upon the successors,
assigns, heirs, executors, administrators, or beneficiaries of the Assignor.

     4. All Policy options and designations in effect as of the date of this
Assignment shall remain in effect unless specifically changed by this Assignment
or by action taken thereafter consistent with this Assignment.

     5. The Insurer is hereby authorized to recognize the Assignee's claim of
right hereunder without investigating the validity or amount thereof, the giving
of any notice, or the existence or amount of any liabilities of the Assignor to
the Assignee. Payment by the Insurer of any or all death proceeds of the Policy
to the Assignee in reliance upon an affidavit of any officer of the Company as
to the share of death proceeds due it shall be a full discharge of the Insurer
for such share and shall be binding on all parties claiming any interest under
the Policy.


Signed at    Illegible     on 10/3/00.
          (City and State)    (Date)


Witness /s/ Illegible                   /s/ Barbara A. Hassan
        ------------------------------  ----------------------------------------
                                        Barbara A. Hassan (Owner)


                                                                              16



Accepted and Agreed to:                 National Grid USA Service Company, Inc.


/s/ Illegible                           By: /s/ William F. Dowd
- -------------------------------------       ------------------------------------
Witness                                 Name: William F. Dowd
                                        Title: Vice President

The Insurer hereby acknowledges receipt of a copy of this Collateral Assignment
form.

                                        Insurer


Date:                                   By:
      --------------------------------      ------------------------------------

      Recorded and Filed at the Office of Metropolitan

          The company assumes no obligation as to the validity and sufficiency
     of this agreement and does not pass upon its legality


     on OCT 17 2000                     By: /s/ Louis J. Raguaa
                                            ------------------------------------
                                            Louis J. Raguaa
                                            Vice-President and Secretary


                                                                              17

EX-10.(Z)

                                                                   Exhibit 10(z)

                      NEW ENGLAND ELECTRIC SYSTEM COMPANIES

                     LIFE INSURANCE PROGRAM FOR EXECUTIVES I

                                       FOR

                                CHERYL A. LAFLEUR



                                TABLE OF CONTENTS



                                                                            Page
                                                                            ----
                                                                         
Section 1.  The Program..................................................     1
Section 2.  Prior Insurance Program......................................     2
Section 3.  Vesting and Forfeiture.......................................     2
Section 4.  Life Insurance Policy........................................     2
Section 5.  Death Benefit................................................     4
Section 6.  Termination of Agreement.....................................     4
Section 7.  Benefits Upon Termination of Employment During
            the Executive's Lifetime.....................................     5
Section 8.  Policy Premiums..............................................     6
Section 9.  Return of Premiums...........................................     7
Section 10. Withdrawals from Policy; Release of Assignment...............     7
Section 11. Liability and Limitation of obligation.......................     7
Section 12. Named Fiduciary, Determination of Benefits, Claims Procedure
            and Administration...........................................     8
Section 13. Notices......................................................    10
Section 14. Binding Effect...............................................    11
Section 15. Governing Law................................................    11
Section 16. Further Documentation........................................    11
Section 17. Amendments and Transfers Within the New England
            Electric System-Companies....................................    11
Section 18. Interpretation of Agreement..................................    11
Section 19. No Implied Right to Employment...............................    12




                              COLLATERAL ASSIGNMENT

                             LIFE INSURANCE PROGRAM

     Agreement entered into as of the 1st day of January, 1996, between New
England Power Service Company, a Massachusetts corporation (the Company), and
Cheryl A. LaFleur (the Executive).

     Section 1. The Program

     The program provides the Executive death benefits and post-retirement
ownership of the cash assets of the related policy. The program is designed with
a goal of three times the Executive's base pay (rounded up to the nearest even
whole thousand) at the time of death (the Target Benefit). During employment,
the first $50,000 of the coverage is to be provided by the Company's group term
life insurance policy.

     For the purposes of this Agreement, "annual base pay" means the annualized
compensation being paid to the Executive on the day of determination (or, if
greater, the highest compensation paid to the Executive during any 12-month
period of employment), including compensation deferred under other plans but
excluding bonuses (including NEES Goals) and contributions made by the Company
to or under any form of employee benefit program and employer contributions
under the New England Electric System Companies incentive Thrift Plan, and
"final annual base pay" means the Executive's annualized base pay on the last
day of employment (or, if greater, the highest compensation paid to the
Executive during any 12-month period of employment).

     Section 2. Prior Insurance Program



                                        2


     The Executive hereby waives the benefits under the Company's group
term-life insurance policy, and the New England Electric System Companies Life
Insurance Program for Executive II to the extent that the benefit provided to
the Executive's beneficiaries, in accordance with Section 5, from the Policy (as
hereinafter defined) equals the Target Benefit. This waiver does not extend to
any optional benefits under the group term-life policy. To the extent that such
waiver is ineffective, the amount of the death benefit provided under the
Policy and otherwise payable hereunder to the beneficiary or beneficiaries
designated by the Executive shall be correspondingly reduced and the amount
payable to the Company shall be correspondingly increased.

     Section 3. Vesting and Forfeiture

     Subject to the provisions of Section 6, the Executive is 100% vested in his
benefits under this Program.

     Section 4. Life Insurance Policy

     One or more split-dollar life insurance policies listed in Exhibit A hereto
(the Policy) have been or will be purchased on the life of the Executive by the
Company. The issuer or issuers of the Policy are hereinafter referred to as the
Insurer. Purchase of insurance policies either now or at later dates may require
proof of insurability at that time.

     To the extent that necessary insurance policies are not reasonably
available at a later date, benefits will be provided under the Company's group
term-life insurance policy so that the total death benefit to the Executive's
beneficiaries during his employment is three times base pay.



                                        3


     (a) Interest in the Policy

     The Executive shall be the sole owner of the Policy and may exercise all
ownership rights granted to the owner thereof by the terms of the Policy,
except as may otherwise be provided herein.

     Except as otherwise provided herein, the Executive shall not sell, assign,
transfer, borrow against, surrender, or cancel the Policy, change the
beneficiary designation provision, or terminate the dividend election without
the express written consent of the Company.

     (b) Collateral Assignment

     To secure the right of the Company to the Excess Value and/or the Company's
Cost (both as hereafter defined), the Executive will, contemporaneously
herewith, assign the Policy to the Company as collateral, using a form
substantially similar to that attached hereto as Exhibit B. The collateral
assignment of the Policy to the Company hereunder shall not be terminated,
altered, or amended by the Executive, without the express written consent of the
Company.

     (c) Assignment of Executive's Interest

     The Executive shall have the right to make an absolute assignment of his
entire interest, or any portion thereof, in the Policy at any time to any person
or persons, subject to the collateral assignment of the policy to the Company
pursuant to subsection (b) hereof. Upon delivery of a signed copy of such
assignment to the Company, all, or such portion, of the rights, obligations, and
duties of the Executive thereunder (subject to the collateral assignment of the
Company) and hereunder shall pass to and be binding upon such assignee



                                        4


(including the right to make further assignments) and the Executive shall have
no further interest whatsoever in the Policy, or such portions.

     (d) Company's Cost

     For the purposes of this Agreement, the Company's Cost means the amount of
the premiums on the Policy paid by it hereunder, less any withdrawals by the
Company from the Policy in accordance with Section 10.

     (e) Dividends

     Any dividend declared on the Policy shall be applied to purchase paid-up
additional insurance on the life of the Executive. The dividend election
provisions of the Policy shall conform to the provisions hereof.

     Section 5. Death Benefit

     Upon the death of the Executive, the beneficiary or beneficiaries
designated by the Executive shall be paid directly, in the manner and in the
amount or amounts provided in the beneficiary designation provision of the
Policy, a death benefit equal to the smaller of (a) the death benefit payable
under the Policy or (b) the Target Benefit. After such payment to such
beneficiary, the balance, if any, of the Policy death benefit (the Excess Value)
shall be paid to the Company.

     Section 6. Termination of Agreement

     (a) This Agreement shall terminate during the Executive's lifetime, without
notice, upon the occurrence of any of the following events:



                                        5


          (i)  total cessation of the Company's business;

          (ii) bankruptcy, receivership, or dissolution of the Company;

          (iii) termination for cause of the Executive's employment by the
               Company or by any direct or indirect subsidiary of the New
               England Electric System or

          (iv) payment of the Company's Cost by the Executive to the Company.

     (b) After termination of this Agreement under this section 6, the Executive
will not be permitted to re-enroll in the program. Upon such termination, the
Company may immediately withdraw its Cost from the Policy. The Executive will
receive no life insurance coverage under the New England Electric System
companies' group life insurance plan.

     Section 7. Benefits Upon Termination of Employment During the Executive's
                Lifetime.

     (a) If the Executive has Retired from the Company before the tenth
anniversary of a Policy, the Company will continue to pay premiums on that
Policy in accordance with section 8 until such tenth anniversary. On or after
such tenth anniversary, the Company may withdraw from the Policy amounts equal
to the Company's Cost. The Company may delay withdrawals from the Policy in
order to preserve the Policy's tax treatment.

          For the purposes of this Agreement, the Executive will be considered
to have Retired from the Company if the termination of employment occurs (i) at
age 61 or older with a minimum of 10 years of service (as defined in Final
Average Pay Pension Plan I) or (ii) at age 55 or older with age plus years of
service equal to at least 85.



                                        6


     (b) If the Executive terminated employment but has not Retired from the
Company before the tenth anniversary of the first Policy, the Company may
immediately withdraw its Cost from the Policy. The Executive will receive no
life insurance coverage under the New England Electric System companies' group
life insurance plan.

     (c) If the Executive terminated employment but has not Retired from the
Company after the tenth anniversary of the first Policy, the Company may
withdraw its Cost from the Policy as soon as it may be withdrawn without causing
the Policy to lose its tax treatment as life insurance. The Executive will
receive no life insurance coverage under the New England Electric System
companies' group life insurance plan.

