10-Q

____________________________________________________________________________________

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

FORM 10-Q

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE      SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended June 30, 2006
	OR
[  ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE      SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ____________ to ____________

Commission File Number	Registrant; State of Incorporation; Address; and Telephone Number	I.R.S. Employer Identification No.
1-5324	NORTHEAST UTILITIES (a Massachusetts voluntary association) One Federal Street Building 111-4 Springfield, Massachusetts 01105 Telephone:  (413) 785-5871	04-2147929
0-00404	THE CONNECTICUT LIGHT AND POWER COMPANY (a Connecticut corporation) 107 Selden Street Berlin, Connecticut 06037-1616 Telephone:  (860) 665-5000	06-0303850
1-6392	PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE (a New Hampshire corporation) Energy Park 780 North Commercial Street Manchester, New Hampshire 03101-1134 Telephone:  (603) 669-4000	02-0181050
0-7624	WESTERN MASSACHUSETTS ELECTRIC COMPANY (a Massachusetts corporation) One Federal Street Building 111-4 Springfield, Massachusetts 01105 Telephone:  (413) 785-5871	04-1961130

____________________________________________________________________________________

Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days:

Yes	No
Ö

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.  (Check one):

	Large Accelerated Filer	Accelerated Filer	Non-accelerated Filer
Northeast Utilities	Ö
The Connecticut Light and Power Company			Ö
Public Service Company of New Hampshire			Ö
Western Massachusetts Electric Company			Ö

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act):

	Yes	No
Northeast Utilities		Ö
The Connecticut Light and Power Company		Ö
Public Service Company of New Hampshire		Ö
Western Massachusetts Electric Company		Ö

Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date:

Company - Class of Stock	Outstanding at July 31, 2006
Northeast Utilities Common stock, $5.00 par value	153,798,675 shares
The Connecticut Light and Power Company Common stock, $10.00 par value	6,035,205 shares
Public Service Company of New Hampshire Common stock, $1.00 par value	301 shares
Western Massachusetts Electric Company Common stock, $25.00 par value	434,653 shares

GLOSSARY OF TERMS
The following is a glossary of frequently used abbreviations or acronyms that are found in this report.
NU COMPANIES,  SEGMENTS OR INVESTMENTS:
CL&P	The Connecticut Light and Power Company
CRC	CL&P Receivables Corporation
HWP	Holyoke Water Power Company
Mt. Tom	Mount Tom generating plant
NGC	Northeast Generation Company
NGS	Northeast Generation Services Company
NU or the company	Northeast Utilities
NU Enterprises	At June 30, 2006, NU’s competitive subsidiaries include the merchant energy segment, which is comprised of Select Energy, NGC, NGS and the generation operations of Mt. Tom, and the energy services segment, which is comprised of E.S. Boulos Company, and NGS Mechanical, Inc., which are subsidiaries of NGS and SECI.  For further information, see Note 12, "Segment Information," to the condensed consolidated financial statements.
PSNH	Public Service Company of New Hampshire
SECI	Select Energy Contracting, Inc.
Select Energy	Select Energy, Inc.
SESI	Select Energy Services, Inc.
Utility Group	NU’s regulated utilities comprised of the electric distribution and transmission businesses of CL&P, PSNH, WMECO, the generation business of PSNH and the gas distribution business of Yankee Gas.  For further information, see Note 12 "Segment Information," to the condensed consolidated financial statements.
WMECO	Western Massachusetts Electric Company
Yankee	Yankee Energy System, Inc.
Yankee Gas	Yankee Gas Services Company
THIRD PARTIES:
CYAPC	Connecticut Yankee Atomic Power Company
ECP	Energy Capital Partners
REGULATORS:
CSC	Connecticut Siting Council
DPUC	Connecticut Department of Public Utility Control
DTE	Massachusetts Department of Telecommunications and Energy
FERC	Federal Energy Regulatory Commission
NHPUC	New Hampshire Public Utilities Commission
SEC	Securities and Exchange Commission

i

OTHER:
AFUDC	Allowance For Funds Used During Construction
CTA	Competitive Transition Assessment
EPS	Earnings Per Share
FASB	Financial Accounting Standards Board
FCM	Forward Capacity Market
FMCC	Federally Mandated Congestion Cost
GSC	Generation Service Charge
Hess	Hess Corporation
ISO-NE	New England Independent System Operator
kWh	Kilowatt-Hour
Kv	Kilovolt
LICAP	Locational Installed Capacity
LOCs	Letters of Credit
MW	Megawatt/Megawatts
NU 2005 Form 10-K	The Northeast Utilities and Subsidiaries combined 2005 Form 10-K as filed with the SEC
NYMEX	New York Mercantile Exchange
OCC	Connecticut Office of Consumer Counsel
RMR	Reliability Must Run
ROE	Return on Equity
RTO	Regional Transmission Organization
SBC	System Benefits Charge
SCRC	Stranded Cost Recovery Charge
SFAS	Statement of Financial Accounting Standards
ES	Transition Energy Service/Default Energy Service
TSO	Transitional Standard Offer

ii

NORTHEAST UTILITIES AND SUBSIDIARIES
THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

TABLE OF CONTENTS

	Page
PART I - FINANCIAL INFORMATION
ITEM 1 - Condensed Consolidated Financial Statements for the Following Companies:
Northeast Utilities and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited) - June 30, 2006 and December 31, 2005	2
Condensed Consolidated Statements of Income/(Loss) (Unaudited) - Three Months and Six Months Ended June 30, 2006 and 2005	4
Condensed Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended June 30, 2006 and 2005	5
Notes to Condensed Consolidated Financial Statements (unaudited - all companies)	6
Report of Independent Registered Public Accounting Firm	41
The Connecticut Light and Power Company and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited) - June 30, 2006 and December 31, 2005	44
Condensed Consolidated Statements of Income (Unaudited) - Three Months and Six Months Ended June 30, 2006 and 2005	46
Condensed Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended June 30, 2006 and 2005	47
Public Service Company of New Hampshire and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited) - June 30, 2006 and December 31, 2005	50
Condensed Consolidated Statements of Income (Unaudited) - Three Months and Six Months Ended June 30, 2006 and 2005	52
Condensed Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended June 30, 2006 and 2005	53
Western Massachusetts Electric Company and Subsidiary
Condensed Consolidated Balance Sheets (Unaudited) - June 30, 2006 and December 31, 2005	56
Condensed Consolidated Statements of Income (Unaudited) - Three Months and Six Months Ended June 30, 2006 and 2005	58
Condensed Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended June 30, 2006 and 2005	59

iii

	Page
ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations for the Following  Companies:
Northeast Utilities and Subsidiaries		60
The Connecticut Light and Power Company and Subsidiaries		90
Public Service Company of New Hampshire and Subsidiaries		94
Western Massachusetts Electric Company and Subsidiary		97
ITEM 3 - Quantitative and Qualitative Disclosures About Market Risk		100
ITEM 4 - Controls and Procedures		102
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings		103
ITEM 1A - Risk Factors		103
ITEM 2 - Unregistered Sales of Equity Securities and Use of Proceeds		104
ITEM 4 - Submission of Matters to a Vote of Security Holders		105
ITEM 6 – Exhibits		105
SIGNATURES		108

iv

NORTHEAST UTILITIES AND SUBSIDIARIES

1

NORTHEAST UTILITIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
	June 30,	December 31,
	2006	2005
	(Thousands of Dollars)
ASSETS
Current Assets:
Cash and cash equivalents	$             48,744	$             45,782
Special deposits	17,804	103,789
Investments in securitizable assets	272,131	252,801
Receivables, less provision for uncollectible
accounts of $25,879 in 2006 and $24,444 in 2005	439,730	901,516
Unbilled revenues	78,916	175,853
Taxes receivable	125,665	-
Fuel, materials and supplies	159,120	206,557
Marketable securities - current	61,769	56,012
Derivative assets - current	168,778	403,507
Prepayments and other	92,861	129,242
Assets held for sale	856,925	101,784
	2,322,443	2,376,843
Property, Plant and Equipment:
Electric utility	6,679,131	6,378,838
Gas utility	842,800	825,872
Competitive energy	21,373	908,776
Other	274,163	254,659
	7,817,467	8,368,145
Less: Accumulated depreciation	2,552,349	2,551,322
	5,265,118	5,816,823
Construction work in progress	621,906	600,407
	5,887,024	6,417,230
Deferred Debits and Other Assets:
Regulatory assets	2,102,778	2,483,851
Goodwill	287,591	287,591
Prepaid pension	274,501	298,545
Marketable securities - long-term	49,632	56,527
Derivative assets - long-term	320,228	425,049
Other	214,755	223,439
	3,249,485	3,775,002
Total Assets	$      11,458,952	$      12,569,075
The accompanying notes are an integral part of these condensed consolidated financial statements.

2

NORTHEAST UTILITIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
	June 30,	December 31,
	2006	2005
	(Thousands of Dollars)
LIABILITIES AND CAPITALIZATION
Current Liabilities:
Notes payable to banks	$           131,000	$             32,000
Long-term debt - current portion	26,731	22,673
Accounts payable	563,332	972,368
Accrued taxes	-	95,210
Accrued interest	41,829	47,742
Derivative liabilities - current	187,030	402,530
Counterparty deposits	6,663	28,944
Other	302,430	272,252
Liabilities of assets held for sale	356,466	101,511
	1,615,481	1,975,230
Rate Reduction Bonds	1,247,175	1,350,502
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	1,400,547	1,306,340
Accumulated deferred investment tax credits	93,608	95,444
Deferred contractual obligations	300,951	358,174
Regulatory liabilities	844,289	1,273,501
Derivative liabilities - long-term	185,482	272,995
Other	356,331	364,157
	3,181,208	3,670,611
Capitalization:
Long-Term Debt	2,945,024	3,027,288
Preferred Stock of Subsidiary - Non-Redeemable	116,200	116,200
Common Shareholders' Equity:
Common shares, $5 par value - authorized
225,000,000 shares; 175,126,947 shares issued
and 153,714,955 shares outstanding in 2006 and
174,897,704 shares issued and 153,225,892 shares
outstanding in 2005	875,635	874,489
Capital surplus, paid in	1,441,298	1,437,561
Deferred contribution plan - employee stock
ownership plan	(40,162)	(46,884)
Retained earnings	433,273	504,301
Accumulated other comprehensive income	4,604	19,987
Treasury stock, 19,676,058 shares in 2006
and 19,645,511 shares in 2005	(360,784)	(360,210)
Common Shareholders' Equity	2,353,864	2,429,244
Total Capitalization	5,415,088	5,572,732
Commitments and Contingencies (Note 7)
Total Liabilities and Capitalization	$      11,458,952	$      12,569,075
The accompanying notes are an integral part of these condensed consolidated financial statements.

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NORTHEAST UTILITIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME/(LOSS) (Unaudited)
	Three Months Ended June 30,		Six Months Ended June 30,
	2006	2005	2006	2005
	(Thousands of Dollars, except share information)
Operating Revenues	$        1,670,531	$        1,531,613	$        3,817,919	$        3,764,577
Operating Expenses:
Operation -
Fuel, purchased and net interchange power	1,106,280	979,925	2,643,480	2,649,087
Other	266,701	272,390	575,472	517,489
Wholesale contract market changes, net	12,861	69,574	19,691	258,466
Restructuring and impairment charges	3,282	2,120	8,425	23,654
Maintenance	49,200	50,219	87,621	86,522
Depreciation	59,589	55,124	118,355	110,258
Amortization	(1,078)	24,026	57,394	47,119
Amortization of rate reduction bonds	43,997	41,116	92,675	86,906
Taxes other than income taxes	54,442	53,210	130,867	127,404
Total operating expenses	1,595,274	1,547,704	3,733,980	3,906,905
Operating Income/(Loss)	75,257	(16,091)	83,939	(142,328)
Interest Expense:
Interest on long-term debt	36,716	32,833	72,527	63,056
Interest on rate reduction bonds	18,982	22,235	38,863	45,273
Other interest	7,626	8,230	13,626	11,314
Interest expense, net	63,324	63,298	125,016	119,643
Other Income, Net	12,676	10,288	28,096	16,194
Income/(Loss) from Continuing Operations Before
Income Tax Expense/(Benefit)	24,609	(69,101)	(12,981)	(245,777)
Income Tax Expense/(Benefit)	8,920	(32,104)	(9,385)	(96,873)
Income/(Loss) from Continuing Operations Before
Preferred Dividends of Subsidiary	15,689	(36,997)	(3,596)	(148,904)
Preferred Dividends of Subsidiary	1,389	1,389	2,779	2,779
Income/(Loss) from Continuing Operations	14,300	(38,386)	(6,375)	(151,683)
Discontinued Operations:
Income from Discontinued Operations,
Before Income Taxes	20,364	18,469	38,847	11,464
Loss from Sale of Discontinued Operations	(5,578)	-	(6,478)	-
Income Tax Expense	6,844	7,787	13,858	5,204
Income from Discontinued Operations	7,942	10,682	18,511	6,260
Net Income/(Loss)	$             22,242	$            (27,704)	$             12,136	$          (145,423)
Basic and Fully Diluted Earnings/(Loss) Per Common Share:
Income/(Loss) from Continuing Operations	$                 0.09	$                (0.30)	$                (0.04)	$                (1.17)
Income from Discontinued Operations	0.05	0.09	0.12	0.05
Basic and Fully Diluted Earnings/(Loss) Per Common Share	$                 0.14	$                (0.21)	$                 0.08	$                (1.12)
Basic Common Shares Outstanding (average)	153,628,709	129,520,644	153,535,675	129,399,574
Fully Diluted Common Shares Outstanding (average)	153,922,635	129,520,644	153,809,133	129,399,574
The accompanying notes are an integral part of these condensed consolidated financial statements.

4

NORTHEAST UTILITIES AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Six Months Ended
	June 30,
	2006	2005
	(Thousands of Dollars)
Operating Activities:
Net income/(loss)	$                   12,136	$               (145,423)
Adjustments to reconcile to net cash flows
provided by operating activities:
Wholesale contract market changes, net	19,691	203,572
Restructuring and impairment charges	6,715	47,812
Bad debt expense	21,181	15,229
Depreciation	121,445	116,349
Deferred income taxes	168,525	(92,457)
Amortization	57,394	47,119
Amortization of rate reduction bonds	92,675	86,906
(Deferral)/amortization of recoverable energy costs	(7,616)	31,544
Pension expense	18,454	16,465
Regulatory refunds	(141,968)	(59,929)
Derivative assets and liabilities	(76,793)	13,158
Deferred contractual obligations	(50,282)	(43,407)
Other non-cash adjustments	(20,545)	34,804
Other sources of cash	22,147	4,148
Other uses of cash	(5,548)	(31,530)
Changes in current assets and liabilities:
Receivables and unbilled revenues, net	543,368	85,656
Fuel, materials and supplies	33,108	8,141
Investments in securitizable assets	(19,330)	(108,491)
Other current assets	11,664	(18,522)
Accounts payable	(408,632)	(11,856)
Counterparty deposits and margin special deposits	63,299	80,468
(Taxes receivable)/accrued taxes	(220,875)	25,886
Other current liabilities	(27,066)	(27,243)
Net cash flows provided by operating activities	213,147	278,399
Investing Activities:
Investments in property and plant:
Electric, gas and other utility plant	(370,652)	(327,081)
Competitive energy assets	(10,051)	(4,989)
Cash flows used for investments in property and plant	(380,703)	(332,070)
Net proceeds from sale of property	150	23,792
Cash payment for sale of competitive businesses	(19,429)	-
Proceeds from sales of investment securities	84,695	54,532
Purchases of investment securities	(79,903)	(56,003)
Other investing activities	(1,139)	5,543
Net cash flows used in investing activities	(396,329)	(304,206)
Financing Activities:
Issuance of common shares	4,068	7,565
Issuance of long-term debt	250,000	200,000
Retirement of rate reduction bonds	(103,327)	(96,729)
Increase/(decrease) in short-term debt	99,000	(2,844)
Reacquisitions and retirements of long-term debt	(10,631)	(48,459)
Cash dividends on common shares	(54,025)	(41,629)
Other financing activities	1,059	16,397
Net cash flows provided by financing activities	186,144	34,301
Net increase in cash and cash equivalents	2,962	8,494
Cash and cash equivalents - beginning of period	45,782	46,989
Cash and cash equivalents - end of period	$                   48,744	$                   55,483
The accompanying notes are an integral part of these condensed consolidated financial statements.

5

NORTHEAST UTILITIES AND SUBSIDIARIES

THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES

WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (All Companies)

A.

Presentation

Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).  The accompanying unaudited condensed consolidated financial statements should be read in conjunction with this complete report on Form 10-Q, the first quarter 2006 Form 10-Q, and the Annual Reports of Northeast Utilities (NU or the company), The Connecticut Light and Power Company (CL&P), Public Service Company of New Hampshire (PSNH), and Western Massachusetts Electric Company (WMECO), which were filed as part of the Northeast Utilities and subsidiaries combined 2005 Form 10-K (NU 2005 Form 10-K) with the SEC, and the current report on Form 8-K dated June 7, 2006 that updated the 2005 Form 10-K to present certain portions of the business as discontinued operations for all periods.  The accompanying condensed consolidated financial statements contain, in the opinion of management, all adjustments (including normal, recurring adjustments) necessary to present fairly NU's and the above companies' financial position at June 30, 2006, and the results of operations for the three and six months ended June 30, 2006 and 2005 and cash flows for the six months ended June 30, 2006 and 2005.  The results of operations and statements of cash flows for the six months ended June 30, 2006 and 2005 are not necessarily indicative of the results expected for a full year.  

The condensed consolidated financial statements of NU and of its subsidiaries, as applicable, include the accounts of all their respective subsidiaries.  Intercompany transactions have been eliminated in consolidation.

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

In NU’s condensed consolidated statements of income/(loss) and CL&P's, PSNH's and WMECO's condensed consolidated statements of income, the classification of expense amounts relating to compensation costs not recoverable from regulated customers, advertising costs, environmental charges and rate reduction bond service fees previously included in other income, net was changed to a more preferable presentation.  These expense amounts, which were reclassified to other operation expense for NU, CL&P, PSNH, and WMECO, totaled $3.7 million, $1.9 million, $1 million and $0.2 million, respectively, for the three months ended June 30, 2005.  Similar amounts for the six months ended June 30, 2005 for NU, CL&P, PSNH, and WMECO totaled $9.1 million, $2.9 million, $1.9 million and $0.4 million, respectively.  These reclassifications had no impact on the companies' results of operations, cash flows, financial condition or changes in shareholders' equity.  

NU’s condensed consolidated statements of income/(loss) for all periods presented classify the operations for the following as discontinued operations, which were reflected in the report on Form 8-K dated June 7, 2006:

·

Northeast Generation Company (NGC),

·

The Mt. Tom generating plant (Mt. Tom) owned by Holyoke Water Power Company (HWP),

·

Select Energy Services, Inc. (SESI) and its wholly owned subsidiaries HEC/Tobyhanna Energy Project, Inc. and HEC/CJTS Energy Center LLC,

·

Woods Electrical Co., Inc. (Woods Electrical),

·

Select Energy Contracting, Inc. - New Hampshire (SECI-NH) (including Reeds Ferry Supply Co., Inc. (Reeds Ferry)), a division of Select Energy Contracting, Inc. (SECI), and

·

Woods Network Services, Inc. (Woods Network).

At June 30, 2006, all assets and liabilities of NGC and Mt. Tom have been classified as assets held for sale and liabilities of assets held for sale on the accompanying condensed consolidated balance sheet.  At December 31, 2005, assets held for sale and liabilities of assets held for sale consisted of certain assets and liabilities of SESI and Woods Electrical.  For further information regarding these companies, see Note 4, "Assets Held for Sale and Discontinued Operations."

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B.

Accounting Standards Issued But Not Yet Adopted

Accounting for Servicing of Financial Assets:  In March of 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 156, "Accounting for Servicing of Financial Assets - An Amendment of FASB Statement No. 140."  SFAS No. 156 requires an entity to recognize a servicing asset or liability at fair value each time it undertakes an obligation to service a financial asset by entering into a servicing contract in a transfer of the servicer's financial assets that meets the requirements for sale accounting and in other circumstances.  Servicing assets and liabilities may be subsequently measured through either amortization or recognition of fair value changes in earnings.  SFAS No. 156 is required to be applied prospectively to transactions beginning in the first quarter of 2007 and may affect the accounting treatment of CL&P Receivables Corporation (CRC), a wholly owned subsidiary of CL&P. &n bsp;Implementation of this statement is not expected to have a material effect on the company's financial statements.

Uncertain Tax Positions:  On July 13, 2006, the FASB issued FASB Interpretation No. (FIN) 48, "Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109."  FIN 48 addresses the methodology to be used in estimating and reporting amounts associated with uncertain tax positions, including interest and penalties.  FIN 48 is required to be implemented in the first quarter of 2007 prospectively as a change in accounting principle with a cumulative effect adjustment reflected in the opening balance of retained earnings.  The company is currently evaluating the potential impacts of FIN 48 on its financial statements.

C.

Regulatory Accounting

The accounting policies of the Utility Group conform to accounting principles generally accepted in the United States of America applicable to rate-regulated enterprises and historically reflect the effects of the rate-making process in accordance with SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation."

The transmission and distribution businesses of CL&P, PSNH and WMECO, along with PSNH's generation business and Yankee Gas Services Company's (Yankee Gas) distribution business, continue to be cost-of-service rate regulated, and management believes that the application of SFAS No. 71 to those businesses continues to be appropriate.  Management also believes that it is probable that the Utility Group will recover its investments in long-lived assets, including regulatory assets.  In addition, all material net regulatory assets are earning an equity return, except for securitized regulatory assets, which are not supported by equity, and substantial portions of the unrecovered contractual obligations regulatory assets.   Amortization and deferrals of regulatory assets are included on a net basis in amortization expense on the accompanying condensed consolidated statements of income/(loss).  

Regulatory Assets:  The components of regulatory assets are as follows:  

	At June 30, 2006
(Millions of Dollars)	NU Consolidated	CL&P	PSNH	WMECO	Yankee Gas
Recoverable nuclear costs	$     15.8	$            -	$        -	$   15.8	$      -
Securitized assets	1,237.6	782.5	350.8	104.3	-
Income taxes, net	308.8	229.9	13.6	48.1	17.2
Unrecovered contractual obligations	226.6	170.6	-	56.0	-
Recoverable energy costs	40.3	38.1	-	2.2	-
CTA undercollections	73.0	73.0	-	-	-
Other regulatory assets/(overrecoveries)	200.7	73.5	64.4	4.8	58.0
Totals	$2,102.8	$1,367.6	$428.8	$231.2	$75.2

	At December 31, 2005
(Millions of Dollars)	NU Consolidated	CL&P	PSNH	WMECO	Yankee Gas
Recoverable nuclear costs	$     44.1	$           -	$ 26.1	$  18.0	$     -
Securitized assets	1,340.9	855.6	375.0	110.3	-
Income taxes, net	332.5	227.6	35.9	51.6	17.4
Unrecovered contractual obligations	327.5	197.7	63.2	66.6	-
Recoverable energy costs	193.0	7.3	171.5	2.5	11.7
Other regulatory assets/(overrecoveries)	245.9	69.8	150.3	(25.8)	51.6
Totals	$2,483.9	$1,358.0	$822.0	$223.2	$80.7

At June 30, 2006, CL&P's CTA was recorded as a $73 million regulatory asset as CTA unrecovered costs were in excess of CTA collections due to refunds to customers.  At December 31, 2005, CTA collections were in excess of CTA costs and a $26 million regulatory liability was recorded.  

7

Included in NU's other regulatory assets/(overrecoveries) above are regulatory assets associated with the implementation of FIN 47, "Accounting for Conditional Asset Retirement Obligations - an interpretation of FASB Statement No. 143," totaling $50.8 million at June 30, 2006 and $47.3 million at December 31, 2005.  A portion of these ARO regulatory assets totaling $17.7 million at June 30, 2006 and $17.3 million at December 31, 2005 has been approved for deferred accounting treatment.  At this time, management believes that the remaining regulatory assets are also probable of recovery.  

The restructuring settlement agreement between PSNH and the state of New Hampshire, which was implemented in May of 2001, requires that non-securitized stranded costs be recovered from PSNH's customers prior to a recovery end date of October 31, 2007.  On June 30, 2006, under the terms of the restructuring settlement agreement, PSNH completed the recovery of its non-securitized stranded costs and offset the remaining stranded cost regulatory asset balances totaling $345.8 million against an offsetting regulatory liability for the cumulative deferral of Stranded Cost Recovery Charge (SCRC) revenues.  As of June 30, 2006 PSNH had $2.4 million of accumulated SCRC costs remaining for recovery.  The SCRC costs will be recovered from customers over the six month period beginning in July of 2006 through December of 2006 in the SCRC rate.  

Included in WMECO's other regulatory assets/(overrecoveries) are $25.4 million and $37.8 million at June 30, 2006 and December 31, 2005, respectively, of amounts related to WMECO's rate cap deferral.  The rate cap deferral allows WMECO to recover stranded costs, and these amounts represent the cumulative excess of transition cost revenues over transition cost expenses.

Additionally, the Utility Group had $12.3 million and $11.2 million of regulatory costs at June 30, 2006 and December 31, 2005, respectively, that are included in deferred debits and other assets - other on the accompanying condensed consolidated balance sheets.  These amounts represent regulatory costs that have not yet been approved by the applicable regulatory agency.  Management believes these assets are recoverable in future cost of service regulated rates.

As discussed in Note 7D, "Commitments and Contingencies - Deferred Contractual Obligations," substantial portions of the unrecovered contractual obligations regulatory assets have not yet been approved for recovery.  At this time management believes that these regulatory assets are probable of recovery.

Regulatory Liabilities:  The Utility Group had $844.3 million of regulatory liabilities at June 30, 2006 and $1.3 billion at December 31, 2005, including revenues subject to refund.  These amounts are comprised of the following:

	At June 30, 2006
(Millions of Dollars)	NU Consolidated	CL&P	PSNH	WMECO	Yankee Gas
Cost of removal	$302.9	$138.3	$  85.4	$23.7	$55.5
CL&P GSC and SBC overcollections	58.6	58.6	-	-	-
Regulatory liabilities offsetting   Utility Group derivative assets	325.2	325.2	- -	- -	- -
Other regulatory liabilities	157.6	72.9	46.3	0.5	37.9
Totals	$844.3	$595.0	$131.7	$24.2	$93.4

	At December 31, 2005
(Millions of Dollars)	NU Consolidated	CL&P	PSNH	WMECO	Yankee Gas
Cost of removal	$  305.5	$139.4	$ 85.7	$23.6	$56.8
CL&P CTA, GSC and SBC overcollections	154.0	154.0	-	-	-
PSNH cumulative deferral - SCRC	303.3	-	303.3	-	-
Regulatory liabilities offsetting   Utility Group derivative assets	391.2	391.2	-	-	-
Other regulatory liabilities	119.5	58.4	25.6	0.2	35.3
Totals	$1,273.5	$743.0	$414.6	$23.8	$92.1

For information regarding derivative assets, see Note 5, "Derivative Instruments."

8

D.

Allowance for Funds Used During Construction

The allowance for funds used during construction (AFUDC) is a non-cash item that is included in the cost of Utility Group utility plant and represents the cost of borrowed and equity funds used to finance construction.  The portion of AFUDC attributable to borrowed funds is recorded as a reduction in other interest expense, and the cost of equity funds is recorded as other income on the condensed consolidated statements of income/(loss), as follows:

	For the Three Months Ended		For the Six Months Ended
(Millions of Dollars)	June 30, 2006	June 30, 2005	June 30, 2006	June 30, 2005
Borrowed funds	$3.2	$2.4	$6.1	$4.2
Equity funds	2.6	2.4	6.3	4.2
Totals	$5.8	$4.8	$12.4	$8.4
Average AFUDC rates	6.7%	5.2%	6.6%	4.9%

The average Utility Group AFUDC rate is based on a Federal Energy Regulatory Commission (FERC) prescribed formula that develops an average rate using the cost of a company’s short-term financings as well as a company’s capitalization (preferred stock, long-term debt and common equity).  The average rate is applied to eligible construction work in progress amounts to calculate AFUDC.  Fifty percent of construction work in progress of CL&P's four major transmission projects in southwest Connecticut is recovered currently in rates.  The remaining fifty percent earns AFUDC.  The increase in AFUDC from borrowed funds during the three months ended June 30, 2006 as compared to the three months ended June 30, 2005 results from CL&P’s issuance of additional debt in June of 2006.  The increase in the average AFUDC rate in 2006 is primarily due to lower levels of short-term debt outstanding and higher equity levels in 2006 as compared to 2005.  

E.

Share-Based Payments

NU maintains an Employee Stock Purchase Plan (ESPP) and other long-term equity-based incentive plans under the Northeast Utilities Incentive Plan (Incentive Plan).  In the first quarter of 2006, NU adopted SFAS No. 123(R), "Share-Based Payments," under the modified prospective method.  Adoption of SFAS No. 123(R) had a de minimus effect on NU’s net income/(loss) and no effect on NU’s income/(loss) per share.  For the six months ended June 30, 2006, a tax benefit in excess of compensation cost totaling $0.2 million increased cash flows from financing activities.  

SFAS No. 123(R) requires that share-based payments be recorded using the fair value-based method based on the fair value at the date of grant and applies to share-based compensation awards granted on or after January 1, 2006 or to awards for which the requisite service period has not been completed.  For prior periods, as permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," and related guidance, NU used the intrinsic value method and disclosed the pro forma effects as if NU recorded equity-based compensation under the fair value-based method.  

NU accounts for its various share-based plans as follows:

·

For grants of restricted stock and restricted stock units (RSUs), NU continues to record compensation expense over the vesting period based upon the fair value of NU's common stock at the date of grant, but records this expense net of estimated forfeitures.  Previously, forfeitures were recorded as they occurred.  Dividend equivalents on RSUs, previously included in compensation expense, are charged to retained earnings net of estimated forfeitures.  

·

For shares granted under the Employee Stock Purchase Plan (ESPP), an immaterial amount of compensation expense was recorded in the first quarter of 2006, and no future compensation expense was recorded in the second quarter of 2006 or will be recorded in future periods as a result of a plan amendment that was effective on February 1, 2006.  

·

NU has not granted any stock options since 2002, and no compensation expense has been recorded.  All options were fully vested prior to January 1, 2006.

Incentive Plans:  Under the Incentive Plan, NU is authorized to grant new shares for various types of awards, including restricted shares, restricted share units, performance units, and stock options to eligible employees and board members.  The number of shares that may be utilized for grants and awards during a given calendar year may not exceed the aggregate of one percent of the total number of NU common shares outstanding as of the first day of that calendar year plus the shares not utilized in previous years.

Restricted Shares and Restricted Share Units:  NU has granted restricted shares under the 2004, 2003 and 2002 incentive programs that are subject to three-year and four-year graded vesting schedules.  NU has granted RSUs under the 2004, 2005 and 2006 incentive programs that are subject to three-year and four-year graded vesting schedules.  RSUs are paid in shares plus cash sufficient to satisfy withholdings subsequent to vesting.  A summary of restricted shares and RSUs for the six months ended June 30, 2006 is as follows:

9

Restricted Shares	Restricted Shares	Weighted Average Grant - Date Fair Value	Total Weighted Average Grant - Date Fair Value (Millions)	Remaining Compensation Cost (Millions)	Weighted Average Remaining Period (Years)
Outstanding at December 31, 2005	152,901	N/A
Granted	-	-
Vested	(74,243)	$14.52	$1.1
Forfeited	(1,388)	$14.17
Outstanding at March 31, 2006	77,270	$14.87	$1.1	$1.0	1.0
Granted	-	-	-
Vested	-	-	-
Forfeited	(3,405)	$14.14
Outstanding at June 30, 2006	73,865	$14.90	$1.1	$0.7	0.8

The weighted average grant date fair value per share for restricted shares vested was $14.60 for the six months ended June 30, 2005.  The total weighted average fair value of restricted shares vested was $1.4 million during the six months ended June 30, 2005.  No shares were vested during the three months ended June 30, 2006 or 2005.  

The total compensation cost recognized during the three and six months ended June 30, 2006 was $0.1 million and $0.3 million, net of taxes of approximately $0.1 million and $0.2 million, respectively.  The total compensation cost recognized during the three and six months ended June 30, 2005 was $0.2 million and $0.4 million, net of taxes of approximately $0.1 million and $0.2 million, respectively.  

RSUs	RSUs (Units)	Weighted Average Grant - Date Fair Value	Total Weighted Average Grant - Date Fair Value (Millions)	Remaining Compensation Cost (Millions)	Weighted Average Remaining Period (Years)
Outstanding at December 31, 2005	521,273	N/A
Granted	352,783	$19.66
Paid	(109,579)	$18.43	$   2.0
Forfeited	(5,604)	$18.93
Outstanding at March 31, 2006	758,873	$19.27	$14.6	$11.6	2.4
Granted	6,244	$20.67	-
Paid	(2,516)	$19.11	-
Forfeited	(18,870)	$19.19
Outstanding at June 30, 2006	743,731	$19.40	$14.4	$10.0	2.1

The weighted average grant date fair value per share for RSUs granted during the three and six months ended June 30, 2005 was $20.86 and $18.79, respectively.  The weighted average grant date fair value per share for RSUs paid during the three and six months ended June 30, 2005 was $18.90 and $19.06, respectively.  The total weighted average fair value of RSUs paid during the three and six months ended June 30, 2005 was approximately $4 thousand and $1.8 million, respectively.  

The total compensation cost recognized for the three and six months ended June 30, 2006 was $0.8 million and $1.4 million, respectively, net of taxes of approximately $0.5 million and $0.9 million, respectively.  The total compensation cost recognized during the three and six months ended June 30, 2005 was $0.8 million and $1 million, net of taxes of approximately $0.6 million and $0.7 million, respectively.  

Stock Options:  Prior to 2003, NU granted stock options to certain employees.  These options were fully vested as of January 1, 2006.  The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model.  The weighted average remaining contractual lives for the options outstanding at June 30, 2006 is 4.4 years.

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A summary of stock option transactions is as follows:

		Exercise Price Per Share
	Options	Range			Weighted Average
Outstanding - December 31, 2005	1,122,541	$14.9375	-	$22.2500	$18.4484
Exercised	8,166	$16.3100	-	$19.5000	$17.7861
Forfeited and cancelled	18,750	$21.0300	-	$21.0300	$21.0300
Outstanding and Exercisable - March 31, 2006	1,095,625	$14.9375	-	$22.2500	$18.4091
Exercised	51,817	$14.9375	-	$19.5000	$17.9485
Forfeited and cancelled	-	N/A	-	N/A	$            -
Outstanding and Exercisable - June 30, 2006	1,043,808	$14.9375	-	$22.2500	$18.4320

Cash received for options exercised during the three and six months ended June 30, 2006 totaled $0.9 million and $1 million, respectively.  

Employee Share Purchase Plan (ESPP):  NU maintains an ESPP for all eligible employees.  Prior to February 1, 2006, NU common shares were purchased by employees at six-month intervals at 85 percent of the lower of the price on the first or last day of each six-month period.  Employees were permitted to purchase shares having a value not exceeding 25 percent of their compensation as of the beginning of the purchase period.  Effective February 1, 2006, the ESPP was amended to change the discount rate to five percent of the market price on the last day of the purchase period.  As a result, the ESPP qualifies as a non-compensatory plan under SFAS No. 123(R).

The following table illustrates the pro forma effect if NU had applied the recognition provisions of SFAS No. 123 to share-based compensation:

(Millions of Dollars, except per share amounts)	For the Three Months Ended June 30, 2005	For the Six Months Ended June 30, 2005
Net loss, as reported	$(27.7)	$(145.4)
Add:  Share-based payments included in reported net loss,   net of related tax effects	1.0	1.4
Net loss before share-based payments	(26.7)	(144.0)
Deduct: Total share-based payments determined under the fair   value-based method for all awards, net of related tax effects	(1.2)	(1.8)
Pro forma net loss	$(27.9)	$(145.8)
Loss Per Share:
Basic and fully diluted - as reported	$(0.21)	$  (1.12)
Basic and fully diluted - pro forma	$(0.21)	$  (1.12)

An income tax rate of 40 percent is used to estimate the tax effect on total share-based payments determined under the fair value-based method for all awards.  

F.

Sale of Customer Receivables

At June 30, 2006 and December 31, 2005, CL&P had sold an undivided interest in its accounts receivable of $100 million and $80 million, respectively, to a financial institution with limited recourse through CRC.  CRC can sell up to $100 million of an undivided interest in its accounts receivable and unbilled revenues.  At June 30, 2006 and December 31, 2005, the reserve requirements calculated in accordance with the Receivables Purchase and Sale Agreement were $17.8 million and $21 million, respectively.  These reserve amounts are deducted from the amount of receivables eligible for sale.  At their present levels, these reserve amounts do not limit CL&P’s ability to access the full amount of the facility.  Concentrations of credit risk to the purchaser under this agreement with respect to the receivables are limited due to CL&P’s diverse customer base.

At June 30, 2006 and December 31, 2005, amounts sold to CRC by CL&P but not sold to the financial institution totaling $272.1 million and $252.8 million, respectively, are included in investments in securitizable assets on the accompanying condensed consolidated balance sheets.  These amounts would be excluded from CL&P’s assets in the event of CL&P’s bankruptcy.  On July 5, 2006, CRC renewed the bank commitment for the Receivables Purchase and Sale Agreement with CL&P and the financial institution through July 3, 2007 to coincide with the date this agreement terminates, unless otherwise extended.  CL&P’s continuing involvement with the receivables that are sold to CRC and the financial institution is limited to servicing those receivables.  

The transfer of receivables to the financial institution under this arrangement qualifies for sale treatment under SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities - A Replacement of SFAS No. 125."  

11

In addition, the company is in the process of evaluating the effect of SFAS No. 156 on its accounting for the sale of these receivables.  See Note 1B, "Accounting Standards Issued But Not Yet Adopted," for further information.

G.

Investment in CYAPC

The operating subsidiaries of NU collectively own 49 percent of the common stock of Connecticut Yankee Atomic Power Company (CYAPC) with a carrying value of $23.4 million at June 30, 2006.  This amount is included in deferred debits and other assets – other on the accompanying condensed consolidated balance sheets.  CYAPC filed with the FERC to recover the increased estimate of decommissioning and plant closure costs.  This FERC proceeding is ongoing.  Parties to these proceedings are currently engaged in settlement discussions, the outcome of which management cannot determine at this time.  Management believes that the FERC proceeding has not impaired the value of its investment in CYAPC at June 30, 2006 but will continue to evaluate the impacts, if any, that the FERC proceeding has on this investment.  For further information, see Note 7D, "Commitments and Contingencies - Deferred Contractual Obligations," and Note 1K, "Other Income, N et."

H.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and short-term cash investments that are highly liquid in nature and have original maturities of three months or less.  At the end of each reporting period, overdraft amounts are reclassified from cash and cash equivalents to accounts payable.

I.

Special Deposits

Special deposits represent amounts Select Energy, Inc. (Select Energy) has on deposit with unaffiliated counterparties and brokerage firms in the amounts of $17.8 million and $103.8 million at June 30, 2006 and December 31, 2005, respectively.  SESI special deposits totaling $10.2 million at December 31, 2005 are included in assets held for sale on the accompanying condensed consolidated balance sheets.  SESI was sold in the second quarter of 2006.

J.

Counterparty Deposits

Balances collected from counterparties resulting from Select Energy’s credit management activities totaled $6.7 million at June 30, 2006 and $28.9 million at December 31, 2005.  These amounts are recorded as current liabilities and included as counterparty deposits on the accompanying condensed consolidated balance sheets.  To the extent Select Energy requires collateral from counterparties, cash is received as a part of the total collateral required.  The right to use such cash collateral in an unrestricted manner is determined by the terms of Select Energy’s agreements.  Key factors affecting the unrestricted status of a portion of this cash collateral include the financial standing of Select Energy and of NU as its credit supporter.

K.

Other Income, Net

The pre-tax components of other income/(loss) items are as follows:

NU	For the Three Months Ended		For the Six Months Ended
(Millions of Dollars)	June 30, 2006	June 30, 2005	June 30, 2006	June 30, 2005
Other Income:
Investment income	$  3.5	$ 5.3	$12.6	$ 8.8
CL&P procurement fee	2.6	2.8	5.5	5.8
AFUDC - equity funds	2.6	2.4	6.3	4.2
Gain on sale of investment in Globix	3.1	-	3.1	-
Energy Independence Act incentives	2.5	-	2.5	-
Other	2.4	3.8	4.3	6.0
Total Other Income	$16.7	$14.3	$34.3	$24.8
Other Loss:
Charitable donations	$ 0.7	$  0.9	$ 1.4	$ 1.7
Lobbying costs	1.8	0.8	2.6	2.0
Loss on investments in securitizable assets	0.7	0.4	1.1	0.8
Loss on disposition of property	-	0.8	-	0.9
Other	0.8	1.1	1.1	3.2
Total Other Loss	$  4.0	$  4.0	$  6.2	$  8.6
Total Other Income, Net	$12.7	$10.3	$28.1	$16.2

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CL&P	For the Three Months Ended		For the Six Months Ended
(Millions of Dollars)	June 30, 2006	June 30, 2005	June 30, 2006	June 30, 2005
Other Income:
Investment income	$  1.9	$2.6	$   7.7	$   4.9
CL&P procurement fee	2.6	2.8	5.5	5.8
AFUDC - equity funds	1.0	2.0	3.5	3.6
Energy Independence Act incentives	2.5	-	2.5	-
Other	1.1	1.0	2.4	2.2
Total Other Income	$ 9.1	$8.4	$21.6	$16.5
Other Loss:
Charitable donations	$ 0.5	$0.4	$ 0.8	$  1.0
Lobbying costs	1.3	0.4	1.7	1.1
Loss on investments in securitizable assets	0.7	0.4	1.1	0.8
Other	0.4	0.3	0.6	1.5
Total Other Loss	$  2.9	$1.5	$  4.2	$  4.4
Total Other Income, Net	$  6.2	$6.9	$17.4	$12.1

PSNH	For the Three Months Ended		For the Six Months Ended
(Millions of Dollars)	June 30, 2006	June 30, 2005	June 30, 2006	June 30, 2005
Other Income:
Investment income	$0.5	$0.2	$0.8	$0.4
AFUDC - equity funds	0.9	0.2	2.0	0.5
Conservation and load management incentive	-	0.5	-	0.6
Other	0.1	0.6	0.1	0.5
Total Other Income	$1.5	$1.5	$2.9	$2.0
Other Loss:
Charitable donations	$0.1	$0.2	$0.4	$0.4
Lobbying costs	0.2	0.2	0.4	0.4
Other	0.1	0.2	0.1	0.2
Total Other Loss	$0.4	$0.6	$0.9	$1.0
Total Other Income, Net	$1.1	$0.9	$2.0	$1.0

WMECO	For the Three Months Ended		For the Six Months Ended
(Millions of Dollars)	June 30, 2006	June 30, 2005	June 30, 2006	June 30, 2005
Other Income:
Investment income/(loss)	$(0.3)	$0.2	$    -	$0.2
Gain on disposition of property	0.2	-	0.2	0.1
Conservation and load management incentive	0.2	0.2	0.6	0.2
Millstone 1 recovery amortization	0.2	0.2	0.5	0.5
Other	-	0.1	0.2	0.1
Total Other Income	$0.3	$0.7	$1.5	$1.1
Other Loss:
Charitable donations	$   -	$0.2	$0.1	$0.2
Lobbying costs	0.1	0.1	0.3	0.3
Other	-	0.1	0.1	0.1
Total Other Loss	$0.1	$0.4	$0.5	$0.6
Total Other Income, Net	$0.2	$0.3	$1.0	$0.5

Investment income for NU includes equity in earnings/(losses) of regional nuclear generating and transmission companies of $(2.2) million and $1 million for the three months ended June 30, 2006 and 2005, respectively, and $(1.2) million and $1.9 million for the six months ended June 30, 2006 and 2005, respectively.  Equity in earnings relates to NU’s investment in CYAPC, Maine Yankee Atomic Power Company (MYAPC), and Yankee Atomic Electric Company (YAEC) (Yankee companies) and the Hydro-Quebec transmission system.

Based on developments in July of 2006, CYAPC management concluded that $10 million of CYAPC's regulatory assets were no longer probable of recovery and should be written off.  Because the contingency surrounding these regulatory assets existed at June 30, 2006, the write-off was recorded in the second quarter.  NU recorded a total after-tax write-off of $3 million ($2.1 million, $0.3 million and $0.6 million for CL&P, PSNH and WMECO, respectively) for its ownership share of this charge, which is included in investment income in the tables above.

13

None of the amounts in either other income - other or other loss - other are individually significant.  

L.

Asset Retirement Obligations

The Department of Public Utility Control (DPUC) initiated a proceeding relating to an incident involving the failure of certain porcelain cutouts that are used in CL&P's distribution system.  A cutout is a protective device that stops the flow of electricity if there is a surge.  On April 26, 2006, the DPUC issued an order requiring CL&P to report its progress in replacing porcelain cutouts.  As a result of a requirement to remove the porcelain cutouts, an asset retirement obligation (ARO) has been recorded.  At June 30, 2006, the fair value of the ARO asset recorded is $4.7 million, accumulated depreciation is $0.6 million, and the ARO liability is $4.7 million.  The charge to record the $0.6 million of accumulated depreciation was recorded as a regulatory asset, as management believes that this amount is recoverable in rates.  Removal of these assets is expected to occur over three years beginning in 2006.  

2.

WHOLESALE CONTRACT MARKET CHANGES (NU, NU Enterprises)

NU recorded $12.9 million and $69.6 million of pre-tax wholesale contract market changes for the three months ended June 30, 2006 and 2005, respectively, and $19.7 million and $258.5 million for the six months ended June 30, 2006 and 2005, respectively, related to the changes in the fair value of wholesale contracts.  These changes are comprised of the following items:

·

Charges of $11.9 million and $18.7 million for the three and six months ended June 30, 2006 and $64.2 million and $358.5 million for the three and six months ended June 30, 2005, respectively, associated with the mark-to-market on certain long-dated wholesale electricity contracts in New England, New York and PJM and contracts to purchase generation products in New England and New York.  The decision in March of 2005 to exit the wholesale marketing business changed management’s conclusion regarding the likelihood that these wholesale marketing contracts would result in physical delivery to customers.  This in turn resulted in a change in the first quarter of 2005 from accrual accounting to mark-to-market accounting for the wholesale marketing contracts.  

·

A charge of $1 million in the second quarter and first half of 2006 related to the mark-to-market of certain asset specific sales and forward sales of electricity at hub points for generation contracts.  

·

A positive mark-to-market of $100 million in the first half of 2005.  This includes a benefit of $94 million for the three months ended March 31, 2005 for mark-to-market gains primarily related to retail supply contracts by the wholesale business that were previously used to serve retail electric load and a benefit of $20.4 million for other wholesale contracts related to electricity that would have been delivered to customers primarily in 2005 and 2006.  The positive mark-to-market is offset by a charge of $14.4 million for mark-to-market contract asset write-offs and a contract termination payment in March of 2005.

·

A charge of $5.4 million in the second quarter of 2005 related to a decrease in the mark-to-market on certain retail marketing supply contracts and other wholesale contracts (included in the first half benefit of $20.4 million above) related to electricity for delivery to customers primarily in 2005 and 2006.

Included in the mark-to-market on long-term wholesale electricity contracts is a $15.7 million and $70.2 million pre-tax mark-to-market charge for the three and six months ended June 30, 2005, respectively, related to an intercompany contract between Select Energy and CL&P.  This contract was included in the portfolio of contracts Select Energy assigned to a third party wholesale power marketer, and Select Energy stopped serving CL&P on December 31, 2005.  This contract was part of CL&P’s stranded costs, and benefits received by CL&P under this contract were provided to CL&P’s ratepayers in the form of lower than market standard offer service rates.  A $2.8 million pre-tax mark-to-market charge in the first half of 2005 was recorded as wholesale contract market changes by Select Energy for the intercompany contract between Select Energy and WMECO for default service from April to June of 2005.  There were no wholesale contract marke t changes in the second quarter of 2005 as this contract expired on June 30, 2005.  WMECO’s benefits under this contract were provided to its ratepayers in the form of lower than market default service rates.  These charges were not eliminated in consolidation because on a consolidated basis NU retained the over-market obligation to its ratepayers of CL&P and WMECO.

For further information regarding derivative assets and liabilities, see Note 5, "Derivative Instruments."

14

3.

RESTRUCTURING AND IMPAIRMENT CHARGES (NU, NU Enterprises)

The company evaluates long-lived assets such as property, plant and equipment to determine if these assets are impaired when events or changes in circumstances occur such as the 2005 announced decisions to exit all of the NU Enterprises businesses.  

When the company believes one of these events has occurred, a determination needs to be made if a long-lived asset should be classified as an asset to be held and used or if that asset should be classified as held for sale.  For assets classified as held and used, the company estimates the undiscounted future cash flows associated with the long-lived asset or asset group and an impairment loss is recognized if the carrying amount of an asset is not recoverable and exceeds its fair value.  The carrying amount is not recoverable if it exceeds the sum of the undiscounted future cash flows expected to result from the use and eventual disposition of the asset.  For assets held for sale, a long-lived asset or disposal group is measured at the lower of its carrying amount or fair value less cost to sell.  

NU Enterprises recorded $9.5 million and $2.3 million of pre-tax restructuring and impairment charges for the three months ended June 30, 2006 and 2005, respectively, and $15.6 million and $47.8 million for the six months ended June 30, 2006 and 2005, respectively, related to exiting the merchant energy businesses and its energy services businesses.  The amounts related to continuing operations are included as restructuring and impairment charges on the condensed consolidated statements of income/(loss) with the remainder included in discontinued operations.  These charges are included as part of the NU Enterprises reportable segment in Note 12, "Segment Information."  A summary of these pre-tax charges is as follows:  

	For the Three Months Ended		For the Six Months Ended
(Millions of Dollars)	June 30, 2006	June 30, 2005	June 30, 2006	June 30, 2005
Merchant Energy:
Wholesale Marketing:
Restructuring charges	$0.6	$ 1.0	$  0.6	$  1.0
Retail Marketing:
Impairment charges	$   -	$    -	$      -	$ 7.2
Restructuring charges	0.8	-	5.5	-
Subtotal	$0.8	$    -	$  5.5	$ 7.2
Competitive Generation:
Impairment charges	$ 0.3	$    -	$  0.3	$     -
Restructuring charges	0.9	-	2.6	-
Subtotal	$1.2	$    -	$  2.9	$     -
Subtotal - Merchant Energy	$2.6	$1.0	$  9.0	$ 8.2

Energy Services and Other:
Impairment charges	$0.1	$0.8	$   0.1	$39.1
Restructuring charges	6.8	0.5	6.5	0.5
Subtotal - Energy Services and Other	$6.9	$1.3	$  6.6	$39.6
Total restructuring and impairment charges	$9.5	$2.3	$15.6	$47.8
Restructuring and impairment charges   included in discontinued operations	$6.2	$0.2	$  7.2	$24.1
Total restructuring and impairment charges   included in continuing operations	$3.3	$2.1	$ 8.4	$23.7

For segment reporting purposes, $0.4 million and $0.4 million of wholesale marketing restructuring charges, $0.9 million and $2.6 million of Retail Marketing restructuring charges and $0.9 million and $2.6 million of Competitive Generation restructuring charges for the three and six months ended June 30, 2006, respectively, are included in the NU Enterprises - Services and Other reportable segment, as these amounts were recorded by NU Enterprises parent.

On May 5, 2006, NU Enterprises completed the sale of SESI to Ameresco, Inc. (Ameresco).  In connection with the closing of this transaction, NU Enterprises paid Ameresco approximately $7.7 million and recorded a pre-tax restructuring charge of $5.6 million in the second quarter of 2006 in the Energy Services and Other segment, which is included in loss from sale of discontinued operations on the accompanying condensed consolidated statements of income.  In addition to the $5.6 million charge, a restructuring charge of $0.9 million was recorded in the first quarter of 2006, resulting in a $6.5 million loss from sale of discontinued operations recorded in the first half of 2006.  Offsetting the first half loss is a restructuring benefit of $1.7 million for the gain on the sale of Massachusetts service location of Select Energy Contracting, Inc. - Connecticut (SECI-CT).  In addition to these charges, restructuring charges of $1.2 million and $1.7 million were recorded i n the first quarter and first half of 2006 for consulting fees, legal fees, employee-related costs and other costs.

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On June 1, 2006, NU Enterprises completed the sale of SENY to Hess Corporation (Hess).  In connection with the closing of this transaction, NU Enterprises recorded restructuring charges of $0.3 million to the Retail Marketing segment, which is included in restructuring and impairment charges on the accompanying condensed consolidated statements of income/(loss) for the three and six months ended June 30, 2006.  In addition to the $0.3 million charge, restructuring charges of $0.5 million and $5.2 million were recorded in the first quarter and first half of 2006 for consulting fees, legal fees, employee-related costs and other costs.

In the second quarter and first half of 2006, $0.3 million of impairments were recorded to the Competitive Generation segment related to certain long lived assets of Northeast Generation Services Company (NGS) that were no longer recoverable and written off.  Restructuring charges of $0.9 million and $2.6 million were recorded in the first quarter and first half of 2006 for consulting fees, legal fees, employee-related and other costs.

In the second quarter and first half of 2006, $0.6 million of restructuring charges were recorded to the Wholesale Marketing segment for consulting fees, legal fees, employee-related and other costs.  

In the first half of 2005, NU Enterprises hired an outside firm to assist in valuing its energy services business and their exit.  Based in part on that firm’s work, the company concluded that $29.1 million of goodwill associated with those businesses and $9.2 million of intangible assets were impaired as of March 31, 2005.  In the second quarter of 2005, the energy services businesses and NU Enterprises parent recorded an additional impairment charge of $0.8 million due to the impairment of certain fixed assets resulting in a total impairment charge of $39.1 million for the first half of 2005 included in the Energy Services and Other segment.  

Also in the first quarter of 2005, an exclusivity agreement intangible asset included in the Retail Marketing segment totaling $7.2 million was written off.  

The following table summarizes the liabilities related to restructuring costs which are recorded in accounts payable and other current liabilities on the accompanying condensed consolidated balance sheets at June 30, 2006 and December 31, 2005:  

(Millions of Dollars)	Employee - Related Costs	Professional Fees	Net (Gain)/ Loss on Sale	Total
Restructuring liability as of January 1, 2005	$    -	$      -	$      -	$      -
Costs incurred	2.3	7.4	-	9.7
Cash payments	(0.5)	(2.1)	-	(2.6)
Restructuring liability as of December 31, 2005	1.8	5.3	-	7.1
Costs incurred/gain on sale	0.3	6.5	(0.7)	6.1
Cash payments	(0.3)	(4.6)	0.7	(4.2)
Restructuring liability as of March 31, 2006	1.8	7.2	-	9.0
Cost incurred/loss on sale	2.0	1.2	5.9	9.1
Cash payments and other deductions	(0.6)	(3.4)	(5.9)	(9.9)
Restructuring liability as of June 30, 2006	$ 3.2	$ 5.0	$   -	$ 8.2

In addition to the $0.6 million of retail marketing severance costs included in restructuring charges above, $3.7 million of other retail marketing severance costs and other employee benefits were recorded in other operating expenses on the accompanying condensed consolidated statements of income/(loss) for the six months ended June 30, 2006 because these amounts are for severance under an existing benefit arrangement.  For further information, see Note 11, "Pension Benefits and Postretirement Benefits Other Than Pensions."

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4.

ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (NU, NU Enterprises)

A summary of the NU Enterprises businesses held for sale status as of June 30, 2006 and December 31, 2005, as well as the discontinued operations status for all periods presented including date sold, is as follows:

	Held for Sale Status as of
	June 30, 2006	December 31, 2005	Discontinued Operations	Sale Date
Wholesale Marketing	No	No	No	N/A
Retail Marketing	Sold	No	No	June 2006
NGC (including certain   components of NGS)	Yes	No	Yes	Expected by end of 2006
Mt. Tom	Yes	No	Yes	Expected by end of 2006
SESI	Sold	Yes	Yes	May 2006
Woods Electrical	Sold	Yes	Yes	April 2006
SECI-NH	Sold	Sold	Yes	November 2005
Woods Network	Sold	Sold	Yes	November 2005
E.S. Boulos Company	No	No	No	N/A

Assets Held for Sale:  In November of 2005, NU decided to exit NU Enterprises’ retail marketing and competitive generation businesses.  At December 31, 2005, management determined that the wholesale and retail marketing businesses did not meet the held for sale criteria under applicable accounting guidance.  

In the first quarter of 2006, management determined that the retail marketing and competitive generation businesses now met held for sale criteria under applicable accounting guidance, and should therefore be recorded at the lower of carrying amount or fair value less cost to sell.  In April of 2006, indicative bids for the competitive generation business were received.  The retail marketing business was reduced to its fair value less cost to sell in the first half of 2006 by a $53.9 million pre-tax charge which was recorded in other operating expenses.  The competitive generation assets are carried at their historical carrying value, which is less than their fair value less cost to sell.  For further information see Note 12, "Segment Information," and Note 13, "Subsequent Events."

At June 30, 2006, management continues to believe the wholesale marketing business does not meet the held for sale criteria under applicable accounting guidance.

Certain assets and liabilities of Select Energy's retail marketing business remaining which will be assigned or transferred to Hess, are recorded at fair value less cost to sell and are included in assets held for sale and liabilities of assets held for sale.  

The businesses above are included as part of the NU Enterprises reportable segment in Note 12, "Segment Information." The major classes of assets and liabilities that are held for sale at June 30, 2006 and December 31, 2005 are as follows (amounts at December 31, 2005 will not be comparable to amounts at June 30, 2006 as the assets held for sale portfolio has changed):

	At June 30, 2006	At December 31, 2005
(Millions of Dollars)
Derivative contracts	$    5.3	$      -
Property, plant and equipment	830.4	-
Long-term contract receivables	-	79.5
Other assets	21.2	22.3
Total assets	856.9	101.8
Derivative contracts	15.4	-
Long-term debt	318.3	86.3
Other liabilities	22.8	15.2
Total liabilities	356.5	101.5
Net assets	$500.4	$   0.3

Discontinued Operations:  NU's condensed consolidated statements of income/(loss) for all periods presented classify NGC, Mt. Tom, SESI and Woods Electrical in discontinued operations.  In addition, SECI-NH (including Reeds Ferry) and Woods Network are included in discontinued operations for the three and six months ended June 30, 2005.  These businesses were sold in November of 2005.  

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The retail marketing business is not presented as discontinued operations because separate financial information is not available for this business for the periods prior to the first quarter of 2006.  

Under discontinued operations presentation, revenues and expenses of these businesses are classified net of tax in income from discontinued operations on the condensed consolidated statements of income/(loss), and all prior periods have been reclassified.  These businesses are included as part of the NU Enterprises reportable segment in Note 12, "Segment Information."  Summarized financial information for the discontinued operations is as follows:  

	For the Three Months Ended		For the Six Months Ended
(Millions of Dollars)	June 30, 2006	June 30, 2005	June 30, 2006	June 30, 2005
Operating revenue	$52.6	$83.5	$111.3	$171.6
Income/(loss) before income tax   expense/(benefit)	20.4	18.5	38.8	11.5
Income tax expense/(benefit)	6.8	7.8	13.9	5.2
Net income/(loss)	7.9	10.7	18.5	6.3

On May 5, 2006, NU Enterprises completed the sale of SESI to Ameresco and recorded a pre-tax charge to income of $5.6 million ($3.3 million net of tax) in the second quarter of 2006.  

Included in discontinued operations are $48.2 million and $98.3 million for the three and six months ended June 30, 2006, respectively, and $57.2 million and $113.4 million for the three and six months ended June 30, 2005, respectively, of intercompany revenues that are not eliminated in consolidation due to the separate presentation of discontinued operations.  Of these amounts, $48.3 million and $98.1 million for the three and six months ended June 30, 2006, respectively, and $52.1 million and $105 million for the three and six months ended June 30, 2005, respectively, represent revenues on intercompany contracts between the generation operations of NGC and Mt. Tom and Select Energy.  NGC’s and Mt. Tom’s revenues and earnings related to these contracts are included in discontinued operations while Select Energy’s related expenses and losses are included in continuing operations.  

At June 30, 2006, NU does not expect that after the disposal it will have significant ongoing involvement or continuing cash flows with the entities presented in discontinued operations.

5.

DERIVATIVE INSTRUMENTS (NU, CL&P, Select Energy, Yankee Gas)

Contracts that are derivatives and do not meet the requirements to be treated as a cash flow hedge or normal purchases or normal sales are recorded at fair value with changes in fair value included in earnings.  For those contracts that meet the definition of a derivative and meet the cash flow hedge requirements, including those related to initial and ongoing documentation, the changes in the fair value of the effective portion of those contracts are generally recognized in accumulated other comprehensive income.  Cash flow hedges impact net income when the forecasted transaction being hedged occurs, when hedge ineffectiveness is measured and recorded, when the forecasted transaction being hedged is no longer probable of occurring, or when there is accumulated other comprehensive loss and the hedge and the forecasted transaction being hedged are in a loss position on a combined basis.  The ineffective portion of contracts that meet the cash flow hedge requirements is rec ognized currently in earnings.  Derivative contracts designated as fair value hedges and the items they are hedging are both recorded at fair value with changes in fair value of both items recognized currently in earnings.  Derivative contracts that meet the requirements of a normal purchase or sale, and are so designated, are recognized in revenues or expenses, as applicable, when the quantity of the contract is delivered.  The change in fair value of a normal purchase or sale contract is not included in earnings.  

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The tables below summarize current and long-term derivative assets and liabilities at June 30, 2006 and December 31, 2005.  At June 30, 2006 and December 31, 2005, derivative assets and liabilities of NU Enterprises have been segregated between wholesale, retail, generation and hedging amounts.  The fair value of these contracts may not represent amounts that will be realized.  

	At June 30, 2006
(Millions of Dollars)	Assets		Liabilities
	Current	Long- Term	Current	Long- Term	Net Totals
NU Enterprises:
Wholesale	$103.1	$  52.9	$(174.2)	$(137.5)	$(155.7)
Retail	5.2	0.1	(4.3)	-	1.0
Generation	7.1	-	(11.9)	(8.1)	(12.9)
Utility Group - Gas:
Non-trading	0.2	-	-	-	0.2
Utility Group - Electric:
Non-trading	58.4	267.3	(4.0)	(33.4)	288.3
NU Parent:
Hedging	-	-	-	(14.5)	(14.5)
	174.0	320.3	(194.4)	(193.5)	106.4
Derivative assets and  liabilities held for sale	(5.2)	(0.1)	7.4	8.0	10.1
Totals	$168.8	$320.2	$(187.0)	$(185.5)	$116.5

	At December 31, 2005
(Millions of Dollars)	Assets		Liabilities
	Current	Long- Term	Current	Long- Term	Net Totals
NU Enterprises:
Wholesale	$256.6	$103.5	$(369.3)	$(220.9)	$(230.1)
Retail	55.0	12.9	(27.2)	0.4	41.1
Generation	9.2	-	(5.1)	(15.5)	(11.4)
Utility Group - Gas:
Non-trading	0.1	-	(0.4)	-	(0.3)
Utility Group - Electric:
Non-trading	82.6	308.6	(0.5)	(31.8)	358.9
NU Parent:
Hedging	-	-	-	(5.2)	(5.2)
Totals	$403.5	$425.0	$(402.5)	$(273.0)	$153.0

The business activities of NU Enterprises that result in the recognition of derivative assets include exposures to credit risk to energy marketing and trading counterparties.  At June 30, 2006 and December 31, 2005, Select Energy had derivative assets from wholesale, retail, generation, and hedging activities that are exposed to counterparty credit risk.  However, a significant portion of these assets is contracted with investment grade rated counterparties or collateralized with cash.  

NU Enterprises - Wholesale:  Certain electricity and natural gas derivative contracts are part of Select Energy's wholesale marketing business that the company is in the process of exiting.  These contracts include wholesale short-term and long-term electricity supply and sales contracts, which include contracts to sell electricity to utilities under full requirements contracts, a contract to sell electricity to a municipality with a term of seven remaining years, and two contracts to purchase the output of generating plants.  The fair value of electricity contracts was determined by prices from external sources for years through 2009 and by models based on natural gas prices and a heat-rate conversion factor to electricity for subsequent periods.  The fair value of the natural gas contracts was primarily determined by prices provided by external sources and active markets.  

Derivatives used in wholesale activities are recorded at fair value and included in the condensed consolidated balance sheets as derivative assets or liabilities.  Changes in fair value are recorded in the period of change, mostly in wholesale contract market changes, net on the accompanying condensed consolidated statements of income/(loss).   

NU Enterprises - Retail:  On June 1, 2006, Select Energy closed on the sale of its retail marketing business to Hess and the related derivative assets and liabilities were transferred to Hess, except in cases where a customer has not yet consented to assignment.  The remaining retail derivative assets and liabilities are recorded at fair value, which is determined using information from available external sources.  During the first quarter of 2006, management was no longer able to conclude that physical delivery was probable

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under contracts that extended past the expected June 1, 2006 sale of the retail marketing business.  As a result, retail marketing derivative contracts that were previously accounted for on an accrual basis under the normal purchase and sale exception were marked to market in the first quarter of 2006 and recognized in other operation expenses.  At June 30, 2006, Select Energy had no hedges.  A negative $2.2 million was recognized in earnings as of March 31, 2006 for the ineffective portion of cash flow hedges delivered through June 1, 2006.  The retail marketing business was reduced to its fair value less cost to sell in the first half of 2006 by a $53.9 million pre-tax charge which was recorded in other operating expenses.  

As of June 30, 2006, Select Energy has derivative assets and liabilities totaling $5.3 and $4.3 million, respectively, related to back-to-back agreements for electric and gas sourcing contracts for which Select Energy has not yet received consent from the customers to assign the contracts to Hess.  

At December 31, 2005, Select Energy maintained natural gas service agreements with certain retail customers to supply gas at fixed prices for terms extending through 2010.  New York Mercantile Exchange (NYMEX) futures contracts acquired to meet these commitments were recorded at fair value as derivative assets totaling $8.2 million and derivative liabilities of $0.3 million.  Select Energy also maintained various financial instruments to hedge its electric and gas purchases and sales which included forwards, futures and swaps.  At December 31, 2005, these hedging contracts, which were valued at the mid-point of bid and ask market prices, were recorded as derivative assets of $24.4 million and derivative liabilities of $4.8 million.  These amounts were zero at June 30, 2006 because the contracts expired or were assigned to Hess.

Select Energy hedged certain amounts of natural gas inventory with gas futures that are accounted for as fair value hedges.  Changes in the fair value of hedging instruments and natural gas inventory were recorded in fuel, purchased, and net interchange power.  The change in fair value of the futures were included in derivative liabilities and amounted to $3.4 million at December 31, 2005.  These amounts were zero at June 30, 2006 because the contracts expired or were assigned to Hess.

NU Enterprises - Generation:  Derivative contracts include generation asset-specific sales and forward sales of electricity at hub trading points.  The fair value of these contracts was determined by prices from external sources for the period of the contracts.  Certain of these short-term forward purchase and sales contracts have been recorded at fair value in revenues, while other generation asset specific sales and forward sales of electricity at hub points qualified for accrual accounting until the fourth quarter of 2005 when Select Energy marked them to market because the probability of physical delivery could no longer be asserted.  Changes in fair value of generation contracts formerly accounted for on an accrual basis are recorded in wholesale contract market changes, net for those contracts that are part of continuing operations.  Changes in fair value of generation contracts that are held for sale are included in discontinued operations.  T hese contracts extend through 2008.

Utility Group - Gas - Non-Trading:  Yankee Gas’s non-trading derivatives consist of peaking supply arrangements to serve winter load obligations and firm retail sales contracts with options to curtail delivery.  These contracts are subject to fair value accounting as these contracts are derivatives that cannot be designated as normal purchase and sales because of the optionality in the contract terms.  Non-trading derivatives at June 30, 2006 included assets of $0.2 million.  At December 31, 2005, non-trading derivatives included assets of $0.1 million and liabilities of $0.4 million.

Utility Group - Electric - Non-Trading:  CL&P has contracts with two independent power producers (IPP) to purchase power that contain pricing provisions that are not clearly and closely related to the price of power and therefore do not qualify for the normal purchases and sales exception.  The fair values of these IPP non-trading derivatives at June 30, 2006 include a derivative asset with a fair value of $325.2 million and a derivative liability with a fair value of $35.7 million.  An offsetting regulatory liability and an offsetting regulatory asset were recorded, as these contracts are part of the stranded costs, and management believes that these costs will continue to be recovered or refunded in cost of service, regulated rates.  At December 31, 2005, the fair values of these IPP non-trading derivatives included a derivative asset with a fair value of $391.2 million and a derivative liability with a fair value of $32.3 million.

CL&P has entered into Financial Transmission Rights (FTR) contracts to limit the congestion costs associated with its transitional standard offer (TSO) contracts.  An offsetting regulatory asset has been recorded as this contract is part of the stranded costs and management believes that these costs will continue to be recovered in rates.  At June 30, 2006, the fair value of these contracts is recorded as a derivative asset of $0.5 million and derivative liability of $1.7 million on the accompanying condensed consolidated balance sheets.  The fair value of CL&P's FTRs at December 31, 2005 was zero.  

NU Parent - Hedging:  In March of 2003, NU parent entered into a fixed to floating interest rate swap on its $263 million, 7.25 percent fixed rate note that matures on April 1, 2012.  The changes in fair value of the swap and the hedged debt instrument are recorded on the condensed consolidated balance sheets and are equal and offsetting in the condensed consolidated statements of income/(loss).  The cumulative change in the fair value of the hedged debt of $14.5 million is included as a decrease to long-term debt on the condensed consolidated balance sheets.  The hedge is recorded as a derivative liability of $14.5 million at June 30, 2006, and $5.2 million at December 31, 2005.  The resulting changes in interest payments made are recorded as adjustments to interest expense.

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6.

GOODWILL AND OTHER INTANGIBLE ASSETS (Yankee Gas, NU Enterprises)

The only NU reporting unit that currently maintains goodwill is the Yankee Gas reporting unit, which is classified under the Utility Group - gas reportable segment.  The goodwill recorded related to the acquisition of Yankee Gas is not being recovered from the customers of Yankee Gas.  The goodwill balance was $287.6 million at both June 30, 2006 and December 31, 2005.   

As a result of NU’s 2005 announcements to exit all of NU Enterprises' businesses, certain goodwill balances and intangible assets were deemed to be impaired.  During the six months ended June 30, 2005, goodwill and intangible asset balances at the NU Enterprises energy services businesses were determined to be impaired, and $38.3 million in write-offs were recorded.  In addition, $7.2 million of intangible assets, related to an exclusivity agreement held by the retail marketing business, were written off.  

NU recorded amortization expense of $0.2 million and $1.1 million for the three and six months ended June 30, 2005, respectively, related to intangible assets subject to amortization.  

7.

COMMITMENTS AND CONTINGENCIES

A.

Regulatory Developments and Rate Matters (CL&P, PSNH, WMECO, Yankee Gas)

Connecticut:

CTA and SBC Reconciliation:  The Competitive Transition Assessment (CTA) allows CL&P to recover stranded costs, such as securitization costs associated with the rate reduction bonds, amortization of regulatory assets, and IPP over market costs, while the System Benefits Charge (SBC) allows CL&P to recover certain regulatory and energy public policy costs, such as public education outreach costs, hardship protection costs, transition period property taxes, and displaced worker protection costs.

On March 31, 2006, CL&P filed its 2005 CTA and SBC reconciliation with the Connecticut Department of Public Utility Control (DPUC), which compares CTA and SBC revenues to revenue requirements.  For the year ended December 31, 2005, total CTA revenues exceeded the CTA revenue requirement by $60.1 million.  This amount was recorded as a regulatory liability on the accompanying condensed consolidated balance sheets.  For the same period, the SBC revenue requirement exceeded SBC revenues by $1.3 million.  On July 24, 2006, the DPUC issued a final decision which approved the reconciliation of the CTA and SBC rates for the year 2005.  

Income Taxes:  In 2000, CL&P requested from the Internal Revenue Service (IRS) a Private Letter Ruling (PLR) regarding the treatment of unamortized investment tax credits (UITC) and excess deferred income taxes (EDIT) related to generation assets that were sold.  On April 18, 2006, the IRS issued a PLR to CL&P regarding the treatment of UITC and EDIT related to generation assets that CL&P has sold.  EDIT are temporary differences between book and taxable income that were recorded when the federal statutory tax rate was higher than it is now or when those differences were expected to be resolved.  The PLR holds that it would be a violation of tax regulations if the EDIT or UITC is used to reduce customers' rates following the sale of the generation assets.  CL&P was ordered by the DPUC to submit the PLR to the DPUC within 10 days of issuance and retain the UITC and EDIT in their existing accounts pending its receipt and review of the PLR. & nbsp;

CL&P's UITC balance is $59 million and EDIT balance is $15 million, totaling $74 million related to generation assets that have been sold.  On July 27, 2006, the DPUC held that the UITC and EDIT amounts were no longer required to be held in their existing accounts.  The $74 million balance will be reflected as a reduction of CL&P's third quarter 2006 income tax expense and will increase CL&P's earnings by the same amount.  

Purchased Gas Adjustment:  On September 9, 2005, the DPUC issued a draft decision regarding Yankee Gas Purchased Gas Adjustment (PGA) clause charges for the period of September 1, 2003 through August 31, 2004.  The draft decision disallowed approximately $9 million in previously recovered PGA revenues associated with two separate Yankee Gas unbilled sales and revenue adjustments.  At the request of Yankee Gas, the DPUC reopened the PGA hearings on September 20, 2005 and requested that Yankee Gas file supplemental information regarding the two adjustments.  Yankee Gas complied with this request.  The DPUC issued a new decision on April 20, 2006 requiring an audit of Yankee Gas' PGA accounting methods and deferred any conclusion on the $9 million of previously recovered revenues until the completion of the audit.  Management believes the unbilled sales and revenue adjustments and resultant charges to customers through the PGA clause were appropriate. & nbsp;Based on the facts of the case and the supplemental information provided to the DPUC, management believes the appropriateness of the PGA charges to customers for the time period under review will be approved.  

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New Hampshire:

DS, SCRC and ES Rates: On January 20, 2006, the New Hampshire Public Utilities Commission (NHPUC) approved a PSNH request to move reconciliation of its generation costs and revenues (including the prudency of its generation operations) from the Stranded Cost Recovery Charge (SCRC) to Energy Service (ES) proceedings.  The change was effective on February 1, 2006.

On May 1, 2006, PSNH filed its 2005 SCRC reconciliation with the NHPUC, and proceedings have begun.  While management believes that the operation of the generation business segment has been prudent and consistent with industry practices, it is unable to determine the impact, if any, of the NHPUC’s review of the SCRC on PSNH’s earnings or financial position.

On May 30, 2006, PSNH filed with the NHPUC to increase its delivery service (DS) rate by approximately $50 million, to decrease its SCRC to recognize the full recovery of its non-securitized part 3 stranded costs, and to decrease its ES rate to recognize changes in its power supply costs.  On June 29, 2006, the NHPUC approved a temporary DS rate increase of $24.5 million, the requested decrease in the SCRC and a decrease in the ES rate.  All rate changes were effective on July 1, 2006.  The impact of the combined rate changes is an overall decrease of 15.5 percent.  The temporary DS rate increase will be reconciled to the NHPUC decision in a full rate case to be decided in 2007, effective back to July 1, 2006.  

Coal Procurement Docket:  During the second quarter of 2006, the NHPUC opened a docket to review PSNH's coal procurement and coal transportation policies and procedures.  PSNH is currently responding to data requests from the NHPUC's outside consultant.  While management believes its coal procurement and transportation policies and procedures are prudent and consistent with industry practice, it is unable to determine the impact, if any, of the NHPUC's review on PSNH's earnings or financial position.

Environmental Legislation:  In April of 2006, New Hampshire adopted legislation requiring PSNH to reduce the level of mercury emissions from its coal-fired plants by 2013 with incentives for early reductions.  To comply with the legislation PSNH intends to install wet scrubber technology by mid-2013 at its two Merrimack coal units, which combined generate 433 megawatts (MW).  PSNH currently estimates the cost to comply with this law to be approximately $250 million.  However, this amount is subject to change as final design of the project is undertaken.  State law and PSNH's restructuring agreement provide for the recovery of its generation costs, including the cost to comply with state environmental regulations.  

Massachusetts:

Transition Cost Reconciliation:  WMECO filed its 2005 transition cost reconciliation with the Massachusetts Department of Telecommunications and Energy (DTE) on March 31, 2006.  This filing reconciles transition costs, default service costs and retail transmission costs with their associated revenues collected from customers.  The DTE has not yet reviewed this filing or issued a schedule for review.  Therefore the timing of a decision is uncertain at this time.  Management does not expect the outcome of the DTE's review to have a material adverse impact on WMECO's earnings or financial position.

B.

NRG Energy, Inc. Exposures (CL&P, Yankee Gas)

Certain subsidiaries of NU, including CL&P and Yankee Gas, entered into transactions with NRG Energy, Inc. (NRG) and certain of its subsidiaries.  On May 14, 2003, NRG and certain of its subsidiaries filed voluntary bankruptcy petitions, and on December 5, 2003, NRG emerged from bankruptcy.  NU’s NRG-related exposures as a result of these transactions relate to 1) the refunding of approximately $30 million of congestion charges previously withheld from NRG prior to the implementation of standard market design on March 1, 2003, which is still pending before the court, 2) the recovery of approximately $23.8 million of CL&P’s station service billings from NRG, which is currently the subject of an arbitration, and 3) the recovery of, among other claimed damages, approximately $17.5 million of capital costs and expenses incurred by Yankee Gas related to an NRG subsidiary’s generating plant construction project that has ceased.  While it is unable to determine the ultimate outcome of these issues, management does not expect their resolution will have a material adverse effect on NU’s consolidated earnings or financial position.  

C.

Long-Term Contractual Arrangements (CL&P, Merchant Energy)

CL&P:  These amounts represent commitments for various services and materials associated primarily with the Bethel, Connecticut to Norwalk, Connecticut, the Middletown, Connecticut to Norwalk, and the Norwalk to Northport-Long Island, New York transmission projects as of June 30, 2006.  

(Millions of Dollars)	2006	2007	2008	2009	2010	Thereafter	Total
Transmission business   project commitments	$159.1	$130.1	$128.8	$7.1	$2.9	$ -	$428.0

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Merchant Energy:  Select Energy maintains long-term agreements to purchase energy as part of its portfolio of resources to meet its actual or expected sales commitments.  The majority of these purchase commitments are being exited.  Certain purchase commitments are accounted for on the accrual basis, while the remaining commitments are recorded at their mark-to-market value.  These purchase commitments at June 30, 2006 are as follows:

(Millions of Dollars)	2006	2007	2008	2009	2010	Thereafter	Total
Select Energy   purchase commitments	$768.4	$494.3	$150.3	$29.9	$5.3	$6.0	$1,454.2

Select Energy's purchase commitment amounts exceed the amount expected to be reported in fuel, purchased and net interchange power because many wholesale sales transactions are also classified in fuel, purchased and net interchange power, and certain purchases are included in revenues.  Select Energy also maintains certain wholesale, retail and generation energy commitments whose mark-to-market values have been recorded on the condensed consolidated balance sheets as derivative assets and liabilities, a portion of which is included in assets held for sale and liabilities of assets held for sale.  These contracts are included in the table above.  

The amounts and timing of the costs associated with Select Energy’s purchase agreements will be impacted by the exit from the NU Enterprises' businesses.

D.

Deferred Contractual Obligations (NU, CL&P, PSNH, WMECO)

CYAPC:  On July 1, 2004, CYAPC filed with the FERC for recovery seeking to increase its annual decommissioning collections from $16.7 million to $93 million for a six-year period beginning on January 1, 2005.  On August 30, 2004, the FERC issued an order accepting the rates, with collection by CYAPC beginning on February 1, 2005, subject to refund.

The FERC staff filed testimony that recommended a total $38 million decrease in the requested rate increase, claiming that CYAPC should have used a different gross domestic product (GDP) escalator.  NU's share of this recommended decrease is $18.6 million.  

On November 22, 2005, a FERC administrative law judge issued an initial decision finding no imprudence on CYAPC's part.  However, the administrative law judge did agree with the FERC staff’s position that a lower GDP escalator should be used for calculating the rate increase and found that CYAPC should recalculate its decommissioning charges to reflect the lower escalator.  Management expects that if the FERC staff's position on the decommissioning GDP cost escalator is found by the FERC to be more appropriate than that used by CYAPC to develop its proposed rates, then CYAPC would review whether to reduce its estimated decommissioning obligation and reduce its customers' obligations, including the obligation of CL&P, PSNH and WMECO.  

The company believes that the costs have been prudently incurred and will ultimately be recovered from the customers of CL&P, PSNH and WMECO.  However, there is a risk that some portion of these increased costs may not be recovered, or will have to be refunded if recovered, as a result of the FERC proceedings.  

On June 10, 2004, the DPUC and the Connecticut Office of Consumer Counsel (OCC) filed a petition with the FERC seeking a declaratory order that CYAPC be allowed to recover all decommissioning costs from its wholesale purchasers, including CL&P, PSNH and WMECO, but that such purchasers may not be allowed to recover in their retail rates any costs that the FERC might determine to have been imprudently incurred.  The FERC rejected the DPUC's and OCC's petition, whereupon the DPUC filed an appeal of the FERC's decision with the D.C. Circuit Court of Appeals.  The FERC and CYAPC have asked the court to dismiss the case, and the DPUC has objected to a dismissal.  On June 13, 2006, the court decided not to take up the motion to dismiss until it reviews the case on the merits.  A briefing schedule has not yet been set.  

Parties to these proceedings are currently engaged in active settlement discussions, the outcome of which management cannot determine at this time.  

YAEC:  In November of 2005, YAEC established an updated estimate of the cost of completing the decommissioning of its plant.  On January 31, 2006, the FERC issued an order accepting the rate increase, effective February 1, 2006, subject to refund by YAEC after hearings and settlement judge proceedings.  

On May 1, 2006, YAEC filed with the FERC a settlement agreement with the DPUC, the Massachusetts Attorney General and the Vermont Department of Public Service.  Under the settlement agreement, YAEC agreed to revise its November 2005 decommissioning cost increase from $85 million to $79 million.  The revision includes adjustments for contingencies and projected escalation and certain decontamination and dismantlement (D&D) expenses.  Other terms of the settlement agreement include extending the collection period for charges through December 2014, reconciling and adjusting future charges based on actual D&D expenses and the decommissioning trust fund's actual investment earnings.  The company believes that its share of the increase in decommissioning costs will ultimately be recovered from the customers of CL&P, PSNH and WMECO.  NU has a 38.5 percent

23

ownership interest in YAEC.  On July 31, 2006, the FERC approved the settlement agreement which then became effective and will not materially affect the level of 2006 charges.

MYAPC:  MYAPC is collecting amounts in rates that are adequate to recover the remaining cost of decommissioning its plant.  

Spent Nuclear Fuel Litigation:  CYAPC, YAEC and MYAPC commenced litigation in 1998 charging that the federal government breached contracts it entered into with each company in 1983 under the Nuclear Waste Policy Act of 1982.  The trial ended on August 1, 2004, and a verdict has not been reached.  Post-trial findings of facts and final briefs were filed by the parties in January of 2005.  The Yankee Companies' current rates do not include an amount for recovery of damages in this matter.  Management can predict neither the outcome of this matter nor its ultimate impact on NU.  

E.

Consolidated Edison, Inc. Merger Litigation

Certain gain and loss contingencies exist with regard to the merger agreement between NU and Consolidated Edison, Inc. (Con Edison) and the related litigation.  

On March 5, 2001, Con Edison advised NU that it was unwilling to close its merger with NU on the terms set forth in the parties' 1999 merger agreement (Merger Agreement).  On March 12, 2001, NU filed suit against Con Edison seeking damages in excess of $1 billion.  

In an opinion dated October 12, 2005, a panel of three judges at the Second Circuit held that the shareholders of NU had no right to sue Con Edison for its alleged breach of the parties' Merger Agreement.  NU's request for a rehearing was denied on January 3, 2006.  This ruling left intact the remaining claims between NU and Con Edison for breach of contract, which include NU’s claim for recovery of costs and expenses of approximately $32 million and Con Edison's claim for damages of "at least $314 million."  NU opted not to seek review of this ruling by the United States Supreme Court.  On April 7, 2006, NU filed its motion for partial summary judgment on Con Edison’s damage claim.  NU's motion asserts that NU is entitled to judgment in its favor with respect to this claim based on the undisputed material facts and applicable law.  The matter is fully briefed and awaiting a decision.  At this stage, NU cannot predict the outcome of this matter or its ultimate effect on NU.

F.

Environmental Matters

Environmental reserves are accrued using a probabilistic model approach when assessments indicate that it is probable that a liability has been incurred and an amount can be reasonably estimated.  The probabilistic model approach estimates the liability based on the most likely action plan from a variety of available remediation options, including no action is required or several different remedies ranging from establishing institutional controls to full site remediation and monitoring.

These estimates are subjective in nature as they take into consideration several different remediation options at each specific site.  The reliability and precision of these estimates can be affected by several factors, including new information concerning either the level of contamination at the site, recently enacted laws and regulations or a change in cost estimates due to certain economic factors.  

Remediation has been conducted at a coal tar contaminated river site in Massachusetts.  Initial work indicates that the contamination could be more significant than currently estimated, but the level and extent of contamination is not yet known.  An increase to the environmental reserve for this site could be recorded in earnings in future periods and could be material.  

The amounts recorded as environmental liabilities on the condensed consolidated balance sheets represent management’s best estimate of the liability for environmental costs and takes into consideration site assessment and remediation costs.  Based on currently available information for estimated site assessment and remediation costs, these costs have increased by $3.6 million and $8.1 million during the three and six months ended June 30, 2006.  At June 30, 2006 and December 31, 2005, NU had $31.8 million and $30.7 million, respectively, recorded as environmental reserves.  A reconciliation of the activity in these reserves for the six months ended June 30, 2006 is as follows:

(Millions of Dollars)
Balance at January 1, 2006	$30.7
Additions and adjustments	8.1
Payments	(7.0)
Balance at June 30, 2006	$31.8

Manufactured gas plant (MGP) sites comprise the largest portion of NU’s environmental liability and the environmental reserves related to these sites increased by $8.2 million in the first half of 2006.  MGPs are sites that manufactured gas from coal which produced certain byproducts that may pose a risk to human health and the environment.  At June 30, 2006 and December 31, 2005,

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$26.6 million and $25.3 million, respectively, represents amounts for the site assessment and remediation of MGPs.   Of this amount, $3.0 million is included in liabilities of assets held for sale on the accompanying condensed consolidated balance sheet at June 30, 2006.  