     Section 8. Policy Premiums

     During the Executive's employment and as provided in subsection 7(a), the
Company shall promptly pay all premiums on the Policy when due until the Policy
can be kept in force with no future premiums due based upon the then current
crediting of the Policy.

     The Company shall bill the Executive for an annual contribution to the
policy premium, which contribution shall be equal to the value, for Federal
income tax purposes, of the "economic benefit" of the life insurance protection
the Executive then enjoys. The Executive shall transfer the contribution to the
Company within thirty days of the bill. The Company will reimburse the Executive
for such contribution and for the related federal and state taxes. This
reimbursement is not a part of the Company's Cost.

     If the Executive fails to make such timely payment, the Company shall
report the "economic benefit" of the life insurance protection as taxable income
to the Executive for



                                        7


the period, and no additional reimbursement will be made to the Executive until
payment has been made.

     Section 9. Return of Premiums

     Notwithstanding any provision hereof to the contrary, in the event that,
for any reason whatsoever, no death benefit is payable under the Policy upon the
death of the Executive and in lieu thereof the Insurer refunds all or any part
of the premiums paid for the Policy, the Company and the Executive's beneficiary
or beneficiaries shall have the unqualified right to share such premiums based
on the respective cumulative contributions thereto.

     Section 10. Withdrawals from Policy; Release of Assignment

     While the Executive is employed, if no additional premiums are required to
be paid under a Policy to maintain the death benefit to the Executive's
beneficiaries, the Company may withdraw its Cost from that Policy at a time when
such withdrawal will not cause the Policy to be terminated or to lose its tax
treatment as life insurance.

     After the Company has withdrawn from the Policy amounts equal in full to
the Company's Cost (whether under section 6, 7, or 10), the Company will release
the collateral assignments of the Policy to the Executive.

     Section 11. Liability and Limitation of Obligation

     The Company and the Insurer believe the assumptions used to determine the
amount of insurance purchased are reasonable. However, the Executive recognizes
that the goals of the Agreement may not be realized and there is no guaranty
that the Target Benefit will actually be provided by the Policy and/or that
additional premiums may not be required to



                                        8


keep the Policy from lapsing or to provide the Target Benefit. The Executive
also recognizes that changes in the Internal Revenue Code or rulings or
regulations thereunder could increase his tax liabilities or reduce his
benefits.

     The Company has no responsibility, liability, or obligation for the
benefits provided the Executive from the Policy.

     The Company may, upon 30 days' written notice to the Executive, limit its
obligations hereunder to purchase, pay premiums on, or otherwise provide life
insurance policies beyond the total death benefit, including all riders then in
force, and all references herein to the annual base pay or final annual base pay
of the Executive shall mean annual base pay at the time of such written
notification.

     The Insurer shall have no liability except as set forth in the Policy and
in any beneficiary designation and in any optional method of settlement election
filed with it. The Insurer shall not be bound to inquire into or take notice of
any of the covenants herein contained as to the Policy. In case of the
Executive's death, the Insurer shall be discharged from ail liability on payment
of the proceeds in accordance with the Policy's provision, and any beneficiary
designation and any optional method of settlement election filed with it without
regard to this Agreement or any amendment thereof.

     Section 12. Named Fiduciary, Determination of Benefits, Claims Procedure
          and Administration

     (a) The Company is hereby designated as the named fiduciary under this
Agreement. The named fiduciary shall have authority to control and manage the
operation and administration of this Agreement, and it shall be responsible for
establishing and carrying out a funding policy and method consistent with the
objectives of this Agreement.



                                       9


     (b) (i) Claim

          A person who believes that he is being denied a benefit to which he is
entitled under this Agreement (the Claimant) may file a written request for such
benefit with the Company, setting forth his claim. The request must be addressed
to the President of the Company at its then principal place of business.

          (ii) Claim Decision

          Upon receipt of a claim, the Company shall advise the Claimant that a
reply will be forthcoming within ninety days and shall, in fact, deliver such
reply within such period. The Company may, however, extend the reply period for
an additional ninety days for reasonable cause.

          If the claim is denied in whole or in part, the Company shall adopt a
written opinion, using language calculated to be understood by the Claimant,
setting forth: (a) the specific reason or reasons for such denial; (b) the
specific reference to pertinent provisions of this Agreement on which such
denial is based; (c) a description of any additional material or information
necessary for the Claimant to perfect his claim and an explanation why such
material or such information is necessary; (d) appropriate information as to the
steps to be taken if the Claimant wishes to submit the claim for review; and (e)
the time limits for requesting a review under subsection (iii) and for review
under subsection (iv) hereof.

          (iii) Request for Review

          Within sixty days after the receipt by the Claimant of the written
opinion described above, the Claimant may request in writing that the Benefits
Appeal Committee (as defined in the Final Average Pay Pension Plan I) review
the determination of the



                                       10


Company. Such request must be addressed to the Secretary of the Committee, at
its then principal place of business. The Claimant or his duly authorized
representative may, but need not, review the pertinent documents and submit
issues and comments in writing for consideration by the Committee. If the
Claimant does not request a review of the Company's determination by the
Committee within such sixty day period, he shall be barred and estopped from
challenging the Company's determination.

          (iv) Review of Decision

          Within sixty days after the Secretary's receipt of a request for
review, the Committee will review the Company's determination. After considering
all materials presented by the Claimant, the Committee will render an opinion,
setting forth the specific reasons for the decision and containing specific
references to the pertinent provisions of this Agreement on which the decision
is based. If special circumstances require that the sixty day time period be
extended, the Secretary will so notify the Claimant and the Committee will
render the decision as soon as possible, but no later than one hundred twenty
days after receipt of the request for review.

     Section 13. Notices

     Any notice, consent, or demand required or permitted to be given under the
provisions of this Agreement shall be in writing, and shall be signed by the
party giving or making the same. If such notice, consent, or demand is mailed to
a party hereto, it shall be sent to United States certified mail, postage
prepaid, addressed to such party's last known address as shown on the records of
the Company. The date of such mailing shall be deemed the date of notice,
consent, or demand.



                                       11


     Section 14. Binding Effect

     This Agreement shall be binding upon and inure to the benefit of the
Company and its successors and assigns, and the Executive, and the Executive's
successors, assigns, heirs, executors, administrators, and beneficiaries.

     Section 15. Governing Law

     This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.

     Section 16. Further Documentation

     The parties hereto agree to execute any documents which may be necessary or
proper in the carrying out of the purpose and intent of this Agreement.

     Section 17. Amendments and Transfers Within the New England Electric System
          Companies

     This Agreement may be amended or altered in any of its provisions, and such
changes shall become effective when reduced to writing and signed by the parties
hereto.

     The Company may, without any consent of the insurer or the Executive,
assign or reassign all of its rights and obligations hereunder to such other
direct or indirect subsidiary of the New England Electric System by which the
Executive may from time to time be employed.



                                       12


     Section 18. Interpretation of Agreement

     Where appropriate in this Agreement, words used in the singular shall
include the plural and words used in the masculine shall include the feminine
and vice versa. The headings of sections and subsections of this Agreement are
for convenience of reference only.

     Section 19. No implied Right to Employment

     Neither this Agreement nor the payment of any premiums hereunder by the
Company shall be construed to create any obligation to give the Executive any
right to continue employment.


                                        /s/ Cheryl A. LaFleur
                                        ----------------------------------------
                                        Cheryl A. LaFleur


                                        New England Power Service Company


                                        By: /s/ Illegible
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------



                                       13


                                    EXHIBIT A

                               Insurance Policies



                                       14


                                    EXHIBIT B

                       Split-Dollar Collateral Assignment

     FOR VALUE RECEIVED, the undersigned owner (hereafter the Assignor) assigns,
transfers, and sets over to New England Power Service Company (Assignee), its
successors and assigns, certain rights in and to policy number ______________
(the Policy), and any and all supplemental benefit riders or agreements issued
under the Policy, issued by Metropolitan Life Insurance Company (the Insurer),
subject to all the terms and conditions of the Policy and this Assignment and to
all superior liens, if any, which the Insurer or any prior Assignee may have
against the Policy. The Assignor by this instrument and the Assignee by
acceptance of the Assignment jointly and severally agree to the conditions and
provisions hereof. This Assignment is made and the Policy is to be held as
cotlateral security for any and all liabilities of the Assignor to the Assignee,
either now existing or that may hereafter arise between the Assignor or any
successors or assigns and the Assignee under the New England Electric System
Companies Life Insurance Program for Executives I, dated January 1, 1996, with
regard to the Policy.

     1.   (a)  it is expressly agreed that the Assignee shall have the following
               rights in the Policy:

               (i)  the right to make and receive withdrawals from the Policy
                    (from the insurer or otherwise), to the extent of the
                    aggregate premiums paid by the Assignee on the Policy;

               (ii) the right to release this Assignment to the Assignor or his
                    assigns;



                                       15


               (iii) the right to surrender the Policy and to receive the Policy
                    cash value and any dividend credits outstanding of the
                    excess over the Target Benefit (as defined in the Program);
                    and

               (iv) the right to receive from the death proceeds of the Policy,
                    and to elect an income settlement option with respect
                    thereto, an amount equal to the excess over the Target
                    Benefit (as defined in the Program).

          (b)  Except as provided in Paragraph (a) above, all other rights in
               the Policy, including but not limited to the right to designate
               and change the beneficiary of the Poilcy and the right to make
               loans against or withdrawals from the Policy and to receive any
               cash values and dividends credits outstanding in excess of
               aggregate premiums paid by the Assignee on the Policy, are
               expressly reserved to the Assignor and are, therefore, excluded
               from this Assignment.