It is possible that new information or future developments could require a reassessment of the potential exposure to related environmental matters.  As this information becomes available, management will continue to assess the potential exposure and adjust the reserves accordingly.  

G.

Guarantees and Indemnifications

NU provides credit assurances on behalf of subsidiaries in the form of guarantees and letters of credit (LOCs) in the normal course of business.  In addition, NU has provided guarantees and various indemnifications on behalf of external parties as a result of the second quarter sales of SESI to Ameresco and the retail marketing business to Hess.  The following table summarizes NU's maximum exposure at June 30, 2006, in accordance with FIN 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," expiration dates, and fair value of amounts recorded.  

Company	Description	Maximum Exposure (in millions)	Expiration Date(s)	Fair Value of Amounts Recorded (in millions)
On behalf of external parties:
SESI	Performance guarantees under government contracts.	$98.7	2019 - 2026 (1)	$0.2
	General indemnifications in connection with the sales of SESI including environmental issues, general product claims, compliance with laws, and other claims.	Not Specified (2)	None	-
	Specific indemnifications in connection with sale of SESI for estimated costs to complete or modify specific projects above specified levels.	Not Specified (2)	Through project completion	0.2
Hess (Retail Marketing)	Performance guarantee for retail marketing contract assigned to Hess for the sale of energy.	-	2007	-
	General indemnifications in connection with the sale including compliance with laws, validity of contract information, absence of default on contracts, and other claims.	Not Specified (2)	None	-

Subsidiary	Description	Maximum Exposure (in millions)	Expiration Date(s)	Fair Value of Amounts Recorded (in millions)
On behalf of subsidiaries:
Utility Group	Surety bonds	$11.0	None	N/A
	Letters of credit	45.6	2006 - 2007	N/A
Rocky River Realty Company	Lease payments	11.5	2024	N/A
Energy Services Businesses	Performance and payment guarantees	76.1	2006 - 2007	N/A
Northeast Generation Company	Debt obligations	14.1	2026 (3)	N/A
Northeast Generation Services	Performance and payment guarantees	2.1	2006 - 2007	N/A
Select Energy	Performance guarantees for retail marketing contracts not yet assigned to Hess.	16.6 (4)	2006 - None (5)	N/A
	Performance guarantees for wholesale marketing contracts.	296.6 (4)	None	N/A
	Letters of credit	71.1	2006	N/A

(1)

NU guarantees SESI's performance under government contracts financed by one investor.  NU is permitted to and intends to terminate these guarantees prior to their annual anniversary dates over the next nine months.  Upon notice of non-renewal, the investor can require NU to repurchase the underlying contract payments to satisfy the debt.  Ameresco has a commitment from a

25

lender to finance SESI’s repurchase of these contract payments from NU.  On July 7, 2006, the investor notified SESI that pursuant to financing terms it would require SESI to repurchase contract payments relating to the only guaranteed project that was behind schedule.  SESI did not satisfy this requirement and on July 26, 2006, the contract payments were assigned to NU and NU paid the investor $10.4 million, $0.6 million of which will be recorded as a third quarter loss.  NU recorded a $0.2 million loss to reflect the fair value of this guarantee in the second quarter.  NU expects to sell the contract payments to SESI upon SESI's completion of the project which SESI would finance with its committed lender.  NU may record additional losses associated with this transaction and associated with the planned termination of its other SESI guarantees, the amount of which will depend on the final calculation of contract payment purchase amounts, changes in interest rates used to determine Ameresco’s financing proceeds, the amount of project cash available to offset NU’s costs, and other factors.  

(2)

There is no specified maximum exposure included in the related sale agreements.  The estimated maximum exposure on the specific indemnifications associated with the SESI sale is $1.1 million.  Hess may not assert an indemnification claim based on unintentional data errors unless and until damages exceed a $5 million aggregate threshold, at which point Hess may assert a claim for all damages.  All other claims are subject to a $0.3 million threshold.

(3)

The guarantee will be terminated upon the sale of NGC's assets.  See Note 13, "Subsequent Events," for more information regarding this sale.  

(4)

Maximum exposure is as of June 30, 2006; however, exposures vary with underlying commodity prices and for certain contracts are essentially unlimited.  

(5)

NU is working with counterparties to terminate these guarantees as the retail marketing contracts are assigned to Hess and does not currently anticipate that these guarantees on behalf of Select Energy will result in significant guarantees of the performance of Hess.

Several underlying contracts that NU guarantees, as well as certain surety bonds, contain credit ratings triggers that would require NU to post collateral in the event that NU’s credit ratings are downgraded below investment grade.

8.

MARKETABLE SECURITIES

The following is a summary of NU’s available-for-sale securities related to NU's investment in Globix Corporation (Globix), NU's Supplemental Executive Retirement Plan (SERP) assets and WMECO's prior spent nuclear fuel trust assets, which are recorded at their fair values and are included in current and long-term marketable securities on the accompanying condensed consolidated balance sheets.  Changes in the fair value of these securities are recorded as unrealized gains and losses in accumulated other comprehensive income:

	At June 30, 2006	At December 31, 2005
(Millions of Dollars)
Globix investment	$       -	$    3.7
SERP assets	59.5	58.1
WMECO prior spent nuclear fuel trust assets	51.9	50.8
Totals	$111.4	$112.6

NU had an investment in the common stock of NEON Communications, Inc. (NEON), a provider of optical networking services.  On March 8, 2005, NEON merged with Globix.  In connection with the closing of the merger, a $0.1 million after-tax loss was recognized in the first quarter of 2005 and a pre-tax positive $0.4 million change in fair value subsequent to March 8, 2005 was included in accumulated other comprehensive income.  On April 6, 2006, NU sold its investment in Globix.  This sale resulted in net proceeds of $6.7 million and a pre-tax gain of $3.1 million.

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At June 30, 2006 and December 31, 2005, marketable securities are comprised of the following:

	At June 30, 2006
(Millions of Dollars)	Amortized Cost	Pre-Tax Gross Unrealized Gains	Pre-Tax Gross Unrealized Losses	Estimated Fair Value
United States equity securities	$  19.6	$4.2	$(0.5)	$  23.3
Non-United States equity securities	5.3	1.5	-	6.8
Fixed income securities	82.4	0.1	(1.2)	81.3
Totals	$107.3	$5.8	$(1.7)	$111.4

	At December 31, 2005
(Millions of Dollars)	Amortized Cost	Pre-Tax Gross Unrealized Gains	Pre-Tax Gross Unrealized Losses	Estimated Fair Value
United States equity securities	$  23.2	$3.9	$(0.3)	$  26.8
Non-United States equity securities	6.3	0.9	-	7.2
Fixed income securities	79.3	0.2	(0.9)	78.6
Totals	$108.8	$5.0	$(1.2)	$112.6

At June 30, 2006 and December 31, 2005, NU evaluated the securities in an unrealized loss position and has determined that none of the related unrealized losses are deemed to be other-than-temporary in nature.  At June 30, 2006 and December 31, 2005, the gross unrealized losses and fair value of NU's investments that have been in a continuous unrealized loss position for less than 12 months and 12 months or greater were as follows:

	Less than 12 Months		12 Months or Greater		Total
(Millions of Dollars) At June 30, 2006	Estimated Fair Value	Pre-Tax Gross Unrealized Losses	Estimated Fair Value	Pre-Tax Gross Unrealized Losses	Estimated Fair Value	Pre-Tax Gross Unrealized Losses
United States equity securities	$  3.2	$(0.4)	$0.6	$(0.1)	$  3.8	$(0.5)
Non-United States   equity securities	-	-	-	-	-	-
Fixed income securities	40.9	(1.0)	4.2	(0.2)	45.1	(1.2)
Totals	$44.1	$(1.4)	$4.8	$(0.3)	$48.9	$(1.7)

	Less than 12 Months		12 Months or Greater		Total
(Millions of Dollars) At December 31, 2005	Estimated Fair Value	Pre-Tax Gross Unrealized Losses	Estimated Fair Value	Pre-Tax Gross Unrealized Losses	Estimated Fair Value	Pre-Tax Gross Unrealized Losses
United States equity securities	$ 2.9	$(0.2)	$0.4	$(0.1)	$ 3.3	$(0.3)
Non-United States   equity securities	- -	-	-	-	-	-
Fixed income securities	39.8	(0.7)	5.7	(0.2)	45.5	(0.9)
Totals	$42.7	$(0.9)	$6.1	$(0.3)	$48.8	$(1.2)

For information related to the change in net unrealized holding gains and losses included in shareholders' equity, see Note 9, "Comprehensive Income," to the condensed consolidated financial statements.

For the three and six months ended June 30, 2006 and 2005, realized gains and losses recognized on the sale of available-for-sale securities are as follows:

	Three Months Ended June 30,			Six Months Ended June 30,
(Millions of Dollars)	Realized Gains	Realized Losses	Net Realized Gains/(Losses)	Realized Gains	Realized Losses	Net Realized Gains/(Losses)
2006	$3.6	$(0.4)	$  3.2	$3.9	$(0.6)	$3.3
2005	$0.5	$(0.2)	$  0.3	$0.6	$(0.4)	$0.2

Net realized gains of $3.4 million and $3.5 million for the three and six months ended June 30, 2006, respectively, and $0.3 million and $0.2 million for the three and six months ended June 30, 2005, respectively, are included in other income, net on the accompanying condensed consolidated statements of income/(loss).  Net realized losses of $0.2 million and $0.2 million for the three and six months ended June 30, 2006, respectively, and $10 thousand and $21 thousand for the three and six months ended June 30,

27

2005, respectively, relating to the WMECO spent nuclear fuel trust are included in fuel, purchased and net interchange power on the accompanying condensed consolidated statements of income/(loss).

NU utilizes the specific identification basis method for the SERP securities and the average cost basis method for the WMECO prior spent nuclear fuel trust to compute the realized gains and losses on the sale of available-for-sale securities.

Proceeds from the sale of these securities, including proceeds from short-term investments, totaled $66.3 million and $84.7 million for the three and six months ended June 30, 2006, respectively.  Of these amounts, $6.7 million relates to the proceeds from the sale of NU's investment in Globix.  These amounts totaled $35.8 million and $54.5 million for the three and six months ended June 30, 2005, respectively.  

At June 30, 2006, the contractual maturities of the available-for-sale securities are as follows:

(Millions of Dollars)	Amortized Cost	Estimated Fair Value
Less than one year	$  31.9	$  31.7
One to five years	27.8	27.6
Six to ten years	7.7	7.3
Greater than ten years	15.1	14.7
Subtotal	82.5	81.3
Equity securities	24.8	30.1
Total	$107.3	$111.4

9.

COMPREHENSIVE INCOME (NU, CL&P, PSNH, WMECO, NU Enterprises, Yankee Gas)

Total comprehensive income, which includes all comprehensive income/(loss) items by category, for the three and six months ended June 30, 2006 and 2005 is as follows:

	For the Three Months Ended June 30, 2006
(Millions of Dollars)	NU*	CL&P	PSNH	WMECO	NU Enterprises	Yankee Gas	Other
Net income/(loss)	$22.2	$16.1	$14.9	$2.6	$(14.3)	$(0.1)	$3.0
Comprehensive (loss)/income items:
Cash flow hedging instruments	(6.9)	(2.7)	-	-	(4.2)	-	-
Unrealized gains/(losses) on securities	2.9	-	-	(0.1)	2.5	-	0.5
Net change in comprehensive income items	(4.0)	(2.7)	-	(0.1)	(1.7)	-	0.5
Total comprehensive income/(loss)	$18.2	$13.4	$14.9	$2.5	$(16.0)	$(0.1)	$3.5

	For the Three Months Ended June 30, 2005
(Millions of Dollars)	NU*	CL&P	PSNH	WMECO	NU Enterprises	Yankee Gas	Other
Net (loss)/income	$(27.7)	$11.0	$9.0	$2.4	$(47.1)	$(0.4)	$(2.6)
Comprehensive (loss)/income items:
Cash flow hedging instruments	(1.9)	-	-	-	(0.9)	(1.0)	-
Unrealized losses on securities	(2.4)	-	-	-	(1.9)	-	(0.5)
Net change in comprehensive\ income items	(4.3)	-	-	-	(2.8)	(1.0)	(0.5)
Total comprehensive (loss)/income	$(32.0)	$11.0	$9.0	$2.4	$(49.9)	$(1.4)	$(3.1)

	For the Six Months Ended June 30, 2006
(Millions of Dollars)	NU*	CL&P	PSNH	WMECO	NU Enterprises	Yankee Gas	Other
Net income/(loss)	$12.1	$48.6	$20.0	$7.8	$(76.9)	$11.7	$0.9
Comprehensive income/(loss) items:
Cash flow hedging instruments	13.2	(4.6)	-	-	17.9	-	(0.1)
Unrealized losses on securities	(0.2)	-	-	(0.1)	-	-	(0.1)
Other	2.4	-	-	-	-	-	2.4
Net change in comprehensive income items	15.4	(4.6)	-	(0.1)	17.9	-	2.2
Total comprehensive income/(loss)	$27.5	$44.0	$20.0	$7.7	$(59.0)	$11.7	$3.1

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	For the Six Months Ended June 30, 2005
(Millions of Dollars)	NU*	CL&P	PSNH	WMECO	NU Enterprises	Yankee Gas	Other
Net (loss)/income	$(145.4)	$36.2	$17.8	$7.1	$(214.5)	$14.5	$(6.5)
Comprehensive income/(loss) items:
Cash flow hedging instruments	5.4	-	-	-	6.4	(1.0)	-
Unrealized losses on securities	(3.1)	-	-	(0.3)	(1.9)	-	(0.9)
Net change in comprehensive income items	2.3	-	-	(0.3)	4.5	(1.0)	(0.9)
Total comprehensive (loss)/income	$(143.1)	$36.2	$17.8	$6.8	$(210.0)	$13.5	$(7.4)

*After preferred dividends of subsidiary.

Comprehensive income amounts included in the Other column primarily relate to NU parent and Northeast Utilities Service Company (NUSCO).

Accumulated other comprehensive income fair value adjustments in NU’s cash flow hedging instruments for the six months ended June 30, 2006 and the twelve months ended December 31, 2005 are as follows:

(Millions of Dollars, Net of Tax)	Six Months Ended June 30, 2006	Twelve Months Ended December 31, 2005
Balance at beginning of period	$18.2	$(3.5)
Hedged transactions recognized into earnings	1.4	5.6
Amount reclassified into earnings due to  discontinuation of cash flow hedges	(14.1)	- -
Change in fair value	(1.7)	11.0
Cash flow transactions entered into for the period	1.2	5.1
Net change associated with the current period   hedging transactions	(13.2)	21.7
Total fair value adjustments included in   accumulated other comprehensive income	$ 5.0	$18.2

For the six months ended June 30, 2006, $1.3 million, net of tax, was reclassified from accumulated other comprehensive income in connection with the consummation of the underlying hedged transactions and recognized into earnings in revenues and fuel, purchased, and net interchange power and $0.1 million was reclassified into earnings related to the amortization of interest rate hedges.  For the six months ended June 30, 2006, $14.1 million was reclassified from accumulated other comprehensive income into earnings (specifically included in other operation expenses) due to discontinuing cash flow hedge accounting and concluding that the retail marketing contracts being hedged beyond June 1, 2006 were no longer probable of physical delivery due to the retail business being sold.  At June 30, 2006, it is estimated that $44 thousand included in the accumulated other comprehensive income balance will be reclassified as an increase to earnings in the next year.  

In March of 2006, CL&P entered into a forward swap agreement to hedge the interest rate associated with $125 million of its planned $250 million, 30-year fixed rate debt issuance.  Under the agreement, CL&P locked in a LIBOR swap rate of 5.322 percent based on the notional amount of $125 million in debt that was issued in June of 2006.  On June 1, 2006, the hedged transaction was settled and as a result $4.6 million, net of tax, ($7.8 million pre-tax) was recorded in accumulated other comprehensive income to be amortized into earnings over the life of the debt.  

Accumulated other comprehensive income items unrelated to NU's cash flow hedging instruments totaled $0.4 million of losses and $1.8 million in gains at June 30, 2006 and December 31, 2005, respectively.  These amounts relate to unrealized gains on investments in marketable debt and equity securities and minimum pension liability adjustments, net of related income taxes.

10.

EARNINGS PER SHARE (NU)

Earnings per share (EPS) is computed based upon the weighted average number of common shares outstanding, excluding unallocated Employee Stock Ownership Plan (ESOP) shares, during each period.  Diluted EPS is computed on the basis of the weighted-average number of common shares outstanding plus the potential dilutive effect if certain securities are converted into common stock.  Dilutive shares in the following table excludes 208,650 options and 1,255,929 options for the three months ended June 30, 2006 and 2005, respectively, and 218,650 options and 1,255,929 options for the six months ended June 30, 2006 and 2005, as these options were antidilutive.  The weighted average common shares outstanding at June 30, 2006 include the impact of the issuance of 23 million common shares on December 12, 2005.  The following table sets forth the components of basic and fully diluted EPS:

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	For the Three Months Ended June 30,		For the Six Months Ended June 30,
(Millions of Dollars, Except for Share Information)	2006	2005	2006	2005
Income/(loss) from continuing operations	$14.3	$(38.4)	$(6.4)	$(151.7)
Income from discontinued operations	7.9	10.7	18.5	6.3
Net income/(loss)	22.2	(27.7)	12.1	(145.4)
Basic EPS common shares outstanding (average)	153,628,709	129,520,644	153,535,675	129,399,574
Dilutive effect	293,926	-	273,458	-
Fully diluted EPS common shares   outstanding (average)	153,922,635	129,520,644	153,809,133	129,399,574
Basic and Fully Diluted EPS:
Income/(loss) from continuing operations	0.09	(0.30)	(0.04)	(1.17)
Income from discontinued operations	0.05	0.09	0.12	0.05
Basic and fully diluted EPS	$0.14	$(0.21)	$0.08	$(1.12)

11.

PENSION BENEFITS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (All Companies)

NU’s subsidiaries participate in a uniform noncontributory defined benefit retirement plan (Pension Plan) covering substantially all regular NU employees and also provide certain health care benefits, primarily medical and dental, and life insurance benefits through a benefit plan to retired employees (PBOP Plan).  The components of net periodic benefit expense for the Pension Plan and the PBOP Plan for the three and six months ended June 30, 2006 and 2005 are estimated as follows:

NU	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	Pension Benefits		Postretirement Benefits		Pension Benefits		Postretirement Benefits
(Millions of Dollars)	2006	2005	2006	2005	2006	2005	2006	2005
Service cost	$ 12.4	$ 11.9	$ 2.2	$  1.9	$ 24.7	$ 24.2	$ 4.1	$ 3.8
Interest cost	31.2	31.5	6.9	6.3	63.4	62.7	13.7	12.6
Expected return on plan assets	(42.9)	(42.9)	(3.5)	(2.8)	(86.4)	(85.9)	(7.0)	(5.6)
Amortization of unrecognized net   transition (asset)/obligation	-	(0.1)	2.8	3.0	(0.1)	(0.2)	5.6	6.0
Amortization of prior service cost	1.4	1.8	(0.1)	(0.1)	3.0	3.6	(0.1)	(0.2)
Amortization of actuarial loss	9.0	8.6	-	-	19.4	16.7	-	-
Other amortization, net	-	-	4.5	4.3	-	-	9.0	8.6
Net periodic expense - before  curtailments and termination  benefits	11.1	10.8	12.8	12.6	24.0	21.1	25.3	25.2
Curtailment expense	(0.4)	-	-	-	(0.4)	-	-	-
Termination benefit expense	0.7	-	-	-	0.7	-	-	-
Total curtailments and  termination benefits	0.3	-	-	-	0.3	- -	- -	- -
Total - net periodic expense	$ 11.4	$ 10.8	$12.8	$12.6	$ 24.3	$ 21.1	$25.3	$25.2

A portion of these pension amounts is capitalized related to current employees that are working on capital projects.  Amounts capitalized were approximately $2.6 million and $5.2 million for the three and six months ended June 30, 2006, respectively, and $2.3 million and $4.7 million for the three and six months ended June 30, 2005, respectively.

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CL&P	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	Pension Benefits		Postretirement Benefits		Pension Benefits		Postretirement Benefits
(Millions of Dollars)	2006	2005	2006	2005	2006	2005	2006	2005
Service cost	$   4.2	$  4.0	$ 0.7	$ 0.7	$  8.6	$   8.5	$  1.4	$  1.3
Interest cost	11.8	11.7	2.8	2.5	23.8	23.4	5.5	5.1
Expected return on plan assets	(20.3)	(19.9)	(1.4)	(1.1)	(40.6)	(39.9)	(2.8)	(2.2)
Amortization of unrecognized net   transition obligation	-	-	1.5	1.6	-	-	3.0	3.1
Amortization of prior service cost	0.6	0.7	-	-	1.3	1.4	-	-
Amortization of actuarial loss	3.8	3.2	-	-	7.8	6.3	-	-
Other amortization, net	-	-	1.8	1.7	-	-	3.6	3.5
Net periodic expense - before  curtailments termination  benefits	0.1	(0.3)	5.4	5.4	0.9	(0.3)	10.7	10.8
Curtailment expense	(0.1)	-	-	-	(0.1)	-	-	-
Termination benefit expense	(0.4)	-	(0.1)	-	(0.4)	-	(0.1)	-
Total curtailments and  termination benefits	(0.5)	- -	(0.1)	- -	(0.5)	-	(0.1)	-
Total - net periodic  (income)/expense	$ (0.4)	$(0.3)	$ 5.3	$ 5.4	$ 0.4	$ (0.3)	$10.6	$10.8

Not included in the pension and postretirement benefits expense amounts above are intercompany allocations totaling $2.8 million and $1.9 million, respectively, for the three months ended June 30, 2006 and $2.1 million and $1.8 million, respectively, for the three months ended June 30, 2005.  Amounts for pension and postretirement totaled $6.1 million and $3.9 million, respectively, for the six months ended June 30, 2006 and $4 million and $3.6 million, respectively, for the six months ended June 30, 2005.  

For CL&P, a portion of the pension amounts is capitalized related to current employees that are working on capital projects.  Amounts capitalized were $0.4 million and $1.4 million for the three and six months ended June 30, 2006, respectively, and $0.6 million and $1.3 million for the three and six months ended June 30, 2005, respectively.  

PSNH	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	Pension Benefits		Postretirement Benefits		Pension Benefits		Postretirement Benefits
(Millions of Dollars)	2006	2005	2006	2005	2006	2005	2006	2005
Service cost	$ 2.4	$ 2.2	$ 0.5	$ 0.4	$ 4.7	$ 4.4	$ 0.9	$ 0.8
Interest cost	4.9	4.8	1.3	1.1	10.0	9.5	2.5	2.2
Expected return on plan assets	(4.1)	(4.1)	(0.7)	(0.5)	(8.2)	(8.2)	(1.3)	(1.0)
Amortization of unrecognized net   transition obligation	0.1	- -	0.6	0.6	0.2	0.1	1.2	1.2
Amortization of prior service cost	0.3	0.4	-	-	0.6	0.8	-	-
Amortization of actuarial loss	1.4	1.3	-	-	2.9	2.4	-	-
Other amortization, net	-	-	0.9	0.8	-	-	1.7	1.5
Net periodic expense - before  termination benefits	5.0	4.6	2.6	2.4	10.2	9.0	5.0	4.7
Termination benefit expense	0.1	-	-	-	0.1	-	-	-
Total - net periodic expense	$ 5.1	$ 4.6	$ 2.6	$ 2.4	$10.3	$ 9.0	$ 5.0	$ 4.7

Not included in the pension and postretirement benefits expense amounts above are intercompany allocations totaling $0.4 million and $0.3 million, respectively, for the three months ended June 30, 2006 and $0.5 million and $0.3 million, respectively, for the three months ended June 30, 2005.  Amounts for pension and postretirement totaled $0.9 million and $0.7 million, respectively, for the six months ended June 30, 2006 and $0.9 million and $0.6 million, respectively, for the six months ended June 30, 2005.  

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For PSNH, a portion of these pension amounts is capitalized related to current employees that are working on capital projects.  Amounts capitalized were $2 million and $3.4 million for the three and six months ended June 30, 2006, respectively, and $1.3 million and $2.6 million for the three and six months ended June 30, 2005, respectively.  

WMECO	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	Pension Benefits		Postretirement Benefits		Pension Benefits		Postretirement Benefits
(Millions of Dollars)	2006	2005	2006	2005	2006	2005	2006	2005
Service cost	$ 0.9	$ 0.8	$ 0.2	$ 0.1	$ 1.7	$ 1.6	$ 0.3	$ 0.3
Interest cost	2.4	2.3	0.6	0.6	4.8	4.6	1.2	1.1
Expected return on plan assets	(4.5)	(4.3)	(0.4)	(0.3)	(8.9)	(8.7)	(0.7)	(0.6)
Amortization of unrecognized net   transition obligation	-	- -	0.3	0.4	-	- -	0.6	0.7
Amortization of prior service cost	0.1	0.2	-	-	0.3	0.4	-	-
Amortization of actuarial loss	0.8	0.7	-	-	1.6	1.3	-	-
Other amortization, net	-	-	0.4	0.3	-	-	0.8	0.7
Net periodic expense - before  termination benefits	(0.3)	(0.3)	1.1	1.1	(0.5)	(0.8)	2.2	2.2
Termination benefit expense	(0.1)	-	-	-	(0.1)	-	-	-
Total - net periodic   (income)/expense	$(0.4)	$(0.3)	$ 1.1	$ 1.1	$(0.6)	$(0.8)	$ 2.2	$ 2.2

Not included in the pension income and postretirement benefits expense amounts above are intercompany allocations totaling $0.5 million and $0.3 million, respectively, for the three months ended June 30, 2006 and $0.4 million and $0.3 million, respectively, for the three months ended June 30, 2005.  Amounts for pension and postretirement totaled $1 million and $0.6 million, respectively, for the six months ended June 30, 2006 and $0.8 million and $0.7 million, respectively, for the six months ended June 30, 2005.  

For WMECO, a portion of these pension amounts is capitalized related to current employees that are working on capital projects.  Amounts capitalized were $0.1 million for both the three and six months ended June 30, 2006, respectively, and $0.1 million for the six months ended June 30, 2005.  A de minimus amount was capitalized during the three months ended June 30, 2005.  The capitalized amounts offset capital project costs, as pension income was recorded for all periods.  

NU does not currently expect to make any contributions to the Pension Plan in 2006.  NU contributed and anticipates contributing approximately $12.4 million quarterly totaling approximately $49.5 million in 2006 to fund its PBOP Plan.  

Severance Benefits:  As a result of its corporate reorganization, in 2005 NU recorded severance and termination benefits totaling $14.4 million relating to expected terminations of Utility Group and NUSCO employees.  These severance benefits were recorded in other operating expenses because these amounts were for severance benefits under an existing benefit arrangement.  NU also recorded $4.1 million, net of amounts capitalized, for pension and postretirement benefit plan curtailment losses relating to these employees and NU Enterprises employees that were expected to leave the company’s benefit plans.  Severance benefits for employees in the retail marketing and competitive generation businesses were not recorded in 2005 or in the first quarter of 2006 as management expected to sell these businesses as going concerns with the employees being transferred to the buyers.

In the second quarter of 2006, NU updated its prior estimates of Utility Group and NUSCO severance benefits based upon actual termination data and updated its estimates of expected head count reductions.  A reduction in severance expense of $1.3 million was recorded and included in other operating expenses on the accompanying condensed consolidated statements of income/(loss) for the three months ended June 30, 2006, primarily due to a reduction in the expected number of terminated Utility Group and NUSCO employees.  Adjustments to the pension plan curtailment losses and termination benefits expense were also recorded in the second quarter of 2006 totaling a $0.7 million reduction, net of amounts capitalized, in the curtailment losses and termination benefits expenses.

Also in the second quarter of 2006, NU recorded $4.3 million for severance and other employee benefits as these benefits became probable and estimable as a result of the sale of the retail marketing business to Hess.  Of this amount, $0.6 million was for enhanced minimum benefits and was included in restructuring charges, with the remaining $3.7 million included in other operating expenses on the accompanying condensed consolidated statements of income/(loss)for the three and six months ended June 30, 2006 because these amounts were for severance benefits under an existing benefit arrangement.

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12.

SEGMENT INFORMATION (All Companies)

Presentation:  NU is organized between the Utility Group and NU Enterprises businesses based on a combination of factors, including the characteristics of each business' products and services, the sources of operating revenues and expenses and the regulatory environment in which they operate.  Effective on January 1, 2005, the portion of Northeast Generation Services Company's (NGS) business that supports NGC's and HWP's generation assets has been reclassified from the services and other segment to the merchant energy segment within the NU Enterprises segment.  Cash flows for total investments in plant included in the segment information below are cash capital expenditures that do not include cost of removal, AFUDC, and the capitalized portion of pension expense or income.  Segment information for all periods presented has been reclassified to conform to the current period presentation, except as indicated.  

Effective in the first quarter of 2006, separate financial information was prepared and used by management for each of the NU Enterprises merchant energy businesses it is exiting.  Accordingly, separate detailed information is presented below for the wholesale and retail marketing and competitive generation businesses for the three months and six months ended June 30, 2006.  It is not practicable to prepare comparable detailed information for any periods prior to the first quarter of 2006 due to the manner in which the merchant energy business operated prior to the first quarter of 2006.  

The Utility Group segment, including the regulated electric, distribution, generation and transmission businesses, as well as the gas distribution business comprised of Yankee Gas, represents approximately 86 percent and 80 percent for the three and six months ended June 30, 2006, respectively, and 81 percent and 70 percent for the three and six months ended June 30, 2005, respectively, of NU's total revenues and includes the operations of the regulated electric utilities, CL&P, PSNH and WMECO, whose complete condensed consolidated financial statements are included in this combined report on Form 10-Q.  PSNH's distribution segment includes generation activities.  Also included in this combined report on Form 10-Q is detailed information regarding CL&P's, PSNH's, and WMECO's transmission businesses.  Utility Group revenues from the sale of electricity and natural gas primarily are derived from residential, commercial and industrial customers and are not dependent o n any single customer.

The NU Enterprises merchant energy business segment includes:  1) Select Energy, consisting of the wholesale and retail marketing businesses; and 2) NGC, NGS, and Mt. Tom, collectively referred to as the competitive generation business.  The NU Enterprises services and other business segment includes E. S. Boulos Company, Woods Electrical, and NGS Mechanical, Inc., (which are subsidiaries of NGS), SESI, SECI, HEC/Tobyhanna Energy Project, Inc. and HEC/CJTS Energy Center LLC, and intercompany eliminations between the energy services businesses and merchant energy businesses.  The results of NU Enterprises parent are also included within services and other.  

Other in the tables includes the results for Mode 1 Communications, Inc., the results of the non-energy-related subsidiaries of Yankee (Yankee Energy Services Company, Yankee Energy Financial Services Company, and NorConn Properties, Inc.), the non-generation operations of HWP, and the results of NU's parent and service companies.  Interest expense included in other primarily relates to the debt of NU parent.  

Intercompany Transactions:  Total Select Energy revenues from CL&P represented $3.8 million and $7.1 million for the three and six months ended June 30, 2006, respectively, and $12.5 million and $26.7 million for the three and six months ended June 30, 2005, respectively, of total NU Enterprises’ revenues.  Total Select Energy sales to CL&P related to nontraditional standard offer contracts are eliminated in consolidation.

Total Select Energy revenues from transactions with WMECO represented $0.5 million and $1 million of total NU Enterprises’ revenues for the three and six months ended June 30, 2006, respectively, and $17.4 million and $37.9 million for the three and six months ended June 30, 2005, respectively.  Total WMECO purchases from Select Energy are eliminated in consolidation.

Select Energy purchases from NGC and Mt. Tom represented $48.3 million and $98.1 million for the three and six months ended June 30, 2006, respectively.  These amounts totaled $52.1 million and $105 million for NGC and Mt. Tom for the three and six months ended June 30, 2005, respectively.

Customer Concentrations:  Select Energy revenues related to contracts with NSTAR companies represented $82.2 million and $288.6 million of total NU Enterprises’ revenues for the three and six months ended June 30, 2005, respectively.  There were no sales to NSTAR for the three and six months ended June 30, 2006.  Select Energy also provides basic generation service in the New Jersey and Maryland markets.  Select Energy revenues related to these contracts represented $117.9 million and $250.5 million of total NU Enterprises’ revenues for the three and six months ended June 30, 2006, respectively, and $73.5 million and $143.2 million for the three and six months ended June 30, 2005, respectively.  Select Energy revenues from Potomac Electric Power Company totaled $46.3 million and $112.9 million of total NU Enterprises' revenues for the three and six months ended June 30, 2006, respectively, and $50.8 million and $89.1 million for the three and si x months ended June 30, 2005, respectively.  No other individual customer represented in excess of 10 percent of NU Enterprises’ revenues for the three and six months ended June 30, 2006 and 2005.

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Select Energy reported the settlement of all derivative wholesale contracts, including full requirements sales contracts and intercompany revenues, in fuel, purchased and net interchange power.  This presentation is a result of applying mark-to-market accounting to those contracts due to the decision to exit the wholesale marketing business in the second quarter of 2005.

NU's segment information for the three and six months ended June 30, 2006 and 2005 is as follows (some amounts between the financial statements and between segment schedules may not agree due to rounding):

	For the Three Months Ended June 30, 2006
	Utility Group
	Distribution (1)
(Millions of Dollars)	Electric	Gas	Transmission	NU Enterprises	Other	Eliminations	Total
Operating revenues	$1,294.1	$ 88.4	$48.7	$246.6	$ 84.0	$(91.3)	$1,670.5
Depreciation and amortization	(88.2)	(5.6)	(7.4)	(0.1)	(4.6)	3.4	(102.5)
Wholesale contract market   changes, net	- -	- -	- -	(12.9)	- -	- -	(12.9)
Restructuring and   impairment charges	-	- -	-	(3.3)	- -	- -	(3.3)
Other operating expenses	(1,126.8)	(79.4)	(18.9)	(261.3)	(78.7)	88.5	(1,476.6)
Operating income/(loss)	79.1	3.4	22.4	(31.0)	0.7	0.6	75.2
Interest expense, net of AFUDC	(43.6)	(4.0)	(4.9)	(8.8)	(9.9)	7.9	(63.3)
Interest income	1.9	-	0.1	1.5	7.3	(8.1)	2.7
Other income/(loss), net	6.3	0.2	(0.7)	0.5	27.1	(23.4)	10.0
Income tax (expense)/benefit	(21.7)	0.3	(3.9)	15.6	1.9	(1.1)	(8.9)
Preferred dividends	(1.1)	-	(0.3)	-	-	-	(1.4)
Income/(loss) from   continuing operations	$    20.9	$(0.1)	$ 12.7	$(22.2)	$ 27.1	$(24.1)	$   14.3
Income/(loss) from   discontinued operations	- -	- -	- -	7.9	- -	- -	7.9
Net income/(loss)	$    20.9	$(0.1)	$ 12.7	$(14.3)	$ 27.1	$(24.1)	$   22.2

	For the Six Months Ended June 30, 2006
	Utility Group
	Distribution (1)
(Millions of Dollars)	Electric	Gas	Transmission	NU Enterprises	Other	Eliminations	Total
Operating revenues	$2,694.8	$   272.5	$ 97.1	$  773.6	$  171.7	$  (191.8)	$ 3,817.9
Depreciation and amortization	(240.1)	(11.3)	(14.4)	(0.3)	(9.2)	6.9	(268.4)
Wholesale contract market   changes, net	- -	- -	- -	(19.7)	- -	- -	(19.7)
Restructuring and   impairment charges	- -	- -	- -	(8.4)	- -	- -	(8.4)
Other operating expenses	(2,303.4)	(235.6)	(38.6)	(883.0)	(161.6)	184.7	(3,437.5)
Operating income/(loss)	151.3	25.6	44.1	(137.8)	0.9	(0.2)	83.9
Interest expense, net of AFUDC	(85.7)	(8.5)	(9.5)	(17.4)	(18.7)	14.8	(125.0)
Interest income	5.4	-	0.2	3.6	14.5	(15.2)	8.5
Other income/(loss), net	16.5	0.2	(1.6)	0.3	87.6	(83.4)	19.6
Income tax (expense)/benefit	(34.3)	(5.6)	(7.2)	55.9	1.7	(1.1)	9.4
Preferred dividends	(2.2)	-	(0.6)	-	-	-	(2.8)
Income/(loss) from   continuing operations	$     51.0	$     11.7	$  25.4	$   (95.4)	$      86.0	$     (85.1)	$        (6.4)
Income/(loss) from   discontinued operations	- -	- -	- -	18.5	- -	- -	18.5
Net income/(loss)	$     51.0	$     11.7	$   25.4	$   (76.9)	$     86.0	$     (85.1)	$       12.1
Total assets (2)	$8,732.5	$1,159.0	$         -	$1,475.5	$4,642.4	$(4,550.4)	$11,459.0
Cash flows for total  investments in plant	$   148.7	$      34.4	$172.5	$     10.1	$    15 .0	$            -	$     380.7

34

	For the Three Months Ended June 30, 2005
	Utility Group
	Distribution (1)
(Millions of Dollars)	Electric	Gas	Transmission	NU Enterprises	Other	Eliminations	Total
Operating revenues	$1,105.2	$88.3	$45.2	$301.9	$82.7	$(91.7)	$1,531.6
Depreciation and amortization	(107.1)	(5.5)	(6.0)	(0.4)	(4.5)	3.3	(120.2)
Wholesale contract market   changes, net	- -	- -	- -	(69.6)	- -	- -	(69.6)
Restructuring and   impairment charges	- -	- -	- -	(2.1)	- -	- -	(2.1)
Other operating expenses	(942.7)	(71.0)	(18.8)	(323.8)	(86.2)	86.7	(1,355.8)
Operating income/(loss)	55.4	11.8	20.4	(94.0)	(8.0)	(1.7)	(16.1)
Interest expense, net of AFUDC	(46.2)	(4.2)	(4.5)	(3.9)	(8.3)	3.8	(63.3)
Interest income	1.0	0.2	0.2	1.1	4.1	(4.7)	1.9
Other income/(loss), net	6.8	(0.1)	-	0.9	27.1	(26.3)	8.4
Income tax (expense)/benefit	(3.9)	(8.1)	(5.4)	38.1	11.2	0.2	32.1
Preferred dividends	(1.0)	-	(0.4)	-	-	-	(1.4)
Income/(loss) from   continuing operations	12.1	(0.4)	10.3	(57.8)	26.1	(28.7)	(38.4)
Income from   discontinued operations	- -	- -	- -	10.7	- -	- -	10.7
Net income/(loss)	$     12.1	$(0.4)	$10.3	$ (47.1)	$26.1	$(28.7)	$   (27.7)

	For the Six Months Ended June 30, 2005
	Utility Group
	Distribution (1)
(Millions of Dollars)	Electric	Gas	Transmission	NU Enterprises	Other	Eliminations	Total
Operating revenues	$2,280.6	$283.2	$   81.9	$1,174.7	$168.8	$(224.6)	$3,764.6
Depreciation and amortization	(217.6)	(10.9)	(11.7)	(2.0)	(8.7)	6.6	(244.3)
Wholesale contract market   changes, net	- -	- -	- -	(258.5)	- -	- -	(258.5)
Restructuring and   impairment charges	- -	- -	- -	(23.7)	- -	- -	(23.7)
Other operating expenses	(1,924.3)	(242.1)	(34.1)	(1,234.1)	(160.7)	214.9	(3,380.4)
Operating (loss)/income	138.7	30.2	36.1	(343.6)	(0.6)	(3.1)	(142.3)
Interest expense, net of AFUDC	(87.6)	(8.4)	(7.4)	(7.4)	(16.3)	7.5	(119.6)
Interest income	1.7	0.2	0.3	1.6	8.2	(9.0)	3.0
Other income/(loss), net	12.0	(0.3)	(0.6)	0.2	73.6	(71.8)	13.1
Income tax (expense)/benefit	(20.3)	(7.2)	(9.0)	128.4	4.7	0.3	96.9
Preferred dividends	(2.1)	-	(0.7)	-	-	-	(2.8)
Income/(loss) from   continuing operations	$    42.4	$ 14.5	$   18.7	$  (220.8)	$  69.6	$  (76.1)	(151.7)
Income from   discontinued operations	- -	- -	- -	6.3	- -	- -	6.3
Net income/(loss)	$   42.4	$ 14.5	$    18.7	$  (214.5)	$  69.6	$  (76.1)	$ (145.4)
Cash flows for total   investments in plant	$ 207.2	$ 27.3	$  85.0	$       5.0	$    7.6	$         -	$  332.1

(1)

Includes PSNH's generation activities.  

(2)

Information for segmenting total assets between electric distribution and transmission is not available at June 30, 2006.  On a NU consolidated basis, these distribution and transmission assets are disclosed in the electric distribution column above.  

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Utility Group segment information related to the regulated electric distribution and transmission businesses for CL&P, PSNH and WMECO for the three and six months ended June 30, 2006 and 2005 is as follows:

	CL&P - For the Three Months Ended June 30, 2006
(Millions of Dollars)	Distribution	Transmission	Totals
Operating revenues	$ 906.2	$ 34.1	$ 940.3
Depreciation and amortization	(57.8)	(5.5)	(63.3)
Other operating expenses	(814.9)	(12.2)	(827.1)
Operating income	33.5	16.4	49.9
Interest expense, net of AFUDC	(28.6)	(3.7)	(32.3)
Interest income	1.1	0.1	1.2
Other income/(loss), net	5.8	(0.8)	5.0
Income tax expense	(4.3)	(2.0)	(6.3)
Preferred dividends	(1.1)	(0.3)	(1.4)
Net income	$    6.4	$  9.7	$   16.1

	CL&P - For the Six Months Ended June 30, 2006
(Millions of Dollars)	Distribution	Transmission	Totals
Operating revenues	$ 1,878.2	$  66.8	$ 1,945.0
Depreciation and amortization	(120.0)	(10.5)	(130.5)
Other operating expenses	(1,678.5)	(24.9)	(1,703.4)
Operating income	79.7	31.4	111.1
Interest expense, net of AFUDC	(55.6)	(7.0)	(62.6)
Interest income	4.3	0.1	4.4
Other income/(loss), net	14.6	(1.6)	13.0
Income tax expense	(11.0)	(3.5)	(14.5)
Preferred dividends	(2.2)	(0.6)	(2.8)
Net income	$    29.8	$  18.8	$     48.6
Cash flows for total investments in plant	$    85.1	$154.9	$   240.0

	CL&P - For the Three Months Ended June 30, 2005
(Millions of Dollars)	Distribution	Transmission	Totals
Operating revenues	$ 767.0	$ 30.6	$ 797.6
Depreciation and amortization	(65.0)	(4.5)	(69.5)
Other operating expenses	(671.8)	(12.4)	(684.2)
Operating income	30.2	13.7	43.9
Interest expense, net of AFUDC	(30.6)	(3.8)	(34.4)
Interest income	0.8	0.2	1.0
Other income/(loss), net	5.9	(0.1)	5.8
Income tax expense	(0.7)	(3.2)	(3.9)
Preferred dividends	(1.0)	(0.4)	(1.4)
Net income	$    4.6	$  6.4	$  11.0

	CL&P - For the Six Months Ended June 30, 2005
(Millions of Dollars)	Distribution	Transmission	Totals
Operating revenues	$ 1,581.9	$ 54.6	$ 1,636.5
Depreciation and amortization	(120.4)	(8.6)	(129.0)
Other operating expenses	(1,380.4)	(21.6)	(1,402.0)
Operating income	81.1	24.4	105.5
Interest expense, net of AFUDC	(57.1)	(5.8)	(62.9)
Interest income	1.5	0.3	1.8
Other income/(loss), net	11.0	(0.7)	10.3
Income tax expense	(10.4)	(5.3)	(15.7)
Preferred dividends	(2.1)	(0.7)	(2.8)
Net income	$      24.0	$ 12.2	$     36.2
Cash flows for total investments in plant	$    117.3	$ 64.4	$   181.7

36

	PSNH - For the Three Months Ended June 30, 2006
(Millions of Dollars)	Distribution (1)	Transmission	Totals
Operating revenues	$ 293.4	$10.0	$303.4
Depreciation and amortization	(27.0)	(1.3)	(28.3)
Other operating expenses	(228.8)	(4.7)	(233.5)
Operating income	37.6	4.0	41.6
Interest expense, net of AFUDC	(10.7)	(0.8)	(11.5)
Interest income	0.5	-	0.5
Other income, net	0.6	-	0.6
Income tax expense	(15.1)	(1.2)	(16.3)
Net income	$  12.9	$  2.0	$ 14.9

	PSNH - For the Six Months Ended June 30, 2006
(Millions of Dollars)	Distribution (1)	Transmission	Totals
Operating revenues	$598.1	$20.7	$618.8
Depreciation and amortization	(112.3)	(2.6)	(114.9)
Other operating expenses	(432.6)	(9.3)	(441.9)
Operating income	53.2	8.8	62.0
Interest expense, net of AFUDC	(21.4)	(1.6)	(23.0)
Interest income	0.7	-	0.7
Other income, net	1.3	-	1.3
Income tax expense	(18.4)	(2.6)	(21.0)
Net income	$ 15.4	$ 4.6	$  20.0
Cash flows for total investments in plant	$ 49.0	$11.4	$  60.4

	PSNH - For the Three Months Ended June 30, 2005
(Millions of Dollars)	Distribution (1)	Transmission	Totals
Operating revenues	$250.3	$ 9.3	$259.6
Depreciation and amortization	(37.6)	(1.1)	(38.7)
Other operating expenses	(193.5)	(3.9)	(197.4)
Operating income	19.2	4.3	23.5
Interest expense, net of AFUDC	(11.2)	(0.6)	(11.8)
Interest income	0.1	0.1	0.2
Other income, net	0.7	-	0.7
Income tax expense	(2.2)	(1.4)	(3.6)
Net income	$ 6.6	$  2.4	$  9.0

	PSNH - For the Six Months Ended June 30, 2005
(Millions of Dollars)	Distribution (1)	Transmission	Totals
Operating revenues	$510.6	$17.9	$528.5
Depreciation and amortization	(87.4)	(2.1)	(89.5)
Other operating expenses	(382.7)	(8.1)	(390.8)
Operating income	40.5	7.7	48.2
Interest expense, net of AFUDC	(22.1)	(1.1)	(23.2)
Interest income	0.2	0.1	0.3
Other income, net	0.7	-	0.7
Income tax expense	(5.8)	(2.4)	(8.2)
Net income	$ 13.5	$  4.3	$ 17.8
Cash flows for total investments in plant	$ 74.4	$ 15.2	$ 89.6

(1)

Includes PSNH's generation activities.  

37

	WMECO  - For the Three Months Ended June 30, 2006
(Millions of Dollars)	Distribution	Transmission	Totals
Operating revenues	$94.5	$ 4.7	$ 99.2
Depreciation and amortization	(3.3)	(0.6)	(3.9)
Other operating expenses	(83.1)	(2.1)	(85.2)
Operating income	8.1	2.0	10.1
Interest expense, net of AFUDC	(4.4)	(0.4)	(4.8)
Interest income	0.2	-	0.2
Income tax expense	(2.3)	(0.6)	(2.9)
Net income	$ 1.6	$ 1.0	$  2.6

	WMECO  - For the Six Months Ended June 30, 2006
(Millions of Dollars)	Distribution	Transmission	Totals
Operating revenues	$218.6	$ 9.6	$228.2
Depreciation and amortization	(7.9)	(1.2)	(9.1)
Other operating expenses	(192.3)	(4.5)	(196.8)
Operating income	18.4	3.9	22.3
Interest expense, net of AFUDC	(8.7)	(0.8)	(9.5)
Interest income	0.4	-	0.4
Other income, net	0.6	-	0.6
Income tax expense	(4.9)	(1.1)	(6.0)
Net income	$   5.8	$ 2.0	$   7.8
Cash flows for total investments in plant	$ 14.6	$ 6.2	$ 20.8

	WMECO  - For the Three Months Ended June 30, 2005
(Millions of Dollars)	Distribution	Transmission	Totals
Operating revenues	$ 88.1	$ 5.2	$ 93.3
Depreciation and amortization	(4.6)	(0.5)	(5.1)
Other operating expenses	(77.5)	(2.3)	(79.8)
Operating income	6.0	2.4	8.4
Interest expense, net of AFUDC	(4.4)	-	(4.4)
Interest income	0.1	-	0.1
Other income, net	0.1	-	0.1
Income tax expense	(0.9)	(0.9)	(1.8)
Net income	$ 0.9	$ 1.5	$ 2.4

	WMECO  - For the Six Months Ended June 30, 2005
(Millions of Dollars)	Distribution	Transmission	Totals
Operating revenues	$188.3	$9.4	$197.7
Depreciation and amortization	(9.8)	(1.0)	(10.8)
Other operating expenses	(161.4)	(4.4)	(165.8)
Operating income	17.1	4.0	21.1
Interest expense, net of AFUDC	(8.5)	(0.5)	(9.0)
Interest income	0.2	-	0.2
Other income, net	0.3	-	0.3
Income tax expense	(4.2)	(1.3)	(5.5)
Net income	$    4.9	$2.2	$   7.1
Cash flows for total investments in plant	$  15.5	$5.4	$ 20.9

38

NU Enterprises' segment information for the six months ended June 30, 2006 and 2005 is as follows.  The services and other column includes eliminations relating to the total merchant energy business and the energy services businesses.

	NU Enterprises – For the Three Months Ended June 30, 2006
(Millions of Dollars)	Wholesale	Retail	Generation	Total Merchant Energy	Services and Other	Totals
Operating revenues	$  0.8	$ 168.3	$ 66.1	$ 235.2	$ 11.4	$ 246.6
Depreciation and amortization	-	(0.1)	0.1	-	(0.1)	(0.1)
Wholesale contract market   changes, net	(11.9)	- -	(1.0)	(12.9)	- -	(12.9)
Restructuring and   impairment charges	(0.2)	0.1	(0.3)	(0.4)	(2.9)	(3.3)
Other operating expenses	5.4	(170.0)	(82.2)	(246.8)	(14.5)	(261.3)
Operating loss	(5.9)	(1.7)	(17.3)	(24.9)	(6.1)	(31.0)
Interest expense	(3.3)	(2.5)	(2.9)	(8.7)	(0.1)	(8.8)
Interest income	0.3	0.5	0.5	1.3	0.2	1.5
Other income/(loss), net	0.1	(0.1)	-	-	0.5	0.5
Income tax benefit	3.4	2.7	8.6	14.7	0.9	15.6
Loss from continuing operations	(5.4)	(1.1)	(11.1)	(17.6)	(4.6)	(22.2)
Income/(loss) from   discontinued operations	- -	- -	12.3	12.3	(4.4)	7.9
Net (loss)/income	$ (5.4)	$   (1.1)	$  1.2	$   (5.3)	$  (9.0)	$  (14.3)

	NU Enterprises – For the Six Months Ended June 30, 2006
(Millions of Dollars)	Wholesale	Retail	Generation	Total Merchant Energy	Services and Other	Totals
Operating revenues	$ 10.1	$ 577.3	$ 161.0	$ 748.4	$ 25.2	$ 773.6
Depreciation and amortization	-	-	(0.1)	(0.1)	(0.2)	(0.3)
Wholesale contract market   changes, net	(18.7)	- -	(1.0)	(19.7)	- -	(19.7)
Restructuring and   impairment charges	(0.2)	(2.9)	(0.3)	(3.4)	(5.0)	(8.4)
Other operating expenses	3.2	(684.1)	(172.8)	(853.7)	(29.3)	(883.0)
Operating loss	(5.6)	(109.7)	(13.2)	(128.5)	(9.3)	(137.8)
Interest expense	(6.3)	(5.2)	(5.9)	(17.4)	-	(17.4)
Interest income	0.7	1.3	1.2	3.2	0.4	3.6
Other income/(loss), net	(0.4)	(0.1)	0.3	(0.2)	0.5	0.3
Income tax benefit	4.4	41.0	8.6	54.0	1.9	55.9
Loss from continuing operations	(7.2)	(72.7)	(9.0)	(88.9)	(6.5)	(95.4)
Income/(loss) from   discontinued operations	- -	- -	23.9	23.9	(5.4)	18.5
Net (loss)/income	$ (7.2)	$ (72.7)	$   14.9	$ (65.0)	$ (11.9)	$ (76.9)

	NU Enterprises - For the Three Months Ended June 30, 2005
(Millions of Dollars)	Total Merchant Energy	Services and Other	Totals
Operating revenues	$ 277.0	$ 24.9	$ 301.9
Depreciation and amortization	(0.2)	(0.2)	(0.4)
Wholesale contract market   changes, net	(69.6)	- -	(69.6)
Restructuring and impairment charges	(2.1)	-	(2.1)
Other operating expenses	(295.8)	(28.0)	(323.8)
Operating loss	(90.7)	(3.3)	(94.0)
Interest expense	(3.8)	(0.1)	(3.9)
Interest income	0.7	0.4	1.1
Other income, net	0.9	-	0.9
Income tax benefit	36.9	1.2	38.1
Loss from continuing operations	(56.0)	(1.8)	(57.8)
Income/(loss) from   discontinued operations	12.4	(1.7)	10.7
Net loss	$ (43.6)	$ (3.5)	$ (47.1)

39

	NU Enterprises - For the Six Months Ended June 30, 2005
(Millions of Dollars)	Total Merchant Energy	Services and Other	Totals
Operating revenues	$1,124.1	$ 50.6	$1,174.7
Depreciation and amortization	(1.6)	(0.4)	(2.0)
Wholesale contract market   changes, net	(258.5)	- -	(258.5)
Restructuring and impairment charges	(23.7)	-	(23.7)
Other operating expenses	(1,165.3)	(68.8)	(1,234.1)
Operating loss	(325.0)	(18.6)	(343.6)
Interest expense	(7.2)	(0.2)	(7.4)
Interest income	1.0	0.6	1.6
Other loss, net	0.2	-	0.2
Income tax benefit	123.4	5.0	128.4
Loss from continuing operations	(207.6)	(13.2)	(220.8)
Income/(loss) from   discontinued operations	25.2	(18.9)	6.3
Net loss	$(182.4)	$(32.1)	$ (214.5)

13.

SUBSEQUENT EVENTS

Competitive Generation Business: On July 24, 2006, NU reached an agreement with various subsidiaries of Energy Capital Partners (ECP) to sell its 100 percent ownership in NGC and HWP's 146-MW Mt. Tom coal-fired plant for $1.34 billion, including the assumption of $320 million of NGC debt.  The sales of the NGC stock and the Mt. Tom plant require FERC approval and other approvals.  The sale is expected to close by the end of 2006.  Exclusive of income tax reserve, apportionment and other secondary impacts, NU currently expects to record an after-tax gain of approximately $300 million upon completion of the sale.

SESI Guarantee:  For further information regarding the status of this issue, see Note 7G, "Commitments and Contingencies - Guarantees and Indemnifications."  

CL&P PLR:  For information regarding the current status of this issue, see Note 7A, "Commitments and Contingencies - Regulatory Developments and Rate Matters."

CYAPC:  See Notes 1K, "Other Income, Net" and 7D, "Commitments and Contingencies - Deferred Contractual Obligations," for further information.  

40

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Trustees and Shareholders of
Northeast Utilities
Berlin, Connecticut

We have reviewed the accompanying condensed consolidated balance sheet of Northeast Utilities and subsidiaries (the "Company") as of June 30, 2006, and the related condensed consolidated statements of income/(loss) for the three-month and six-month periods ended June 30, 2006 and 2005, and of cash flows for the six-month periods ended June 30, 2006 and 2005.  These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States).  A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters.  It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole.  Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

As discussed in Notes 2 and 3, the Company recorded significant charges in the three-month and six-month periods ended June 30, 2006 and 2005 in connection with its decision to exit certain business lines.  Also, as discussed in Note 4, prior period financial statements have been restated to include certain components of the Company’s generation business as discontinued operations.  

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet and consolidated statement of capitalization of Northeast Utilities and subsidiaries as of December 31, 2005, and the related consolidated statements of loss, comprehensive loss, shareholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated March 7, 2006 (June 7, 2006 as to Notes 1B, 1H, 1P, 1V, 2, 4, 12, 16, 17 and 18) (which report included an explanatory paragraph related to the recording of significant charges in connection with the Company’s decision to exit certain business lines and the presentation of certain components of the Company’s energy service businesses as discontinued operations), we expressed an unqualified opinion on those consolidated financial statements.  In our opinion, the information set forth in the accompanying co ndensed consolidated balance sheet as of December 31, 2005 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/	Deloitte & Touche LLP
	Deloitte & Touche LLP

Hartford, Connecticut

August 4, 2006

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42

THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES

43

THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
	June 30,	December 31,
	2006	2005
	(Thousands of Dollars)
ASSETS
Current Assets:
Cash	$                    19,762	$                     2,301
Investments in securitizable assets	272,131	252,801
Receivables, less provision for uncollectible
accounts of $2,038 in 2006 and $1,982 in 2005	71,128	80,883
Accounts receivable from affiliated companies	885	17,214
Unbilled revenues	8,428	7,888
Materials and supplies	37,515	32,929
Derivative assets - current	58,368	82,578
Prepayments and other	13,111	18,003
	481,328	494,597
Property, Plant and Equipment:
Electric utility	4,218,377	3,997,652
Less: Accumulated depreciation	1,217,284	1,175,164
	3,001,093	2,822,488
Construction work in progress	377,152	344,204
	3,378,245	3,166,692
Deferred Debits and Other Assets:
Regulatory assets	1,367,610	1,357,985
Prepaid pension	315,430	315,532
Derivative assets - long-term	267,364	308,648
Other	116,107	121,618
	2,066,511	2,103,783
Total Assets	$               5,926,084	$              5,765,072
The accompanying notes are an integral part of these condensed consolidated financial statements.

44

THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
	June 30,	December 31,
	2006	2005
	(Thousands of Dollars)
LIABILITIES AND CAPITALIZATION
Current Liabilities:
Notes payable to affiliated companies	$                          125	$                   26,825
Accounts payable	332,422	253,974
Accounts payable to affiliated companies	44,187	39,755
Accrued taxes	19,069	60,531
Accrued interest	17,898	16,947
Derivative liabilities - current	3,950	477
Other	68,158	70,025
	485,809	468,534
Rate Reduction Bonds	783,262	856,479
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	837,216	774,190
Accumulated deferred investment tax credits	84,666	85,970
Deferred contractual obligations	204,732	243,279
Regulatory liabilities	595,050	742,993
Derivative liabilities - long-term	33,522	31,774
Other	135,009	131,253
	1,890,195	2,009,459
Capitalization:
Long-Term Debt	1,513,732	1,258,883
Preferred Stock - Non-Redeemable	116,200	116,200
Common Stockholder's Equity:
Common stock, $10 par value - authorized
24,500,000 shares; 6,035,205 shares outstanding
in 2006 and 2005	60,352	60,352
Capital surplus, paid in	672,909	612,815
Retained earnings	399,286	382,628
Accumulated other comprehensive income/(loss)	4,339	(278)
Common Stockholder's Equity	1,136,886	1,055,517
Total Capitalization	2,766,818	2,430,600
Commitments and Contingencies (Note 7)
Total Liabilities and Capitalization	$               5,926,084	$              5,765,072
The accompanying notes are an integral part of these condensed consolidated financial statements.

45

THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME Unaudited)
	Three Months Ended June 30,		Six Months Ended June 30,
	2006	2005	2006	2005
	(Thousands of Dollars)
Operating Revenues	$             940,265	$              797,568	$         1,945,025	$         1,636,469
Operating Expenses:
Operation -
Fuel, purchased and net interchange power	602,283	486,311	1,267,210	1,022,996
Other	168,122	141,770	312,075	258,144
Maintenance	23,105	23,804	43,557	42,479
Depreciation	36,687	33,005	72,426	65,457
Amortization of regulatory (liabilities)/assets, net	(2,427)	9,462	(4,321)	5,208
Amortization of rate reduction bonds	29,070	26,998	62,523	58,378
Taxes other than income taxes	33,492	32,312	80,538	78,302
Total operating expenses	890,332	753,662	1,834,008	1,530,964
Operating Income	49,933	43,906	111,017	105,505
Interest Expense:
Interest on long-term debt	17,339	15,182	33,653	27,957
Interest on rate reduction bonds	11,982	14,202	24,566	28,970
Other interest	2,979	5,042	4,424	5,944
Interest expense, net	32,300	34,426	62,643	62,871
Other Income, Net	6,177	6,888	17,392	12,054
Income Before Income Tax Expense	23,810	16,368	65,766	54,688
Income Tax Expense	6,338	3,925	14,464	15,712
Net Income	$                17,472	$               12,443	$              51,302	$              38,976

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

46

THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Six Months Ended
	June 30,
	2006	2005
	(Thousands of Dollars)
Operating Activities:
Net income	$                    51,302	$                 38,976
Adjustments to reconcile to net cash flows
provided by operating activities:
Bad debt expense	8,629	7,331
Depreciation	72,426	65,457
Deferred income taxes	56,230	14,715
Amortization of regulatory (liabilities)/assets, net	(4,321)	5,208
Amortization of rate reduction bonds	62,523	58,378
Deferral of recoverable energy costs	(30,858)	(1,845)
Pension expense	467	365
Regulatory refunds	(111,842)	(50,325)
Deferred contractual obligations	(33,475)	(29,506)
Other non-cash adjustments	(21,359)	(9,501)
Other sources of cash	19,008	4,474
Other uses of cash	(3,893)	(17,138)
Changes in current assets and liabilities:
Receivables and unbilled revenues, net	16,915	(3,241)
Materials and supplies	(4,586)	514
Investments in securitizable assets	(19,330)	(108,491)
Other current assets	4,950	5,762
Accounts payable	63,543	42,507
Accrued taxes	(41,462)	17,367
Other current liabilities	(2,051)	5,090
Net cash flows provided by operating activities	82,816	46,097
Investing Activities:
Investments in plant	(240,040)	(181,672)
Proceeds from sales of investment securities	770	797
Purchases of investment securities	(796)	(818)
Net proceeds from sale of land	-	21,993
NU Money Pool investing	-	(8,375)
Other investing activities	(401)	1,243
Net cash flows used in investing activities	(240,467)	(166,832)
Financing Activities:
Issuance of long-term debt	250,000	200,000
Retirement of rate reduction bonds	(73,217)	(68,363)
Capital contribution from Northeast Utilities	60,000	122,000
Decrease in short-term debt	-	(15,000)
Decrease in NU Money Pool borrowing	(26,700)	(90,025)
Cash dividends on preferred stock	(2,779)	(2,779)
Cash dividends on common stock	(31,865)	(26,918)
Other financing activities	(327)	(1,548)
Net cash flows provided by financing activities	175,112	117,367
Net increase/(decrease) in cash	17,461	(3,368)
Cash - beginning of period	2,301	5,608
Cash - end of period	$                    19,762	$                   2,240
The accompanying notes are an integral part of these condensed consolidated financial statements.

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48

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES

49

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
	June 30,	December 31,
	2006	2005
	(Thousands of Dollars)
ASSETS
Current Assets:
Cash	$                              80	$                              27
Receivables, less provision for uncollectible
accounts of $2,376 in 2006 and $2,362 in 2005	94,015	95,599
Accounts receivable from affiliated companies	567	20,348
Unbilled revenues	42,316	47,705
Taxes receivable	14,858	-
Fuel, materials and supplies	77,490	72,820
Prepayments and other	11,780	11,987
	241,106	248,486
Property, Plant and Equipment:
Electric utility	1,797,689	1,732,716
Other	5,816	5,816
	1,803,505	1,738,532
Less: Accumulated depreciation	717,002	698,480
	1,086,503	1,040,052
Construction work in progress	109,504	115,371
	1,196,007	1,155,423
Deferred Debits and Other Assets:
Regulatory assets	428,858	821,951
Other	71,098	68,723
	499,956	890,674
Total Assets	$                  1,937,069	$                  2,294,583
The accompanying notes are an integral part of these condensed consolidated financial statements.

50

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
	June 30,	December 31,
	2006	2005
	(Thousands of Dollars)
LIABILITIES AND CAPITALIZATION
Current Liabilities:
Notes payable to affiliated companies	$                       11,300	$                       15,900
Accounts payable	63,180	63,320
Accounts payable to affiliated companies	20,549	16,738
Accrued taxes	-	5,186
Accrued interest	8,198	8,202
Other	15,480	15,733
	118,707	125,079
Rate Reduction Bonds	358,620	382,692
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	202,165	242,590
Accumulated deferred investment tax credits	1,053	1,230
Deferred contractual obligations	40,217	48,262
Regulatory liabilities	131,721	414,558
Accrued pension	86,769	76,446
Other	44,986	44,136
	506,911	827,222
Capitalization:
Long-Term Debt	507,092	507,086
Common Stockholder's Equity:
Common stock, $1 par value - authorized
100,000,000 shares; 301 shares outstanding
in 2006 and 2005	-	-
Capital surplus, paid in	212,226	209,788
Retained earnings	233,422	242,633
Accumulated other comprehensive income	91	83
Common Stockholder's Equity	445,739	452,504
Total Capitalization	952,831	959,590
Commitments and Contingencies (Note 7)
Total Liabilities and Capitalization	$                  1,937,069	$                  2,294,583
The accompanying notes are an integral part of these condensed consolidated financial statements.

51

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
	Three Months Ended June 30,		Six Months Ended June 30,
	2006	2005	2006	2005
	(Thousands of Dollars)
Operating Revenues	$       303,438	$       259,586	$       618,754	$         528,477
Operating Expenses:
Operation -
Fuel, purchased and net interchange power	156,764	122,256	299,002	248,487
Other	45,590	45,377	88,158	88,790
Maintenance	22,246	21,075	35,737	35,110
Depreciation	12,229	11,523	24,453	22,841
Amortization of regulatory assets, net	4,144	15,771	66,220	43,708
Amortization of rate reduction bonds	11,975	11,350	24,166	22,913
Taxes other than income taxes	8,923	8,758	19,018	18,477
Total operating expenses	261,871	236,110	556,754	480,326
Operating Income	41,567	23,476	62,000	48,151
Interest Expense:
Interest on long-term debt	5,959	5,102	11,683	9,874
Interest on rate reduction bonds	5,294	6,115	10,829	12,418
Other interest	215	546	445	909
Interest expense, net	11,468	11,763	22,957	23,201
Other Income, Net	1,143	884	2,030	980
Income Before Income Tax Expense	31,242	12,597	41,073	25,930
Income Tax Expense	16,338	3,534	21,037	8,079
Net Income	$         14,904	$           9,063	$         20,036	$           17,851

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

52

PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Six Months Ended
	June 30,
	2006	2005
	(Thousands of Dollars)
Operating activities:
Net income	$                 20,036	$                17,851
Adjustments to reconcile to net cash flows
provided by operating activities:
Bad debt expense	1,994	1,040
Depreciation	24,453	22,841
Deferred income taxes	(18,081)	(23,021)
Amortization of regulatory assets, net	66,220	43,708
Amortization of rate reduction bonds	24,166	22,913
Pension expense	6,883	6,558
Regulatory (underrecoveries)/overrecoveries	(674)	2,571
Deferred contractual obligations	(7,594)	(6,153)
Other non-cash adjustments	(6,664)	3,754
Other sources of cash	-	6
Other uses of cash	(3,017)	(19,284)
Changes in current assets and liabilities:
Receivables and unbilled revenues, net	24,760	(12,217)
Fuel, materials and supplies	(4,670)	(4,545)
Other current assets	306	6,950
Accounts payable	8,673	9,562
Accrued taxes	(20,044)	12,225
Other current liabilities	(254)	437
Net cash flows provided by operating activities	116,493	85,196
Investing Activities:
Investments in plant	(60,408)	(89,651)
Proceeds from sales of investment securities	1,321	1,366
Purchases of investment securities	(1,365)	(1,401)
Other investing activities	(1,756)	(2,780)
Net cash flows used in investing activities	(62,208)	(92,466)
Financing Activities:
Retirement of rate reduction bonds	(24,072)	(22,701)
Increase in short-term debt	-	10,000
(Decrease)/increase in NU Money Pool borrowing	(4,600)	12,600
Capital contribution from Northeast Utilities	2,500	15,000
Cash dividends on common stock	(29,247)	(12,256)
Other financing activities	1,187	(13)
Net cash flows (used in)/provided by financing activities	(54,232)	2,630
Net increase/(decrease) in cash	53	(4,640)
Cash - beginning of period	27	4,855
Cash - end of period	$                        80	$                     215
The accompanying notes are an integral part of these condensed consolidated financial statements.

53

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54

WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

55

WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
	June 30, 2006	December 31, 2005
	(Thousands of Dollars)
ASSETS
Current Assets:
Cash	$                       732	$                        1
Receivables, less provision for uncollectible
accounts of $5,058 in 2006 and $3,653 in 2005	42,453	43,490
Accounts receivable from affiliated companies	295	5,752
Unbilled revenues	16,219	16,411
Taxes receivable	1,232	-
Materials and supplies	1,742	1,414
Marketable securities - current	24,994	20,905
Prepayments and other	863	897
	88,530	88,870
Property, Plant and Equipment:
Electric utility	686,756	671,292
Less: Accumulated depreciation	197,129	193,151
	489,627	478,141
Construction work in progress	23,154	21,176
	512,781	499,317
Deferred Debits and Other Assets:
Regulatory assets	231,154	223,174
Prepaid pension	81,292	80,618
Marketable securities - long-term	27,468	30,434
Other	21,782	23,583
	361,696	357,809
Total Assets	$                963,007	$             945,996

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

56

WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
	June 30, 2006	December 31, 2005
	(Thousands of Dollars)

LIABILITIES AND CAPITALIZATION
Current Liabilities:
Notes payable to banks	$                  10,000	$                          -
Notes payable to affiliated companies	15,200	14,900
Accounts payable	24,490	31,333
Accounts payable to affiliated companies	6,608	9,015
Accrued taxes	210	1,620
Accrued interest	4,553	4,517
Other	9,534	9,364
	70,595	70,749
Rate Reduction Bonds	105,293	111,331
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes	227,308	219,992
Accumulated deferred investment tax credits	2,487	2,655
Deferred contractual obligations	56,001	66,633
Regulatory liabilities	24,162	23,836
Other	12,998	11,977
	322,956	325,093
Capitalization:
Long-Term Debt	260,470	259,487
Common Stockholder's Equity:
Common stock, $25 par value - authorized
1,072,471 shares; 434,653 shares outstanding
in 2006 and 2005	10,866	10,866
Capital surplus, paid in	103,295	82,811
Retained earnings	88,798	84,965
Accumulated other comprehensive income	734	694
Common Stockholder's Equity	203,693	179,336
Total Capitalization	464,163	438,823
Commitments and Contingencies (Note 7)
Total Liabilities and Capitalization	$              963,007	$              945,996
The accompanying notes are an integral part of these condensed consolidated financial statements.

57

WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

	Three Months Ended June 30,		Six Months Ended June 30,
	2006	2005	2006	2005
	(Thousands of Dollars)
Operating Revenues	$            99,162	$            93,317	$          228,202	$          197,652
Operating Expenses:
Operation -
Fuel, purchased and net interchange power	61,543	54,360	150,418	117,058
Other	17,431	18,386	32,953	34,380
Maintenance	3,521	4,197	7,353	8,035
Depreciation	4,234	4,041	8,527	8,068
Amortization of regulatory liabilities, net	(3,271)	(1,682)	(5,457)	(2,935)
Amortization of rate reduction bonds	2,953	2,768	5,987	5,615
Taxes other than income taxes	2,646	2,876	6,124	6,292
Total operating expenses	89,057	84,946	205,905	176,513
Operating Income	10,105	8,371	22,297	21,139
Interest Expense:
Interest on long-term debt	2,678	2,149	5,422	4,326
Interest on rate reduction bonds	1,707	1,917	3,469	3,885
Other interest	394	410	642	747
Interest expense, net	4,779	4,476	9,533	8,958
Other Income, Net	242	322	1,006	459
Income Before Income Tax Expense	5,568	4,217	13,770	12,640
Income Tax Expense	2,939	1,849	5,964	5,545
Net Income	$              2,629	$              2,368	$              7,806	$              7,095

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

58

WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Six Months Ended
	June 30,
	2006	2005
	(Thousands of Dollars)
Operating Activities:
Net income	$                        7,806	$                       7,095
Adjustments to reconcile to net cash flows
provided by operating activities:
Bad debt expense	2,779	781
Depreciation	8,527	8,068
Deferred income taxes	8,172	123
Amortization of regulatory liabilities, net	(5,457)	(2,935)
Amortization of rate reduction bonds	5,987	5,615
Pension income	(343)	(348)
Regulatory (underrecoveries)/overrecoveries	(10,666)	6,658
Deferred contractual obligations	(9,215)	(8,018)
Other non-cash adjustments	(2,501)	(3,063)
Other sources of cash	3,293	1,039
Other uses of cash	-	(3,942)
Changes in current assets and liabilities:
Receivables and unbilled revenues, net	3,907	(2,472)
Materials and supplies	(328)	139
Other current assets	34	4,942
Accounts payable	(8,002)	5,263
Accrued taxes	(2,642)	2,107
Other current liabilities	389	(1,063)
Net cash flows provided by operating activities	1,740	19,989
Investing Activities:
Investments in plant	(20,776)	(20,919)
Net proceeds from sale of land	-	1,599
Proceeds from sales of investment securities	55,799	31,597
Purchases of investment securities	(56,986)	(32,485)
Other investing activities	165	1,109
Net cash flows used in investing activities	(21,798)	(19,099)
Financing Activities:
Retirement of rate reduction bonds	(6,038)	(5,666)
Increase/(decrease) in short-term debt	10,000	(15,000)
Increase in NU Money Pool borrowing	300	17,400
Capital contribution from Northeast Utilities	20,500	4,500
Cash dividends on common stock	(3,973)	(3,842)
Other financing activities	-	41
Net cash flows provided by/(used in) financing activities	20,789	(2,567)
Net increase/(decrease) in cash	731	(1,677)
Cash - beginning of period	1	1,678
Cash - end of period	$                            732	$                              1
The accompanying notes are an integral part of these condensed consolidated financial statements.

59

NORTHEAST UTILITIES AND SUBSIDIARIES

Management's Discussion and Analysis of
Financial Condition and Results of Operations

This discussion should be read in conjunction with the condensed consolidated financial statements and footnotes in this Form 10-Q, the First Quarter 2006 Form 10-Q and the NU 2005 Form 10-K as amended by NU's report on Form 8-K dated June 7, 2006 to classify certain businesses as discontinued operations.  All per share amounts are reported on a fully diluted basis.

FINANCIAL CONDITION AND BUSINESS ANALYSIS

Executive Summary

The following items in this executive summary are explained in more detail in this quarterly report:

Results, Strategy and Outlook:

·

Northeast Utilities (NU or the company) earned $22.2 million, or $0.14 per share, in the second quarter of 2006, compared with a loss of $27.7 million, or $0.21 per share, in the second quarter of 2005.  The results for 2006 included Utility Group net income of $33.5 million, or $0.22 per share, after payment of preferred dividends, NU Enterprises businesses losses of $14.3 million, or $0.10 per share, and parent company and other income of $3 million, or $0.02 per share.

·

In the first half of 2006, NU earned $12.1 million, or $0.08 per share, compared with a loss of $145.4 million, or $1.12 per share, in the first half of 2005.  The primary reason for the improved 2006 results were after-tax charges totaling $195.7 million ($306.3 million pre-tax) recorded in the first half of 2005 resulting from impairments and mark-to-market impacts associated with NU’s decision to exit the wholesale marketing and energy services businesses.

·

Utility Group results in the second quarter of 2006 included earnings of $12.7 million for the transmission businesses of The Connecticut Light & Power Company (CL&P), Public Service Company of New Hampshire (PSNH), and Western Massachusetts Electric Company (WMECO), compared with $10.3 million in the second quarter of 2005.  For the first half of 2006, the transmission businesses earned $25.4 million, compared with $18.7 million in the first half of 2005.  The higher transmission earnings were due primarily to a higher level of transmission investment on which these companies earned a return.

·

Earnings at the distribution businesses of CL&P, PSNH, WMECO and Yankee Gas Services Company (Yankee Gas) and the regulated generation business of PSNH totaled $20.8 million in the second quarter of 2006 and $62.7 million in the first half of 2006, compared with $11.7 million in the second quarter of 2005 and $56.9 million in the first half of 2005.  The earnings increase in 2006 was the result of the settlement of a CL&P tax case with the State of Connecticut in 2006, the full recovery in the second quarter of 2006 within pre-tax earnings of a deferred tax expense included in PSNH's non-securitized Part 3 stranded costs, while the associated tax expense is recorded on a pro-rata basis throughout 2006, and an after-tax charge of $4.4 million recorded in 2005 related to refunds to CL&P’s streetlighting customers.

·

Losses in the first half of 2006 for the NU Enterprises businesses were related primarily to the retail marketing business.  That business, which was sold to Hess Corporation (Hess) on June 1, 2006, lost $1.1 million in the second quarter of 2006 and $72.7 million in the first half of 2006.  A significant factor in the first half loss was related to an after-tax charge of $33.3 million which was recorded to reduce the book value of this business to its fair value less its cost to sell in order to reflect its held for sale status.  NU Enterprises also recorded after-tax charges of $3.3 million ($5.6 million pre-tax) in the second quarter of 2006 to reflect the sale of Select Energy Services, Inc. (SESI) to Ameresco, Inc. (Ameresco).  The improved 2006 results from 2005 reflect after-tax charges totaling $195.7 million ($306.3 million pre-tax) recorded in the first half of 2005 associated with exiting the wholesale market ing and energy services businesses.

·

On July 24, 2006, NU reached an agreement with various subsidiaries of Energy Capital Partners (ECP) to sell its 100 percent ownership in Northeast Generation Company (NGC) and Holyoke Water Power Company's (HWP) 146 megawatt (MW) Mt. Tom coal-fired plant (Mt. Tom) for $1.34 billion, including the assumption of $320 million of NGC debt.  The sale of the NGC stock and the Mt. Tom plant requires Federal Energy Regulatory Commission (FERC) approval and other approvals.  The sale is expected to close by the end of 2006.  Exclusive of income tax reserve, apportionment and other secondary impacts, NU currently expects to record an after-tax gain of approximately $300 million upon completion of the sale.  The sales price is subject to final purchase price adjustments for working capital and other items.

60

·

NU has revised its projection for 2006 combined earnings for the Utility Group and parent company from between $1.09 per share and $1.22 per share to between $1.57 per share and $1.70 per share as a result of the inclusion of a gain of $0.48 per share in CL&P’s third quarter distribution results as a result of a one-time $74 million reduction of income tax expense pursuant to a private letter ruling (PLR) received from the Internal Revenue Service (IRS).  NU is not providing consolidated earnings guidance or earnings guidance for NU Enterprises.  NU has made significant progress in its strategic initiative to exit all of its competitive businesses.  Upon the completion of the recently announced sale of its competitive generation business to ECP, NU will have divested or sold substantially all of NU Enterprises’ assets.  As a result of divestitures, NU’s annual revenues are projected to decrease by app roximately $2 billion from 2005 levels.  

Regulatory Items:

·

On June 15, 2006, the FERC approved a settlement agreement which proposed a Forward Capacity Market (FCM) in place of the previously proposed Locational Installed Capacity (LICAP) pricing mechanism.  The settlement was filed by the New England Independent System Operator (ISO-NE) and a broad cross-section of critical stakeholders from around the region, including CL&P, PSNH and Select Energy, Inc. (Select Energy) at the FERC.  The settlement agreement is expected to be implemented by December 1, 2006.  Several parties have sought rehearing of this issue by the FERC.  

·

On June 29, 2006, the New Hampshire Public Utilities Commission (NHPUC) approved a temporary Delivery Service (DS) rate increase of $24.5 million, the requested decrease in the Stranded Cost Recovery Charge (SCRC) and a decrease in the Energy Service (ES) rate.  All rate changes were effective on July 1, 2006.  The impact of the combined rate changes is an overall decrease of 15.5 percent.

·

On July 20, 2006, the FERC issued its final rules promoting transmission investment through pricing reform that included the financial incentives for the construction of high-voltage electric transmission in the United States.  The final rule identifies specific incentives the FERC will allow when justified in the context of specific rate applications.  Management views this rule to be positive, but the actual impacts on NU will be determined by the specific incentives that NU seeks and that are approved by the FERC.  

·

On July 27, 2006, the Connecticut Department of Public Utility Control (DPUC) issued a letter releasing its hold on unamortized investment tax credits (UITC) and excess deferred income taxes (EDIT) pursuant to a PLR from the IRS.  The $74 million of UITC and EDIT will be reflected as a reduction of CL&P's third quarter 2006 income tax expense and will increase CL&P's earnings by the same amount.  

·

On August 4, 2006, CL&P notified Governor Rell and the DPUC that it intends to postpone filing a distribution rate case until mid-2007 for rates effective on January 1, 2008.

Liquidity:

·

NU's capital expenditures totaled $380.7 million in the first half of 2006, compared with $332.1 million in the first half of 2005.  The increase in NU's capital expenditures was primarily the result of higher transmission capital expenditures, particularly at CL&P.  Utility Group capital expenditures are expected to approach approximately $900 million in 2006.  

·

Cash flows from operations decreased by $65.3 million from $278.4 million for the first half of 2005 to $213.1 million for the first half of 2006.  The decrease in operating cash flows is due primarily to higher regulatory refunds in 2006 as CL&P refunded amounts to its ratepayers to moderate the increase in CL&P's transitional standard offer (TSO) rates that became effective on January 1, 2006, a higher level of recoverable energy costs paid but not yet recovered in regulated rates, and a federal income tax payment of approximately $55 million in the first quarter of 2006 related to NU's 2005 tax return.

Overview

Consolidated:  NU earned $22.2 million, or $0.14 per share, in the second quarter of 2006, compared with a loss of $27.7 million, or $0.21 per share, in the second quarter of 2005.  NU earned $12.1 million, or $0.08 per share, in the first half of 2006, compared with a loss of $145.4 million, or $1.12 per share, in the first half of 2005.  Earnings per share results in 2006 include the impact of the issuance of 23 million NU common shares on December 12, 2005.  A summary of NU's earnings/(losses) by major business line for the second quarter and first half of 2006 and 2005 is as follows:

61

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(Millions of Dollars,	2006		2005		2006		2005
except per share amounts)	Amount	Per Share	Amount	Per Share	Amount	Per Share	Amount	Per Share
Utility Group	$33.5	$0.22	$  22.0	$  0.17	$88.1	$0.58	$   75.6	$  0.58
NU Enterprises	(14.3)	(0.10)	(47.1)	(0.36)	(76.9)	(0.50)	(214.5)	(1.65)
Parent and Other	3.0	0.02	(2.6)	(0.02)	0.9	-	(6.5)	(0.05)
Net (Loss)/Income (1)	$22.2	$0.14	$(27.7)	$(0.21)	$12.1	$0.08	$(145.4)	$(1.12)

(1)

The segments above do not necessarily coincide with the legal entities that have exchangeable securities.  Instead, the segments reflect how management views the financial performance of its businesses.  As such, the shareholders of NU do not have a direct legal right to the assets and liabilities of any one segment but do have a right to part of NU's assets and liabilities as a whole.  

A portion of NU Enterprises results are included in discontinued operations.  See the Overview – NU Enterprises section included in this management's discussion and analysis for further information.  

Within the Utility Group, NU segments its earnings between its transmission and distribution businesses with regulated generation included in the distribution business.  The electric transmission business earned $12.7 million in the second quarter of 2006 and $25.4 million in the first half of 2006, compared with $10.3 million in the second quarter of 2005 and $18.7 million in the first half of 2005.  The higher level of transmission earnings was due primarily to a return on a higher level of transmission investment at CL&P.  

In the second quarter of 2006, the electric distribution and regulated generation companies earned $20.9 million, compared with $12.1 million in the second quarter of 2005.  Those companies earned $51 million in the first half of 2006, compared with $42.4 million in the same period of 2005.  Yankee Gas lost $0.1 million in the second quarter of 2006 and earned $11.7 million in the first half of 2006, compared with a loss of $0.4 million in the second quarter of 2005 and earnings of $14.5 million in the first half of 2005.  The decline in the first half of 2006 earnings at Yankee Gas was primarily due to an 11.5 percent decline in firm gas sales, mostly caused by milder weather.

In the first half of 2006, the NU Enterprises businesses accounted for approximately 20 percent of NU's revenues and at June 30, 2006, these businesses also accounted for approximately 13 percent of NU's total assets.  NU Enterprises is comprised of the wholesale marketing, competitive generation, and the energy services businesses.  It also included the results of the retail marketing business, which was sold to Hess on June 1, 2006.  Through July of 2006, NU had also sold four of its six energy services businesses and portions of a fifth.

In the first half of 2006, the NU Enterprises loss was primarily related to its retail marketing business.  NU Enterprises' retail marketing business lost $1.1 million in the second quarter of 2006, almost all of it prior to the June 1, 2006 sale to Hess.  An after-tax charge of $33.3 million ($53.9 million pre-tax) was recorded in the first half of 2006 to reduce the book value of this business to its fair value less its cost to sell.  In addition to the retail marketing business charge, NU Enterprises lost $43.6 million in the first half of 2006.  The primary reason for the improved 2006 results were after-tax charges totaling $195.7 million ($306.3 million pre-tax) recorded in the first half of 2005 resulting from impairments and mark-to-market impacts associated with NU’s decision to exit the wholesale marketing and energy services businesses.

62

Utility Group:  The Utility Group is comprised of CL&P, PSNH, WMECO and Yankee Gas, and is comprised of their applicable transmission, distribution and generation businesses.  A summary of Utility Group earnings by company and business segment for the three and six months ended June 30, 2006 and 2005 is as follows:

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
(Millions of Dollars)	2006	2005	2006	2005
CL&P Distribution	$  6.4	$ 4.6	$29.8	$24.0
CL&P Transmission	9.7	6.4	18.8	12.2
Total CL&P *	16.1	11.0	48.6	36.2
PSNH Distribution and Generation	12.9	6.6	15.4	13.5
PSNH Transmission	2.0	2.4	4.6	4.3
Total PSNH	14.9	9.0	20.0	17.8
WMECO Distribution	1.6	0.9	5.8	4.9
WMECO Transmission	1.0	1.5	2.0	2.2
Total WMECO	2.6	2.4	7.8	7.1
Total Distribution and Generation	20.9	12.1	51.0	42.4
Total Transmission	12.7	10.3	25.4	18.7
Yankee Gas	(0.1)	(0.4)	11.7	14.5
Total Utility Group Net Income	$33.5	$22.0	$88.1	$75.6

*After preferred dividends in all periods.  