          (c) For purposes of Paragraphs (a) and (b) above, the signature of
               either the Assignor or the Assignee shall be adequate. Both the
               Assignor and the Assignee acknowledge that, between themselves,
               they are bound by the limitations of this Assignment and that the
               Insurer will recognize the signature of either.

     2. For purposes of this Assignment, aggregate premiums paid by the Assignee
on the Policy shall exclude premiums for any extra benefit riders or agreements
issues under the Policy.



                                       16


     3. All provisions of this Assignment shall be binding upon the successors,
assigns, heirs, executors, administrators, or beneficiaries of the Assignor.

     4. All Policy options and designations in effect as of the date of this
Assignment shall remain in effect unless specifically changed by this Assignment
or by action taken thereafter consistent with this Assignment.

     5. The Insurer is hereby authorized to recognize the Assignee's claim of
right hereunder without investigating the validity or amount thereof, the giving
of any notice, or the existence or amount of any liabilities of the Assignor to
the Assignee. Payment by the insurer of any or all death proceeds of the Policy
to the Assignee in reliance upon an affidavit of any officer of the Company as
to the share of death proceeds due it shall be a full discharge of the Insurer
for such share and shall be binding on all parties claiming any interest under
the Policy.

Signed at     Illegible    on March 5, 1996.
          (City and State)      (Date)


/s/ Illegible                           /s/ Illegible
- -------------------------------------   ----------------------------------------
Witness                                 Owner



                                       17


Accepted and Agreed to:                 New England Power Service Company


/s/ Illegible                           By: /s/ Illegible
- -------------------------------------       ------------------------------------
Witness                                 Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

The Insurer hereby acknowledges receipt of a copy of this Collateral Assignment
form.

                                        Insurer


Date:                                   By:
      -------------------------------       ------------------------------------

                Recorded and Filed at the Office of Metropolitan
            The company assumes no obligation as to the validity and
        sufficiency of this agreement and does not pass upon its legality


on Mar. 14 1996                         /s/ Joseph A. Reali
                                        ----------------------------------------
                                        Joseph A. Reali
                                        Vice-President and Secretary


\
(NEW ENGLAND POWER SERVICE A NEES COMPANY LOGO)

MEMORANDUM

To: Cheryl A. LaFleur                   Date: November 16, 1998

From: Don Goodwin                       Phone: 508 389 2125

Subject: Life Insurance Program for
Executives I Agreement                  File:

A review of the Life Insurance Program for Executives I agreements indicates
that the coverage provided therein would cease after termination of employment
other than at retirement. That is not in accordance with the Program as approved
by the Compensation Committee of the Board. Accordingly, please append the
attached "Corrected Section 7" to your copy of your agreement. A Corrected
Section 7 will be added to the Company's and Insurer's copies of your agreement.


/s/ Don F. Goodwin
- ---------------------------------------
Don F. Goodwin, Vice President

Tel: 508 389-2125 Fax: 508 836-5487
e-mail: goodwi@neesnet.com



                     Life Insurance Program for Executives I

                               Corrected Section 7

     Section 7. Option on Termination During the Executive's Lifetime.

     (a) For sixty days after the date of the termination of this Agreement
during the Executive's lifetime, the Executive shall have the option of
obtaining the release of the collateral assignment of the policy to the Company.
To obtain such release, the Executive shall repay to the Company Company's Cost.
Upon receipt of such amount, the Company shall release the collateral assignment
of the Policy.

     (b) If the Executive has terminated employment but has not Retired from the
Company, the Company will continue to pay premiums on the Policy in accordance
with Section 8 until the earlier of (i) the Policy can be kept in force with no
future premiums due based upon the then current crediting of the Policy or (ii)
the tenth anniversary of the Policy. Thereafter, the Company may withdraw from
the Policy amounts equal to the Company's Costs. The Company may delay
withdrawal from the Policy in order to preserve the Policy's tax treatment.

EX-10.(AA)

                                                                  Exhibit 10(aa)

                      NEW ENGLAND ELECTRIC SYSTEM COMPANIES

                    LIFE INSURANCE PROGRAM FOR EXECUTIVES II

                                       FOR

                                 ANTHONY C. PINI



                                TABLE OF CONTENTS



                                                                            Page
                                                                            ----
                                                                         
Section 1.  The Program..................................................     1
Section 2.  Prior Insurance Program......................................     2
Section 3.  Vesting and Forfeiture.......................................     2
Section 4.  Life Insurance Policy........................................     2
Section 5.  Death Benefit................................................     4
Section 6.  Termination of Agreement.....................................     4
Section 7.  Benefits Upon Termination of Employment During the
            Executive Lifetime...........................................     5
Section 8.  Policy Premiums..............................................     6
Section 9.  Return of Premiums...........................................     7
Section 10. Withdrawals from Policy; Release of Assignment...............     7
Section 11. Liability and limitation of obligation.......................     7
Section 12. Named Fiduciary, Determination of Benefits, Claims Procedure
            and Administration ..........................................     8
Section 13. Notices......................................................    10
Section 14. Binding Effect...............................................    11
Section 15. Governing Law................................................    11
Section 16. Further Documentation........................................    11
Section 17. Amendments and Transfers Within the New England Electric
            System Companies.............................................    11
Section 18. Interpretation of Agreement..................................    11
Section 19. No Implied Right to Employment...............................    12




                              COLLATERAL ASSIGNMENT

                            LIFE INSURANCE PROGRAM II

     Agreement entered into as of the 1st day of July, 1995, between
Massachusetts Electric Company, a Massachusetts corporation (the Company), and
Anthony C. Pini (the Executive).

     Section 1. The Program

     The program provides the Executive death benefits and post-retirement
ownership of the cash assets of the related policy. The program is designed with
a goal of two times the Executive's base pay (rounded up to the nearest even
whole thousand) at the time of death (or if the Executive has terminated
employment, two times final base pay, reduced to 1 1/2 times final base pay on
the first anniversary of his termination of employment and to one times final
base pay on the second anniversary) (the Target Benefit)). During employment,
the first $50,000 of the coverage is to be provided by the Company's group term
life insurance policy.

     For the purposes of this Agreement, "annual base pay" means the annualized
compensation being paid to the Executive on the day of determination (or, if
greater, the highest compensation paid to the Executive during any 12-month
period of employment), including compensation deferred under other plans but
excluding bonuses (including NEES Goals) and contributions made by the Company
to or under any form of employee benefit program and employer contributions
under the New England Electric System Companies Incentive Thrift Plan, and
"final annual base pay" means the Executive's annualized base pay on the last
day of employment (or, if greater, the highest compensation paid to the
Executive during any 12-month period of employment).



                                        2


     Section 2. Prior Insurance Program

     The Executive hereby waives the benefits under the Company's group
term-life insurance policy, to the extent that the benefit provided to the
Executive's beneficiaries, in accordance with Section 5, from the Policy (as
hereinafter defined) equals the Target Benefit. This waiver does not extend to
any optional benefits under the group term-life policy. To the extent that such
waiver is ineffective, the amount of the death benefit provided under the Policy
and otherwise payable hereunder to the beneficiary or beneficiaries designated
by the Executive shall be correspondingly reduced and the amount payable to the
Company shall be correspondingly increased.

     Section 3. Vesting and Forfeiture

     Subject to the provisions of Section 6, the Executive is 100% vested in his
benefits under this Program.

     Section 4. Life Insurance Policy

     One or more split-dollar life insurance policies listed in Exhibit A hereto
(the Policy) have been or will be purchased on the life of the Executive by the
Company. The issuer or issuers of the Policy are hereinafter referred to as the
Insurer. Purchase of insurance policies either now or at later dates may require
proof of insurability at that time.

     To the extent that necessary insurance policies are not reasonably
available at a later date, benefits will be provided under the Company's group
term-life insurance policy so that the total death benefit to the Executive's
beneficiaries during his employment is twice base pay.



                                        3


     (a) Interest in the Policy

     The Executive shall be the sole owner of the Policy and may exercise all
ownership rights granted to the owner thereof by the terms of the Policy, except
as may otherwise be provided herein.

     Except as otherwise provided herein, the Executive shall not sell, assign,
transfer, borrow against, surrender, or cancel the Policy, change the
beneficiary designation provision, or terminate the dividend election without
the express written consent of the Company.

     (b) Collateral Assignment

     To secure the right of the Company to the Excess Value and/or the Company's
Cost (both as hereafter defined), the Executive will, contemporaneously
herewith, assign the Policy to the Company as collateral, using a form
substantially similar to that attached hereto as Exhibit B. The collateral
assignment of the Policy to the Company hereunder shall not be terminated,
altered, or amended by the Executive, without the express written consent of the
Company.

     (c) Assignment of Executive's Interest

     The Executive shall have the right to make an absolute assignment of his
entire interest, or any portion thereof, in the Policy at any time to any person
or persons, subject to the collateral assignment of the policy to the Company
pursuant to subsection (b) hereof. Upon delivery of a signed copy of such
assignment to the Company, all, or such portion, of the rights, obligations, and
duties of the Executive thereunder (subject to the collateral assignment of the
Company) and hereunder shall pass to and be binding upon such assignee



                                        4


(including the right to make further assignments) and the Executive shall have
no further interest whatsoever in the Policy, or such portions.

     (d) Company's Cost

     For the purposes of this Agreement, the Company's Cost means the amount of
the premiums on the Policy paid by it hereunder, less any withdrawals by the
Company from the Policy in accordance with Section 10.

     (e) Dividends

     Any dividend declared on the Policy shall be applied to purchase paid-up
additional insurance on the life of the Executive. The dividend election
provisions of the Policy shall conform to the provisions hereof.

     Section 5. Death Benefit

     Upon the death of the Executive, the beneficiary or beneficiaries
designated by the Executive shall be paid directly, in the manner and in the
amount or amounts provided in the beneficiary designation provision of the
Policy, a death benefit equal to the smaller of (a) the death benefit payable
under the Policy or (b) the Target Benefit. After such payment to such
beneficiary, the balance, if any, of the Policy death benefit (the Excess Value)
shall be paid to the Company.

     Section 6. Termination of Agreement

     (a) This Agreement shall terminate during the Executive's lifetime, without
notice, upon the occurrence of any of the following events:



                                        5


          (i)  total cessation of the Company's business;

          (ii) bankruptcy, receivership, or dissolution of the Company;

          (iii) termination for cause of the Executive's employment by the
               Company or by any direct or indirect subsidiary of the New
               England Electric System or

          (iv) payment of the Company's Cost by the Executive to the Company.

     (b) After termination of this Agreement under this section 6, the Executive
will not be permitted to re-enroll in the program. Upon such termination, the
Company may immediately withdraw its Cost from the Policy. The Executive will
receive no life insurance coverage under the New England Electric System
companies' group life insurance plan.

     Section 7. Benefits Upon Termination of Employment During the Executive's
          Lifetime.

     (a) If the Executive has Retired from the Company before the tenth
anniversary of a Policy, the Company will continue to pay premiums on that
Policy in accordance with section 8 until such tenth anniversary. On or after
such tenth anniversary, the Company may withdraw from the Policy amounts equal
to the Company's Cost. The Company may delay withdrawals from the Policy in
order to preserve the Policy's tax treatment.

          For the purposes of this Agreement, the Executive will be considered
to have Retired from the Company if the termination of employment occurs (i) at
age 61 or older with a minimum of 10 years of service (as defined in Final
Average Pay Pension Plan I) or (ii) at age 55 or older with age plus years of
service equal to at least 85.



                                        6


     (b) If the Executive terminated employment but has not Retired from the
Company before the tenth anniversary of the first Policy, the Company may
immediately withdraw its Cost from the Policy. The Executive will receive no
life insurance coverage under the New England Electric System companies' group
life insurance plan.

     (c) If the Executive terminated employment but has not Retired from the
Company after the tenth anniversary of the first Policy, the Company may
withdraw its Cost from the Policy as soon as it may be withdrawn without causing
the Policy to lose its tax treatment as life insurance. The Executive will
receive no life insurance coverage under the New England Electric System
companies' group life insurance plan.

     Section 8. Policy Permiums

     During the Executive's employment and as provided in subsection 7(a), the
Company shall promptly pay all premiums on the Policy when due until the Policy
can be kept in force with no future premiums due based upon the then current
crediting of the Policy.

     The Company shall bill the Executive for an annual contribution to the
policy premium, which contribution shall be equal to the value, for Federal
income tax purposes, of the "economic benefit" of the life insurance protection
the Executive then enjoys. The Executive shall transfer the contribution to the
Company within thirty days of the bill. The Company will reimburse the Executive
for such contribution and for the related federal and state taxes. This
reimbursement is not a part of the Company's Cost.

     If the Executive fails to make such timely payment, the Company shall
report the "economic benefit" of the life insurance protection as taxable income
to the Executive for



                                        7


the period, and no additional reimbursement will be made to the Executive until
payment has been made.

     Section 9. Return of Premiums

     Notwithstanding any provision hereof to the contrary, in the event that,
for any reason whatsoever, no death benefit is payable under the Policy upon the
death of the Executive and in lieu thereof the insurer refunds all or any part
of the premiums paid for the Policy, the Company and the Executive's beneficiary
or beneficiaries shall have the unqualified right to share such premiums based
on the respective cumulative contributions thereto.

     Section 10. Withdrawals from Policy; Release of Assignment

     While the Executive is employed, if no additional premiums are required to
be paid under a Policy to maintain the death benefit to the Executive's
beneficiaries, the Company may withdraw its Cost from that Policy at a time when
such withdrawal will not cause the Policy to be terminated or to lose its tax
treatment as life insurance.

     After the Company has withdrawn from the Policy amounts equal in full to
the Company's Cost (whether under section 6, 7, or 10), the Company will release
the collateral assignments of the Policy to the Executive.

     Section 11. Liability and Limitation of Obligation

     The Company and the Insurer believe the assumptions used to determine the
amount of insurance purchased are reasonable. However, the Executive recognizes
that the goals of the Agreement may not be realized and there is no guaranty
that the Target Benefit will actually be provided by the Policy and/or that
additional premiums may not be required to



                                        8


keep the Policy from lapsing or to provide the Target Benefit. The Executive
also recognizes that changes in the Internal Revenue Code or rulings or
regulations thereunder could increase his tax liabilities or reduce his
benefits.

     The Company has no responsibility, liability, or obligation for the
benefits provided the Executive from the Policy.

     The Company may, upon 30 days' written notice to the Executive, limit its
obligations hereunder to purchase, pay premiums on, or otherwise provide life
insurance policies beyond the total death benefit, including all riders then in
force, and all references herein to the annual base pay or final annual base pay
of the Executive shall mean annual base pay at the time of such written
notification.

     The Insurer shall have no liability except as set forth in the Policy and
in any beneficiary designation and in any optional method of settlement election
filed with it. The Insurer shall not be bound to inquire into or take notice of
any of the covenants herein contained as to the Policy. In case of the
Executive's death, the Insurer shall be discharged from all liability on payment
of the proceeds in accordance with the Policy's provision, and any beneficiary
designation and any optional method of settlement election filed with it without
regard to this Agreement or any amendment thereof.

     Section 12. Named Fiduciary, Determination of Benefits, Claims Procedure
          and Administration

     (a) The Company is hereby designated as the named fiduciary under this
Agreement. The named fiduciary shall have authority to control and manage the
operation and administration of this Agreement, and it shall be responsible for
establishing and carrying out a funding policy and method consistent with the
objectives of this Agreement.



                                        9


     (b) (i) Claim

          A person who believes that he is being denied a benefit to which he is
entitled under this Agreement (the Claimant) may file a written request for such
benefit with the Company, setting forth his claim. The request must be addressed
to the President of the Company at its then principal place of business.

          (ii) Claim Decision

          Upon receipt of a claim, the Company shall advise the Claimant that a
reply will be forthcoming within ninety days and shall, in fact, deliver such
reply within such period. The Company may, however, extend the reply period for
an additional ninety days for reasonable cause.

          If the claim is denied in whole or in part, the Company shall adopt a
written opinion, using language calculated to be understood by the Claimant,
setting forth: (a) the specific reason or reasons for such denial; (b) the
specific reference to pertinent provisions of this Agreement on which such
denial is based; (c) a description of any additional material or information
necessary for the Claimant to perfect his claim and an explanation why such
material or such information is necessary; (d) appropriate information as to the
steps to be taken if the Claimant wishes to submit the claim for review; and (e)
the time limits for requesting a review under subsection (iii) and for review
under subsection (iv) hereof.

          (iii) Request for Review

          Within sixty days after the receipt by the Claimant of the written
opinion described above, the Claimant may request in writing that the Benefits
Appeal Committee (as defined in the Final Average Pay Pension Plan I) review the
determination of the



                                       10


Company. Such request must be addressed to the Secretary of the Committee, at
its then principal place of business. The Claimant or his duly authorized
representative may, but need not, review the pertinent documents and submit
issues and comments in writing for consideration by the Committee. If the
Claimant does not request a review of the Company's determination by the
Committee within such sixty day period, he shall be barred and estopped from
challenging the Company's determination.

          (iv) Review of Decision

          Within sixty days after the Secretary's receipt of a request for
review, the Committee will review the Company's determination. After considering
all materials presented by the Claimant, the Committee will render an opinion,
setting forth the specific reasons for the decision and containing specific
references to the pertinent provisions of this Agreement on which the decision
is based. If special circumstances require that the sixty day time period be
extended, the Secretary will so notify the Claimant and the Committee will
render the decision as soon as possible, but no later than one hundred twenty
days after receipt of the request for review.

     Section 13. Notices

     Any notice, consent, or demand required or permitted to be given under the
provisions of this Agreement shall be in writing, and shall be signed by the
party giving or making the same. If such notice, consent, or demand is mailed to
a party hereto, it shall be sent to United States certified mail, postage
prepaid, addressed to such party's last known address as shown on the records of
the Company. The date of such mailing shall be deemed the date of notice,
consent, or demand.



                                       11


     Section 14. Binding Effect

     This Agreement shall be binding upon and inure to the benefit of the
Company and its successors and assigns, and the Executive, and the Executive's
successors, assigns, heirs, executors, administrators, and beneficiaries.

     Section 15. Governing Law

     This Agreement shall be governed by the laws of Massachusetts.

     Section 16. Further Documentation

     The parties hereto agree to execute any documents which may be necessary or
proper in the carrying out of the purpose and intent of this Agreement.

     Section 17. Amendments and Transfers Within the New England Electric
          System Companies

     This Agreement may be amended or altered in any of its provisions, and such
changes shall become effective when reduced to writing and signed by the parties
hereto.

     The Company may, without any consent of the Insurer or the Executive,
assign or reassign all of its rights and obligations hereunder to such other
direct or indirect subsidiary of the New England Electric System by which the
Executive may from time to time be employed.

     Section 18. Interpretation of Agreement

     Where appropriate in this Agreement, words used in the singular shall
include the plural and words used in the masculine shall include the feminine
and vice versa. The



                                       12


headings of sections and subsections of this Agreement are for convenience of
reference only.

     Section 19. No Implied Right to Employment

     Neither this Agreement nor the payment of any premiums hereunder by the
Company shall be construed to create any obligation to give the Executive any
right to continue employment.