CL&P's second quarter and first half of 2006 distribution earnings increased as a result of higher distribution rates and an after-tax charge of $4.4 million recorded in the second quarter of 2005 related to refunds to streetlighting customers offset by lower sales and higher interest and operating expenses in 2006.  CL&P's distribution earnings for the first half of 2006 also increased as a result of a lower effective tax rate resulting from the settlement of a tax case with the State of Connecticut which improved CL&P's 2006 first quarter net income by $4.9 million.  CL&P’s regulatory return on equity (ROE) on a trailing 12-month basis is now approximately 7.7 percent compared to its allowed ROE of 9.85 percent.

Second quarter and first half 2006 CL&P transmission earnings benefited from higher revenues due to earnings on a higher level of investment in its transmission system.  

PSNH's distribution and generation earnings in the second quarter of 2006 and first half of 2006 were higher than similar periods in 2005 primarily due to the full recovery in the second quarter of 2006 within pre-tax earnings of a deferred tax expense included in PSNH's non-securitized Part 3 stranded costs.  However, the associated tax expense will be recorded on a pro-rata basis throughout 2006 and will have no impact on PSNH's net income in 2006.  PSNH’s regulatory ROE on a trailing 12-month basis is now approximately 6.9 percent.

PSNH's transmission earnings for the second quarter were lower due to the true-up of prior period expenses partially offset by higher earnings resulting from higher rate base.  PSNH transmission earnings for the first half of 2006 benefited from higher rate base earnings, partially offset by the true-up of prior period expenses.  

WMECO's improved second quarter and first half of 2006 distribution results were higher due to a $3 million annualized distribution rate increase that took effect on January 1, 2006 offset by a 2.7 percent decrease in sales and increased interest expense in the first half of 2006.  WMECO's regulatory ROE on a trailing 12-month basis is now approximately 10 percent compared to its allowed ROE of 9.85 percent.  

WMECO's transmission earnings for the second quarter and first half of 2006 were lower due to the true-up of prior period expenses partially offset by higher rate base earnings in both periods.  

Yankee Gas' first half of 2006 results were lower than the same periods of 2005 primarily as a result of an 11.5 percent decline in firm natural gas retail sales, mostly caused by milder weather during the 2006 heating season.  Yankee Gas’ regulatory ROE on a trailing 12-month basis is now approximately 6.8 percent compared to its allowed ROE of 9.9 percent.

The Utility Group's first half of 2006 retail electric sales were negatively affected by temperatures that were milder in the first quarter of 2006 than during the same periods of 2005 and by price elasticity driven by higher energy prices in 2006.  Overall, retail kilowatt-hour (kWh) electric sales decreased by 2.5 percent in the second quarter of 2006 from the second quarter of 2005 (a 0.6 percent decrease on a weather-normalized basis).  Retail electric sales decreased by 3 percent in the first half of 2006 (a 0.8 percent decrease on a weather-normalized basis) compared with the first half of 2005.  Residential electric sales in the first half of 2006 decreased by 5.2 percent from 2005; commercial electric sales decreased by 1 percent; and industrial sales decreased by 2.2 percent.  Absent the

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impacts of the weather, management believes the decline in sales is due primarily to higher prices driven by the higher fuel and purchased power costs.  

NU Enterprises:  At June 30, 2006, NU Enterprises was the parent of Select Energy, NGC, Northeast Generation Services Company (NGS) and its subsidiary, E.S. Boulos Company (Boulos), Select Energy Contracting, Inc. - Connecticut (SECI-CT), which is a division of Select Energy Contracting, Inc. (SECI), all of which are collectively referred to as "NU Enterprises."  The generation operations of HWP's Mt. Tom plant are also included in the results of NU Enterprises.  

The merchant energy business includes Select Energy's wholesale marketing and retail marketing businesses, 1,442 MW of generation assets, including 1,296 MW of primarily pumped storage and hydroelectric generation assets at NGC and 146 MW of coal-fired generation assets at HWP related to Mt. Tom, and NGS.  At June 30, 2006, the energy services businesses include the operations of Boulos, and SECI-CT.  

NU’s condensed consolidated statements of income/(loss) for the three and six months ended June 30, 2006 and 2005 present the operations for the following companies as discontinued operations:

·

NGC,

·

Mt. Tom,

·

SESI, which was sold in May of 2006 to Ameresco, Inc.,

·

Woods Electrical Co., Inc. (Woods Electrical), which was sold in April of 2006 to WESDAC, LLC.

·

Select Energy Contracting, Inc. - New Hampshire (SECI-NH) (including Reeds Ferry Supply Co., Inc. (Reeds Ferry)), which was sold in November of 2005 to Denron Plumbing & HVAC, LLC., and

·

Woods Network Services, Inc. (Woods Network), which was sold in November of 2005 to Barn Systems, Inc.

NU Enterprises' wholesale and retail marketing businesses are not included in discontinued operations because they do not meet the accounting criteria for this presentation.  

A summary of NU Enterprises' losses for the three and six months ended June 30, 2006 and 2005 is as follows:

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
(Millions of Dollars)	2006	2005	2006	2005
Merchant Energy	$   (5.3)	$(43.6)	$(65.0)	$(182.4)
Energy Services, Parent and Other	(9.0)	(3.5)	(11.9)	(32.1)
Net Loss	$(14.3)	$(47.1)	$(76.9)	$(214.5)

A summary of NU Enterprises' losses from continuing operations and discontinued operations for the three and six months ended June 30, 2006 and 2005 is as follows:

	For the Three Months Ended June 30,		For the Six Months Ended June 30,
(Millions of Dollars)	2006	2005	2006	2005
Continuing Operations:
Merchant Energy	$ (17.6)	$(56.0)	$(88.9)	$(207.6)
Energy Services, Parent and Other	(4.6)	(1.8)	(6.5)	(13.2)
	(22.2)	(57.8)	(95.4)	(220.8)
Discontinued Operations:
Merchant Energy	12.3	12.4	23.9	25.2
Energy Services, Parent and Other	(4.4)	(1.7)	(5.4)	(18.9)
	7.9	10.7	18.5	6.3
Net Loss	$(14.3)	$(47.1)	$(76.9)	$(214.5)

The earnings included in discontinued operations relate to NGC's and Mt. Tom's contracts with Select Energy.  Retail marketing results are included as continuing operations, as separate financial information for the retail marketing business is not available due to the manner in which the merchant energy business operated prior to January 1, 2006.  

The retail marketing business loss from operations totaling $1.1 million for the second quarter and $72.7 million for the first half of 2006 reflects the operating margins of the retail marketing business being more than offset by its ongoing operating expenses and a $33.3 million negative after-tax adjustment to record the retail business at fair value less cost to sell, which partially reflects the impacts of the decision to exit the wholesale marketing business.  

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In addition to the charge to reflect the fair value of the retail marketing business, results for the first half of 2006 reflect the losses from both the electric sales and natural gas sales.  The losses for electric sales were caused primarily by replacing the electricity supply at current prices.  When the decision to exit the competitive generation and retail marketing businesses was announced, the resources of the competitive generation business that were previously dedicated to the retail marketing business at a fixed price were separated from the retail marketing business, exposing the portfolio of retail sales to current market prices.  Market prices have generally been higher than those that would have been charged by the competitive generation business (with generation receiving a partially offsetting benefit).  The retail marketing losses on natural gas were primarily the results of mild weather which lowered demand and created a surplus of supply which was either sold at a loss or remained in storage with a reduced fair value.

Contributing to the negative results totaling $4.2 million in the second quarter of 2006 for the combined wholesale marketing and competitive generation businesses was an after-tax loss of $9.2 million due to changes in the fair value of the wholesale marketing contracts compared to an after-tax gain of $4 million on these contracts in the first quarter of 2006.  The combined wholesale marketing and competitive generation businesses recorded earnings of $7.7 million in the first half of 2006.  Short-term energy prices in the second quarter of 2006 continued to decrease and reduced the value received from sales of generation products compared to the first quarter of 2006, which contributed to the second quarter 2006 loss.  However, generation earnings are higher in 2006 than the first half of last year because generation is selling its products into a market that is generally higher than if it would have sold those products to the retail marketing business.  

The combined wholesale marketing and competitive generation businesses losses in the second quarter of 2005 and the first half of 2005 totaling $45 million and $180.6 million, respectively, reflect the impacts of NU’s March 2005 decision to exit the wholesale marketing business.  As a result of that decision, third party sales contracts and the majority of contracts intended to source a combination of retail and wholesale loads were marked to market.  

The losses at the energy services businesses, parent and other are primarily due to increases in the costs to complete certain SECI contracts and restructuring charges associated with Woods Electrical, SESI and SECI-CT.  A $3.3 million after-tax loss is included in the second quarter as a result of the sale of SESI.  The improved results in the first half of 2006 are due to the absence of comparable restructuring and impairment charges in 2006 recorded in the first quarter of 2005.

For information regarding the current status of the exit from the wholesale marketing, retail marketing, competitive generation and energy services businesses, see "NU Enterprises Divestitures," included in this management's discussion and analysis.

Parent and Other:  Parent company and other after-tax income totaled $3 million in the second quarter and $0.9 million in the first half of 2006, compared with expenses of $2.6 million in the second quarter and $6.5 million in the first half of 2005.  Improved second quarter results were due to higher investment income in 2006 and a $2 million after-tax gain associated with the sale of NU's 2.7 million shares of Globix Corporation (Globix), a telecommunications company.

Future Outlook

NU has revised its projection for 2006 combined earnings for the Utility Group and parent company from between $1.09 per share and $1.22 per share to between $1.57 per share and $1.70 per share as a result of the inclusion of a gain of $0.48 per share in CL&P’s third quarter distribution results as a result of a one-time $74 million reduction of income tax expense pursuant to a PLR received from the IRS.

Utility Group Distribution: NU currently projects earnings at its regulated distribution and generation businesses of between $1.23 per share and $1.33 per share, including the reduction in CL&P’s income tax expense as a result of the PLR, and between $0.75 per share and $0.85 per share excluding the impact of the PLR.  Previously, NU had projected distribution company earnings of $0.89 per share and $0.96 per share in 2006.  Among other factors, NU’s distribution segments are being negatively affected by less rate relief and lower sales than previously anticipated.

CL&P’s distribution rates will remain unchanged except for the previously approved increase of $7 million that will take effect on January 1, 2007.  As a result, CL&P does not expect to earn its authorized 9.85 percent ROE in 2007.  Management projects that CL&P's ROE could decline to approximately 7 percent.  However, management expects to file a rate case in mid-2007, for new rates effective on January 1, 2008.

PSNH's temporary distribution rate increase that took effect on July 1, 2006, and ultimately its permanent rate case is expected to improve PSNH's financial performance in 2007 compared to 2006.

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Utility Group Transmission:  NU currently projects higher transmission business earnings of between $0.34 per share and $0.37 per share, an increase from the company’s previous estimate of between $0.32 per share and $0.35 per share.  The increase is due in part to projects being constructed ahead of schedule.  

Parent and Other:  As a result of higher investment income, a gain on the sale of Globix shares, and earnings from NU's service company and real estate affiliates, NU expects approximately breakeven performance at the parent company as compared with a previously projected loss of $0.09 per share to $0.12 per share.

NU Enterprises:  NU is not providing 2006 earnings guidance for NU Enterprises.  However, NU expects to record an after-tax gain of approximately $300 million, or approximately $1.95 per share, in the fourth quarter of 2006 related to the sale of competitive generation business.

NU has made significant progress in its strategic initiative to exit all of its competitive businesses.  Upon the completion of the recently announced sale of its competitive generation business to ECP, NU will have divested or sold substantially all of NU Enterprises’ assets.  As a result of divestitures, NU’s annual revenues are projected to decrease by approximately $2 billion from 2005 levels.  

The NU Enterprises assets that have not yet either been sold or placed under contract to be sold are as follows:

·

Five wholesale sales contracts in PJM (four of which expire in 2007 and one expires in 2008) and associated purchased supply contracts;

·

A long-term wholesale sales contract in New York which expires in 2013;

·

Three power purchase contracts (two in New England and one in New York).  Two contracts expire in 2007, and one expires in 2012, and

·

The electrical contracting company, E. S. Boulos Company (Boulos).

See Note 4, "Assets Held for Sale and Discontinued Operations," for information regarding what businesses are held for sale and discontinued operations.  

2007 Outlook:  Various securities analysts who follow NU's stock have 2007 earnings estimates in the $1.30 to $1.40 range.  The company does not provide specific 2007 guidance until the late fall, but at this time management is comfortable with this range.

There will be several key factors that will impact earnings in 2007.  First, investments in the transmission business continue to grow rate base, which in turn provide meaningful net income growth.  This factor is supported by the increase in 2006 earnings guidance for the transmission segment.  

Second, although there will be no CL&P rate case in 2006, a $7 million rate increase will be in effect for CL&P on January 1, 2007, which is the last increase resulting from CL&P's 2003 rate case.  PSNH rate relief and a Yankee Gas rate filing, which the company expects to become effective on July 1, 2007, will also benefit 2007 earnings.  The Yankee Gas rate case will incorporate the company’s $108 million liquefied natural gas (LNG) facility into rate base and result in a significant increase in Yankee Gas' rate base.

Third, the cash proceeds received from the sale of the competitive generation business will provide interest income for NU parent and offset NU parent's interest and other operating expenses.

Management continues to believe that the company can achieve earnings growth of between 8 percent and 10 percent, and that 2007 earnings growth will be higher than this 8 percent to 10 percent range.  Management also believes that this type of growth can support dividend increases above industry averages without negatively impacting the company's dividend payout ratio.

Liquidity

Consolidated:  NU continues to maintain an ample level of liquidity.  At June 30, 2006, NU's total unused borrowing capacity through its revolving credit agreement, the Utility Group's revolving credit agreement and CL&P's accounts receivable facility totaled approximately $850 million.  At June 30, 2006, NU also had $48.7 million of cash and cash equivalents on hand, compared with $45.8 million at December 31, 2005.  

Cash flows from operations decreased by $65.3 million from $278.4 million for the first half of 2005 to $213.1 million for the first half of 2006.  The decrease in operating cash flows is due primarily to higher regulatory refunds in 2006 as CL&P refunded amounts

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to its ratepayers to moderate the increase in CL&P's TSO rates that became effective on January 1, 2006.  Operating cash flows also decreased due to a higher level of recoverable energy costs paid but not yet recovered in regulated rates.  The decrease in operating cash flows is also due to a federal income tax payment of approximately $55 million related to NU's 2005 tax return.  This payment was made in the first quarter of 2006.  No such federal income tax payment was made in the first quarter of 2005 related to NU's 2004 tax year.  Offsetting the decrease in operating cash flows are collections of accounts receivable that were much greater than payments on accounts payable.  These changes relate primarily to the termination of wholesale sales obligations and the sale of the retail marketing business.  The company expects net cash flows to increase and CL&P refunds to decline in the second half of 2006 as a result of a DPUC decision to termi nate a $0.009 per kWh credit on customer bills to refund previous Competitive Transition Assessment (CTA) overrecoveries.  

PSNH's operating cash flows are expected to decline in the second half of 2006 and thereafter as a result of a significant reduction in approved SCRC rates to an average rate of $0.0155 per kWh from the current average rate of $0.0335 per kWh effective on July 1, 2006.  That decline, which amounts to approximately $170 million annually, is the result of the completion of PSNH's recovery of its Part 3 non-securitized stranded costs as of June 30, 2006.  

In November of 2005, NU entered into an amended revolving credit agreement that increased NU’s credit line from $500 million to $700 million and extended the maturity date of the agreement by one year to November 6, 2010.  There were $111 million of borrowings outstanding under that agreement at June 30, 2006.  In November of 2005, NU also entered into a separate liquidity facility.  This facility, which was unused, provided $310 million of liquidity and was terminated on June 29, 2006 because of reduced NU Enterprises' liquidity needs.

NU Enterprises had a modestly negative impact on NU's liquidity in the first half of 2006.  However, NU Enterprises is expected to have a positive impact on NU's liquidity over the remainder of 2006 assuming the company executes the balance of its plans to exit its remaining competitive businesses.  The sale of the retail marketing business, which closed on June 1, 2006, will result in NU making three payments to Hess totaling $44 million.  The first of those payments totaling approximately $11.5 million was made on June 1, 2006.  The remaining payments of approximately $17.5 million and $15 million are scheduled to be made by December of 2006 and 2007, respectively.  Remaining cash flows for the retail marketing business are expected to be positive as accounts receivable of approximately $70 million are collected.  Most supply payments through the June 1, 2006 sale date have already been made.  

The sale of NU's competitive generation business to ECP will result in significant cash inflows totaling between $500 million and $550 million after assumption of $320 million of debt by ECP and after payment of taxes with proceeds from the sale.  The sale of the remaining energy services business is not expected to have a significant impact on NU's liquidity.  NU will use these proceeds to fund Utility Group capital expenditures and reduce short-term debt.

Management had previously indicated that the company did not expect to issue additional common equity before 2008.  Based on the expected cash inflows totaling between $500 million and $550 million as a result of the sale of the competitive generation business, management currently expects these inflows to largely negate that need, assuming no changes to the company's capital expenditure program or the company's leverage target of 55 percent.  However, the divestiture of Select Energy's remaining wholesale contracts could result in significant payments to counterparties or third parties.

NU's senior unsecured debt is rated Baa2, BBB- and BBB with a stable outlook by Moody's Investors Service (Moody's), Standard & Poor's (S&P) and Fitch Ratings (Fitch).  If NU were to be downgraded to a sub-investment grade level by either Moody's or S&P, a number of Select Energy's contracts would require the posting of additional collateral in the form of cash or letters of credit (LOCs).  Were NU's senior unsecured ratings to be reduced to sub-investment grade by either Moody's or S&P, Select Energy could, under its present contracts, be asked to provide approximately $154.3 million of collateral or LOCs to various unaffiliated counterparties and approximately $81 million to several independent system operators and unaffiliated local distribution companies (LDCs) at June 30, 2006.  If such a downgrade were to occur, management believes NU would currently be able to provide this collateral.  

On August 1, 2006, Moody's downgraded PSNH securities by one notch and changed the outlook to stable from under review - negative.  The downgrade resulted from the lower cash flows Moody's forecast for PSNH following PSNH's full recovery of part 3 stranded costs and resulting July 1, 2006 overall rate reduction.  At Moody's new rating of Baa1, PSNH bonds continue to be at an investment grade level.

NU paid common dividends of $54 million in the first half of 2006, compared with $41.6 million in the first half of 2005.  The higher level of dividend payments reflects a 7.7 percent increase in the NU quarterly dividend to $0.175 per share that was effective with the September 30, 2005 dividend and an increase in the number of outstanding shares as a result of the 23 million common share issuance in December of 2005.  On May 9, 2006, the NU Board of Trustees approved a dividend of $0.1875 per share, payable September 29, 2006 to shareholders of record as of September 1, 2006.  This represented the sixth consecutive year that NU’s Board of Trustees has approved an increase in the quarterly dividend.

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Capital expenditures included on the condensed consolidated statements of cash flows and described in the liquidity section of this management's discussion and analysis are cash capital expenditures and do not include cost of removal, the allowance for funds used during construction (AFUDC), and the capitalized portion of pension expense or income.  NU's capital expenditures totaled $380.7 million in the first half of 2006, compared with $332.1 million in the first half of 2005.  First half 2006 capital expenditures totaled $240 million by CL&P, $60.4 million by PSNH, $20.8 million by WMECO, $34.4 million by Yankee Gas and $25.1 million by other NU subsidiaries, including $10.1 million by NU Enterprises.  The increase in NU's capital expenditures was primarily the result of higher transmission capital expenditures, particularly at CL&P.  Utility Group capital expenditures are expected to approach approximately $900 million in 2006, including approximately $60 0 million, $150 million, $50 million, and $100 million for CL&P, PSNH, WMECO and Yankee Gas, respectively.  

On April 6, 2006, Mode 1 Communications, Inc., a wholly-owned subsidiary of  NU, sold its entire investment in 2.7 million Globix shares for $6.7 million and recognized an after-tax gain of $2 million.

Utility Group:  In November of 2005, the Utility Group companies entered into an amended revolving credit agreement that maintained its $400 million credit line and extended the maturity date of their agreement by one year to November 6, 2010.  There were $20 million of borrowings outstanding under that agreement at June 30, 2006.

In addition to its revolving credit line, CL&P has an arrangement with a financial institution under which CL&P can sell up to $100 million of accounts receivable and unbilled revenues.  At June 30, 2006, CL&P had sold $100 million to that financial institution.  For more information regarding the sale of receivables, see Note 1F, "Summary of Significant Accounting Policies - Sale of Customer Receivables," to the condensed consolidated financial statements.

NU expects to fund approximately half of its expected capital expenditures over the next several years through internally generated cash flows.  As a result, the company expects its Utility Group companies, particularly CL&P, to issue debt regularly.  On June 7, 2006, CL&P closed on the sale of $250 million of 30-year first mortgage bonds with a coupon rate of 6.35 percent.  Because of an interest rate hedge CL&P executed earlier in 2006 to offset the impact of higher interest rates, CL&P received $7.8 million from counterparties at the closing of this transaction.

On June 21, 2006, PSNH converted $89.3 million variable interest rate insured tax-exempt pollution control revenue bonds to a fixed interest rate of 4.75 percent with maturity in 2021.

The Utility Group will also fund its capital expenditures through equity contributions from NU.  In the first half of 2006, NU invested $60 million of equity into CL&P, $2.5 million into PSNH, $20.5 million into WMECO and $30 million into Yankee Gas.

NU Enterprises:  Currently, NU Enterprises' liquidity is impacted by both the amount of collateral it receives from other counterparties and the amount of collateral it is required to deposit with counterparties.  From December 31, 2005 to June 30, 2006, the net positive impact on NU Enterprises' liquidity related to these items was approximately $75 million.  

Most of the working capital and LOCs required by NU Enterprises are currently used to support the wholesale marketing business.  As NU Enterprises' wholesale contracts expire or are exited, its liquidity requirements are expected to decline.  However, the sale or assignment of additional long-term below market wholesale power contracts would likely require NU Enterprises to continue to make significant payments to the counterparties in such transactions.

NU Enterprises Divestitures

In 2005, NU announced that NU Enterprises would exit its competitive businesses.  NU will use sale proceeds to invest in its regulated businesses, reduce short-term debt and pay taxes related to the sale of the competitive operation business.  An overview of this process is as follows:  

Wholesale Marketing Business:  In the first half of 2006, NU Enterprises continued to serve its remaining wholesale power obligations.  Select Energy's remaining wholesale obligations in the PJM power pool include 5 wholesale sales contracts and numerous supply contracts which expire by 2008.  By the end of 2006, if no obligations are divested, remaining obligations in PJM are projected to be approximately 4 million MWh, down from 16 million MWh as of March of 2005 when NU Enterprises announced it was exiting the wholesale marketing business.  Select Energy's one remaining wholesale sales contract in New York expires in 2013.  NU Enterprises also has three contracts to purchase generation products, two of which expire in 2007, with the remaining contract expiring in 2012.  

NU Enterprises resumed efforts to reduce its obligations related to its portfolio of PJM sales and supply contracts.  At this time, management cannot estimate at what value the contracts will be divested compared to the mark-to-market currently recorded.

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Select Energy has also taken steps to reduce the volatility of these obligations by hedging a portion of them.  Management is continuing to pursue opportunities to complete the divestiture of the wholesale marketing business and began to market these contracts in July of 2006.  

Retail Marketing Business:  On June 1, 2006, Select Energy sold its retail marketing business to Hess, including all of its retail sales obligations and supply contracts.  Under the terms of the agreement, Select Energy paid Hess approximately $11.5 million at closing and will pay an additional $32.5 million included in other current liabilities on the accompanying condensed consolidated balance sheet by the end of 2007.  

NU Enterprises continues to have accounts receivable of approximately $70 million at June 30, 2006, for services provided to customers prior to the June 1, 2006 sale of the retail marketing business.  The company will monitor the collectibility of the accounts receivable retained to ensure their carrying values continue to be realizable.  

In connection with the sale of the retail marketing business, NU has provided various indemnifications to Hess.  Management does not expect that these indemnification obligations will have a material adverse effect on NU, and no liability has been recorded at June 30, 2006.  See Note 7G, "Guarantees and Indemnifications," for further information regarding these indemnifications.

Competitive Generation Business:  On July 24, 2006, NU reached an agreement with ECP to sell its 100 percent ownership in NGC and HWP's 146-MW Mt. Tom for $1.34 billion, including the assumption of $320 million of NGC debt.  The sale of the NGC stock and the Mt. Tom plant requires FERC approval and other approvals.  The sale is expected to close by the end of 2006.  Exclusive of income tax reserve, apportionment and other secondary impacts, NU currently expects to record an after-tax gain of approximately $300 million upon completion of the sale.

Energy Services Businesses:  SECI-NH, including Reeds Ferry, and Woods Network were sold in November of 2005.  In January of 2006, the Massachusetts service location of SECI-CT was sold.  In April of 2006, NU Enterprises sold certain assets of Woods Electrical.  

On May 5, 2006, NU Enterprises completed the sale of SESI to Ameresco.  In connection with the closing of this transaction, NU Enterprises paid Ameresco approximately $7.7 million and recorded a pre-tax charge to income of $5.6 million in the second quarter of 2006, which is included in loss from sale of discontinued operations on the accompanying condensed consolidated statements of income/(loss).  

At June 30, 2006, $16 million in total assets and $10.8 million in total liabilities of SECI-NH, Woods Network, Woods Electrical and SESI were retained by NU Enterprises after the sale of these businesses.  These assets and liabilities are primarily comprised of accounts receivable and unbilled revenues, accounts payable, long-term and short-term debt.  The company will monitor the collectibility of the accounts receivable retained to ensure their carrying values continue to be realizable.

NU Enterprises continues to wind down eight SECI-CT contracts and anticipates their completion by the end of 2006.  NU Enterprises continues to own and operate Boulos.

NU guarantees SESI's performance under government contracts financed by one investor.  NU is permitted to and intends to terminate these guarantees prior to their annual anniversary dates over the next nine months.  Upon notice of non-renewal, the investor can require NU to repurchase the underlying contract payments to satisfy the debt.  Ameresco has a commitment from a lender to finance SESI’s repurchase of these contract payments from NU.  On July 7, 2006, the investor notified SESI that pursuant to financing terms it would require SESI to repurchase contract payments relating to the only guaranteed project that was behind schedule.  SESI did not satisfy this requirement and on July 26, 2006, the contract payments were assigned to NU and NU paid the investor $10.4 million, $0.6 million of which will be recorded as a third quarter loss.  NU recorded a $0.2 million loss to reflect the fair value of this guarantee in the second quarter.  NU expect s to sell the contract payments to SESI upon SESI's completion of the project which SESI would finance with its committed lender.  NU may record additional losses associated with this transaction and associated with the planned termination of its other SESI guarantees, the amount of which will depend on the final calculation of contract payment purchase amounts, changes in interest rates used to determine Ameresco’s financing proceeds, the amount of project cash available to offset NU’s costs, and other factors.  

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Provisions of the purchase agreement also require NU to indemnify Ameresco for estimated costs to complete or modify specific construction projects above specified levels.  Management does not expect that these indemnifications obligations will have a material adverse effect on NU.

See Note 7G, "Guarantees and Indemnifications," for further information regarding these guarantees.

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Business Development and Capital Expenditures

Consolidated:  In the first half of 2006, NU's cash capital expenditures, which exclude cost of removal, AFUDC, and the capitalized portion of pension expense or income, totaled $380.7 million, compared with $332.1 million in the first half of 2005.  Capital expenditures including cost of removal, AFUDC, and the capitalized portion of pension expense or income totaled $420.3 million in the first half of 2006, compared with $344.3 million in 2005.  Included in these amounts are $399.2 million and $331.2 million related to the Utility Group.  Capital expenditures are expected to total approximately $900 million in 2006, compared with $813.4 million in 2005.  This increasing level of capital expenditures is caused primarily by the continuing need to improve the capacity and reliability of NU's regulated transmission system.  

Utility Group:

Transmission Rate Base:  At December 31, 2005, the Utility Group's transmission business rate base was approximately $600 million and is projected to be approximately $1.0 billion at December 31, 2006.  Several factors may impact the December 31, 2006 projected Utility Group transmission business rate base amount, including the level and timing of transmission capital expenditures, transmission plant placed in service, and various other factors.

CL&P:  In December of 2003, the DPUC approved a total of $900 million of distribution capital expenditures for CL&P from 2004 through 2007.  Those expenditures are intended to improve the reliability of the distribution system and to meet growth requirements on the distribution system.  In the first half of 2006, CL&P's distribution capital expenditures totaled $100.7 million, compared with $125.9 million in the first half of 2005.  In 2006, CL&P projects distribution capital expenditures of approximately $200 million.

CL&P's transmission capital expenditures totaled $176.9 million in the first half of 2006, compared with $66 million in the first half of 2005.  The increase was primarily the result of increased spending on a new 21-mile 345 kilovolt (kV) transmission project between Bethel and Norwalk, Connecticut.  In 2006, CL&P's transmission capital expenditures are projected to total approximately $400 million.

Transmission capital expenditures in Connecticut are focused primarily on four major transmission projects in southwest Connecticut.  These projects include 1) the Bethel to Norwalk project, 2) a 69-mile Middletown to Norwalk 345 kV transmission project, 3) a related two cable 115 kV underground project between Norwalk and Stamford, Connecticut (Glenbrook Cables), and 4) the replacement of the existing 138 kV cable between Connecticut and Long Island.  Each of these projects has received approval from the Connecticut Siting Council (CSC) and ISO-NE.  Capital expenditures for these projects totaled $142.4 million in the first half of 2006 compared to $40.6 million in the first half of 2005.  

Construction began in April of 2005 on a 21-mile 115 kV/345 kV line project between Bethel and Norwalk. This project, which is expected to cost approximately $350 million, is approximately 90 percent complete and is expected to be placed in service by November of 2006.  CL&P has capitalized $289.7 million through June 30, 2006.  

On April 7, 2005, the CSC unanimously approved a proposal by CL&P and United Illuminating to build a 69-mile 345 kV transmission line from Middletown to Norwalk and CL&P has commenced site work.  Approximately 24 miles of the 345 kV line will be built underground with the balance being built overhead.  The project still requires CSC review of certain detailed construction plans, as well as United States Army Corps of Engineers approval to bury the line beneath certain navigable rivers and the Connecticut Department of Environmental Protection (DEP) approvals.  The original CSC decision included provisions for low magnetic field designs in certain areas and made variations to the proposed route.  The CSC intends to amend the Middletown to Norwalk docket and will hold a limited scope proceeding to address CL&P's proposal to re-route a 1.3 mile section of 345 kV underground cable in Norwalk.  This route change will further minimize the environmental imp act of the project and is not expected to change either its cost or scope.  CL&P received final technical approval from ISO-NE on January 20, 2006 and expects to award the major equipment  contracts during 2006.  CL&P's portion of the project is estimated to cost approximately $1.05 billion and is expected to be completed by the end of 2009.  CL&P has reached tentative settlement agreements on all three of the appeals related to the project, and signed two settlement agreements.  At this time, CL&P does not expect any of these three appeals to delay construction.  At June 30, 2006, CL&P has capitalized $81.4 million associated with this project.

CL&P’s construction of the Glenbrook Cables Project, two 9-mile 115 kV underground transmission lines between Norwalk and Stamford, was approved by the CSC on July 20, 2005 and approved by ISO-NE on August 3, 2005.  This decision has not been

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appealed.  The project is intended to respond to the growing electric demand in the area.  The original, conceptual cost estimate of $120 million has been increased to $183 million, reflecting actual construction and procurement experience on the Middletown to Norwalk and Bethel to Norwalk projects.  Management expects to begin construction in late 2006 and expects the lines to be in service in 2008.  Through June 30, 2006, CL&P has capitalized $13.5 million associated with this project.  

On October 1, 2004, CL&P and the Long Island Power Authority (LIPA) jointly filed plans with the DEP to replace a 138 kV undersea electric transmission line between Norwalk, Connecticut and Northport - Long Island, New York, consistent with a comprehensive settlement agreement reached on June 24, 2004.  CL&P and LIPA each own approximately 50 percent of the line.  CL&P's portion of the project is estimated to cost $72 million.  On June 20, 2005, the New York State Controller’s Officer and the New York State Attorney General approved the comprehensive settlement agreement.  The project had earlier received CSC approval.  State and federal permits are expected to be issued in the third quarter of 2006.  In June of 2006, CL&P awarded the engineering, procurement and construction contract for this project and expects to place the project into service in 2008.  Through June 30, 2006, CL&P has capitalized $6.6 million associated with this project.

In the fourth quarter of 2005, CL&P began construction of a new substation in Killingly, Connecticut, which will improve CL&P’s 345 kV and 115 kV transmission systems in northeast Connecticut.  The project is expected to be completed by the end of 2006 at a cost of approximately $32 million.  At June 30, 2006, CL&P has capitalized $13.9 million associated with this project.

As part of a larger regional system plan, NU, ISO-NE and National Grid have begun planning an upgrade to the transmission system connecting Massachusetts, Rhode Island and Connecticut in a comprehensive study called the Southern New England Transmission Reliability Project.  The parties are expected to identify a number of possible routes and configurations by 2007.  NU and National Grid have not yet completed a detailed estimate of the total cost for the upgrade, but NU estimates that approximately $400 million of its $2.3 billion transmission capital budget in 2006 through 2010 could be spent on this project.

Yankee Gas:  In the first half of 2006, Yankee Gas' capital expenditures totaled $37.6 million, compared with $32.2 million in the first half of 2005.  Yankee Gas is constructing a LNG storage and production facility in Waterbury, Connecticut, which will be capable of storing the equivalent of 1.2 billion cubic feet of natural gas.  Construction of the facility began in March of 2005 and is expected to be completed in time for the 2007/2008 heating season.  The facility, which is expected to cost $108 million, was approximately 65 percent complete at June 30, 2006.  Yankee Gas has capitalized $67.1 million related to this project through June 30, 2006.

PSNH:  In the first half of 2006, PSNH's capital expenditures totaled $63.8 million, compared with $86.2 million in the first half of 2005.  The 2006 expenditures included $6.3 million in construction activities associated with PSNH's conversion of a 50 MW coal-fired unit at Schiller Station in Portsmouth, New Hampshire to burn wood (Northern Wood Power Project).  Construction of the $75 million Northern Wood Power Project started in 2004 and the project is expected to be declared commercially operational in the fall of 2006.  The new unit generated its first test power when it was phased to the transmission grid on July 4, 2006.  The unit is currently undergoing a number of start-up and testing activities.  Through June 30, 2006, PSNH has capitalized $70.9 million related to this project and the project was 95 percent complete.

WMECO:  WMECO's capital expenditures totaled $20.2 million in the first half of 2006, compared with $20.9 million in the first half of 2005.  In 2006, WMECO projects total capital expenditures of approximately $50 million.

NU Enterprises: In the second quarter of 2006, HWP completed installation of a selective catalytic reduction system at Mt. Tom.  The $14 million project commenced in July of 2005 and began operation in June of 2006.  At June 30, 2006, HWP has capitalized $13.7 million related to this project.

Transmission Access and FERC Regulatory Changes

The New England Regional Transmission Organization (RTO) was activated on February 1, 2005.  As a result, the ROE in the local network service (LNS) tariff was increased to 12.8 percent.  The ROE being utilized in the calculation of the current regional network service (RNS) rates is the sum of the 12.8 percent "base" ROE, plus a 50 basis point incentive adder for joining the RTO, or a total of 13.3 percent, plus an additional 100 basis point adder on new transmission investment.  NU collects approximately 75 percent of its wholesale transmission revenues under its RNS tariff and 25 percent under its LNS tariff.

An initial decision by a FERC administrative law judge (ALJ) set the base ROE at 10.72 percent as compared with the 12.8 percent requested by the New England RTO.  One of the adjustments made by the ALJ was to modify the underlying proxy group used to determine the ROE, resulting in a reduction in the base ROE of approximately 50 basis points.  The ALJ deferred to the FERC for final resolution on the 100 basis point incentive adder for new transmission investments but reaffirmed the 50 basis point incentive for joining the RTO.  The New England transmission owners have challenged the ALJ's findings and recommendations through written exceptions filed on June 27, 2005.  The result of this order, if upheld by the FERC, would be an ROE for LNS of 10.72 percent and an ROE for RNS of 11.22 percent.  When blended, the resulting "all in" ROE would be approximately 11.15 percent for the NU

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transmission business.  A final order from the FERC is expected in 2006.  Management cannot at this time predict what ROE will ultimately be established by the FERC in these proceedings but for purposes of current earnings accruals and estimates, the transmission business is assuming an ROE of 11.5 percent.  As a result of the difference in the 12.8 percent ROE and the 13.3 percent ROE being billed to LNS and RNS customers, respectively, and the 11.5 percent ROE assumed for earnings accruals and estimates,
at June 30, 2006, a $10.5 million regulatory liability was recognized.

On July 20, 2006, the FERC issued final rules promoting transmission investment through pricing reform that included up to 100 percent of construction work in progress (CWIP), accelerated depreciation, higher ROEs for belonging to an RTO, among others.  The final rule identifies specific incentives the FERC will allow when justified in the context of specific rate applications.  The burden remains on the applicant to illustrate through its filing that the incentives requested are just and reasonable and the project involved increases reliability or decreases congestion costs.  Management views this rule to be positive, but the actual impacts on NU will be determined by the specific incentives that NU seeks and that are approved by the FERC.

Legislative Matters

Environmental Legislation:  The Regional Greenhouse Gas Initiative (RGGI) is a cooperative effort by certain northeastern states to develop a regional program for stabilizing and ultimately reducing CO2 emissions from fossil-fired electric generators.  This initiative proposed to stabilize CO2 emissions at current levels and require a ten percent reduction by 2020.  The RGGI agreement was signed on December 20, 2005 by the states of Connecticut, Delaware, Maine, New Jersey, New Hampshire, New York, and Vermont.  Each state commits to propose for approval legislative and regulatory mechanisms to implement the program.  RGGI may impact PSNH's Merrimack, Newington and Schiller stations, if adopted by the New Hampshire legislature.  At this time, the impact of this agreement on NU cannot be determined.  

On January 1, 2006 a CO2 cap on emissions from fossil-fired electric generators took effect in Massachusetts, with a separate CO2 emissions rate limit effective in 2008.  Affected parties are currently awaiting the Massachusetts DEP's proposal concerning a trading or other form of offset program.  The Mt. Tom plant would be impacted by this regulation.  Given the uncertainty of the future compliance mechanism under these regulations, the impact of this regulation on NU and the Mt. Tom plant cannot be determined.

Connecticut:

Transmission Tracking Mechanism:  On July 6, 2005, Connecticut adopted legislation creating a mechanism to allow the DPUC to true-up, at least annually, the retail transmission charge in local electric distribution company rates based on changes in FERC-approved charges.  This mechanism, which includes two adjustments annually in January and June, allows CL&P to include forward-looking transmission charges in its retail transmission rate and promptly recover its transmission expenditures.  On January 1, 2006, CL&P raised its retail transmission rate to collect $21 million of additional transmission costs over the first half of 2006.  On July 1, 2006, CL&P raised its retail transmission rate to collect an incremental $6.1 million of additional revenues over the second half of 2006.  

Public Act 05-01: Public Act 05-01, an "Act Concerning Energy Independence," (Act) was signed by Governor Rell on July 22, 2005.  The legislation provides incentives to encourage the construction of distributed generation, new large-scale generation, and conservation and load management initiatives to reduce federally mandated congestion cost (FMCC) charges.  The legislation requires regulators to a) implement near-term measures as soon as possible, and b) commence a new request for proposals to build customer side distributed resources and contracts for new or repowered larger generating facilities in the state.  Developers could receive contracts of up to 15 years from Connecticut distribution companies.  The legislation provides utilities with the opportunity to earn one-time awards for generation that is installed in their service territories.  The legislation requires the DPUC to investigate the financial impact on distribution companies of entering into long-term contracts and to allow distribution companies to recover through rates any increased costs.  The DPUC ruled that at this point the financial impact of any such contracts is hypothetical and instructed the utilities to raise the issue in subsequent rate cases.  CL&P has appealed this decision.  The DPUC is conducting additional proceedings to implement this legislation.  

On March 27, 2006, the DPUC issued final decisions that will provide customers with financial incentives for installing distributed generation resources.  These customer incentives include capital grants of up to $200 per kW for emergency generators and $450 per kW for base load generation, with an extra customer incentive of $50 per kW for projects located in southwest Connecticut.  Distribution companies, including CL&P, could be eligible for one-time awards of $200 per kW for customer demand-side generation and $25 per kW for more traditional generation when these units become operational.

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New Hampshire:

Environmental Legislation:  In April of 2006, New Hampshire adopted legislation requiring PSNH to reduce the level of mercury emissions from its coal-fired plants by 2013 with incentives for early reductions.  To comply with the legislation PSNH intends to install wet scrubber technology by mid-2013 at its two Merrimack coal units, which combined generate 433 MW.  PSNH currently estimates the cost to comply with this law to be approximately $250 million.  However, this amount is subject to change as final design of the project is undertaken.  State law and PSNH's restructuring agreement provide for the recovery of its generation costs, including the cost to comply with state environmental regulations.  The company does not expect these costs to have a significant impact as sulfur emissions are expected to be reduced by at least 80 percent with a corresponding reduction in the need to purchase sulfur allowances.

Utility Group Regulatory Issues and Rate Matters

Transmission - Wholesale Rates:  Wholesale transmission revenues are based on rates and formulas that are approved by the FERC.  Most of NU's wholesale transmission revenues are collected through a combination of the RNS tariff and NU's LNS tariff.  NU's LNS rate is reset on January 1 and June 1 of each year.  NU's RNS rate is reset on June 1 of each year.  Additionally, NU's LNS tariff provides for a true-up to actual costs, which ensures that NU's transmission business recovers its total transmission revenue requirements, including the allowed ROE.  

Effective February 1, 2006, NU included 50 percent of CWIP for its four major southwest Connecticut transmission projects in its formula rate for transmission service (Schedule 21 – NU (LNS)).  The new rates allow NU to collect 50 percent of the construction financing expenses while these projects are under construction.

On July 28, 2006, the FERC approved NU's proposal to allocate costs associated with the Bethel to Norwalk transmission project that are determined to be localized costs to all customers in Connecticut as all of Connecticut will benefit from the associated reduction in congestion charges.  There are three load serving entities in Connecticut:  CL&P, The United Illuminating Company and the Connecticut Municipal Electrical Energy Cooperative (CMEEC).  These customers would pay their allocated share of the localized costs on a projected basis commencing June 1, 2006, subject to true-up based on actual costs.  For the balance of 2006, these charges would include each customer’s allocated share of NU’s transmission revenue requirement from the time the localized facilities were first placed in service through May 31, 2006, in addition to the revenue requirements for the remainder of the year.  

On June 15, 2006, ISO-NE issued its draft decision on CL&P’s transmission cost allocation (TCA) application for the Bethel to Norwalk project and approximately $7 million of ancillary projects.  ISO-NE approved $237.3 million for regional cost recovery and found that the remaining $119.9 million are costs that should be localized.  On July 14, 2006, NU submitted its comments to ISO-NE on their draft determination of the Bethel-Norwalk project’s localized costs.  NU is requesting ISO-NE reconsider certain determinations and correct certain factual statements.  As specified in Schedule 12C, ISO-NE and NU will now enter into negotiations not to exceed 60 days.