                                        /s/ Anthony C. Pini
                                        ----------------------------------------
                                        Anthony C. Pini


                                        Massachusetts Electric Company


                                        By: /s/ Illegible
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------



                                       13


                                    EXHIBIT A

                               Insurance Policies



                                       14


                                    EXHIBIT B

                       SPLIT-DOLLAR COLLATERAL ASSIGNMENT

     FOR VALUE RECEIVED, the undersigned owner (hereafter the Assignor) assigns,
transfers, and sets over to Massachusetts Electric Company (Assignee), its
successors and assigns, certain rights in and to policy number _________________
(the Policy), and any and all supplemental benefit riders or agreements issued
under the Policy, issued by Metropolitan Life Insurance Company (the Insurer),
subject to all the terms and conditions of the Policy and this Assignment and to
all superior liens, if any, which the Insurer or any prior Assignee may have
against the Policy. The Assignor by this instrument and the Assignee by
acceptance of the Assignment jointly and severally agree to the conditions and
provisions hereof. This Assignment is made and the Policy is to be held as
collateral security for any and all liabilities of the Assignor to the Assignee,
either now existing or that may hereafter arise between the Assignor or any
successors or assigns and the Assignee under the New England Electric System
Companies Life Insurance Program for Executives II, dated JULY 1, 1995, with
regard to the Policy.

     1.   (a)  It is expressly agreed that the Assignee shall have the following
               rights in the Policy:

               (i)  the right to make and receive withdrawals from the Policy
                    (from the insurer or otherwise), to the extent of the
                    aggregate premiums paid by the Assignee on the Policy;

               (ii) the right to release this Assignment to the Assignor or his
                    assigns;



                                       15


               (iii) the right to surrender the Policy and to receive the Policy
                    cash value and any dividend credits outstanding of the
                    excess over the Target Benefit (as defined in the Program);
                    and

               (iv) the right to receive from the death proceeds of the Policy,
                    and to elect an income settlement option with respect
                    thereto, an amount equal to the excess over the Target
                    Benefit (as defined in the Program).

          (b)  Except as provided in Paragraph (a) above, all other rights in
               the Policy, including but not limited to the right to designate
               and change the beneficiary of the Policy and the right to make
               loans against or withdrawals from the Policy and to receive any
               cash values and dividends credits outstanding in excess of
               aggregate premiums paid by the Assignee on the Policy, are
               expressly reserved to the Assignor and are, therefore, excluded
               from this Assignment.

          (c)  For purposes of Paragraphs (a) and (b) above, the signature of
               either the Assignor or the Assignee shall be adequate. Both the
               Assignor and the Assignee acknowledge that, between themselves,
               they are bound by the limitations of this Assignment and that the
               Insurer will recognize the signature of either.

     2. For purposes of this Assignment, aggregate premiums paid by the Assignee
on the Policy shall exclude premiums for any extra benefit riders or agreements
issues under the Policy.



                                       16


     3. All provisions of this Assignment shall be binding upon the successors,
assigns, heirs, executors, administrators, or beneficiaries of the Assignor.

     4. All Policy options and designations in effect as of the date of this
Assignment shall remain in effect unless specifically changed by this Assignment
or by action taken thereafter consistent with this Assignment.

     5. The Insurer is hereby authorized to recognize the Assignee's claim of
right hereunder without investigating the validity or amount thereof, the giving
of any notice, or the existence or amount of any liabilities of the Assignor to
the Assignee. Payment by the Insurer of any or all death proceeds of the Policy
to the Assignee in reliance upon an affidavit of any officer of the Company as
to the share of death proceeds due it shall be a full discharge of the Insurer
for such share and shall be binding on all parties claiming any interest under
the Policy.

Signed at   WESTBORO, MA   on 9/6/95
          (City and State)   (date)


/s/ Illegible                           /s/ Illegible
- -------------------------------------   ----------------------------------------
Witness                                 Owner



                                       17


Accepted And Agreed To:                 Massachusetts Electric Company


/s/ Illegible                           BY: /s/ Illegible
- -------------------------------------       ------------------------------------
Witness                                 Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

THE INSURER HEREBY ACKNOWLEDGES RECEIPT OF A COPY OF THIS COLLATERAL ASSIGNMENT
FORM.

                                        Insurer


Date:                                   By:
      -------------------------------       ------------------------------------

Recorded and Filed at the Office of Metropolitan

     The company assumes no obligation as to the validity and sufficiency of
this agreement and does not pass upon its legality.


on OCT 18 1995                          /s/ Joseph A. Reali
                                        ----------------------------------------
                                        Joseph A. Reali
                                        Vice-President and Secretary

EX-10.(BB)

                                                                  Exhibit 10(bb)

                                 FIRST AMENDMENT
                                     TO THE
                          EASTERN UTILITIES ASSOCIATES
                               KEY EXECUTIVE PLAN

     WHEREAS, Eastern Utilities Associates (the "Association") previously
adopted the Eastern Utilities Associates Key Executive Plan (the "Plan")
effective July 1984;

     WHEREAS, the Association amended and restated the Plan effective January 1,
1995;

     WHEREAS, the Association has resolved to enhance the benefits for Donald G.
Pardus and John R. Stevens; and

     WHEREAS, the Association has reserved the right to amend the Plan from time
to time under Section 10 of the Plan;

     NOW, THEREFORE, in accordance with and pursuant to the foregoing, the Plan
is amended, effective January 1,1999, as follows:

1.   Section 4(b) is hereby amended by deleting the same in its entirety and by
     substituting therefore the following:

     "The Supplemental Pension Benefit provided by this Plan shall consist of
     the monthly payment of twenty-five percent of the Key Executive's Salary to
     the Key Executive for the fifteen year period beginning on the first day of
     the month following the termination of Key Executive's employment with the
     Association; providing, however, that the Supplemental Pension Benefit
     payment period shall be twenty years instead of fifteen years in the case
     of Donald G. Pardus and John R. Stevens.

2.   Section 8(b) is hereby amended by deleting the same in its entirety and by
     substituting therefore the following:

     "Notwithstanding anything to the contrary in Section 8(a) above, the
     benefits payable under this Plan shall be offset by the excess cash
     surrender value or death benefits in any insurance policy or policies owned
     by the Key Executive over the amount payable to the Association (or any of
     its affiliates) under any split-dollar insurance agreement between the
     Association (or any of its affiliates) and the Key Executive, after such
     excess cash value or death benefits have been further reduced by any
     amounts used to offset benefits due under the Supplemental Retirement Plan
     for Certain Officers of Eastern Utilities Association and Its Affiliates.
     In determining the benefits that could be paid with such excess cash value,
     (i) the amount of excess cash surrender value under this paragraph (b)



     shall be determined effective as of the date that the split-dollar
     insurance arrangement between the participant and EUA Service Corporation
     terminates; and (ii) discounting for present value shall be performed using
     the 83-Group Annuity Mortality table and an interest rate equal to the
     then-prevailing 30 year Treasury Note rate on the date the participant
     commenced benefits under the Plan; provided, however, that the interest
     rate shall in no event exceed 5.19% when discounting the Plan benefits
     payable to Donald G. Pardus and John R. Stevens."

     IN WITNESS WHEREOF, EASTERN UTILITIES ASSOCIATES has caused this instrument
to be executed and delivered on its behalf by the undersigned on this 30th day
of September 1999.

ATTEST:                                 EASTERN UTILITIES ASSOCIATES


/s/ Illegible                           /s/ Paul J. Choquette, Jr.
- -------------------------------------   ----------------------------------------
Secretary                               By: Paul J. Choquette, Jr.
                                        Its: Compensation and Nominating
                                             Committee Chairman


                                       -2-



                               KEY EXECUTIVE PLAN

                                       OF

                          EASTERN UTILITIES ASSOCIATES

                 Amended and Restated Effective January 1, 1995

     The undersigned officer of Eastern Utilities Associates hereby certifies
that this is a true and complete copy of the Key Executive Plan of Eastern
Utilities Associates, amended and restated effective January 1, 1995 and as in
full force and effect on the date hereof.



                               KEY EXECUTIVE PLAN

                                       OF

                          EASTERN UTILITIES ASSOCIATES

1.   PURPOSE

     The purpose of the Key Executive Plan of Eastern Utilities Associates (the
"Plan") is to advance the interests of Eastern Utilities Associates (the
"Association") by providing supplemental pension benefits and death benefit
coverage to those key employees who contribute significantly to the performance
of the Association and its affiliates (the "Key Executives"). The Plan is
intended to enhance the ability of the Association to attract and retain
individuals of superior managerial ability and to motivate such individuals to
exert their best efforts towards future progress and profitability of the
Association. This amendment and restatement of the Plan is intended to supersede
the Key Executive Insurance Plan as originally adopted by the Association in
July 1984.

2.   ADMINISTRATION AND INTERPRETATION

          (a) Administration. The Plan is administered by the Association. The
Association, from time to time, may adopt such rules and regulations as may be
necessary or desirable for the proper and efficient administration of the Plan
and as are consistent with the terms of the Plan, The Association, from time to
time, may also appoint such individuals to act as the Association's
representatives as the Association considers necessary or desirable for the
effective administration of the Plan. Any notice or document required to be
given or filed with the Association will be properly given or filed if delivered
or mailed, by certified or registered mail, postage prepaid, to the Association
at One Liberty Square, P.O. Box 2333, Boston, MA 02107.

          (b) Top Hat Exemption. It is the Association's intent that this Plan,
as set forth herein, constitute an unfunded plan for a "select group of
management and highly compensated employees" within the meaning of U.S.
Department of Labor Regulation Section 2520.104-23, and comply with the
applicable requirements of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA").

          (c) Interpretation. The interpretation and construction by the
Association of any provisions of the Plan and any determination by the
Association under any provision of the Plan shall be final and conclusive for
all purposes.