Transmission - Retail Rates:  A significant portion of the NU transmission business revenue comes from ISO-NE charges to the distribution businesses of CL&P, PSNH and WMECO.  The distribution businesses recover these costs through the retail rates that are charged to their retail customers.  In July of 2005, as a result of the enactment of the legislation passed by the Connecticut legislature in 2005, CL&P began tracking its retail transmission revenues and expenses and on January 1, 2006 raised its retail transmission rate to collect $21 million of additional revenues over the first half of 2006.  On July 1, 2006, CL&P raised its retail transmission rates by an incremental $6.1 million.  WMECO implemented its retail transmission tracker and rate adjustment mechanism in January of 2002 as part of its 2002 rate change filing.  PSNH does not currently have a retail transmission rate tracking mechanism, but the company requested such a mecha nism in its 2006 energy delivery rate case.

Forward Capacity Market:  In March of 2004, ISO-NE proposed at the FERC an administratively determined electric generation capacity pricing mechanism known as LICAP, intended to provide a revenue stream sufficient to maintain existing generation assets and encourage the construction of new generation assets at levels sufficient to serve peak load, plus fixed reserve and contingency margins.  After opposition from state regulators, utilities and various Congressional delegations, the FERC ordered settlement negotiations before an ALJ to determine whether there was an acceptable alternative to LICAP.  On March 6, 2006, ISO-NE and a broad cross-section of critical stakeholders from around the region, including CL&P, PSNH and Select Energy, filed a comprehensive settlement agreement at the FERC proposing a FCM in place of the previously proposed LICAP mechanism.  The settlement agreement provides for a fixed level of compensation to generators from December 1, 2006 through May 31, 2010 without regard to location in New England, and annual forward capacity auctions, beginning in 2008, for the 1-year period ending on May 31, 2011, and annually thereafter.  According to preliminary estimates, FCM would require the operating companies to pay approximately the following amounts during the 3½-year transition period:  CL&P - $470 million; PSNH - $80 million; and WMECO - $100 million.  CL&P, PSNH and WMECO expect to recover these costs from their customers.  On June 16, 2006, the FERC accepted the settlement

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agreement.  The settlement agreement is expected to be implemented by December 1, 2006.  Several parties have sought rehearing of this issue by the FERC.  

Connecticut - CL&P:     

Distribution Rates:  In its December 2003 rate case decision, the DPUC allowed CL&P to increase distribution rates annually from 2004 through 2007.  A $25 million distribution rate increase took effect on January 1, 2005, an additional $11.9 million distribution rate increase took effect on January 1, 2006, and another $7 million distribution rate increase is due to take effect on January 1, 2007.  

On August 4, 2006, CL&P notified Governor Rell and the DPUC that it intends to postpone filing a distribution rate case until mid-2007 for rates effective on January 1, 2008.

Procurement Fee Rate Proceedings:  CL&P is currently allowed to collect a fixed procurement fee of 0.50 mills per kWh from customers who purchase TSO service through 2006.  One mill is equal to one-tenth of a cent.  That fee can increase to 0.75 mills per kWh if CL&P outperforms certain regional benchmarks.  CL&P submitted to the DPUC its proposed methodology to calculate the variable portion (incentive portion) of the procurement fee.  CL&P requested approval of $5.8 million for its 2004 incentive payment.  On December 8, 2005, a draft decision was issued in this docket, which accepted the methodology proposed by CL&P and authorized payment of the $5.8 million incentive fee.  A final decision, which had been scheduled for December 28, 2005, was delayed by the DPUC and the DPUC re-opened this docket to allow the Connecticut Office of Consumer Counsel (OCC) to submit additional testimony.  A new schedule has been est ablished which provides for a final decision in October of 2006.  Management continues to believe that recovery of the $5.8 million regulatory asset recorded related to CL&P's 2004 incentive payment, which was reflected in 2005 earnings, is probable.  No amounts have been recorded related to the 2005 incentive portion of CL&P's procurement fee.  

CTA and SBC Reconciliation:  The CTA allows CL&P to recover stranded costs, such as securitization costs associated with the rate reduction bonds, amortization of regulatory assets, and IPP over market costs, while the System Benefits Charge (SBC) allows CL&P to recover certain regulatory and energy public policy costs, such as public education outreach costs, hardship protection costs, transition period property taxes, and displaced worker protection costs.

On March 31, 2006, CL&P filed its 2005 CTA and SBC reconciliation with the DPUC, which compares CTA and SBC revenues to revenue requirements.  For the year ended December 31, 2005, total CTA revenues exceeded the CTA revenue requirement by $60.1 million.  This amount was recorded as a regulatory liability on the accompanying condensed consolidated balance sheets.  For the same period, the SBC revenue requirement exceeded SBC revenues by $1.3 million.  On July 24, 2006, the DPUC issued a final decision which approved the reconciliation of the CTA and SBC rates for the year 2005.  

In CL&P's 2001 CTA and SBC reconciliation, and subsequently in a September 10, 2002 petition to reopen related proceedings, CL&P requested that a deferred intercompany tax liability associated with the intercompany sale of generation assets be excluded from the calculation of CTA revenue requirements.  This liability is currently included as a reduction in the calculation of CTA revenue requirements.  On September 10, 2003, the DPUC issued a final decision denying CL&P’s request, and on October 24, 2003, CL&P appealed the DPUC’s final decision to the Connecticut Superior Court.  On June 20, 2006, the Connecticut Superior Court denied CL&P's appeal.  

Income Taxes:  In 2000, CL&P requested from the IRS a PLR regarding the treatment of unamortized UITC and EDIT related to generation assets that were sold.  On April 18, 2006, the IRS issued a PLR to CL&P regarding the treatment of UITC and EDIT related to generation assets that CL&P has sold.  EDIT are temporary differences between book and taxable income that were recorded when the federal statutory tax rate was higher than it is now or when those differences were expected to be resolved.  The PLR holds that it would be a violation of tax regulations if the EDIT or UITC is used to reduce customers' rates following the sale of the generation assets.  CL&P was ordered by the DPUC to submit the PLR to the DPUC within 10 days of issuance and retain the UITC and EDIT in their existing accounts pending its receipt and review of the PLR.  

CL&P's UITC balance is $59 million and EDIT balance is $15 million, totaling $74 million, related to generation assets that have been sold.  On July 27, 2006, the DPUC held that the UITC and EDIT amounts were no longer required to be held in their existing accounts.  The $74 million balance will be reflected as a reduction of CL&P's third quarter 2006 income tax expense and will increase CL&P's earnings by the same amount.  

Standard Electric Service Procurement:  On June 21, 2006, the DPUC approved a proposal by CL&P to issue requests for proposal (RFPs) every six months for periods of up to three years to layer the standard electric service full requirements supply contracts to mitigate market volatility for its residential and lower use commercial and industrial customers.  Additionally, the DPUC approved the issuance of RFPs for supplier of last resort service for larger commercial and industrial customers every six months.  Previously, all of CL&P’s residential, commercial and industrial requirements, regardless of customer size, were bid together.  The DPUC’s decision also provides for enhanced access to the RFP materials, bids and other data during the RFP process.  On August 2, 2006, CL&P issued the RFP for 2007 and 2008.

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CL&P Rates:  On February 1, 2006, CL&P filed with the DPUC its annual FMCC reconciliation filing for the year ended 2005.  No change in the current rates was proposed.  A final decision is expected in August of 2006.  

Porcelain Cutouts:  The DPUC initiated a proceeding relating to an incident involving the failure of certain porcelain cutouts that are used in CL&P's distribution system.  A cutout is a protective device that stops the flow of electricity if there is a surge.  On April 26, 2006, the DPUC issued an order requiring CL&P to report its progress in replacing porcelain cutouts.  As a result of a requirement to remove the porcelain cutouts, an asset retirement obligation (ARO) has been recorded.  At June 30, 2006, the fair value of the ARO asset recorded is $4.7 million, accumulated depreciation is $0.6 million, and the ARO liability is $4.7 million.  The charge to record the $0.6 million of accumulated depreciation was recorded as a regulatory asset, as management believes that this amount is recoverable in rates.  Removal of these assets is expected to occur over three years beginning in 2006.

Connecticut - Yankee Gas:

Purchased Gas Adjustment:  On September 9, 2005, the DPUC issued a draft decision regarding Yankee Gas Purchased Gas Adjustment (PGA) clause charges for the period of September 1, 2003 through August 31, 2004.  The draft decision disallowed approximately $9 million in previously recovered PGA revenues associated with two separate Yankee Gas unbilled sales and revenue adjustments.  At the request of Yankee Gas, the DPUC reopened the PGA hearings on September 20, 2005 and requested that Yankee Gas file supplemental information regarding the two adjustments.  Yankee Gas complied with this request.  The DPUC issued a new decision on April 20, 2006 requiring an audit of Yankee Gas' PGA accounting methods and deferred any conclusion on the $9 million of previously recovered revenues until the completion of the audit.  Management believes the unbilled sales and revenue adjustments and resultant charges to customers through the PGA clause were appropriate. & nbsp;Based on the facts of the case and the supplemental information provided to the DPUC, management believes the appropriateness of the PGA charges to customers for the time period under review will be approved.  

New Hampshire:

DS, SCRC and ES Rates:  On January 20, 2006, the NHPUC approved a PSNH request to move reconciliation of its generation costs and revenues (including the prudency of its generation operations) from the SCRC to ES proceedings.  The change was effective on February 1, 2006.

On May 1, 2006, PSNH filed its 2005 SCRC reconciliation with the NHPUC, and proceedings have begun.  While management believes that the operation of the generation business segment has been prudent and consistent with industry practices, it is unable to determine the impact, if any, of the NHPUC’s review of the SCRC on PSNH’s earnings or financial position.

On May 30, 2006, PSNH filed with the NHPUC to increase its DS rate by approximately $50 million, to decrease its SCRC to recognize the full recovery of its non-securitized part 3 stranded costs, and to decrease its ES rate to recognize changes in its power supply costs.  On June 29, 2006, the NHPUC approved a temporary DS rate increase of $24.5 million, the requested decrease in the SCRC and a decrease in the ES rate.  All rate changes were effective on July 1, 2006.  The impact of the combined rate changes is an overall decrease of 15.5 percent.  The temporary DS rate increase will be reconciled to the NHPUC decision in a full rate case to be decided in 2007, effective back to July 1, 2006.  

Coal Procurement Docket:  During the second quarter of 2006, the NHPUC opened a docket to review PSNH's coal procurement and coal transportation policies and procedures.  PSNH is currently responding to data requests from the NHPUC's outside consultant.  While management believes its coal procurement and transportation policies and procedures are prudent and consistent with industry practice, it is unable to determine the impact, if any, of the NHPUC's review on PSNH's earnings or financial position.

Generation ROE:  On December 2, 2005 the NHPUC issued a decision lowering PSNH’s allowed ROE to 9.62 percent that was retroactive to an effective date of August 1, 2005 and PSNH's request for reconsideration was denied.  On May 17, 2006, the New Hampshire Supreme Court declined to consider PSNH’s appeal of the NHPUC's decision.  This decrease in allowed ROE will lower PSNH’s net income by approximately $1.5 million annually based on the current level of generation asset investment.

Massachusetts:

Transition Cost Reconciliation:  WMECO filed its 2005 transition cost reconciliation with the Massachusetts Department of Telecommunications and Energy (DTE) on March 31, 2006.  This filing reconciles transition costs, default service costs and retail transmission costs with their associated revenues collected from customers.  The DTE has not yet reviewed this filing or issued a schedule for review.  Therefore the timing of a decision is uncertain at this time.  Management does not expect the outcome of the DTE's review to have a material adverse impact on WMECO's earnings or financial position.

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Annual Rate Change Filing:  Under the 2004 rate case settlement agreement, WMECO expects to file later in 2006 for new rates to be effective on January 1, 2007.  Pursuant to its 2004 rate settlement, WMECO was allowed to file for a rate increase in June of 2006 to take effect on January 1, 2007.  WMECO has delayed its rate filing in order to pursue settlement discussions with several parties, traditionally involved in WMECO rate cases.  WMECO is hopeful these discussions will lead to a settlement satisfactory to the company and that the DTE will approve the settlement for new rates effective on January 1, 2007.  

Deferred Contractual Obligations

CYAPC:  On July 1, 2004, the Connecticut Yankee Atomic Power Company (CYAPC) filed with the FERC for recovery seeking to increase its annual decommissioning collections from $16.7 million to $93 million for a six-year period beginning on January 1, 2005.  On August 30, 2004, the FERC issued an order accepting the rates, with collection by CYAPC beginning on February 1, 2005, subject to refund.

The FERC staff filed testimony that recommended a total $38 million decrease in the requested rate increase, claiming that CYAPC should have used a different gross domestic product (GDP) escalator.  NU's share of this recommended decrease is $18.6 million.  

On November 22, 2005, a FERC administrative law judge issued an initial decision finding no imprudence on CYAPC's part.  However, the administrative law judge did agree with the FERC staff’s position that a lower GDP escalator should be used for calculating the rate increase and found that CYAPC should recalculate its decommissioning charges to reflect the lower escalator.  Management expects that if the FERC staff's position on the decommissioning GDP cost escalator is found by the FERC to be more appropriate than that used by CYAPC to develop its proposed rates, then CYAPC would review whether to reduce its estimated decommissioning obligation and reduce its customers' obligations, including the obligation of CL&P, PSNH and WMECO.  

The company believes that the costs have been prudently incurred and will ultimately be recovered from the customers of CL&P, PSNH and WMECO.  However, there is a risk that some portion of these increased costs may not be recovered, or will have to be refunded if recovered, as a result of the FERC proceedings.  

On June 10, 2004, the DPUC and the OCC filed a petition with the FERC seeking a declaratory order that CYAPC be allowed to recover all decommissioning costs from its wholesale purchasers, including CL&P, PSNH and WMECO, but that such purchasers may not be allowed to recover in their retail rates any costs that the FERC might determine to have been imprudently incurred.  The FERC rejected the DPUC's and OCC's petition, whereupon the DPUC filed an appeal of the FERC's decision with the D.C. Circuit Court of Appeals.  The FERC and CYAPC have asked the court to dismiss the case, and the DPUC has objected to a dismissal.  On June 13, 2006, the court decided not to take up the motion to dismiss until it reviews the case on the merits.  A briefing schedule has not yet been set.

Parties to these proceedings are currently engaged in active settlement discussions, the outcome of which management cannot determine at this time.   

YAEC:  In November of 2005, YAEC established an updated estimate of the cost of completing the decommissioning of its plant.  On January 31, 2006, the FERC issued an order accepting the rate increase, effective February 1, 2006, subject to refund by YAEC after hearings and settlement judge proceedings.  

On May 1, 2006, YAEC filed with the FERC a settlement agreement with the DPUC, the Massachusetts Attorney General and the Vermont Department of Public Service.  Under the settlement agreement, YAEC agreed to revise its November 2005 decommissioning cost increase from $85 million to $79 million.  The revision includes adjustments for contingencies and projected escalation and certain decontamination and dismantlement (D&D) expenses.  Other terms of the settlement agreement include extending the collection period for charges through December 2014, reconciling and adjusting future charges based on actual D&D expenses and the decommissioning trust fund's actual investment earnings.  The company believes that its share of the increase in decommissioning costs will ultimately be recovered from the customers of CL&P, PSNH and WMECO.  NU has a 38.5 percent ownership interest in YAEC.  On July 31, 2006, the FERC approved the settlement agreemen t which then became effective and will not materially affect the level of 2006 charges.

MYAPC: MYAPC is collecting amounts in rates that are adequate to recover the remaining cost of decommissioning its plant.

Spent Nuclear Fuel Litigation:  CYAPC, YAEC and MYAPC commenced litigation in 1998 charging that the federal government breached contracts it entered into with each company in 1983 under the Nuclear Waste Policy Act of 1982.  The trial ended on August 1, 2004, and a verdict has not been reached.  Post-trial findings of facts and final briefs were filed by the parties in January of 2005.  The Yankee Companies' current rates do not include an amount for recovery of damages in this matter.  Management can predict neither the outcome of this matter nor its ultimate impact on NU.

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NU Enterprises

NU has decided to exit all aspects of NU Enterprises' businesses.  

Merchant Energy Business:  At June 30, 2006, the merchant energy business includes Select Energy's wholesale marketing business, 1,442 MW of generation assets, including 1,296 MW of primarily pumped storage and hydroelectric generation assets at NGC and 146 MW of coal-fired generation assets at HWP related to Mt. Tom, and NGS, which NU Enterprises is exiting.  Prior to the March 2005 decision to exit the wholesale marketing business, this business also included full requirements sales to LDCs and bilateral sales to other load-serving counterparties.  These sales were sourced by the generation assets and an inventory of energy contracts.

Energy Services Business:  At June 30, 2006, the energy services businesses include the operations of Boulos, which is not currently being actively marketed, and SECI-CT, which is a division of SECI.

Intercompany Transactions:  There were no CL&P TSO purchases from Select Energy in the second quarters of 2006 or 2005.  Other energy purchases between CL&P and Select Energy totaled $7.1 million in the first half of 2006 and $26.7 million in the first half of 2005.  WMECO had $1 million in purchases from Select Energy in the first half of 2006, compared with $37.9 million in the first half of 2005.  These transactions relate to nontraditional standard offer contracts.  

Select Energy purchases from NGC and Mt. Tom represented $48.3 million and $98.1 million for the six months ended June 30, 2006, respectively.  These amounts totaled $52.1 million and $105 million for NGC and Mt. Tom, respectively, for the six months ended June 30, 2005.  

Risk Management: Until the exit from the merchant energy business is completed, NU Enterprises will continue to be exposed to various market risks which could negatively affect the value of its remaining business.  This business includes its remaining portfolio of wholesale energy contracts and its generation assets.  Market risk at this point is comprised of the possibility of adverse energy commodity price movements and, in the case of the wholesale marketing business, unexpected load ingress or egress, which would affect the volumes and values of these contracts.

NU Enterprises manages these and associated operating risks through detailed operating procedures and an internal review committee.  A separate, parent-level committee, the Risk Oversight Council (ROC), meets monthly and upon the occurrence of specific portfolio-triggered events with NU Enterprises' leadership to review the conformity of NU Enterprises' activities, commitments and exposures to NU's risk parameters.  

Wholesale Contracts:  As a result of NU’s decision to exit the wholesale marketing business, certain wholesale energy contracts previously accounted for under accrual accounting were required to be marked-to-market in the first quarter of 2005.  Existing energy trading contracts have been and will continue to be marked-to-market with changes in fair value reflected in the statements of income/(loss).  

At June 30, 2006 and December 31, 2005, Select Energy had wholesale derivative assets and derivative liabilities as follows:   

(Millions of Dollars)	June 30, 2006	December 31, 2005
Current wholesale derivative assets	$ 103.1	$  256.6
Long-term wholesale derivative assets	52.9	103.5
Current wholesale derivative liabilities	(174.2)	(369.3)
Long-term wholesale derivative liabilities	(137.5)	(220.9)
Portfolio	$(155.7)	$(230.1)

NU Enterprises resumed efforts to reduce its obligations related to its portfolio of PJM sales and supply contracts.  NU Enterprises also has three contracts to purchase generation products, two of which expire in 2007, with the remaining contract expiring in 2012.  

Numerous factors could either positively or negatively affect the realization of the net fair value amounts in cash.  These include the amounts paid or received to divest some or all of these contracts, the volatility of commodity prices until the contracts are divested, the outcome of future transactions, the performance of counterparties, and other factors.

Select Energy has policies and procedures requiring all wholesale positions to be marked-to-market at the end of each business day and segregating responsibilities between the individuals actually transacting (front office) and those confirming the trades (middle office).  The determination of the portfolio's fair value is the responsibility of the middle office independent from the front office.

The methods used to determine the fair value of wholesale energy contracts are identified and segregated in the table of fair value of contracts at June 30, 2006 and December 31, 2005.  A description of each method is as follows: 1) prices actively quoted primarily

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represent New York Mercantile Exchange (NYMEX) futures, swaps and options that are marked to closing exchange prices; and 2) prices provided by external sources primarily include over-the-counter forwards and options, including bilateral contracts for the purchase or sale of electricity or natural gas, and are marked to the mid-point of bid and ask market prices.  The mid-points of market prices are adjusted to include all applicable market information, such as prior contract settlements with third parties.  Currently, Select Energy has a contract for which a portion of the contract's fair value is determined based on a model or other valuation method.  The model utilizes natural gas prices and a conversion factor to electricity.  Broker quotes for electricity at locations for which Select Energy has entered into transactions are generally available through the year 2009.  For all natural gas positions, broker quotes extend through 2011 and are approximated for 2012 and 2013.

Generally, valuations of short-term contracts derived from quotes or other external sources are more reliable should there be a need to liquidate the contracts, while valuations for longer-term contracts are less certain.  Accordingly, there is a risk that contracts will not be realized at the amounts recorded.  

As of June 30, 2006 and December 31, 2005, the sources of the fair value of wholesale contracts and for the three and six months ended June 30, 2006 and 2005, the changes in fair value of these contracts are included in the following tables:

(Millions of Dollars)	Fair Value of Wholesale Contracts at June 30, 2006
Sources of Fair Value	Maturity Less than One Year	Maturity of One to Four Years	Maturity in Excess of Four Years	Total Fair Value
Prices actively quoted	$    11.1	$     2.7	$         -	$    13.8
Prices provided by external sources	(82.2)	(47.1)	(1.2)	(130.5)
Models based	-	(16.5)	(22.5)	(39.0)
Totals	$(71.1)	$(60.9)	$(23.7)	$(155.7)

(Millions of Dollars)	Fair Value of Wholesale Contracts at December 31, 2005
Sources of Fair Value	Maturity Less than One Year	Maturity of One to Four Years	Maturity in Excess of Four Years	Total Fair Value
Prices actively quoted	$    31.3	$  19.1	$        -	$    50.4
Prices provided by external sources	(147.5)	(94.7)	(2.8)	(245.0)
Models based	0.7	(10.3)	(25.9)	(35.5)
Totals	$(115.5)	$(85.9)	$(28.7)	$(230.1)

	Three Months Ended June 30, 2006	Six Months Ended June 30, 2006
	Total Portfolio Fair Value	Total Portfolio Fair Value
Fair value of wholesale contracts   outstanding at beginning of period	$(173.7)	$(230.1)
Contracts realized or otherwise settled during the period	30.0	93.4
Changes in fair value recorded:
Wholesale contract market changes, net	(11.9)	(18.7)
Fuel, purchased and net interchange power	(0.1)	(0.2)
Operating revenues	-	(0.1)
Changes in model based assumption included in      operating revenues	-	-
Fair value of wholesale contracts   outstanding at end of period	$(155.7)	$(155.7)

Changes in the fair value of wholesale contracts that were marked-to-market as a result of the decision to exit the wholesale business totaled a negative $11.9 million and $18.7 million for the three and six months ended June 30, 2006, respectively, and are recorded as wholesale contract market changes, net on the accompanying condensed consolidated statements of income/(loss).  Changes in the fair value of natural gas contracts totaling a negative $0.1 million and $0.2 million for the three and six months ended June 30, 2006, respectively, are recorded as fuel, purchased and net interchange power, while changes in fair value of contracts formerly designated as trading totaling a negative $0.1 million for the six months ended June 30, 2006, respectively, are recorded as revenue on the condensed consolidated statements of income/(loss).

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Retail Marketing Activities:  Select Energy sold its retail marketing business to Hess on June 1, 2006.  

At June 30, 2006, Select Energy had derivative assets and liabilities totaling $5.3 million and $4.3 million, respectively, related to back-to-back agreements for electric and gas contracts that Select Energy has not yet received consent from the customers to transfer to Hess.  These derivative assets and liabilities are classified as assets held for sale and liabilities of assets held for sale, respectively, on the accompanying condensed consolidated balance sheets.

At June 30, 2006 and December 31, 2005, Select Energy had retail derivative assets and derivative liabilities as follows:   

(Millions of Dollars)	June 30, 2006	December  31, 2005
Current retail derivative assets	$5.2	$55.0
Long-term retail derivative assets	0.1	12.9
Current retail derivative liabilities	(4.3)	(27.2)
Long-term retail derivative liabilities	-	0.4
Total retail	1.0	41.1
Retail hedges	-	24.1
Mark-to-market portfolio	$1.0	17.0

The methods used to determine the fair value of retail energy contracts are identified and segregated in the table of fair value of contracts at June 30, 2006 and December 31, 2005.  A description of each method is as follows: 1) prices actively quoted primarily represent NYMEX futures and swaps that are marked to closing exchange prices; and 2) prices provided by external sources primarily include over-the-counter forwards, including bilateral contracts for the purchase or sale of electricity or natural gas, and are marked to the mid-point of bid and ask market prices.  

At June 30, 2006 and December 31, 2005, the sources of the fair value of retail energy contracts and for the three and six months ended June 30, 2006, the changes in fair value of these contracts are included in the following tables:  

(Millions of Dollars)	Fair Value of Retail Sourcing Contracts at June 30, 2006
Sources of Fair Value	Maturity Less than One Year	Maturity of One to Four Years	Total Fair Value
Prices actively quoted	$     -	$    -	$   -
Prices provided by external sources	0.9	0.1	1.0
Totals	$0.9	$0.1	$1.0

(Millions of Dollars)	Fair Value of Retail Sourcing Contracts at December 31, 2005
Sources of Fair Value	Maturity Less than One Year	Maturity of One to Four Years	Total Fair Value
Prices actively quoted	$ (8.8)	$ -	$(8.8)
Prices provided by external sources	25.8	-	25.8
Totals	$17.0	$ -	$17.0

(Millions of Dollars)	Three Months Ended June 30, 2006	Six Months Ended June 30, 2006
	Total Portfolio Fair Value	Total Portfolio Fair Value
Fair value of retail contracts outstanding   at beginning of period	$(12.7)	$17.0
Contracts realized or otherwise settled during the period	(1.0)	(5.8)
Changes in fair value recorded:
Transferred to Hess	45.9	45.9
Other operating expenses	(23.9)	(47.6)
Fuel, purchased and net interchange power	(7.3)	(8.5)
Fair value of retail contracts   outstanding at end of period	$   1.0	$  1.0

Changes in the fair value of retail contracts through the June 1, 2006 sale of the retail business totaling $23.9 million and $47.6 million for the three and six months ended June 30, 2006, respectively, are recorded in other operating expenses on the accompanying condensed consolidated statements of income/(loss).  During the second quarter of 2006, $45.9 million of derivatives were transferred to Hess as a result of the sale of retail to Hess.  In connection with the decision to exit the wholesale marketing business in March of 2005, Select Energy identified certain contracts previously designated as wholesale and redesignated them to support its retail marketing business.  For the three and six months ended June 30, 2006, $7.3 million and $8.5 million of charges, respectively, were recorded in fuel, purchased and net interchange power on the condensed consolidated statements of income/(loss).

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Competitive Generation Activities:  The competitive generation assets owned by NU Enterprises are subject to certain operational risks, including but not limited to the length of scheduled and non-scheduled outages, bidding and scheduling with various ISOs, environmental issues and fuel costs.  Competitive generation activities are also subject to various federal, state and local regulations.  These risks may result in changes in the anticipated gross margins realized from competitive generation portfolio activities.  

For the six months ended June 30, 2006, the Mt. Tom plant had an availability factor of 79.5 percent, while the 1,080 MW Northfield Mountain facility had an availability factor of 88.5 percent.  The approximately 200 MW of hydroelectric units had an aggregate availability factor of 94.2 percent.  During the second quarter of 2006, both the Mt. Tom plant and Northfield Mountain facility had significant outages.  The Mt. Tom plant was shut down for approximately three weeks during the second quarter for an annual maintenance outage and to complete the installation of its new selective catalytic reduction system.  One of the Northfield Mountain facility's four 270-MW units was off-line from April 3, 2006 through July 6, 2006 for repairs to the Unit 3 generator rotor assembly.  NU Enterprises realized energy-related gross margin of approximately $6.9 million, which was not significantly impacted by these outages, in the six months ended June 30, 2006 primarily due t o a favorable ratio of on-peak to off-peak energy prices for the Northfield Mountain facility early in the year and strong performance from the conventional hydro units throughout the first half of 2006.  

The competitive generation business also receives revenues from sales of the ISO-NE products other than energy.  The recent settlement agreement cleared by the FERC that proposed the adoption of transition period pricing and the FCM in place of the prior LICAP mechanism will increase capacity revenues above their current level.  

Total competitive generation was 1.4 million MWhs through June 30, 2006.  The Mt. Tom plant generated more than 0.4 million MWhs in the first half of 2006.  NGC's Northfield Mountain facility generated approximately 0.5 million MWhs and other hydroelectric facilities generated approximately 0.5 million MWhs for the six months ended June 30, 2006.  Conventional hydroelectric output benefited from above average rainfall.

The competitive generation business includes third party derivative generation related sales contracts (third party generation contracts) and physical generation from NGC and HWP (physical generation).  At June 30, 2006 and December 31, 2005, Select Energy had generation derivative assets and derivative liabilities as follows:   

(Millions of Dollars)	June 30, 2006	December 31, 2005
Current generation derivative assets	$     7.1	$   9.2
Long-term generation derivative assets	-	-
Current generation derivative liabilities	(11.9)	(5.1)
Long-term generation derivative liabilities	(8.1)	(15.5)
Portfolio	$(12.9)	$(11.4)

Certain generation derivatives are included in liabilities of assets held for sale.  See Note 4, "Assets Held for Sale and Discontinued Operations," to the condensed consolidated financial statements.

The methods used to determine the fair value of generation contracts are identified and segregated in the table of fair value of contracts at June 30, 2006 and December 31, 2005.  A description of each method is as follows:  1) prices actively quoted primarily represent exchange traded futures and swaps that are marked to closing exchange prices; and 2) prices provided by external sources primarily include over-the-counter forwards, including bilateral contracts for the purchase or sale of electricity and are marked to the mid-point of bid and ask market prices.  

At June 30, 2006 and December 31, 2005, the sources of the fair value of generation contracts and for the three and six months ended June 30, 2006, the changes in fair value of these contracts are included in the following tables:  

(Millions of Dollars)	Fair Value of Generation Contracts at June 30, 2006
Sources of Fair Value	Maturity Less than One Year	Maturity of One to Four Years	Total Fair Value
Prices actively quoted	$ 2.5	$    -	$    2.5
Prices provided by external sources	(7.3)	(8.1)	(15.4)
Totals	$(4.8)	$(8.1)	$(12.9)

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(Millions of Dollars)	Fair Value of Generation Contracts at December 31, 2005
Sources of Fair Value	Maturity Less than One Year	Maturity of One to Four Years	Total Fair Value
Prices actively quoted	$(1.8)	$        -	$  (1.8)
Prices provided by external sources	5.9	(15.5)	(9.6)
Totals	$ 4.1	$(15.5)	$(11.4)

(Millions of Dollars)	Three Months Ended June 30, 2006	Six Months Ended June 30, 2006
	Total Portfolio Fair Value	Total Portfolio Fair Value
Fair value of competitive generation   contracts outstanding at beginning of period	$  (8.1)	$(11.4)
Contracts realized or otherwise settled during the period	(1.4)	(11.5)
Changes in fair value recorded:
Discontinued operations	1.8	4.3
Wholesale contract market changes, net	(1.0)	(1.0)
Operating revenues	(4.2)	6.7
Fair value of competitive generation contracts   outstanding at end of period	$(12.9)	$(12.9)

Changes in the fair value of generation contracts that became marked-to-market as a result of the decision to exit the remainder of the NU Enterprises' businesses totaled a positive $1.8 million and $4.3 million for the three and six months ended June 30, 2006, respectively, which is recorded in discontinued operations on the accompanying condensed consolidated statements of income/(loss).  Changes in fair value of generation contracts that were marked to market as a result of the decision to exit the wholesale marketing business totaled a negative $1 million for the first half of 2006 and are recorded as wholesale contract market changes, net on the accompanying condensed consolidated statements of income/(loss).  Changes in the fair value of energy contracts that remain in continuing operations totaling a negative $4.2 million for the three months ended June 30, 2006 and a positive $6.7 million for the six months ended June 30, 2006 are recorded as revenues on the conde nsed consolidated statements of income/(loss).

For further information regarding Select Energy's derivative contracts, see Note 5, "Derivative Instruments," to the condensed consolidated financial statements.  

Counterparty Credit:  Counterparty credit risk relates to the risk of loss that Select Energy would incur because of non-performance by counterparties pursuant to the terms of their contractual obligations.  Select Energy has established credit policies with regard to its counterparties to minimize overall credit risk.  These policies require an evaluation of potential counterparties' financial condition (including credit ratings), collateral requirements under certain circumstances (including cash advances, LOCs, and parent guarantees), and the use of standardized agreements that allow for the netting of positive and negative exposures associated with a single counterparty.  This evaluation results in establishing credit limits prior to Select Energy's entering into contracts.  The appropriateness of these limits is subject to continuing review.  Concentrations among these counterparties may affect Select Energy's overall exposure to credit risk, ei ther positively or negatively, in that the counterparties may be similarly affected by changes to economic, regulatory or other conditions.  At June 30, 2006, approximately 29 percent of Select Energy's counterparty credit exposure to wholesale and trading counterparties was collateralized or rated BBB- or better.  The composition of Select Energy’s credit portfolio has shifted from being largely investment grade-rated to being non-rated.  This is largely due to the divestiture of Select Energy’s New England and retail portfolios.  The bulk of the non-rated credit exposure is comprised of one counterparty (93 percent of total) that is a public instrumentality and political subdivision of the State of Connecticut.  Select Energy was provided $6.7 million and $28.9 million of counterparty deposits at June 30, 2006 and December 31, 2005, respectively.  For further information, see Note 1J, "Summary of Significant Accounting Policies - Counterparty Deposits," to the condensed consolidated financial statements.

Critical Accounting Policies and Estimates Update

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates, assumptions and at times difficult, subjective or complex judgments.  Changes in these estimates, assumptions and judgments, in and of themselves, could materially impact the financial statements of NU.  Management communicates to and discusses with NU’s Audit Committee of the Board of Trustees those accounting policies and estimates it believes are most critical.  

Discontinued Operations Presentation:  In order for discontinued operations treatment to be appropriate, management must conclude that there is a component of a business that is "held for sale" in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," and that it meets the criteria for discontinued operations.  As of June 30, 2006, based on the status of exiting the NU Enterprises businesses, management concluded

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that discontinued operations presentation is appropriate for NGC, Mt. Tom, SESI, Woods Electrical, SECI-NH and Woods Network.  The retail marketing business, which is held for sale, is not presented as discontinued operations because separate financial information is not available for this business for the periods prior to the first quarter of 2006.  The wholesale marketing business is not held for sale.  In November of 2005, NU Enterprises sold SECI-NH and Woods Network to unaffiliated buyers.  In April of 2006, NU Enterprises sold certain assets of Woods Electrical.  On May 5, 2006, NU Enterprises completed the sale of SESI.  On June 1, 2006, NU Enterprises completed the sale of Select Energy's retail marketing business.

For further information regarding these companies, see Note 4, "Assets Held for Sale and Discontinued Operations," to the condensed consolidated financial statements.  Management will continue to evaluate this classification in 2006 for NU Enterprises' businesses that are being exited.  

Impairment of Long-Lived Assets:  The company evaluates long-lived assets such as property, plant and equipment to determine if these assets are impaired when events or changes in circumstances occur such as the 2005 announced decisions to exit the NU Enterprises businesses.  

When the company believes one of these events has occurred, the determination needs to be made whether a long-lived asset should be classified as held and used or held for sale.  For assets classified as held and used, the company estimates the undiscounted future cash flows associated with the long-lived asset or asset group and an impairment loss is recognized if the carrying amount of an asset is not recoverable and exceeds its fair value.  The carrying amount is not recoverable if it exceeds the sum of the undiscounted future cash flows expected to result from the use and eventual disposition of the asset.  For assets held for sale, a long-lived asset or disposal group is measured at the lower of its carrying amount or fair value less cost to sell and depreciation of these assets is discontinued.  

In order to estimate an asset's future cash flows, the company considers historical cash flows, changes in the market and other factors that may affect future cash flows.  The company considers various relevant factors, including the method and timing of recovery, forward price curves for energy, fuel costs, and operating costs.  Actual future market prices, costs and cash flows could vary significantly from those assumed in the estimates, and the impact of such variations could be material.

In the first quarter of 2006, management determined that the competitive generation business, which includes NGC and Mt. Tom, should be classified as assets held for sale rather than held and used.  No impairment existed for the competitive generation assets as the fair value of these assets less their expected costs to sell exceeded their carrying values.  Management determined that the best estimate for the fair value of the generation assets at June 30, 2006 were the bids received on July 10, 2006.  The bids received were above carrying value, and therefore indicated that no impairment of the competitive generation assets existed at June 30, 2006.

For further information regarding impairment charges and assets held for sale, see Note 3, "Restructuring and Impairment Charges," and Note 4, "Assets Held for Sale and Discontinued Operations," to the condensed consolidated financial statements.

Pension Plan Curtailment:  NU’s subsidiaries participate in a uniform noncontributory defined benefit retirement plan (Pension Plan) covering substantially all regular NU employees.  For the Pension Plan, the development of the benefit obligation, fair value of plan assets, funded status and net periodic benefit credit or cost is based on several significant assumptions.  If these assumptions were changed, the resulting change in the benefit obligation, fair value of plan assets, funded status and net periodic benefit credit or cost could have a material impact on NU’s condensed consolidated financial statements.

On December 15, 2005, the NU Board of Trustees approved a benefit for new non-union employees hired on and after January 1, 2006 to receive retirement benefits under a new 401(k) benefit rather than under the Pension Plan.  Non-union employees actively employed on December 31, 2005 were given the choice in 2006 to elect to continue participation in the Pension Plan or instead receive a new employer contribution under the 401(k) Savings Plan effective on January 1, 2007.  If the new benefit is elected, their accrued pension liability in the Pension Plan will be frozen as of December 31, 2006.  Non-union employees are required to make this election by August 14, 2006.  The approval of the new plan resulted in the recording of an estimated pre-capitalization, pre-tax curtailment expense of $6.2 million in 2005, as a certain number of employees were expected to elect the new 401(k) benefit, resulting in a reduction in aggregate estimated future years of service unde r the Pension Plan.  Management estimated the amount of the curtailment expense associated with this change based upon actuarial calculations and certain assumptions, including the expected level of transfers to the new 401(k) benefit.  

At this time, management believes that it is possible that the ultimate number of employees electing to leave the Pension Plan may be lower than previously estimated and that it is possible that a significant reduction in the estimated future years of service may not occur.  The final impact of this benefit plan change will be determined in the third quarter of 2006.  

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Other Matters

Commitments and Contingencies:  For further information regarding other commitments and contingencies, see Note 7, "Commitments and Contingencies," to the condensed consolidated financial statements.

Contractual Obligations and Commercial Commitments:  For updated information regarding NU's contractual obligations and commercial commitments at June 30, 2006, see Note 7C, "Commitments and Contingencies - Long-Term Contractual Arrangements," to the condensed consolidated financial statements.  

Consolidated Edison, Inc. Merger Litigation:  Certain gain and loss contingencies exist with regard to the merger agreement between NU and Consolidated Edison, Inc. (Con Edison) and the related litigation.  On March 5, 2001, Con Edison advised NU that it was unwilling to close its merger with NU on the terms set forth in the parties' 1999 merger agreement (Merger Agreement).  On March 12, 2001, NU filed suit against Con Edison seeking damages in excess of $1 billion.  

In an opinion dated October 12, 2005, a panel of three judges at the Second Circuit held that the shareholders of NU had no right to sue Con Edison for its alleged breach of the parties' Merger Agreement.  NU's request for a rehearing was denied on January 3, 2006.  This ruling left intact the remaining claims between NU and Con Edison for breach of contract, which include NU's claim for recovery of costs and expenses of approximately $32 million and Con Edison's claim for damages of "at least $314 million."  NU opted not to seek review of this ruling by the United States Supreme Court.  On April 7, 2006, NU filed its motion for partial summary judgment on Con Edison's damage claim.  NU's motion asserts that NU is entitled to judgment in its favor with respect to this claim based on the undisputed material facts and applicable law.  The matter is fully briefed and awaiting a decision.  At this stage, NU cannot predict the outcome of this matt er or its ultimate effect on NU.  

Proposed Accounting Pronouncements:

Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans:  On March 31, 2006, the Financial Accounting Standards Board (FASB) issued an exposure draft, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and 132(R)."  An exposure draft is not a final accounting pronouncement and is subject to change.  If adopted as proposed, a company would be required to recognize the projected benefit pension and other postretirement plan obligations, net of the fair value of plan assets, on the balance sheet.  The offsetting amount to the adjustment would be recognized in shareholders' equity in other comprehensive income.  The exposure draft is expected to be effective on December 31, 2006, and is expected to be prospectively applied beginning on that date.  To the extent the company is unable to receive rate treatment allowing for the est ablishment of regulatory assets or could not recognize such regulatory assets under GAAP, the final statement would have a material reduction of NU's shareholders' equity.  See Note 11, "Pension Benefits and Postretirement Benefits Other Than Pensions," for information related to NU's defined benefit pension and other postretirement benefit plans.  

Accounting Standard Issued But Not Yet Adopted:

A.

Accounting for Servicing of Financial Assets:  In March of 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets - An Amendment of FASB Statement No. 140."  SFAS No. 156 requires an entity to recognize a servicing asset or liability at fair value each time it undertakes an obligation to service a financial asset by entering into a servicing contract in a transfer of the servicer's financial assets that meets the requirements for sale accounting and in other circumstances.  Servicing assets and liabilities may be subsequently measured through either amortization or recognition of fair value changes in earnings.  SFAS No. 156 is required to be applied prospectively to transactions beginning in the first quarter of 2007 and may affect the accounting treatment of CL&P Receivables Corporation (CRC), a wholly owned subsidiary of CL&P.  Implementation of this statement is not expected to have a material effect on the company's financial statements.

B.

Uncertain Tax Positions:  On July 13, 2006, the FASB issued FIN 48, "Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109."  FIN 48 addresses the methodology to be used in estimating and reporting amounts associated with uncertain tax positions, including interest and penalties.  FIN 48 is required to be implemented in the first quarter of 2007 prospectively as a change in accounting principle with a cumulative effect adjustment reflected in the opening balance of retained earnings.  The company is currently evaluating the potential impacts of FIN 48 on its financial statements.

Forward Looking Statements:  This discussion and analysis includes statements concerning NU's expectations, plans, objectives, future financial performance and other statements that are not historical facts.  These statements are "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  In some cases the reader can identify these forward looking statements by words such as "estimate," "expect," "anticipate," "intend," "plan," "believe," "forecast," "should," "could," and similar expressions.  Forward looking statements involve risks and uncertainties that may cause actual results or outcomes to differ materially from those included in the forward looking statements.  Factors that may cause actual results to differ materially from those included in the forward looking statements include, but are not limited to, actions by state and federal regulatory bodies, competition

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and industry restructuring, changes in economic conditions, changes in weather patterns, changes in laws, regulations or regulatory policy, expiration or initiation of significant energy supply contracts, changes in levels of capital expenditures, developments in legal or public policy doctrines, technological developments, volatility in electric and natural gas commodity markets, effectiveness of risk management policies and procedures, changes in accounting standards and financial reporting regulations, fluctuations in the value of electricity positions, the methods, timing and results of disposition of competitive businesses, actions of rating agencies, terrorist attacks on domestic energy facilities and other presently unknown or unforeseen factors. Other risk factors are detailed from time to time in our reports to the Securities and Exchange Commission (SEC). Management undertakes no obligation to update the information contained in any forward looking statements to reflect develo pments or circumstances occurring after the statement is made.