                                       -1-



          (d) Limitation on Liability. Neither the Association, the trustees of
the Association (collectively, the "Trustees") or any individual authorized to
act on behalf of the Association shall be liable for any act, omission,
interpretation construction or determination made in connection with the Plan in
good faith. The Trustees and any individuals authorized to act on behalf of the
Association shall be entitled to indemnification and reimbursement by the
Association in respect of any claim, loss, damage or expense (including counsel
fees) arising therefrom to the full extent permitted by law and under any
liability insurance coverage that may be in effect from time to time.

3.   PARTICIPATION

          The individuals eligible to participate in this Plan shall be those
Key Executives as the Association from time to time shall determine. A list of
the Key Executives is attached hereto as Appendix A. The Association shall
update Exhibit A from time to time as the Association adds additional
individuals as Key Executives under the Plan.

4.   SUPPLEMENTAL PENSION BENEFIT

          (a) Eligibility. A Key Executive shall be entitled to receive payment
of a Supplemental Pension Benefit (as defined in Section 4(b) below) upon
Retirement (as defined in Section 4(c) below) or Termination without Cause (as
defined in Section 4(d) below).

          (b) Amount and Payment of Supplemental Pension Benefit. The
Supplemental Pension Benefit provided by this Plan shall consist of the monthly
payment of twenty-five percent of the Key Executive's Salary to the Key
Executive for the fifteen year period beginning on the first day of the month
following the termination of Key Executive's employment with the Association.
For purposes of this Plan, the Key Executive's Salary shall equal the highest
annualized rate of salary paid to the Key Executive at any time prior to the Key
Executive's sixty-fifth birthday.

          (c) Retirement. A Key Executive may retire at any time on or after the
first day of any month coincident with or next following the earlier of the date
on which the Key Executive (i) attains sixty-one years of age and completes ten
or more years of vesting service under the Employees' Retirement Plan of Eastern
Utilities Associates and its Affiliated Companies (the "Tax-Qualified Pension
Plan") or (ii) qualifies for Special Early Retirement under Section 4.4 of the
Tax-Qualified Pension Plan.

          (d) Termination without Cause. Termination without Cause shall consist
of any termination of the Key Executive's employment by the Association


                                       -2-



without Cause (as defined in Section 6 below) and any termination of the Key
Executive's employment by the Key Executive under circumstances which entitle
the Key Executive to severance benefits under any plan, agreement or arrangement
with the Association or its affiliates.

5.   DEATH BENEFITS

          (a) Death Benefit After Commencement of the Supplemental Pension
Benefit. In the event of the Key Executive's death after the Supplemental
Pension Benefit has commenced but before the expiration of the fifteen year
payment period for such benefit, the Association shall continue to pay the Key
Executive's Supplemental Pension Benefit for the remainder of such period to the
Beneficiary (as defined in Section 5(c) below) of such Key Executive. If the
Beneficiary dies after the death of the Key Executive, but prior to receiving
the full death benefit under this Section 5(a), any remaining benefit shall be
paid to the Beneficiary's estate. No death benefit shall be payable under this
Plan in the event that the Key Executive dies after receiving his entire
Supplemental Pension Benefit.

          (b) Death Benefit Before Commencement of the Supplemental Pension
Benefit. In the event of the Key Executive's death before the Supplemental
Pension Benefit has commenced, the Association shall pay an amount equal to two
times the Key Executive's Salary in a single lump sum to the Beneficiary (as
defined in Section 5(c) below) of such executive. Such payment shall be made
within ninety days of the Key Executive's death. If the Beneficiary dies after
the death of the Key Executive, but prior to receiving the benefit under this
Section 5(b), such benefit shall be paid to the Beneficiary's estate.

          (c) Beneficiary. The Beneficiary shall mean the person or persons
designated by the Key Executive to receive a death benefit under the Plan in the
event of the Key Executive's death. If the Key Executive is married and
designates someone other than his legal spouse, the designation by such
executive must include the written consent of such spouse at the time the
designation is made in order to be valid. A former spouse's consent shall not be
binding on a subsequent spouse.

          A Beneficiary designation must be filed with the Association prior to
the Key Executive's death to be effective. In addition, the designation of a
Beneficiary will not be effective if the Beneficiary dies before the Key
Executive. If there is no Beneficiary designation in effect immediately prior to
the Key Executive's death, the Beneficiary shall be (i) the Key Executive's
surviving spouse, in the case of a married Key Executive, or (ii) the estate of
the Key Executive, in the case of a Key Executive who is not married.


                                       -3-



6.   TERMINATION FOR CAUSE

     For purposes of this Plan, "Cause" shall exist for the Association to
terminate the Key Executive's employment if, and only if, the Key Executive has
committed theft, embezzlement or other serious and substantial crimes against
the Association. For purposes of this definition, no act or omission shall be
considered to have been "willful" unless it was not in good faith and the Key
Executive had knowledge at the time that the act or omission was not in the best
interests of the Association. The Key Executive must be notified in writing by
the Association of any termination of his employment for Cause, which writing
shall set forth in reasonable detail the facts and circumstances relied upon
therefor. The Key Executive will then have the right, within ten days of receipt
of such notice, to file a written request for review. In such case, the Key
Executive will be given the opportunity to be heard, personally or by counsel,
by the Trustees who are not then executives of the Association (the "Independent
Trustees") and a majority of the Independent Trustees must thereafter confirm
that such termination is for Cause. If the Independent Trustees do not provide
such confirmation, the termination shall be treated under this Plan as a
termination by the Association without Cause.

7.   FINANCING OF PLAN BENEFITS

     All amounts due and benefits provided under this Plan shall constitute a
general obligation of the Association. The Association shall not be required to
segregate on their books any amount to be used for the payment of benefits under
this Plan or maintain any life insurance policy on behalf of a Key Executive.

8.   EFFECT ON OTHER PLANS AND AGREEMENTS

          (a) Benefits provided to a Key Executive hereunder shall be in
addition to any benefits the Key Executive is entitled to under any employer
stock, deferred compensation, savings, retirement, severance or other employee
benefit plan, agreement, arrangement or understanding, including but not limited
to the Tax-Qualified Pension Plan, the Supplemental Retirement Plan for Certain
Officers of Eastern Utilities Associates and its Affiliated Companies, the
Retirement and Savings Restoration Plan for Members of The Employees' Retirement
Plan of Eastern Utilities Associates and its Affiliated Companies, the Eastern
Utilities Associates Employees' Savings Plan and any severance agreement with
the Association or its affiliates.

          (b) Notwithstanding anything to the contrary in Section 8(a) above,
the benefits payable under this Plan shall be offset by the excess cash value or
death benefits in any insurance policy or policies owned by the Key Executive
over the amount payable to the Association (or any of its affiliates) under any
split-dollar


                                       -4-



insurance agreement between the Association (or any of its affiliates) and the
Key Executive, after such excess cash value or death benefits have been further
reduced by any amounts used to offset benefits due under the Supplemental
Retirement Plan for Certain Officers of Eastern Utilities Associates and Its
Affiliates. The value of benefits under such plans shall be determined on the
date the Key Executive or Beneficiary, as the case may be, would begin receiving
benefits under this Plan. To the extent that the benefit due under this Plan is
offset by excess amounts under such a split-dollar life insurance agreement, no
benefit shall be due under this Plan. For purposes of determining the benefit
which could be paid with such excess amounts, discounting shall be calculated
using the 83-Group Annuity Mortality table and an interest rate equal to the
then prevailing thirty year Treasury Note rate on the date such determination is
made.

9.   CLAIMS PROCEDURE

          The procedure for all claims under this Plan is set forth in Appendix
B hereto.

10.  AMENDMENT AND TERMINATION

          The Association reserves the right to amend or terminate the Plan in
whole or in part at any time. No amendment or termination of the Plan may
deprive any Key Executive without his consent of any benefit to which the Key
Executive was previously entitled to based on the Key Executive's Salary prior
to such amendment and termination. The Plan shall survive any acquisition by or
merger or consolidation into any other corporation. In the event of a
reorganization, consolidation, dissolution or merger of the Association, the
Plan shall be continued by the successor, and in such event the successor shall
be substituted for the Association and shall assume all of the Plan liabilities
and all of the powers, duties and responsibilities of the Association under the
Plan.

11.  MISCELLANEOUS

     a. No Employment Contract. Nothing contained in the Plan shall be construed
as conferring upon any Key Executive the right to continue in the employ of the
Association and its affiliates.

     b. Employment with Affiliates. Employment by the Association for the
purposes of this Plan shall be deemed to include employment by any affiliate or
subsidiary of the Association.

     c. Withholding. The Association will withhold from any amounts payable
under this Plan all federal, state, city and local taxes as shall be legally
required.


                                       -5-



     d. Action by Association. Any action required of or permitted by the
Association under the Plan shall be by resolution of its Board of Trustees, by
resolution of a duly authorized committee of its Board of Trustees, or by a
person or persons authorized by resolutions of its Board of Trustees or such
committee.

     e. Nonassignability. A Key Executive shall not have the power or right to
sell, exchange, pledge, transfer, assign or encumber or dispose of such
executive's interest in any benefit under this Plan nor shall such interest be
subject to seizure for the payment of a Key Executive's debts, judgments,
alimony or separate maintenance or be transferable by operation of law in the
event of a Key Executive's bankruptcy or insolvency.

     f. Severability. In the event any provision of the Plan shall be held to
be illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if such illegal or invalid provisions had never been contained in
the Plan.

     g. Governing Law; Construction. All rights and obligations under the Plan
shall be governed by, and the Plan shall be construed in accordance with, the
laws of the Commonwealth of Massachusetts to the extent not preempted by ERISA.
Titles and headings to Sections herein are for purposes of reference only, and
shall in no way limit, define or otherwise affect the meaning or interpretation
of any provisions of the Plan.

     h. Gender and Number. Where the context admits, words in the masculine
gender shall include the feminine and neuter genders, the plural shall include
the singular and the singular shall include the plural.


                                       -6-



               APPENDIX A - KEY EXECUTIVES COVERED UNDER THE PLAN

     The following is a list of each Key Executive covered under the Plan as of
January 1, 1995:


                                       -7-



                          APPENDIX B - CLAIMS PROCEDURE

     a. Filing of a Claim for Benefits. All claims for benefits under the Plan
shall be in writing and shall be submitted to the Treasurer of the Association
or such other person as the Association may designate from time to time for the
processing of claims. Upon receipt of a claim for benefits, the Association may
require the claimant to complete such forms and provide such additional
information as may be reasonably necessary to establish the claimant's right to
benefits under the Plan.

     b. Notification to Claimant of Decision. If a claim for benefits is wholly
or partially denied, the Association shall furnish to the claimant a notice of
the decision, meeting the requirements of paragraph (c) below, within ninety
(90) days after receipt of the claim. If the special circumstances require more
than ninety (90) days to process the claim, this period may be extended for up
to an additional ninety (90) days by giving written notice to the claimant
before the end of the initial 90-day period stating the special circumstances
requiring the extension and the date by which a final decision is expected.
Failure to provide a notice of decision in the time specified shall constitute a
denial of the claim and the claimant shall be entitled to require a review of
the denial under the review procedures specified in paragraphs (d) and (e)
below.

     c. Content of Notice. The notice to be provided to every claimant who is
denied a claim for benefits under paragraph (b) above shall be in writing and
shall set forth, in a manner calculated to be understood by the claimant, the
following:

     (1)  The specific reason or reasons for the denial;

     (2)  Specific reference to pertinent Plan provisions on which the denial is
          based;

     (3)  A description of any additional material or information necessary for
          the claimant to perfect the claim and an explanation of why such
          material or information is necessary; and

     (4)  An explanation of the Plan's claim review procedure describing the
          steps to be taken by a claimant who wishes to submit his or her claim
          for review.

     d. Review Procedure. The purpose of the review procedure set forth in this
paragraph and in paragraph (e) below is to provide a procedure by which a
claimant may have a reasonable opportunity to appeal a denial of a claim to the


                                       -8-



Association for a full and fair review. To accomplish that purpose, the claimant
or his duly authorized representative:

          (1)  May request a review upon written application to the Association;

          (2)  May review pertinent Plan documents; and

          (3)  May submit issues and comments in writing.

     A claimant (or his duly authorized representative) shall request a review
by filing a written application for review with the Association at any time
within sixty (60) days after receipt by the claimant of written notice of the
denial of his or her claim.

     e. Decision on Review. The decision on review of a denied claim shall be
made in the following manner:

          (1)  The decision on review shall be made by the Association, which
               may in its discretion hold a hearing on the denied claim. The
               Association shall make its decision promptly, which shall
               ordinarily be not later than sixty (60) days after the Plan's
               receipt of the request for review, unless special circumstances
               (such as the need for holding a hearing) require an extension of
               time for processing. In that case a decision shall be rendered as
               soon as possible, but not later than one hundred twenty (120)
               days after receipt of the request for review. If an extension of
               time is required due to special circumstances, written notice of
               the extension shall be furnished to the claimant prior to the
               time the extension commences.

          (2)  The decision on review shall be in writing and shall include
               specific reasons for the decision, written in a manner calculated
               to be understood by the claimant, as well as specific references
               to the pertinent Plan provisions on which the decision is based.

          (3)  In the event the decision on review is not furnished to the
               claimant within the time required, the claim shall be deemed
               denied on review.


                                      -9-

EX-10.(CC)

                                                                  Exhibit 10(cc)

                             SPLIT DOLLAR ASSIGNMENT
                              INSURANCE AGREEMENT

     THIS AGREEMENT made effective as of February 1, 1995, by and between EUA
Service Corporation, a Massachusetts corporation having its principal place of
business in Boston, Massachusetts (the "Corporation"), and Barbara A. Hassan
(the "Employee").

     WHEREAS, the Employee is a valued employee of the Corporation; and

     WHEREAS, the Corporation wishes to assist the Employee with a life
insurance program in recognition of the Employee's ongoing valuable contribution
to the business success of the Corporation; and

     WHEREAS, the Employee is the owner of an insurance policy on his or her
life, including all supplemental riders or endorsements to such insurance
policy, which policy the Employee and Corporation wish to make subject to a life
insurance plan pursuant to the terms and conditions of this Agreement.

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
hereinafter set forth, the Parties hereto agree as follows:

                                    ARTICLE I
                             OWNERSHIP OF THE POLICY

1.1  Employee as Owner. The Employee shall be the owner of the policy (which
     term shall include all supplemental riders or endorsements thereto)
     (hereinafter the "Policy") and may exercise all ownership rights granted to
     the owner thereof by the terms of the Policy, except as may otherwise be
     provided herein. If the Employee transfers ownership of the Plan to a
     trustee or other third party owner, such trustee or owner shall be treated
     as the Employee throughout this Agreement where appropriate. The Employee
     and the Corporation agree that the Policy shall be subject to the terms and
     conditions of this Agreement.

1.2  Assignment. The Employee agrees to execute an assignment (the "Assignment")
     to the Corporation to secure the Corporation's rights under this Agreement,
     in the form required by or acceptable to the issuer of the Policy (the
     "Issuer"), a copy of which is attached hereto. The Assignment shall set
     forth the rights of the Corporation in and with respect to the Policy
     pursuant to the terms and conditions of this Agreement. The Employee and
     the Corporation agree to be bound by the terms of the Assignment.



AGREEMENT
PAGE TWO


     (a)  Corporation's Rights. The Corporation's rights with respect to the
          Policy shall be limited to:

          (i)  The right to realize up to the Corporate Interest (See Sec. 4.3)
               of the fund value of the Policy on the full or partial surrender
               of the Policy;

          (ii) The right to realize the proceeds of the Policy as set forth in
               Section 3.2 of Article 3, below (the "Corporation's Death Benefit
               Portion"), in the event of the death of the Employee; and

          (iii) The right to release the Assignment upon receipt of the
               Corporate Interest.

     (b)  Employee's Rights. The Employee shall retain all other rights as owner
          of the Policy, including, but not limited to, the following:

          (i)  The right to cause the full or partial surrender of the Policy;
               provided, however, that the Employee shall give the Corporation
               thirty (30) days advance written notice of his exercise of such
               right; and

          (ii) The right to exercise all non-forfeiture or lapse option rights
               permitted by the terms of the Policy; and

          (iii) The right to designate and to change the beneficiary or
               beneficiaries of the portion of the proceeds of the Policy
               payable, upon the death of the Employee, to the Employee's
               beneficiary, pursuant to Subsection 3.1 of Article 3, below (the
               "Employee's Death Benefit Portion"); and

          (iv) The right to assign the Employee's rights in and with respect to
               the Policy.

          (v)  The right to elect any optional form of settlement available with
               respect to the Employee's Death Benefit Portion; and,

          (vi) The right to obtain, directly or indirectly, one or more loans or
               advances against the fund value of the Policy and the right to
               pledge or assign the Policy as security for such loans or
               advances; provided, however, that any such actions by the
               Employee shall in no way diminish the Corporation's right to
               receive the Corporate Interest or the Corporation's Death Benefit
               Portion, or an equivalent amount pursuant to Subsection 1.2(a).
               The Employee agrees to exercise this right only with the written
               consent of the Corporation.



AGREEMENT
PAGE THREE


                                   ARTICLE II
                PAYMENT OF PREMIUMS AND APPLICATION OF DIVIDENDS

2.1  Premium. As used herein, the term "premium" shall mean the planned yearly
     amount agreed upon between the Corporation and the Employee as the
     contribution toward the Policy for any year; provided, however, that such
     amount shall never be less than the Policy's minimum required premium for
     such year. "Premium" shall also include all costs associated with all
     supplemental riders and endorsements to the Policy.

2.2  Premium Payment: Timing. Effective February 1, 1995, the Corporation
     shall pay the premium on the Policy to the Issuer on or before the due date
     of each premium payment, and in any event, not later than the expiration of
     the grace period under the Policy for such premium payment. Within the
     policy year, the Corporation shall furnish the Employee with written notice
     of such timely payment.

                                   ARTICLE III
                          RIGHTS UPON DEATH OF EMPLOYEE

3.1  Employee's Death Benefit Portion. The Employee's designated beneficiary or
     beneficiaries, as set forth in the Policy, shall be entitled to receive (a)
     if the Employee dies while actively employed by the Corporation, four times
     the Employee's then current annual salary, or (b) if the Employee dies
     after retirement from the Corporation but prior to the termination of this
     Agreement, one-half (0.5) times the Employee's salary at time of
     retirement.

3.2  Corporation's Death Benefit Portion. Upon the death of the Employee, the
     Corporation shall be entitled to receive directly from the Insurer an
     amount equal to the net death benefit remaining after satisfaction of the
     Employee's Death Benefit Portion under Section 3.1.

                                   ARTICLE IV
           RIGHTS UPON TERMINATION OF AGREEMENT OR SURRENDER OF POLICY

4.1  Termination Defined. This Agreement shall automatically terminate upon the
     occurrence of any of the following events:

     (a)  the bankruptcy, receivership or dissolution of the Corporation;

     (b)  the termination of employment of the Employee with the Corporation
          (other than by reason of death, retirement, or disability);



AGREEMENT
PAGE FOUR


     (c)  the Employee's notice of her intent to exercise her right to surrender
          the Policy, pursuant to Subsection 1.2(b)(i) of Article 1, above;

     (d)  the mutual written Agreement of the Employee and the Corporation; or

     (e)  the payment to the Corporation of the Corporate Interest determined
          pursuant to Section 4.3 below and in the manner so described.