Web Site:  Additional financial information is available through NU’s web site at www.nu.com.

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RESULTS OF OPERATIONS - NU CONSOLIDATED

The following table provides the variances in income statement line items for the condensed consolidated statements of income/(loss) for NU included in this report on Form 10-Q for the three and six months ended June 30, 2006:

	Income Statement Variances (Millions of Dollars) 2006 over/(under) 2005
	Second Quarter				Percent		Six Months			Percent
Operating Revenues:		$	139		9	%	$	53		1	%
Operating Expenses:
Fuel, purchased and net interchange power		126			13		(6)			-
Other operation		(6)			(2)		58			11
Wholesale contract market changes, net		(57)			(82)		(239)			(92)
Restructuring and impairment charges		1			55		(15)			(64)
Maintenance		(1)			(2)		1			1
Depreciation		5			8		8			7
Amortization		(25)			(a)		10			22
Amortization of rate reduction bonds		3			7		6			7
Taxes other than income taxes		1			2		4			3
Total operating expenses		47			3		(173)			(4)
Operating Income/(Loss)		92			(a)		226			(a)
Interest expense, net		-			-		5			4
Other income, net		2			23		12			73
Income/(Loss) before income tax expense		94			(a)		233			95
Income tax expense/(benefit)		41			(a)		87			90
Preferred dividends of subsidiary		-			-		-			-
Income/(loss) from continuing operations		53			(a)		146			96
Income from discontinued operations		(3)			(26)		12			(a)
Net Income/(Loss)		$		50	(a)	%	$		158	(a)	%

(a) Percent greater than 100.

Comparison of the Second Quarter of 2006 to the Second Quarter of 2005

Operating Revenues

Operating revenues increased $139 million in the second quarter of 2006 primarily due to higher distribution revenues ($189 million) and higher regulated transmission business revenues ($4 million), partially offset by lower revenues from NU Enterprises ($56 million).

Distribution revenues increased $189 million primarily due to higher electric distribution revenues.  Higher electric distribution revenues include the components of CL&P, PSNH and WMECO retail revenues which are included in regulatory commission approved tracking mechanisms that track the recovery of certain incurred costs ($183 million).  The tracking mechanisms allow for rates to be changed periodically with over collections refunded to customers or under collections collected from customers in future periods.  The distribution revenue tracking components increase of $183 million is primarily due to the pass through of higher energy supply costs ($158 million), higher CL&P FMCC charges ($17 million) and higher wholesale revenues ($9 million).  The distribution component of these companies and the retail transmission component of PSNH which flow through to earnings increased $5 million primarily due to an increase in regulated retail rates, partially offset by a decrease in retail sales.  Retail electric sales decreased 2.5 percent in 2006 compared with 2005.  On a weather adjusted basis, retail electric sales were lower by 0.6 percent.

Transmission business revenues increased $4 million primarily due to a higher transmission investment base and the recovery of higher operating expenses in 2006 as allowed under FERC Tariff Schedule 21.

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The NU Enterprises’ revenues decrease of $56 million is primarily due to the divesture of the competitive businesses which include the sale of the retail marketing business on June 1, 2006, the sale of the Massachusetts service location of SECI-CT in January 2006, and lower revenues from certain other competitive businesses not classified as discontinued operations.  

Fuel, Purchased and Net Interchange Power

Fuel, purchased and net interchange power expenses increased $126 million in the second quarter of 2006 primarily due to higher purchased power costs for distribution ($155 million), partially offset by lower costs at NU Enterprises ($30 million).

The $155 million increase in distribution purchased power costs is primarily due to higher standard offer supply costs for CL&P and WMECO ($121 million) and higher expenses for PSNH primarily due to higher energy costs ($35 million).  

NU Enterprises’ lower costs of $30 million are primarily due to the divesture of the competitive businesses which include the sale of the retail marketing business on June 1, 2006.  

Other Operation

Other operation expenses decreased $6 million in the second quarter of 2006 primarily due to lower NU Enterprises’ expenses of $33 million, partially offset by higher distribution and transmission expenses ($28 million).

NU Enterprises’ expenses decreased $33 million primarily due to the divesture of the competitive businesses which include exiting all of the New England wholesale marketing business in 2005 and the sale of the retail marketing business on June 1, 2006 ($15 million), the sale of the Massachusetts service location of SECI-CT in January 2006 ($13 million), and lower expenses from certain other competitive businesses not classified as discontinued operations ($5 million).

Higher distribution and transmission expenses of $28 million are primarily due to higher distribution reliability must run (RMR) costs and other power pool related expenses ($20 million), higher distribution uncollectible expenses ($3 million) and higher distribution and transmission employee related costs ($2 million).  

Wholesale Contract Market Changes, Net

See Note 2, "Wholesale Contract Market Changes," to the condensed consolidated financial statements for a description and explanation of this amount.

Restructuring and Impairment Charges

See Note 3, "Restructuring and Impairment Charges," to the condensed consolidated financial statements for a description and explanation of this amount.

Maintenance

Maintenance expenses decreased $1 million in the second quarter of 2006 primarily due to lower transmission maintenance expenses.

Depreciation

Depreciation increased $5 million in the second quarter of 2006 primarily due to higher distribution and transmission plant balances.

Amortization

Amortization decreased $25 million in the second quarter of 2006 primarily due to PSNH distribution ($12 million) and CL&P distribution ($12 million).  The PSNH decrease is primarily due to completing the recovery of its non-securitized stranded costs by offsetting the remaining stranded cost regulatory asset balances against an offsetting regulatory liability for the cumulative deferral of SCRC revenues.  The CL&P decrease is primarily due to lower amortization related to distribution’s recovery of transition charges ($10 million).  

Amortization of Rate Reduction Bonds

Amortization of rate reduction bonds increased $3 million in the second quarter of 2006.  The higher portion of principal within the rate reduction bonds payment results in a corresponding increase in the amortization of regulatory assets.  

Taxes Other Than Income Taxes

Taxes other than income taxes increased $1 million in the second quarter of 2006 primarily due to distribution’s higher property taxes and higher Connecticut gross earnings tax related to higher CL&P distribution revenue.

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Other Income, Net

Other income, net increased $2 million in the second quarter of 2006 primarily due to a $3 million gain associated with the sale of 2.7 million shares of Globix and higher CL&P Energy Independence Act (EIA) ($3 million), partially offset by the CYAPC regulatory asset write-off ($3 million).

Income Tax Expense/(Benefit)

Income taxes increased $41 million due to higher pre-tax earnings, the regulatory recovery of tax expense associated with nondeductible acquisition costs and an increase in state income taxes.  The increase in state income taxes results from higher unitary taxable income due primarily to the sale of competitive generation assets.

Income from Discontinued Operations

For the three months ended June 30, 2006 and 2005, the operations of NGC, Mt. Tom, SESI and Woods Electric were presented as discontinued operation as a result of meeting certain criteria requiring this presentation.  In addition, SECI-NH (including Reeds Ferry) and Woods Network are included in discontinued operations for the three months ended June 30, 2005.  These businesses were sold in November of 2005.  Under this presentation, revenues and expenses of these businesses are included in the income from discontinued operations on the condensed consolidated statement of loss.  See Note 4, "Assets Held for Sale and Discontinued Operations," to the condensed financial statements for a description and explanation of the discontinued operations.

Comparison of the First Six Months of 2006 to the First Six Months of 2005

Operating Revenues

Operating revenues increased $53 million in the first six months of 2006 primarily due higher distribution revenues ($403 million) and higher regulated transmission business revenues ($15 million), partially offset by lower revenues from NU Enterprises ($370) million.  

Distribution revenues increased $403 million primarily due to higher electric distribution revenues ($414 million), partially offset by lower gas distribution revenues ($11 million).  Higher electric distribution revenues include the components of CL&P, PSNH and WMECO retail revenues which are included in regulatory commission approved tracking mechanisms that track the recovery of certain incurred costs ($405 million).  The tracking mechanisms allow for rates to be changed periodically with over collections refunded to customers or under collections collected from customers in future periods.  The distribution revenue tracking components increase of $405 million is primarily due to the pass through of higher energy supply costs ($339 million), higher CL&P FMCC charges ($51 million) and higher wholesale revenues ($15 million).  The distribution component of these companies and the retail transmission component of PSNH which flow through to earnings increased $9 million primarily due to an increase in regulated retail rates, partially offset by a decrease in retail sales.  Retail electric sales decreased 3.0 percent in 2006 compared with 2005, primarily due to a mild winter.  On a weather adjusted basis, retail electric sales were lower by 0.8 percent.

Transmission business revenues increased $15 million primarily due to a higher transmission investment base and the recovery of higher operating expenses in 2006 as allowed under FERC Tariff Schedule 21.

The increase in electric distribution revenues is partially offset by lower gas distribution revenues of $11 million primarily due to lower sales volumes.  Firm gas sales decreased 11.5 percent in 2006 compared with 2005 primarily due to a mild winter and increased conservation driven by higher gas costs.  On a weather adjusted basis, firm gas sales decreased 3.9 percent.

The NU Enterprises’ revenues decrease of $370 million is primarily due to the divesture of the competitive businesses.  Revenues in the wholesale marketing business decreased $365 million as a result of exiting all of its New England wholesale sales obligations in 2005 by either buying out those contracts or assigning its obligations to third parties.  There were no additional contracts bought out or assigned in the first six months of 2006.  NU Enterprises’ revenues also decreased primarily due to the sale of the Massachusetts service location of SECI-CT in January 2006 the winding down of the remaining SECI-CT contracts, and lower revenues from certain other competitive businesses not classified as discontinued operations ($32 million).  These decreases are partially offset by an increase in the retail marketing business prior to its sale on June 1, 2006 ($27 million).

Fuel, Purchased and Net Interchange Power

Fuel, purchased and net interchange power expenses decreased $6 million in the first six months of 2006 primarily due to lower costs at NU Enterprises ($360 million), partially offset by higher purchased power costs for distribution ($352 million).  

NU Enterprises’ lower costs of $360 million are primarily due to the divesture of the competitive businesses.  Wholesale marketing costs decreased $440 million primarily due to the absence of servicing the New England wholesale sales contracts that were exited in 2005.  The remaining wholesale obligations in the PJM power pool expire in 2008 and the remaining wholesale obligation in New York continues through 2013.  This decrease is partially offset by higher costs in the retail marketing business prior to its sale on June 1, 2006 ($80 million).

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The $352 million increase in distribution purchased power costs is primarily due to higher standard offer supply costs for CL&P and WMECO ($307 million) and higher expenses for PSNH primarily due to higher energy costs ($51 million).  The increase in distribution purchased power costs is partially offset by lower Yankee Gas expenses as a result of lower gas sales ($6 million).

Other Operation

Other operation expenses increased $58 million in the first six months of 2006 primarily due to higher distribution and transmission expenses ($53 million) and higher NU Enterprises’ expenses ($7 million).

Higher distribution and transmission expenses of $53 million are primarily due to higher distribution RMR costs and other power pool related expenses ($41 million), higher distribution and transmission employee related costs ($7 million) and higher distribution uncollectible expenses ($2 million).

NU Enterprises’ expenses increased $7 million primarily due to a charge to record the retail marketing business at its fair value less cost to sell ($54 million).  Partially offsetting the increase is a $46 million decrease in NU Enterprises’ expenses primarily due to the divesture of the competitive businesses which include the sale of the Massachusetts service location of SECI-CT in January 2006 ($26 million), exiting all of the New England wholesale marketing business in 2005, and the sale of the retail marketing business on June 1, 2006 ($15 million), and lower expenses from certain other competitive businesses not classified as discontinued operations ($6 million).

Wholesale Contract Market Changes, Net

See Note 2, "Wholesale Contract Market Changes," to the condensed consolidated financial statements for a description and explanation of this amount.

Restructuring and Impairment Charges

See Note 3, "Restructuring and Impairment Charges," to the condensed consolidated financial statements for a description and explanation of this amount.

Maintenance

Maintenance expenses increased $1 million in the first six months of 2006 primarily due to higher transmission maintenance expenses.

Depreciation

Depreciation increased $8 million in the first six months of 2006 primarily due to higher distribution and transmission plant balances.

Amortization

Amortization increased $10 million in the first six months of 2006 primarily due to PSNH distribution ($22 million), partially offset by CL&P distribution  ($10 million).  The PSNH increase is primarily due to the overrecovery of ES costs in February and March of 2006 ($23 million) and the acceleration in the recovery of PSNH’s non-securitized stranded costs ($11 million), partially offset by offsetting the remaining stranded cost regulatory asset balances against an offsetting regulatory liability for the cumulative deferral of SCRC revenues ($12 million).  The CL&P decrease is primarily due to lower amortization related to distribution’s recovery of transition charges ($9 million).   

Amortization of Rate Reduction Bonds

Amortization of rate reduction bonds increased $6 million in the first six months of 2006.  The higher portion of principal within the rate reduction bonds payment results in a corresponding increase in the amortization of regulatory assets.  

Taxes Other Than Income Taxes

Taxes other than income taxes increased $4 million in the first six months of 2006 primarily due to distribution’s higher property taxes and higher Connecticut gross earnings tax related to higher CL&P distribution revenue.

Interest Expense, Net

Interest expense, net increased $5 million in the first six months of 2006, primarily due to the issuance of long-term debt of $350 million in 2005 and $250 million in 2006.  The 2005 long-term debt issuance includes $200 million for CL&P in April and the issuance of $50 million per company related to Yankee Gas, WMECO and PSNH in July, August and October, respectively.  The 2006 long-term debt issuance was $250 million for CL&P which was issued in June 2006.  The increase is partially offset by interest related to the final decision on the streetlight refund docket recorded in the second quarter of 2005.    

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Other Income, Net

Other income, net increased $12 million in the first six months of 2006 primarily due to higher investment income ($7 million), which includes $2 million for CL&P related to a Connecticut tax refund claim settlement, a $3 million gain associated with the sale of 2.7 million shares of Globix and higher CL&P EIA incentives ($3 million).  The increase is also due to higher AFUDC ($2 million), partially offset by the CYAPC regulatory asset write-off ($3 million).

Income Tax Expense/(Benefit)

Income tax benefit decreased $87 million due to lower pre-tax loss and the regulatory recovery of tax expense associated with non-deductible acquisition costs.

Income from Discontinued Operations

For the six months ended June 30, 2006 and 2005, the operations of NGC, Mt. Tom, SESI and Woods Electric were presented as discontinued operation as a result of meeting certain criteria requiring this presentation.  In addition, SECI-NH (including Reeds Ferry) and Woods Network are included in discontinued operations for the six months ended June 30, 2005.  These businesses were sold in November of 2005.  Under this presentation, revenues and expenses of these businesses are included in the income from discontinued operations on the condensed consolidated statement of loss.  See Note 4, "Assets Held for Sale and Discontinued Operations," to the condensed financial statements for a description and explanation of the discontinued operations.

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THE CONNECTICUT LIGHT AND POWER COMPANY AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

CL&P is a wholly owned subsidiary of NU.  This discussion should be read in conjunction with NU's management’s discussion and analysis of financial condition and results of operations, condensed consolidated financial statements and footnotes in this Form 10-Q and the NU 2005 Form 10-K.  

RESULTS OF OPERATIONS

The following table provides the variances in income statement line items for the condensed consolidated statements of income for CL&P included in this report on Form 10-Q for the three and six months ended June 30, 2006:

	Income Statement Variances (Millions of Dollars) 2006 over/(under) 2005
	Second Quarter				Percent		Six Months			Percent
Operating Revenues:		$	143		18	%	$	309		19	%
Operating Expenses:
Fuel, purchased and net interchange power		116			24		244			24
Other operation		27			19		54			21
Maintenance		(1)			(3)		1			3
Depreciation		4			11		7			11
Amortization of regulatory (liabilities)/assets, net		(12)			(a)		(9)			(a)
Amortization of rate reduction bonds		2			8		4			7
Taxes other than income taxes		1			4		2			3
Total operating expenses		137			18		303			20
Operating Income		6			14		6			5
Interest expense, net		(2)			(6)		-			-
Other income, net		(1)			(10)		5			44
Income before income tax expense		7			45		11			20
Income tax expense		2			61		(1)			(8)
Net Income		$		5	40	%	$		12	32	%

(a) Percent greater than 100.

Comparison of the Second Quarter of 2006 to the Second Quarter of 2005

Operating Revenues

Operating revenues increased $143 million in the second quarter of 2006, compared with the same period in 2005, due to higher distribution revenues ($139 million) and higher transmission revenues ($4 million).

The distribution revenue increase of $139 million is primarily due to the components of revenues which are included in regulatory commission approved tracking mechanisms that track the recovery of certain incurred costs ($136 million).  The tracking mechanisms allow for rates to be changed periodically with over collections refunded to customers or under collections collected from customers in future periods.  The distribution component of rates which impact earnings increased $3 million, primarily due to higher retail rates as a result of the rate increase effective January 1, 2006 and the absence in 2006 of an additional reserve recorded in 2005 to reflect the final decision on the streetlight docket ($3 million), partially offset by decreased sales volumes.  Retail sales in the second quarter of 2006 were 3.6 percent lower than the same period in 2005 and 1.4 percent lower on a weather normalized basis.

The distribution revenue tracking components increased $136 million primarily due to higher TSO related revenues ($118 million) and an increase in revenues associated with the recovery of FMCC charges ($17 million).

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Transmission revenues increased $4 million primarily due to a higher rate base and higher operating expenses which are recovered under the NU schedule 21 tariff.

Fuel, Purchased and Net Interchange Power

Fuel, purchased and net interchange power expense increased $116 million in the second quarter of 2006 primarily due to higher standard offer supply costs and higher purchased power costs as a result of higher energy prices.

Other Operation

Other operation expenses increased $27 million in the second quarter of 2006 primarily due to higher RMR costs ($18 million) which are tracked and recovered through the FMCC, higher pension, injuries and damages costs ($3 million), and higher C&LM expenses ($2 million) which are included in a regulatory rate tracking mechanism.

Maintenance

Maintenance expenses decreased $1 million in the second quarter of 2006 primarily due to lower expenses related to overhead lines maintenance ($1 million) and lower substation maintenance expenses ($1 million), partially offset by higher tree trimming expenses ($1 million).

Depreciation

Depreciation expense increased $4 million in the second quarter of 2006 due to higher utility plant balances resulting from plant additions.

Amortization of Regulatory (Liabilities)/Assets, Net

Amortization of regulatory (liabilities)/assets, net decreased $12 million in the second quarter of 2006 primarily due to lower amortization related to the recovery of transition charges ($10 million).

Amortization of Rate Reduction Bonds

Amortization of rate reduction bonds increased $2 million in the second quarter of 2006.  The higher portion of principal within the rate reduction bonds payment results in a corresponding increase in the amortization of regulatory assets.  

Taxes Other Than Income Taxes

Taxes other than income taxes increased $1 million in the second quarter of 2006 primarily due to higher property taxes.   

Interest Expense, Net

Interest expense, net decreased $2 million in the second quarter of 2006 primarily due to the absence of interest expense related to the final decision on the streetlight refund docket recorded in the second quarter of 2005 ($4 million) and lower rate reduction bond interest resulting from lower principal balances outstanding ($2 million), partially offset by higher short-term interest expense ($2 million) and higher interest on long-term debt mainly as a result of new debt issued in June 2006 ($1 million).

Other Income, Net

Other income, net decreased $1 million in the second quarter of 2006 primarily due to lower investment income ($1 million).  

Income Tax Expense

Income tax expense increased $2 million in the second quarter of 2006 due to higher pre-tax earnings and a higher effective tax rate.  The effective tax rate increased from 24.0 percent to 26.6 percent primarily due to higher plant and non-plant related flow through adjustments; partially offset by lower state tax expense resulting from higher credits.  

Comparison of the First Six Months of 2006 to the First Six Months of 2005

Operating Revenues

Operating revenues increased $309 million in the first six months of 2006, compared with the same period in 2005, due to higher distribution revenues ($296 million) and higher transmission revenues ($12 million).

The distribution revenue increase of $296 million is primarily due to the components of revenues which are included in regulatory commission approved tracking mechanisms that track the recovery of certain incurred costs ($291 million).  The tracking mechanisms allow for rates to be changed periodically with over collections refunded to customers or under collections collected from customers in future periods.  The distribution component of rates which impact earnings increased $5 million, primarily due to higher retail rates as a result of the rate increase effective January 1, 2006 and the absence in 2006 of an additional reserve recorded in 2005 to reflect the final decision on the streetlight docket ($2 million), partially offset by decreased sales volumes.  Retail sales for the first six months of 2006 were 3.9 percent lower than the same period in 2005 and 1.4 percent lower on a weather normalized basis.

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The distribution revenue tracking components increased $291 million primarily due to higher TSO related revenues ($226 million), an increase in revenues associated with the recovery of FMCC charges ($51 million), and higher retail transmission revenues ($10 million).

Transmission revenues increased $12 million primarily due to a higher rate base and higher operating expenses which are recovered under the NU schedule 21 tariff.

Fuel, Purchased and Net Interchange Power

Fuel, purchased and net interchange power expense increased $244 million in the first six months of 2006 primarily due to higher standard offer supply costs and higher purchased power costs as a result of higher energy prices, partially offset by deferred fuel costs.

Other Operation

Other operation expenses increased $54 million in the first six months of 2006 primarily due to higher RMR costs ($39 million) which are tracked and recovered through the FMCC, higher administrative and general costs which include pension and other benefit costs ($8 million), and higher C&LM expenses ($4 million) which are included in a regulatory rate tracking mechanism.  

Maintenance

Maintenance expenses increased $1 million in the first six months of 2006 primarily due to higher tree trimming expenses ($2 million) and higher expenses related to underground lines maintenance ($1 million), partially offset by lower transformer and substation maintenance expenses ($2 million).

Depreciation

Depreciation expense increased $7 million in the first six months of 2006 due to higher utility plant balances resulting from plant additions.

Amortization of Regulatory (Liabilities)/Assets, Net

Amortization of regulatory (liabilities)/assets, net decreased $9 million in the first six months of 2006 primarily due to lower amortization related to the recovery of transition charges ($9 million).  

Amortization of Rate Reduction Bonds

Amortization of rate reduction bonds increased $4 million in the first six months of 2006.  The higher portion of principal within the rate reduction bonds payment results in a corresponding increase in the amortization of regulatory assets.  

Taxes Other Than Income Taxes

Taxes other than income taxes increased $2 million in the first six months of 2006 primarily due to higher property taxes.   

Other Income, Net

Other income, net increased $5 million in the first six months of 2006 primarily due to interest income related to a Connecticut tax refund claim settlement ($2 million), higher EIA (Energy Independence Act) incentives ($3 million), higher other interest income ($2 million).  

Income Tax Expense

Income tax expense decreased $1 million in the first six months of 2006 due to a lower effective tax rate; partially offset by higher pre-tax earnings.  The effective tax rate decreased from 28.7 percent to 22 percent due to a favorable Connecticut refund claim settlement, higher state tax credits and a higher Medicare subsidy; partially offset by higher plant related flow through adjustments.

LIQUIDITY

Net cash flows from operations increased by $36.7 million from $46.1 million for the first half of 2005 to $82.8 million for the first half of 2006.  The increase in operating cash flows is primarily due to changes in investments in securitizable assets which increased more in the first half of 2005 than in the first half of 2006.  Investments in securitizable assets are affected by the level of accounts receivable and by the amount of accounts receivable sold through CRC to a financial institution.  In the first half of 2006, the level of accounts receivable increased as compared to 2005, partially offset by the increase in the cash receipts from the sale of receivables to the financial institution totaling approximately $50 million in 2006 as compared to 2005.  The increase in operating cash flows is offset by higher regulatory refunds as CL&P refunded previous overrecoveries to its ratepayers to moderate the increase in CL&P's TSO rates that became effecti ve on January 1, 2006 and an estimated federal income tax payment of approximately $20 million related to CL&P's 2005 tax return.  This payment was made in the first quarter of 2006.  No such federal income tax payment was made in the first quarter of 2005.  The company expects net cash flows to increase and CL&P refunds to decline in the second half of 2006 as a result of a DPUC decision to terminate a $0.009 per kWh credit on customer bills to refund previous CTA overrecoveries.  

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CL&P's capital expenditures totaled $240 million in the first half of 2006 compared to $181.7 million in the first half of 2005.  This increase is primarily due to higher transmission capital expenditures.  CL&P projects capital expenditures to total approximately $600 million in 2006.  

Financing activities increased for the first half of 2006 primarily as a result of CL&P's $250 million debt issuance.  On June 7, 2006, CL&P closed on the sale of $250 million, 30-year first mortgage bonds with a coupon rate of 6.35 percent.  In addition, at June 30, 2006, CL&P's financing activities also included $60 million of capital contributions from NU, offset by dividend payments to NU of $31.9 million.  

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PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

PSNH is a wholly owned subsidiary of NU.  This discussion should be read in conjunction with NU's management’s discussion and analysis of financial condition and results of operations, condensed consolidated financial statements and footnotes in this Form 10-Q and the NU 2005 Form 10-K.  

RESULTS OF OPERATIONS

The following table provides the variances in income statement line items for the condensed consolidated statements of income for PSNH included in this report on Form 10-Q for the three and six months ended June 30, 2006:

	Income Statement Variances (Millions of Dollars) 2006 over/(under) 2005
	Second Quarter				Percent		Six Months			Percent
Operating Revenues:		$	44		17	%	$	90		17	%
Operating Expenses:
Fuel, purchased and net interchange power		35			28		50			20
Other operation		-			-		(1)			(1)
Maintenance		1			6		1			2
Depreciation		1			6		2			7
Amortization of regulatory assets, net		(12)			(74)		22			52
Amortization of rate reduction bonds		1			6		1			5
Taxes other than income taxes		-			-		1			3
Total operating expenses		26			11		76			16
Operating Income		18			77		14			29
Interest expense, net		(1)			(3)		-			-
Other income, net		-			-		1			(a)
Income before income tax expense		19			(a)		15			58
Income tax expense		13			(a)		13			(a)
Net Income		$		6	64	%	$		2	12	%

(a) Percent greater than 100.

Comparison of the Second Quarter of 2006 to the Second Quarter of 2005

Operating Revenues

Operating revenues increased $44 million in the second quarter of 2006, as compared to the same period in 2005, primarily due to higher distribution revenue ($43 million) and higher transmission revenue ($1 million).  The distribution revenue increase of $43 million is primarily due to the components of revenues which are included in regulatory commission approved tracking mechanisms that track the recovery of certain incurred costs ($42 million).  The tracking mechanisms allow for rates to be changed periodically with over collections refunded to customers or under collections collected from customers in future periods.  The distribution and transmission components of PSNH’s retail rates which impact earnings increased $1 million primarily due to the retail rate increases effective June 1, 2005, partially offset by lower retail sales.  Retail sales decreased 0.4 percent in 2006 compared to the same period of 2005.

The distribution revenue tracking components increased $42 million primarily due to an increase in the ES rate component of retail revenues of $34 million, primarily due to an increase in the cost of fuel and purchased power.   

Fuel, Purchased and Net Interchange Power

Fuel, purchased and net interchange power increased $35 million in the second quarter of 2006 primarily due to the higher cost of energy as a result of higher fuel prices.   

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Maintenance

Maintenance expenses increased $1 million in the second quarter of 2006 primarily due to higher boiler plant and overhead line maintenance expenses.

Depreciation

Depreciation expense increased $1 million in the second quarter of 2006 primarily due to higher plant balances.

Amortization of Regulatory Assets, Net

Amortization of regulatory assets, net decreased $12 million in the second quarter as a result of PSNH completing the recovery of its non-securitized stranded costs by offsetting the remaining stranded cost regulatory asset balances against an offsetting regulatory liability for the cumulative deferral of SCRC revenues.  

Amortization of Rate Reduction Bonds

Amortization of rate reduction bonds increased $1 million in the second quarter of 2006.  The higher portion of principal within the rate reduction bonds payment results in a corresponding increase in the amortization of regulatory assets.  

Interest Expense, Net

Interest expense, net decreased $1 million in the second quarter of 2006 primarily due to lower rate reduction bond interest resulting from lower principal balances outstanding ($1 million).

Income Tax Expense

Income tax expense increased $13 million due to higher pre-tax earnings and an increase in the effective tax rate (from 28.1 percent to 52.3 percent).  The increase in the effective tax rate primarily results from higher state income tax expense and the regulatory recovery of tax expense associated with nondeductible acquisition costs.  The increase in state income taxes results from higher unitary taxable income due primarily to the sale of competitive generation assets.

Comparison of the First Six Months of 2006 to the First Six Months of 2005

Operating Revenues

Operating revenues increased $90 million in the first six months of 2006, as compared to the same period in 2005, primarily due to higher distribution revenue ($87 million) and higher transmission revenue ($3 million).  The distribution revenue increase of $87 million is primarily due to the components of revenues which are included in regulatory commission approved tracking mechanisms that track the recovery of certain incurred costs ($83 million).  The tracking mechanisms allow for rates to be changed periodically with over collections refunded to customers or under collections collected from customers in future periods.  The distribution and transmission components of PSNH’s retail rates which impact earnings increased $4 million primarily due to the retail rate increases effective June 1, 2005 ($5 million), partially offset by lower retail sales ($1 million).  Retail sales decreased 0.6 percent in 2006 compared to the same period of 2005.  

The distribution revenue tracking components increased $83 million primarily due to an increase in the ES rate component of retail revenues of $80 million, primarily due to an increase in the cost of fuel and purchased power.   

Fuel, Purchased and Net Interchange Power

Fuel, purchased and net interchange power increased $50 million in the first six months of 2006 primarily due to the higher cost of energy as a result of higher fuel prices.   

Other Operation

Other operation expenses decreased $1 million in the first six months of 2006 primarily due to lower customer service expenses ($3 million) and lower load dispatch expenses ($2 million), partially offset by higher administrative expenses ($3 million) primarily due to higher pension and medical costs ($2 million).

Maintenance

Maintenance expenses increased $1 million in the first six months of 2006 primarily due to higher overhead line maintenance expenses ($2 million), partially offset by lower electric plant maintenance ($1 million).

Depreciation

Depreciation expense increased $2 million in the first six months of 2006 primarily due to higher plant balances.

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Amortization of Regulatory Assets, Net

Amortization of regulatory assets, net increased $22 million in the first six months as a result of the over-recovery of ES costs in February and March of 2006 ($23 million) and the acceleration of the recovery of PSNH's non-securitized stranded ($11 million) partially offset by offsetting the remaining stranded cost regulatory asset balances against an offsetting regulatory liability for the cumulative deferral of SCRC revenues.

Amortization of Rate Reduction Bonds

Amortization of rate reduction bonds increased $1 million in the first six months of 2006.  The higher portion of principal within the rate reduction bonds payment results in a corresponding increase in the amortization of regulatory assets.  

Taxes Other Than Income Taxes

Taxes other than income taxes increased $1 million in the first six months of 2006 primarily due to higher property taxes.

Other Income/(Loss), Net

Other income/(loss), net increased $1 million in the first six months of 2006 primarily due to a higher allowance for funds used during construction (AFUDC) as a result of increased eligible CWIP for generation, lower short-term debt, and a greater component of CWIP being subject to a higher equity rate.

Income Tax Expense

Income tax expense increased $13 million due to higher pre-tax earnings and an increase in the effective tax rate (from 31.2 to 51.2 percent).  The increase in the effective tax rate primarily results from higher state income tax expense and the regulatory recovery of tax expense associated with nondeductible acquisition costs.  The increase in state income taxes results from higher unitary taxable income due primarily to the sale of competitive generation assets.

LIQUIDITY

Net cash flows from operations increased by $31.3 million from $85.2 million for the first half of 2005 to $116.5 million for the first half of 2006.  The increase in operating cash flows is primarily due to an increase in accounts receivable collections.  PSNH's operating cash flows are expected to decline in the second half of 2006 and thereafter as a result of a significant reduction in approved SCRC rates to an average rate of $0.0155 per kWh from the current average rate of $0.0335 per kWh effective on July 1, 2006.  That decline, which amounts to approximately $170 million annually, is the result of the completion of PSNH's recovery of its Part 3 non-securitized stranded costs as of June 30, 2006.  

PSNH's capital expenditures totaled $60.4 million in the first half of 2006 compared to $89.7 million in the first half of 2005.  PSNH projects capital expenditures to total $150 million in 2006.  

Financing activities for the first half of 2006 included the payment of $29.2 million in dividends to NU, compared to $12.3 million for the first half of 2005.  

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WESTERN MASSACHUSETTS ELECTRIC COMPANY AND SUBSIDIARY

Management's Discussion and Analysis of

Financial Condition and Results of Operations

WMECO is a wholly owned subsidiary of NU.  This discussion should be read in conjunction with NU's management’s discussion and analysis of financial condition and results of operations, condensed consolidated financial statements and footnotes in this Form 10-Q and the NU 2005 Form 10-K.  

RESULTS OF OPERATIONS

The following table provides the variances in income statement line items for the condensed consolidated statements of income for WMECO included in this report on Form 10-Q for the three and six months ended June 30, 2006:

	Income Statement Variances (Millions of Dollars) 2006 over/(under) 2005
	Second Quarter				Percent		Six Months			Percent
Operating Revenues:		$	6		6	%	$	30		15	%
Operating Expenses:
Fuel, purchased and net interchange power		7			13		33			28
Other operation		(1)			(5)		(1)			(4)
Maintenance		(1)			(16)		(1)			(8)
Depreciation		-			-		-			-
Amortization of regulatory liabilities, net		(1)			(94)		(2)			(86)
Amortization of rate reduction bonds		-			-		-			-
Taxes other than income taxes		-			-		-			-
Total operating expenses		4			5		29			17
Operating Income		2			21		1			5
Interest expense, net		1			7		1			6
Other income, net		-			-		1			(a)
Income before income tax expense		1			32		1			9
Income tax expense		1			59		-			8
Net Income		$		-	-	%	$		1	10	%

(a) Percent greater than 100.  

Comparison of the Second Quarter of 2006 to the Second Quarter of 2005

Operating Revenues

Operating revenues increased $6 million in the second quarter of 2006, as compared to the same period in 2005, primarily due to higher distribution revenue ($7 million), partially offset by lower transmission revenue ($1 million).  The distribution revenue increase of $7 million is primarily due to the components of revenues which are included in regulatory commission approved tracking mechanisms that track the recovery of certain incurred costs ($6 million).  The tracking mechanisms allow for rates to be changed periodically with over collections refunded to customers or under collections collected from customers in future periods.  The distribution revenue tracking components increase of $6 million is primarily due to the pass through of higher energy supply costs ($7 million), partially offset by lower retail transmission revenues ($1 million).  

Fuel, Purchased and Net Interchange Power

Fuel, purchased and net interchange power expense increased $7 million in the second quarter of 2006 primarily due to higher default service supply costs.

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Other Operation

Other operation expenses decreased $1 million in the second quarter of 2006 primarily due to lower transmission costs and lower general and administrative expenses as a result of lower pension and other benefits costs.

Maintenance

Maintenance expenses decreased $1 million in the second quarter of 2006 primarily due to lower expenses related to overhead and underground lines maintenance and lower tree trimming expenses.

Amortization of Regulatory Liabilities, Net

Amortization of regulatory liabilities, net decreased $1 million in the second quarter of 2006 primarily due to a lower deferral of transition costs, as a result of higher default service expenses.  

Interest Expense, Net

Interest expense, net increased $1 million in the second quarter of 2006 primarily due to higher long-term debt levels as a result of the issuance of $50 million of ten-year senior notes in August 2005.

Income Tax Expense

Income tax expense increased $1 million in the second quarter of 2006 due to higher pre-tax earnings and a higher effective tax rate.  The effective tax rate increased from 43.8 percent to 52.8 percent primarily due to unfavorable variances in non-plant flow through differences and a 2006 state tax loss that provides no benefit.  

Comparison of the First Six Months of 2006 to the First Six Months of 2005

Operating Revenues

Operating revenues increased $30 million in the first six months of 2006, as compared to the same period in 2005, primarily due to higher distribution revenue ($30 million).  The distribution revenue increase of $30 million is primarily due to the components of revenues which are included in regulatory commission approved tracking mechanisms that track the recovery of certain incurred costs ($30 million).  The tracking mechanisms allow for rates to be changed periodically with over collections refunded to customers or under collections collected from customers in future periods.  The distribution revenue tracking components increase of $30 million is primarily due to the pass through of higher energy supply costs ($32 million), partially offset by lower retail transmission revenues ($2 million).  

Fuel, Purchased and Net Interchange Power

Fuel, purchased and net interchange power expense increased $33 million in the first six months of 2006 primarily due to higher default service supply costs.

Other Operation

Other operation expenses decreased $1 million in the first six months of 2006 primarily due to lower transmission costs.

Maintenance

Maintenance expenses decreased $1 million in the first six months of 2006 primarily due to lower tree trimming expenses.

Amortization of Regulatory Liabilities, Net

Amortization of regulatory liabilities, net decreased $2 million in the first six months of 2006 primarily due to a lower deferral of transition costs, as a result of higher default service expenses.  

Interest Expense, Net

Interest expense, net increased $1 million in the first six months of 2006 primarily due to higher long-term debt levels as a result of the issuance of $50 million of ten-year senior notes in August 2005.

Other Income, Net

Other income, net increased $1 million in the first six months of 2006 primarily due to higher interest and dividend income, and higher C&LM incentive.

LIQUIDITY

Net cash flows from operations decreased by $18.3 million from $20 million for the first half of 2005 to $1.7 million for the first half of 2006.  The decrease in operating cash flows is primarily due to an increase in the regulatory assets relating to a significant increase in the retail transmission costs driven by RMR costs that have been deferred and will be recovered from customers at a future date.  Additionally, there was a decrease in the transition charge to customers of $13 million due to a significant 2004 overrecovery of the transition charge of approximately $56 million.

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WMECO's capital expenditures totaled $20.8 million in the first half of 2006 compared to $20.9 million in the first half of 2005.  WMECO projects total capital expenditures to total approximately $50 million in 2006.  

At June 30, 2006, WMECO's financing activities included $20.5 million of capital contributions from NU, borrowings of $10 million from the Utility Group's revolving credit line, and the payment of $4 million in dividends to NU.  

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ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Information

The merchant energy business utilizes the sensitivity analysis methodology to disclose quantitative information for its commodity price risks (including where applicable capacity and ancillary components).  Sensitivity analysis provides a presentation of the potential loss of future earnings, fair values or cash flows from market risk-sensitive instruments over a selected time period due to one or more hypothetical changes in commodity price components, or other similar price changes.  Under sensitivity analysis, the fair value of the portfolio is a function of the underlying commodity components, contract prices and market prices represented by each derivative contract.  For swaps, forward contracts and options, fair value reflects management's best estimates considering over-the-counter quotations, time value and volatility factors of the underlying commitments.  Exchange-traded futures and options are recorded at fair value based on closing exchange prices.   As the NU Enterprises' businesses are exited, the risks associated with commodity prices are expected to be reduced.  

NU Enterprises - Wholesale Portfolio:  When conducting sensitivity analyses of the change in the fair value of Select Energy’s wholesale portfolio which would result from a hypothetical change in the future market price of electricity, the fair values of the contracts are determined from models that take into consideration estimated future market prices of electricity, the volatility of the market prices in each period, as well as the time value factors of the underlying commitments.

A hypothetical change in the fair value of the wholesale portfolio was determined assuming a 10 percent change in forward market prices.  At June 30, 2006, Select Energy has calculated the market price resulting from a 10 percent change in forward market prices of those contracts.  A 10 percent increase would have resulted in a pre-tax decrease in fair value of $6.3 million ($3.9 million after-tax) and a 10 percent decrease would have resulted in a pre-tax increase in fair value of $4.9 million ($3 million after-tax).

The impact of a change in electricity and natural gas prices on Select Energy's wholesale transactions at June 30, 2006 are not necessarily representative of the results that will be realized.  These transactions are accounted for at fair value, and changes in market prices impact earnings.

NU Enterprises - Generation Portfolio:  When conducting sensitivity analyses of the change in the fair value of merchant energy’s generation portfolio which would result from a hypothetical change in the future market price of electricity, the fair values of the contracts are determined from models that take into consideration estimated future market prices of electricity, the volatility of the market prices in each period, as well as the time value factors of the underlying commitments.  The merchant energy generation portfolio is comprised of primarily third party derivative generation related sales contracts (third party generation contracts) and physical generation from NGC and HWP (physical generation).  In most instances, market prices and volatility are determined from quoted prices.  Models are used for periods beyond 2009.  

A hypothetical change in the fair value for generation contracts was determined assuming a 10 percent change in forward market prices.  At June 30, 2006, a 10 percent increase in market price would have resulted in a pre-tax increase in fair value of $151 million ($93.3 million after-tax) and a 10 percent decrease would have resulted in a pre-tax decrease in fair value of $150.7 million ($93.1 million after-tax).

The impact of a change in electricity prices on merchant energy’s generation portfolio at June 30, 2006, is not necessarily representative of the results that will be realized.  These transactions are accounted for at fair value, and changes in market prices impact earnings.  

Other Risk Management Activities

Interest Rate Risk Management:  NU manages its interest rate risk exposure in accordance with its written policies and procedures by maintaining a mix of fixed and variable rate debt.  At June 30, 2006, approximately 10.5 percent (19.3 percent including the debt subject to the fixed-to-floating interest rate swap of variable rate debt) of NU’s long-term debt, including fees and interest due for spent nuclear fuel disposal costs, is at a fixed interest rate.  The remaining long-term debt is variable-rate and is subject to interest rate risk that could result in earnings volatility.  Assuming a one percentage point increase in NU’s variable interest rates, including the rate on debt subject to the fixed-to-floating interest rate swap, annual interest expense would have increased by $3.1 million.  At June 30, 2006, NU parent maintained a fixed-to-floating interest rate swap to manage the interest rate risk associated with its $263 million of f ixed-rate debt.

Credit Risk Management:  Credit risk relates to the risk of loss that NU would incur as a result of non-performance by counterparties pursuant to the terms of its contractual obligations.  NU serves a wide variety of customers and suppliers that include IPPs, industrial companies, gas and electric utilities, oil and gas producers, financial institutions, and other energy marketers.  Margin accounts exist within this diverse group, and NU realizes interest receipts and payments related to balances outstanding in these margin accounts.  This wide customer and supplier mix generates a need for a variety of contractual structures, products and terms which, in turn,

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requires NU to manage the portfolio of market risk inherent in those transactions in a manner consistent with the parameters established by NU’s risk management process.

Credit risks and market risks at NU Enterprises are monitored regularly by a Risk Oversight Council operating outside of the business lines that create or actively manage these risk exposures to ensure compliance with NU’s stated risk management policies.  

NU tracks and re-balances the risk in its portfolio in accordance with fair value and other risk management methodologies that utilize forward price curves in the energy markets to estimate the size and probability of future potential exposure.

NYMEX traded futures and option contracts cleared off the NYMEX exchange are ultimately guaranteed by NYMEX to Select Energy.  Select Energy has established written credit policies with regard to its counterparties to minimize overall credit risk on all types of transactions.  These policies require an evaluation of potential counterparties’ financial condition (including credit ratings), collateral requirements under certain circumstances (including cash in advance, LOCs, and parent guarantees), and the use of standardized agreements, which allow for the netting of positive and negative exposures associated with a single counterparty.  This evaluation results in establishing credit limits prior to Select Energy entering into energy contracts.  The appropriateness of these limits is subject to continuing review.  Concentrations among these counterparties may impact Select Energy’s overall exposure to credit risk, either positively or negatively, in tha t the counterparties may be similarly affected by changes to economic, regulatory or other conditions.