4.2  Rights Upon Termination. Upon the termination of this Agreement as
     specified above, the Employee shall instruct the Insurer to pay to the
     Corporation the amount determined pursuant to Section 4.3 of Article 4,
     below. Upon receipt of such amount from the Employee, the Corporation shall
     take all steps necessary to release the Assignment so that the Employee
     shall own the Policy free of all encumbrances thereon in favor of the
     Corporation required by this Agreement.

4.3  Corporate Interest. The Corporation shall be entitled to receive either (a)
     from the Employee, as specified in Section 4.2, above, or (b) from the
     Insurer upon surrender, from the cash value of the Policy, an amount equal
     to A + B - C where:

     A.   is the cumulative value of all premiums paid by the Corporation (or
          its agent) immediately prior to such termination or surrender;

     B.   is the cash value remaining under the Policy after application of
          Subparagraph 4.3A, if any, which exceeds the amount required to pay
          the then remaining benefits due to the Employee under any
          non-qualified benefit program maintained by Eastern Utilities
          Associates, the Corporation or their respective affiliates in which
          the Employee is a participant;

     C.   is the surrender charges, if any, imposed by the Issuer.

                                    ARTICLE V
                            ADMINISTRATIVE PROVISIONS

5.1  Issuer's Responsibility. The Issuer shall not be considered a party to this
     Agreement and shall not be bound hereby. No provision of this Agreement, or
     any amendment hereof, shall in any way enlarge, change, vary or affect the
     obligations of the Issuer as expressly provided in the Policy, except as
     the same may become a part of the Policy by acceptance by the Issuer of the
     Assignment.



AGREEMENT
PAGE FIVE


5.2  Amendment. This Agreement may be amended only by express written Agreement
     signed by both the Employee and a duly authorized representative of the
     Corporation.

5.3  Notice. Any and all notices required to be given under the terms of this
     Agreement shall be given in writing and signed by the appropriate party,
     and shall be sent by certified mail, postage prepaid, to the appropriate
     address set forth below:

     (a)  to the Employee at:

          Barbara A. Hassan
          596 Harvard Street
          Fall River, Massachusetts 02720

     (b)  to the Corporation at:

          EUA Service Corporation
          One Liberty Square
          Boston, Massachusetts 02109

5.4  Heirs. Successors and Assigns. This Agreement shall be binding upon and
     shall inure to the benefit of the Employee, his or her successors, heirs
     and the executors or administrators of the estate of the Employee, and to
     the Corporation and its successors. The Employee and the Corporation agree
     that either party may assign its interest under this Agreement upon the
     prior written consent of the other party hereto, and any assignee shall be
     bound by the terms and conditions of this Agreement as if an original party
     hereto.

5.5  Interpretation. This Agreement and the interests of the Employee and the
     Corporation hereunder shall be governed by and construed in accordance with
     the laws of the Commonwealth of Massachusetts. Venue shall lie in Suffolk
     County, Massachusetts.

5.6  Terms. This Agreement shall be effective as of the date first above
     written, and shall continue until terminated as herein provided or until
     all covenants herein activated by the death of the Employee are fully
     carried out.

5.7  Headings. Any headings or captions in this Agreement are for reference
     purposes only, and shall not expand, limit, change or affect the meaning of
     any provision of this Agreement.

5.8  Counterparts. This Agreement may be executed in any number of counterparts,
     each of which shall be deemed an original, and all of which together shall
     constitute one and the same Agreement.



AGREEMENT
PAGE SIX


5.9  Fiduciary. The Treasurer of Eastern Utilities Associates shall serve as the
     named fiduciary and administrator (hereinafter the "Fiduciary") of the
     split-dollar arrangement established pursuant to this Agreement. The
     Fiduciary shall have full power to administer this Agreement, and the
     Fiduciary's actions with respect hereto shall be binding and conclusive
     upon all persons for all purposes; subject to Section 5.10 of this Article
     5. The Fiduciary shall not be liable to any person for any action taken or
     omitted in connection with its responsibilities, rights and duties under
     this Agreement unless attributable to willful misconduct or lack of good
     faith.

5.10 Claims Procedure. Any controversy or claim arising out of or relating to
     this Agreement shall be filed with the Fiduciary which shall make all
     determinations concerning such claim. Any decision by the Fiduciary denying
     such claim shall be in writing and shall be delivered to all parties in
     interest in accordance with the notice provisions of Section 5.3 hereof.
     Such decision shall set forth the reasons for denial in plain language.
     Pertinent provisions of the Agreement shall be cited and, where
     appropriate, an explanation as to how the Employee can perfect the claim
     will be provided. This notice of denial of benefits will be provided within
     90 days of the Fiduciary's receipt of the Employee's claim for benefits. If
     the Fiduciary fails to notify the Employee of his decision regarding his
     claim, the claim shall be considered denied, and the Employee shall then be
     permitted to proceed with his appeal as provided in this Section.

     An Employee who has been completely or partially denied a benefit shall be
     entitled to appeal this denial of his claim by filing a written statement
     of his position with the Fiduciary no later than sixty (60) days after
     receipt of the written notification of such claim denial. The Fiduciary
     shall schedule an opportunity for a full and fair review of the issue
     within thirty (30) days of receipt of the appeal.

     The decision on review shall set forth specific reasons for the decision,
     and shall cite specific references to the pertinent Agreement provisions on
     which the decision is based.

     Following his review of any additional information submitted by the
     Employee, either through the hearing process or otherwise, the Fiduciary
     shall render a decision on his review of the denied claim in the following
     manner:

     (a)  The Fiduciary shall make his decision regarding the merits of the
          denied claim within 60 days following his receipt of the request for
          review (or within 120 days after such receipt, in a case where there
          are special circumstances requiring extension of time for reviewing
          the appealed claim). He shall deliver the decision to the claimant in
          writing. If an extension of time for reviewing the appealed claim is
          required because of special circumstances, written notice of the
          extension shall be furnished to the Employee prior to the commencement
          of the extension. If the decision on review is not furnished within
          the prescribed time, the claim shall be deemed denied on review.



AGREEMENT
PAGE SEVEN


     (b)  The decision on review shall set forth specific reasons for the
          decision, and shall cite specific references to the pertinent
          Agreement provisions on which the decision is based.

     IN WITNESS WHEREOF, the parties hereto have hereto set their hands and
seals as of the day and year first above written.

EUA Service Corporation


By /s/ Illegible
   ---------------------------------
Its: Vice President


The Employee


/s/ Barbara A. Hassan
- ------------------------------------
Barbara A. Hassan
(Name of Employee)

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
   Salmon Shores, Inc.
   Salmon Shores Partnership
   Riverview, Inc.
      Riverview Galusha LLC
   Landwest, Inc.
   Hudson Pointe, Inc.
   Upper Hudson Development Inc.
   OPropCo., Inc.
   Moreau Park, Inc.
   Land Management & Development, Inc.
      Port of the Islands North, LLC
      Salmon Shores Partnership
      Second Street Associates, LLC



                                        1

EX-31.1

                                                                    EXHIBIT 31.1

              CERTIFICATION REQUIRED BY RULE 13A-14(A) OR 15D-14(A)
                    UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, William F. Edwards, certify that:

1.   I have reviewed this annual report on Form 10-K of Niagara Mohawk Power
     Corporation;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a)  Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          registrant, including its consolidated subsidiaries, is made known to
          us by others within those entities, particularly during the period in
          which this report is being prepared;

     (b)  Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     (c)  Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter that has materially affected, or is
          reasonably likely to materially affect, the registrant's internal
          control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):



     (a)  All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and

     (b)  Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control over financial reporting.


Date: June 29, 2006                     /s/ William F. Edwards
                                        ----------------------------------------
                                        William F. Edwards
                                        President

EX-31.2

                                                                    EXHIBIT 31.2

              CERTIFICATION REQUIRED BY RULE 13A-14(A) OR 15D-14(A)
                    UNDER THE SECURITIES EXCHANGE ACT OF 1934

I, John G. Cochrane, certify that:

1.   I have reviewed this annual report on Form 10-K of Niagara Mohawk Power
     Corporation;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     (a)  Designed such disclosure controls and procedures, or caused such
          disclosure controls and procedures to be designed under our
          supervision, to ensure that material information relating to the
          registrant, including its consolidated subsidiaries, is made known to
          us by others within those entities, particularly during the period in
          which this report is being prepared;

     (b)  Evaluated the effectiveness of the registrant's disclosure controls
          and procedures and presented in this report our conclusions about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     (c)  Disclosed in this report any change in the registrant's internal
          control over financial reporting that occurred during the registrant's
          most recent fiscal quarter that has materially affected, or is
          reasonably likely to materially affect, the registrant's internal
          control over financial reporting; and

5.   The registrant's other certifying officer and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):



     (a)  All significant deficiencies and material weaknesses in the design or
          operation of internal control over financial reporting which are
          reasonably likely to adversely affect the registrant's ability to
          record, process, summarize and report financial information; and

     (b)  Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          control over financial reporting.


Date: June 29, 2006                     /s/ John G. Cochrane
                                        ----------------------------------------
                                        John G. Cochrane
                                        Chief Financial Officer

EX-32

                                                                      EXHIBIT 32

                CERTIFICATIONS PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the Annual Report of Niagara Mohawk Power Corporation (the
"Company") on Form 10-K for the fiscal year ended March 31, 2006 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), each
of the undersigned certifies, to the best of his knowledge, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:

(1)  The Report fully complies with the requirements of section 13(a) or 15 (d)
     of the Securities Exchange Act of 1934; and

(2)  The information contained in the Report fairly presents, in all material
     respects, the financial condition and results of operations of the Company.


Date: June 29, 2006                     /s/ William F. Edwards
                                        ----------------------------------------
                                        William F. Edwards
                                        President


Date: June 29, 2006                     /s/ John G. Cochrane
                                        ----------------------------------------
                                        John G. Cochrane
                                        Chief Financial Officer