At June 30, 2006 and December 31, 2005, Select Energy maintained collateral balances from counterparties of $6.7 million and $28.9 million, respectively.  These amounts are included in counterparty deposits on the accompanying condensed consolidated balance sheets.  Select Energy also has collateral balances deposited with counterparties of $19 million and $103.8 million at June 30, 2006 and December 31, 2005 respectively.

The Utility Group has a lower level of credit risk related to providing regulated electric and gas distribution service than NU Enterprises.  However, the Utility Group companies are subject to credit risk from certain long-term or high-volume supply contracts with energy marketing companies.  The Utility Group manages the credit risk with these counterparties in accordance with established credit risk practices and maintains an oversight group that monitors contracting risks, including credit risk.

In 2005, NU adopted Enterprise Risk Management (ERM) as a methodology for managing the principle risks of the company.  ERM involves the application of a well-defined, enterprise-wide methodology which will enable NU's Risk and Capital Committee, comprised of senior NU officers, to oversee the identification, management and reporting of the principal risks of the business.

Additional quantitative and qualitative disclosures about market risk are set forth in Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in this combined report on Form 10-Q.

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ITEM 4.

CONTROLS AND PROCEDURES

NU evaluated the design and operation of its disclosure controls and procedures at June 30, 2006 to determine whether they are effective in ensuring that the disclosure of required information is made timely and in accordance with the Exchange Act and the rules and forms of the SEC.  This evaluation was made under the supervision and with the participation of management, including NU’s principal executive officer and principal financial officer, as of the end of the period covered by this report on Form 10-Q.  The principal executive officer and principal financial officer concluded, based on their review, that NU’s disclosure controls and procedures were effective to ensure that information required to be disclosed by NU in reports that it files under the Exchange Act i) is recorded, processed, summarized, and reported within the timeframes specified in SEC rules and forms and ii) is accumulated and communicated to management, including the principal executive offic er and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

There have been no significant changes in NU’s internal controls over financial reporting during the quarter ended June 30, 2006 that have materially affected, or are reasonably likely to materially affect NU’s internal control over financial reporting.

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PART II.  OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

We are parties to various legal proceedings.  We have identified these legal proceedings in Part I, Item 3, "Legal Proceedings" in our Annual Report on Form 10-K for the year ended December 31, 2005.  There have been no material changes with regard to the legal proceedings previously disclosed in our most recent Form 10-K as such were updated by the disclosure of legal proceedings in our Quarterly Report on Form 10-Q for the period ended March 31, 2006.

ITEM 1A.

RISK FACTORS

NU is subject to a variety of significant risks in addition to the matters set forth under "Forward Looking Statements," in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Other Matters."  We have identified a number of these risk factors in our Annual Report on Form 10-K for the year ended December 31, 2005.  NU’s susceptibility to certain risks, including those discussed in detail in our Annual Report on Form 10-K, could exacerbate other risks.  These risk factors should be considered carefully in evaluating NU’s risk profile.  With the exception of the risk factors described below, which descriptions have been modified to take into account certain recent events, there have been no material changes with regard to the risk factors previously disclosed in our most recent Form 10-K as updated by the risk factors described in our Quarterly Report on Form 10-Q for the period ended March 31, 2 006.

Risks Related to the Exit from the Competitive Businesses

On March 9, 2005, NU announced the decision to exit its wholesale marketing and energy services businesses, and on November 7, 2005, NU announced the decision to exit its retail marketing and competitive generation businesses, which constituted the remainder of NU’s competitive businesses.  NU has disposed of a substantial part of its wholesale business, closed on the sale of its retail marketing business on June 1, 2006, has sold four of its six services businesses and parts of a fifth, and contracted to sell its competitive generation assets to affiliates of ECP on July 24, 2006 for $1.34 billion.  

The principle remaining risks from NU’s competitive businesses are related to the unhedged portion of a large wholesale contract expiring in 2013.  This wholesale contract carries the risk that Select Energy may have to serve higher-than-anticipated loads, which will vary depending on weather and other factors not in its control.  Select Energy may settle this contract in the future, possibly at a cost higher than the present mark-to-market of the contract.  In the first half of 2006, the wholesale marketing and competitive generation businesses were profitable, while the retail marketing business lost $72.3 million, due primarily to removing from retail certain of its wholesale supply contracts and the support from the competitive generation business.  The sale of the retail business on June 1 ended NU’s exposure to this business.

The financial reliability of Select Energy’s counterparties and its ability to manage its wholesale marketing portfolio of contracts and assets within acceptable risk parameters will be of material importance to Select Energy until these contracts are divested.  The net fair value position of the wholesale portfolio at June 30, 2006 was a net liability of $155.7 million for derivative contracts.  

NU’s decision to exit the competitive generation business could have material negative financial implications in 2006, if the expected sale of the competitive generation assets to ECP were delayed or cancelled.  These could include the results of future asset impairment analyses, recognition of closure or exit costs in excess of estimates and recognition of other losses from disposing of or otherwise exiting this business.  Such losses would not be realized if the sale to ECP is consummated as presently planned, by the end of 2006.  

Exiting from Select Energy’s remaining wholesale obligations could have an adverse impact on NU’s liquidity, although any negative effect is expected to be mitigated by the sale of the competitive generation assets.   To date, most of Select Energy’s contract terminations have been on terms where Select Energy settled with its counterparty for a sum of money and obtained a full release from further liability on the contract.  One significant wholesale contract settlement was, and future contract terminations may be, negotiated on terms whereby Select Energy’s obligations are assigned or transferred to a credit-worthy third party, but a release from Select Energy’s customer is not obtained.  In such circumstances, Select Energy or another NU company will be liable to the customer should the third party default.  Any such contingent liabilities could remain open for extended periods of time.

NU currently expects, but cannot assure, that it will substantially complete the exit from its competitive businesses by the end of 2006.   

Risks Related to NU Enterprises’ Wholesale Marketing and Competitive Generation Businesses

A significant portion of Select Energy’s competitive energy marketing activities has been providing electricity to full requirements customers, which are primarily regulated LDC and commercial and industrial retail customers. Under the terms of full requirements contracts, Select Energy is required to provide a percentage of the LDC’s electricity requirements at all times.  The volumes sold

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under these contracts vary based on the usage of the LDC’s retail electric customers, and usage is dependent upon factors outside of Select Energy’s control, such as unanticipated migration or inflow of customers.  The varying sales volumes could be different than the supply volumes that Select Energy expected to utilize, either from its owned limited generation or from electricity purchase contracts, to serve the full requirements contracts.  Differences between actual sales volumes and supply volumes can require Select Energy to purchase additional electricity or sell excess electricity, both of which are subject to market conditions such as weather, plant availability, transmission congestion, and potentially volatile price fluctuations that can impact prices and, in turn, Select Energy’s margins.

Risks Related to Liquidity and Collateral Calls

NU’s senior unsecured debt ratings by Moody’s and S&P are currently Baa2 and BBB-, respectively, with stable outlooks.  Were either of these ratings to decline to non-investment grade level, Select Energy could be asked to provide, as of June 30, 2006, approximately $154.3 million of collateral or LOCs to unaffiliated counterparties and  approximately $81 million to several independent system operators and unaffiliated LDCs and LDCs under agreements largely guaranteed by NU.  While NU’s credit facilities are in amounts that would be adequate to meet calls at that level, NU’s ability to meet any future calls would depend on its liquidity and access to bank lines of credit and the capital markets at such time.

Risks Associated With the Transmission Operations of NU’s Utility Subsidiaries

NU, primarily through its subsidiary CL&P, has undertaken a substantial transmission capital investment program over the past several years and expects to invest approximately $2.3 billion in regulated electric transmission infrastructure from 2006 through 2010.  Included in this amount is approximately $1.4 billion for costs associated with construction of two Connecticut 345 kV transmission lines from Middletown to Norwalk and Bethel to Norwalk; replacement of an undersea electric transmission line between Norwalk and Northport, New York; and two 115 kV underground transmission lines between Norwalk and Stamford, Connecticut.  The regulatory approval process for these transmission projects has encompassed an extensive permitting, design and technical approval process.  Various factors have resulted in increased cost estimates and delayed construction.  Recoverability of all such investments in rates may be subject to prudence review at the FERC at the time such projects are placed in service.  While NU believes that all such expenses have been prudently incurred, NU cannot predict the outcome of future reviews should they occur.

The projects are expected to help alleviate identified reliability issues in southwest Connecticut and to help reduce customers’ costs in all of Connecticut.  However, if, due to further regulatory or other delays, the projected in-service date for one or more of these projects is delayed, there may be increased risk of failures in the existing electricity transmission system in southwestern Connecticut and supply interruptions or blackouts may occur.

The successful implementation of NU’s transmission construction plans is also subject to the risks that applicable permits or approvals are not issued or not timely issued, or issued with limiting or adverse conditions and/or that new legislation, regulations or judicial or regulatory interpretations of applicable law or regulations all of which could impact NU’s ability to meet its construction schedule, require NU to incur additional expenses and/or delay recovery of transmission costs from customers, and may adversely affect its ability to achieve forecasted levels of revenues.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no purchases made by or on behalf of NU or any "affiliated purchaser" (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934), of common stock during the quarter ended June 30, 2006.

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ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At the Annual Meeting of Shareholders of NU held on May 9, 2006 the following ten nominees were elected to serve on the Board of Trustees by the votes set forth below:

		For	Withheld	Total
1.	Richard H. Booth	129,734,242	2,408,229	132,142,471
2.	Cotton M. Cleveland	126,920,426	5,222,045	132,142,471
3.	Sanford Cloud, Jr.	129,695,662	2,446,809	132,142,471
4.	James F. Cordes	129,765,305	2,377,166	132,142,471
5.	E. Gail de Planque	126,591,015	5,551,456	132,142,471
6.	John G. Graham	129,763,294	2,379,177	132,142,471
7.	Elizabeth T. Kennan	126,696,502	5,445,969	132,142,471
8.	Robert E. Patricelli	126,776,129	5,366,342	132,142,471
9.	Charles W. Shivery	126,777,462	5,365,009	132,142,471
10.	John F. Swope	126,785,207	5,357,264	132,142,471

NU's shareholders also ratified the Board of Trustees' selection of Deloitte & Touche LLP to serve as independent auditors of NU and its subsidiaries for 2006.  The vote ratifying such selection was 131,079,068 votes in favor and 676,347 votes against, and 387,056 abstentions.

CL&P.  In a written Consent in Lieu of an Annual Meeting of Stockholders of CL&P dated June 30, 2006, stockholders voted to fix the number of directors for the ensuing year at three and the following three directors were elected, to serve on the Board of Directors for the ensuing year:  Cheryl W. Grisé, Raymond P. Necci and Leon J. Olivier.  The vote on each of these proposals was 6,035,205 shares in favor, representing 100 percent of the issued and outstanding shares of common stock of CL&P.  

WMECO.  In a written Consent in Lieu of an Annual Meeting of Stockholders of WMECO dated June 30, 2006 (“WMECO Consent”), stockholders voted to fix the number of directors for the ensuing year at four and the following four directors were elected, to serve on the Board of Directors for the ensuing year:  Cheryl W. Grisé, David R. McHale, Leon J. Olivier and Rodney O. Powell.  In the WMECO Consent stockholders also voted to elect Randy A. Shoop as Vice President and Treasurer and Kerry J. Kuhlman as Vice President-Shared Services, Secretary and Clerk for the ensuing year.  The vote on each of these proposals was 434,653 shares in favor, representing 100 percent of the issued and outstanding shares of common stock of WMECO.  

PSNH.  In a written Consent in Lieu of an Annual Meeting of Stockholders of PSNH dated June 30, 2006 (“PSNH Consent”), stockholders voted to fix the number of directors for the ensuing year at four and the following four directors were elected, to serve on the Board of Directors for the ensuing year:  Cheryl W. Grisé, Gary A. Long, David R. McHale and Leon J. Olivier.  The vote on each of these proposals was 301 shares in favor, representing 100 percent of the issued and outstanding shares of common stock of PSNH.  

ITEM 6.

EXHIBITS

Document designated with a (*) are filed herewith.  

(a)

Listing of Exhibits (NU)

Exhibit No.

Description

10

Material Contracts

*10.11.7

Form of Amendment No. 10 to Power Contract, dated April 14, 2006 between YAEC and each of CL&P, PSNH and WMECO.

*10.33

Purchase and Sale Agreement dated July 24, 2006 between HWP and Mt. Tom Generating Company LLC.

*10.33.1

Guaranty dated July 24, 2006 of Energy Capital Partners I, LP for the benefit of HWP

*10.33.2

Guaranty dated July 24, 2006 of NU for the benefit of Mt. Tom Generating Company LLC

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*10.34

Stock Purchase Agreement dated July 24, 2006 between NU Enterprises and NE Energy, Inc.

*10.34.1

Guaranty dated July 24, 2006 of Energy Capital Partners I, LP for the benefit of NU Enterprises

*10.34.2

Guaranty dated July 24, 2006 of NU for the benefit of NE Energy, Inc.

*10.35

Purchase and Sale Agreement dated July 24, 2006 by and among NGS, Select Energy, Northeast Utilities Service Company on the one hand, and NE Energy, Inc. on the other hand.

*10.35.1

Guaranty dated July 24, 2006 of Energy Capital Partners I, LP for the benefit of NGS, Select and Northeast Utilities Service Company

*10.35.2

Guaranty dated July 24, 2006 of NU for the benefit of NE Energy, Inc.

*10.36

Stock Purchase Agreement dated as of February 1, 2006 by and among Ameresco, Inc. ("Ameresco"), NU Enterprises and NU

*10.36.1

Extension Letter dated March 1, 2006 among NU Enterprises, NU and Ameresco.

*10.36.2

Extension Letter dated March 31, 2006 between NU Enterprises, NU and Ameresco.

*10.36.3

Stock Purchase Agreement Amendment and Waiver dated as of May 5, 2006 among NU Enterprises, NU and Ameresco.

*10.36.4

NU Indemnification Agreement dated as of May 5, 2006.

*10.36.5

Agreement to Purchase Contract Payments dated as of May 5, 2006 among NU, Ameresco and General Electric Capital Corporation.

*15

Deloitte & Touche LLP Letter Regarding Unaudited Financial Information

*31

Certification of Charles W. Shivery, Chairman, President and Chief Executive Officer of Northeast Utilities, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 4, 2006

*31.1

Certification of David R. McHale, Senior Vice President and Chief Financial Officer of Northeast Utilities, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 4, 2006

*32

Certification of Charles W. Shivery, Chairman, President and Chief Executive Officer of Northeast Utilities and David R. McHale, Senior Vice President and Chief Financial Officer of Northeast Utilities, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated August 4, 2006

Listing of Exhibits (CL&P)

4.1.8

Supplemental Indenture (2006 Series A Bonds) between CL&P and Deutsche Bank Trust Company Americas, as Trustee dated as of June 1, 2006  ("Supplemental Indenture") (Exhibit 99.2 to CL&P Form 8-K filed June 7, 2006, File No. 0-00404)

*4.12.5

Amendment No. 6 to the Amended and Restated Receivables Purchase and Sales Agreement dated as of July 5, 2006.

*31

Certification of Cheryl W. Grisé, Chief Executive Officer of The Connecticut Light and Power Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 4, 2006

107

*31.1

Certification of David R. McHale, Senior Vice President and Chief Financial Officer of The Connecticut Light and Power Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 4, 2006

*32

Certification of Cheryl W. Grisé, Chief Executive Officer of The Connecticut Light and Power Company and David R. McHale, Senior Vice President and Chief Financial Officer of The Connecticut Light and Power Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated August 4, 2006

Listing of Exhibits (PSNH)

*31

Certification of Cheryl W. Grisé, Chief Executive Officer of Public Service Company of New Hampshire, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 4, 2006

*31.1

Certification of David R. McHale, Senior Vice President and Chief Financial Officer of Public Service Company of New Hampshire, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 4, 2006

*32

Certification of Cheryl W. Grisé, Chief Executive Officer of Public Service Company of New Hampshire and David R. McHale, Senior Vice President and Chief Financial Officer of Public Service Company of New Hampshire, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated August 4, 2006

Listing of Exhibits (WMECO)

*31

Certification of Cheryl W. Grisé, Chief Executive Officer of Western Massachusetts Electric Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 4, 2006

*31.1

Certification of David R. McHale, Senior Vice President and Chief Financial Officer of Western Massachusetts Electric Company, required by Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, dated August 4, 2006

*32

Certification of Cheryl W. Grisé, Chief Executive Officer of Western Massachusetts Electric Company and David R. McHale, Senior Vice President and Chief Financial Officer of Western Massachusetts Electric Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, dated August 4, 2006

108

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.  

		NORTHEAST UTILITIES
		Registrant
Date:  August 4, 2006	By	/s/ David R. McHale
		David R. McHale
		Senior Vice President and Chief Financial Officer
		(for the Registrant and as Principal Financial Officer)

____________________________________________________________________________________

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.  

		THE CONNECTICUT LIGHT AND POWER COMPANY
		Registrant
Date:  August 4, 2006	By	/s/ David R. McHale
		David R. McHale
		Senior Vice President and Chief Financial Officer
		(for the Registrant and as Principal Financial Officer)

109

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE
		Registrant
Date:  August 4, 2006	By	/s/ David R. McHale
		David R. McHale
		Senior Vice President and Chief Financial Officer
		(for the Registrant and as Principal Financial Officer)

____________________________________________________________________________________

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.    

		WESTERN MASSACHUSETTS ELECTRIC COMPANY
		Registrant
Date:  August 4, 2006	By	/s/ David R. McHale
		David R. McHale
		Senior Vice President and Chief Financial Officer
		(for the Registrant and as Principal Financial Officer)

110

EX-10.11.7

Exhibit 10.11.7

AMENDMENT NO. 10
TO
POWER CONTRACT

AMENDMENT NO. 10, dated as of the 14th day of April 2006, to the Power Contract dated June 30, 1959, as heretofore amended and revised effective June 2, 1975, October 1, 1980, April 1, 1985, May 6, 1988, June 26, 1989, July 1, 1989, February 1, 1992, June 1, 2003, and November 17, 2005, between Yankee Atomic Electric Company ("Yankee"), a Massachusetts corporation, and ____________________ ("Customer"), a _______________ corporation (the "Power Contract").

WITNESSETH

WHEREAS, pursuant to the Power Contract, Yankee supplied to the Customer and, pursuant to separate power contracts substantially identical to the Power Contract except for the names of the parties, to the other stockholders of Yankee, each of whom is contemporaneously entering into an amendment to its power contract which is identical hereto except for the necessary changes in the names of the parties, all of the capacity and electric energy available from the nuclear generating unit owned by Yankee at a site in Rowe, Massachusetts (such unit, together with the site and all related facilities owned by Yankee, being herein referred to as the "Plant"); and

WHEREAS, the parties to the Power Contract and the Federal Energy Regulatory Commission (the "Commission"), which has regulatory jurisdiction over the Power Contract, have consistently recognized that the cost of the capacity and electric energy sold under the Power Contract necessarily included the costs of shutting down, removing from service and decommissioning the Plant after its useful life had ended and the parties have heretofore incorporated in the Power Contract provisions designed to achieve that

result, whether or not the Plant produced electricity and whether or not the Plant operated for the full term of the Facility Operating License; and

WHEREAS, Section 6 of the Power Contract allows Yankee to collect its costs of decommissioning the Plant from the Customer and the other stockholders of Yankee through accruals to a reserve fund, with accruals made over a period extending to December 31, 2010; and

WHEREAS, Section 11 of the Power Contract provides that, upon authorization by its board of directors of a uniform amendment to all customer power contracts, Yankee shall have the right to amend the provisions of Section 6 of the Power Contract by serving an appropriate statement of such amendment upon the Customer and filing the same with the Commission, and that the amendment shall thereupon become effective on the date specified therein, subject to any suspension order duly issued by such agency; and

WHEREAS, the parties to the Power Contract desire to amend Section 6 of the Power Contract to allow the collection of costs through accruals to extend beyond December 31, 2010, to a date approved by the board of directors so that the costs of decommissioning the Plant can be met through the fund.

NOW, THEREFORE, in consideration of the above, the parties hereto agree that the Power Contract is hereby amended as follows:

1. Terms used herein and not defined shall have the meanings set forth in the Power Contract.

2. The first sentence of the fourth paragraph of Section 6 of the Power Contract is hereby modified to read as follows:

Yankee's "operating expenses" shall include all amounts properly chargeable to operating expense accounts, less any applicable credits thereto, in accordance with the Uniform System; it being understood that for purposes of this contract "operating expenses" shall include (i) depreciation or amortization accrued at a rate at least sufficient to fully amortize over the estimated remaining useful life of the plant Yankee's non-salvageable investments in plant, nuclear fuel and materials and supplies or other assets, provided, however, that if a decision is made to cease electricity production at the plant prior to July 9, 2000, then such remaining non-salvageable investments shall be amortized over a period extending to July 9, 2000; (ii) obligations incurred in connection with the leasing of fuel inventory; (iii) interest charges not associated with outstanding indebtedness; and (iv) costs incurred in connection with d ecommissioning the plant, including (a) the direct and indirect costs of operating, maintaining or dismantling the spent fuel storage facilities and other plant facilities after the cessation of electricity production and (b) the accruals to any reserve established by Yankee's board of directors to provide for physical decommissioning of the plant over the estimated remaining useful life of the plant, provided, however, that if a decision is made to cease electricity production at the plant prior to July 9, 2000, then the accruals to the reserve referred to in clause (b) shall be made over a period determined by Yankee's board of directors.

3. This Amendment shall become effective as of the date first above written, subject to any order duly issued by the Federal Energy Regulatory Commission.

4. This Amendment may be executed in any number of counterparts, all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused their respective duly authorized representative to execute this Amendment on their behalf as of the date first above written.

YANKEE ATOMIC ELECTRIC COMPANY	PURCHASER
_________________________	________________________________
Michael E. Thomas Vice President and Chief    Financial Officer 49 Yankee Road Rowe, Massachusetts 01367	Name: Title: Address:

3

EX-10.33

Exhibit 10.33

EXECUTION COPY

PURCHASE AND SALE AGREEMENT

BETWEEN

HOLYOKE WATER POWER COMPANY

AND

MT. TOM GENERATING COMPANY LLC

JULY 24, 2006

EXHIBITS

Exhibit A	- Form of Deed
Exhibit B	- Form of Bill of Sale
Exhibit C	- Form of Assignment and Assumption Agreement
Exhibit D	- Form of Interconnection Agreement
Exhibit E	- Form of Property Tax Allocation Agreement
Exhibit F	- Form of Acceptable Guaranty
Exhibit G	- Form of Asset Demarcation Agreement
Exhibit H	- Interim Services
Exhibit I	- Form of Interim Services Agreement
Exhibit J	- Form of Acceptable Letter of Credit
Exhibit L	- Form of Seller’s Guaranty

SCHEDULES

Schedule 2.1(a)(i)	- Real Property
Schedule 2.1(a)(ii)	- Real Property Matters
Schedule 2.1(b)	- Personal Property
Schedule 2.1(c)	- Leases
Schedule 2.1(e)	- Contracts
Schedule 2.1(g)	- Name of Facility
Schedule 2.1(h)	- Power Contracts
Schedule 2.1(j)	- Leased Vehicles
Schedule 2.1(k)	- Air Emissions Credits and Allowances
Schedule 2.2(a)	- T&D and Associated Telecommunication Assets
Schedule 2.10(o)	- Matters for Opinion from Counsel to Seller
Schedule 2.11(j)	- Matters for Opinion from Counsel to Buyer
Schedule 3.3	- Matters of Contravention
Schedule 3.5(a)	- Title Commitments/Policies, Defects in Title
Schedule 3.5(b)	- Sufficiency of Assets
Schedule 3.6	- Compliance
Schedule 3.6(b)	- Compliance (Permits)
Schedule 3.7	- Taxes
Schedule 3.8(b)	- Exceptions to Contract Obligations
Schedule 3.9	- Insurance
Schedule 3.10	- Litigation
Schedule 3.11(a)	- Collective Bargaining Agreement and Related Matters
Schedule 3.11(b)	- Employee Benefit Plans
Schedule 3.12	- Environmental
Schedule 3.13	- Condemnation
Schedule 3.16	- No Undisclosed Liabilities
Schedule 5.3	- Pre-Approved Capital Expenditures
Schedule 5.7(a)	- Facility personnel represented by the Local as of the Effective Date
Schedule 5.7(b)	- Facility personnel not represented by the Local as of the Effective Date
Schedule 5.7(c)	- Support personnel as of the Effective Date
Schedule 6.1(c)	- Buyer’s Regulatory Approvals
Schedule 6.2(c)	- Seller’s Regulatory Approvals

PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement (the "Agreement") is entered into on July 24, 2006, by and between Holyoke Water Power Company, a Massachusetts business corporation ("HWP" or "Seller"), and Mt. Tom Generating Company LLC, a Delaware limited liability company ("Buyer").  Buyer and Seller are each referred to herein as a "Party" or, collectively as the "Parties."

WHEREAS, Seller owns the Mt. Tom Station, a coal-fired electric generating facility (the "Facility") located in Holyoke, Massachusetts, and certain facilities and other assets associated therewith and ancillary thereto;

WHEREAS, Northeast Generation Services Company ("NGS") manages, operates, maintains and provides administrative services to Seller with respect to the Facility on behalf of and as agent for Seller pursuant to the Management and Operation Agreement between Holyoke Water Power Company and Northeast Generation Services Company, dated as of January 1, 2000, as amended (the "HWP-NGS M&OA");

WHEREAS, Seller sells 100% of the net output of the Facility to its wholly-owned subsidiary Holyoke Power and Electric Company ("HP&E") pursuant to the Hydroelectric Power Sales Agreement between Holyoke Power and Electric Company and Holyoke Water Power Company, dated October 14, 1957, as amended (the "HWP-HP&E Agreement");

WHEREAS, HP&E sells 100% of its entitlement to the Facility’s output to Select Energy, Inc. ("Select") pursuant to the Power Sales Agreement between Holyoke Power and Electric Company and Select Energy, Inc., dated October, 1999, as amended ("HP&E-Select Agreement");

WHEREAS, Select provides certain asset management services to Seller pursuant to the Agency Agreement between Holyoke Water Power Company and Select Energy, Inc., dated June 17, 2004 (the "HWP-Select Agency Agreement");

WHEREAS, Northeast Utilities Service Company ("NUSCO") provides certain corporate center services to Seller in connection with the Facility pursuant to the Service Agreement between Holyoke Water Power Company and NUSCO, dated September 30, 1967 as amended (the "HWP-NUSCO Services Agreement");

WHEREAS, Seller, HP&E, NGS, Select, NUSCO and NUEI are each wholly-owned direct or indirect subsidiaries of Northeast Utilities;

WHEREAS, contemporaneously with the execution of this Agreement Buyer has entered into the Interconnection Agreement (as defined below); and

WHEREAS, Buyer desires to purchase and assume, and Seller desires to sell and assign, or cause to be sold or assigned, the Acquired Assets (as defined in Section 2.1 below) and certain associated liabilities upon the Closing as more fully described herein, upon the terms and conditions set forth in this Agreement;

NOW THEREFORE, in consideration of the covenants, representations, warranties, and mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1.

Definitions.

"Acceptable Guarantor" means Energy Capital Partners I, LP, a Delaware limited partnership or a substitute entity acceptable to the Seller in its sole discretion.

"Acceptable Guaranty" means a guaranty issued by an Acceptable Guarantor, substantially in the form attached hereto as Exhibit F or such other form of performance assurance that is acceptable to Seller in its sole discretion.

"Acceptable Letter of Credit" means a letter of credit in the form attached hereto as Exhibit J.

"Acquired Assets" is defined in Section 2.1.

"Acquired Assets Employees" is defined in Section 5.7(c).

"Acquired Assets Employees’ Records" mean all personnel records maintained by Seller or its Affiliates relating to the Acquired Assets Employees to the extent such files contain (i) names, addresses, dates of birth, job titles and descriptions; (ii) starting dates of employment; (iii) salary and benefits information; (iv) resumes and job applications; (v) performance reviews, attendance records, and discipline records and (vi) any other documents that neither Seller nor its Affiliates are prohibited by Law to deliver to Buyer.  To the extent the consent of an Acquired Assets Employee is required in order for Seller or its Affiliates to deliver a document which is part of the Acquired Assets Employees’ Records to Buyer, Seller agrees to use Commercially Reasonable Efforts to secure such consent.

"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934, as amended.

"Agreement" is defined in the introductory paragraph.

"Air Emission Credit" also known as Emission Reduction Credit or ERC, means (i) a reduction of carbon dioxide (CO2), nitrogen oxides (NOx) or mercury  that is certified by a Governmental Authority as real, quantifiable, surplus, permanent and enforceable, and is recorded, inventoried, or approved as such.

"Allowance" means (i) an authorization by the United States Environmental Protection Agency under the Clean Air Act, 42 U.S.C. §7401 et seq. to emit up to one ton of sulfur dioxide (SO₂) during or after a specific calendar year, or (ii) the limited authorization under applicable state Laws to emit up to one ton of (NOx) during a specified control period.

"Ancillary Agreements" means, collectively, the Assignment and Assumption Agreement, the Bill of Sale, the Deed, the Property Tax Allocation Agreement, the Interconnection Agreement, the Acceptable Guaranty, the Interim Services Agreement, the Asset Demarcation Agreement and the Seller Guaranty.

"Asset Demarcation Agreement" means the agreement between Seller and Buyer evidencing their agreement as to the demarcation of ownership with respect to certain assets not situated wholly on real property owned, or to be owned, by either Seller or its Affiliates or Buyer, in substantially the form attached hereto as Exhibit G.

"Assignment and Assumption Agreement" means the agreement by which Seller shall assign or cause to be assigned certain rights, liabilities and obligations and Buyer shall assume the Assumed Liabilities, in substantially the form attached hereto as Exhibit C.

"Assumed Liabilities" is defined in Section 2.3.

"Bill of Sale" means the form of bill of sale by which the title to personal property shall be conveyed to Buyer, substantially in the form attached hereto as Exhibit B.

"Business Day" means any day other than a Saturday, Sunday or day on which banks are legally closed for business in Hartford, Connecticut or New York, New York.

"Buyer" is defined in the introductory paragraph.

"Buyer Indemnified Parties" is defined in Section 9.3.

"Buyer’s Observers" is defined in Section 5.4(b).

"Buyer Master Agreements" means those EEI Master Power Purchase and Sale Agreement between Buyer and each of the counterparties to the Power Contracts that shall, as of the Closing, govern the Power Contracts with such counterparties.

"Buyer’s Regulatory Approvals" means those consents, approvals, orders or authorizations of, or registrations, declarations or filings with, all Governmental Authorities required in connection with the execution, delivery or performance hereof by Buyer set forth on Schedule 6.1(c) attached hereto.

"Capital Commitments" means all binding contractual commitments to make capital expenditures relating to the Acquired Assets, the Facility or the Site incurred by Seller or by NGS on behalf of Seller during the Interim Period that extend beyond the Closing Date, whether or not relating to the Pre-Approved Capital Expenditures.

"Cash" means cash and Cash Equivalents (including marketable securities and short term investments) calculated in accordance with GAAP.

"Cash Equivalents" means cash equivalents as determined in accordance with GAAP and consistent with Seller’s past practices used in the preparation of the balance sheets and financial statements.

"Closing" is defined in Section 2.9.

"Closing Adjustment" is defined in Section 2.6(b).

"Closing Date" is defined in Section 2.9.

"Closing Purchase Price" is defined in Section 2.5.

"Closing Statement" is defined in Section 2.6(c).

"Code" means the Internal Revenue Code of 1986, as amended from time to time or any successor law, and regulations issued by the IRS pursuant to the Internal Revenue Code as amended from time to time or any successor law.

"Collective Bargaining Agreement" means the contract between Northeast Generation Services Mt. Tom Station and International Brotherhood of Electrical Workers Local Union 455 dated October 1, 2004.

"Commercially Reasonable Efforts" means efforts that are reasonably within the contemplation of the Parties at the Effective Date and that do not require the performing Party to expend any funds other than expenditures that are customary and reasonable in transactions of the kind and nature contemplated by this Agreement in order for the performing Party to satisfy its obligations hereunder.

 "Contracts" is defined in Section 2.1(e).

"Condemnation Value" is defined in Section 5.10(a).

"CPR" is defined in Section 11.20.

"Deed" means the form of deed by which the Real Property shall be conveyed to Buyer, substantially in the form attached hereto as Exhibit A.

"Disclosing Party" is defined in the definition of Proprietary Information.

"Effective Date" means the date on which this Agreement has been duly executed and validly delivered by the Parties.

"Employee Benefit Plan" means any (a) nonqualified deferred compensation or retirement plan, program or arrangement which is an Employee Pension Benefit Plan, (b) qualified defined contribution retirement plan, program or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan, program or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan), (d) Employee Welfare Benefit Plan or material fringe benefit plan or program or arrangement, or (e) profit sharing, bonus, stock option, stock purchase, equity, stock appreciation, deferred compensation, incentive, severance, employment, change in control, fringe benefit, agreement, program, policy or other arrangement, whether or not subject to ERISA.

"Employee Pension Benefit Plan" is defined in ERISA §3(2).

"Employee Welfare Benefit Plan" is defined in ERISA §3(1).

"Enhanced Severance" means with respect to a Non-Represented Plant Employee or a Non-Represented Support Employee, (a) an amount equal to two (2) weeks of salary (based on such Person’s base salary immediately preceding the date of termination of employment) for each full year of credited service of such Person with Seller or its Affiliates and Buyer, measured as continuous service in the case of any year in which such Person was employed by both Seller or its Affiliates and Buyer, subject to a minimum of twelve (12) weeks and a maximum of fifty-two (52) weeks of such salary paid bi-monthly, less applicable federal, state, Social Security and Medicare Tax withholdings, (b) payment of such employee’s payments for the employee and any applicable dependents of the employee (other than co-pay and deductibles) pursuant to COBRA for a period of six (6) months following termination, and (c) the provision of outplacement services of duration and of a nature consistent with Seller’s and its Affiliates’ practices with respect to the divestiture of their respective competitive businesses as in effect immediately preceding the Closing.

"Environment" means soil, land surface or subsurface strata, real property, surface waters, groundwater, wetlands, sediments, drinking water supply, ambient air (including indoor air) plant and animal life (including fish and all other aquatic life) and any other environmental medium or natural resource.

"Environmental Claim" means a claim by any Person based upon a breach of Environmental Laws or an Environmental Liability alleging loss of life, injury to persons, property or business, damage to natural resources or trespass to property, whether or not such loss, injury, damage or trespass arose or was made manifest before the Closing Date or arises or becomes manifest after the Closing Date.

"Environmental Laws" means all applicable Laws and any binding administrative or judicial interpretations thereof relating to: (a) the regulation, protection and use of the Environment; (b) the conservation, management, development, control and/or use of land, natural resources and wildlife; (c) the management, manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal, release, threatened release, abatement, removal, remediation, or handling of, or exposure to, any Hazardous Substances; or (d) noise; and includes, without limitation, the following federal statutes (and their implementing regulations): the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. §9601 et seq; the Solid Waste Disposal Act, as amended, 42 U.S.C. §6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended, 33 U.S.C. §1251 et seq. ; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §2601 et. seq.; the Clean Air Act of 1966, as amended, 42 U.S.C. §7401 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act, as amended, 7 U.S.C. §136 et seq.; the Coastal Zone Management Act of 1972, as amended, 16 U.S.C. §1451 et seq.; the Oil Pollution Act of 1990, as amended, 33 U.S.C. §2701 et. seq.; the Rivers and Harbors Act of 1899, as amended, 33 U.S.C. §401 et seq.; the Hazardous Materials Transportation Act, as amended, 49 U.S.C. § 1801 et seq.; the Endangered Species Act of 1973, as amended, 16 U.S.C. §1531 et. seq.; the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §651 et seq.; and the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. §300(f) et seq.; and all analogous or comparable state statutes and regulations, including, without limitation, the Massachusetts Oil and Hazardous Release Prevention and Response Act, as amended, M.G.L. c. 21E. < /P>

"Environmental Liabilities" means any Liability under or related to Environmental Laws arising as a result of or in connection with (i) any violation or alleged violation of Environmental

Law, prior to, on or after the Closing Date, with respect to the ownership, operation or use of the Acquired Assets; (ii) any Environmental Claims caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, adjacent to or migrating from the Acquired Assets prior to, on or after the Closing Date; (iii) the investigation and/or Remediation (whether or not such investigation or Remediation commenced before the Closing Date or commences after the Closing Date) of Hazardous Substances that are present or have been Released prior to, on or after the Closing Date at, on, in, under, adjacent to or migrating from the Acquired Assets; (iv) compliance with Environmental Laws on or after the Closing Date with respect to the ownership or operation or use of the Acquired Assets; (v) any Environmental Claim arising from or relating to the off-site disposal, treatment, storage, transportation, discharge, Release or recycling, or the arrangement for such activities, of Hazardous Substances, on or after the Closing Date, in connection with the ownership, operation or use of the Acquired Assets; and (vi) the investigation and/or remediation of Hazardous Substances that are generated, disposed, treated, stored, transported, discharged, Released, recycled, or the arrangement of such activities, on or after the Closing Date, in connection with the ownership, operation or use of the Acquired Assets, at any Offsite Disposal Facility.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

"Estimated Adjustment" is defined in Section 2.6(b).

"Estimated Closing Statement" is defined in Section 2.6(b).

"Event of Loss" is defined in Section 5.10.

"Excluded Assets" is defined in Section 2.2.

"Excluded Liabilities" is defined in Section 2.4.

"Exhibits" means the exhibits to this Agreement.

"Facility" is defined in the Recitals.

"FERC" means the Federal Energy Regulatory Commission, or its regulatory successor, as applicable.

"FERC Capacity Settlement" is defined in the definition of Material Adverse Effect.

"FIRPTA Affidavit" means the affidavit to be delivered at Closing pursuant to Section 1445(b)(2) of the Code, to establish that Seller is not a "foreign person" within the meaning of that Section.

"GAAP" means United States generally accepted accounting principles as in effect from time to time.

"Generation Asset" is defined in Section 5.13(b).

"Glencore Contracts" means, collectively, the Coal Supply and Transportation Agreement, effective March 29, 2006, between Glencore Ltd. and HWP, and the Coal Supply

and Transportation Agreement, effective July 11, 2005, between Glencore Ltd. and HWP and the related transportation, storage and wharfage arrangements.

"Good Industry Practices" means any of the practices, methods and acts engaged in or approved by a significant portion of the power generation industry during the relevant time period, or any of the practices, methods or acts that, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition.  Good Industry Practices are not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be acceptable practices, methods or acts generally accepted in the region or as required by any Governmental Authority or standards setting agency including but not limited to FERC, ISO New England, the North American Electric Reliability Council, the Northeast Power Coordinating Council, and th e Electric Reliability Organization.

"Governmental Authority" means any federal, state, local or other governmental, regulatory or administrative agency, commission, department, board, or other governmental subdivision, court, tribunal, arbitral body or other governmental authority, but excluding Buyer and any subsequent owner of the Site (if otherwise a Governmental Authority under this definition).

"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

"Hazardous Substance" means (a) any petrochemical or petroleum products, oil, waste oil, asbestos in any form that is or could become friable, urea formaldehyde foam insulations, lead-based paint and polychlorinated biphenyls; (b) any products, mixtures, compounds, materials or wastes, air emissions, toxic substances, wastewater discharges and any chemical, material or substance that may give rise to liability pursuant to, or is listed or regulated under, or the human exposure to which or the Release of which is controlled or limited by applicable Environmental Laws; and (c) any materials or substances defined in Environmental Laws as "hazardous", "toxic", "pollutant", or "contaminant", or words of similar meaning or regulatory effect.

"HP&E" is defined in the Recitals.

"HP&E-Select Agreement" is defined in the Recitals.

"HWP" is defined in the introductory paragraph.

"HWP-HP&E Agreement" is defined in the Recitals.

"HWP-NGS M&OA" is defined in the Recitals.

"HWP-NUSCO Services Agreement" is defined in the Recitals.

"HWP-Select Agency Agreement" is defined in the Recitals.

"Improvements" means all buildings, structures (including all fuel handling and storage facilities), utility facilities, machinery and equipment, fixtures, construction work in progress, including all piping, cables and similar equipment forming part of the mechanical, electrical, plumbing or HVAC infrastructure of any building, structure or equipment, and including all generating units, located on and affixed to the Site.

"Indebtedness" means any of the following:  (a) any indebtedness for borrowed money; (b) any obligations evidenced by bonds, debentures, notes or other similar instruments; (c) any obligations to pay the deferred purchase price of property or services, except trade accounts payable and other current liabilities arising in the ordinary course of business; (d) any obligations as lessee under capitalized leases; (e) any indebtedness created or arising under any conditional sale or other title retention agreement with respect to acquired property; (f) any obligations, contingent or otherwise, under acceptance, letters of credit or similar facilities; (g) any obligations under commodity swap agreements, commodity cap agreements, interest rate cap agreements, interest rate swap agreements, foreign currency exchange agreements and other similar agreements; and (h) any guaranty of any of the foregoing.

"Indemnified Party" is defined in Section 9.7(a).

"Indemnifying Party" is defined in Section 9.7(a).

"Independent Appraiser" is defined in Section 2.7.

"Intellectual Property" means all (a) patents, patent applications, inventions, discoveries, processes, designs, techniques, developments, technology, and related improvements and know-how, whether or not patented or patentable; (b) copyrights and works of authorship in any media, including computer hardware, software, firmware, applications, files, systems, networks, databases and compilations, documentation and related textual works, graphics, advertising, marketing and promotional materials, photographs, artwork, drawings, articles, textual works, and Internet site content, and all registrations of and applications to register regarding the forgoing; (c) trademarks, service marks, trade names, brand names, corporate names, domain names, logos trade dress and other source indicators, all registrations of and applications to register regarding the foregoing together with all translations, adaptations, derivations and combinations thereof and including all goodwill of any business symbolized thereby; (d) trade secrets, drawings, blueprints and all non-public, confidential or proprietary information, documents, materials, analyses, research and lists; (e) rights to sue for past, present and future infringement, misappropriation, dilution or other violations thereof; (f) rights in licenses to or from a third party in any of the foregoing; and (g) all tangible embodiments thereof.

"Initial Purchase Price" is defined in Section 2.5.

"Intercompany Agreements" is defined in Section 2.2(d).

"Interconnection Agreement" means the interconnection agreement for the Facility among Seller, HP&E, ISO New England and Buyer in the form attached hereto as Exhibit D.

"Interim Period" means that period of time commencing on the Effective Date and ending at the time of Closing.

"Interim Services Agreements" means the Interim Services Agreement substantially in the form of Exhibit I, to be effective at Closing between Buyer and NUSCO, pursuant to which NUSCO will provide to Buyer the services listed on Exhibit H hereto (for the fees listed on such Exhibit H hereto).

"Inventory" or "Inventories" means all inventory or inventories of the Facility.

"Investment Grade" means a rating of at least BBB- by S&P or Baa3 by Moody’s.

"IRS" means the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of Treasury.

"ISO New England" means ISO New England Inc.

"Knowledge" means (i) with respect to Seller, the actual knowledge, after due inquiry, of Dennis R. Brown, John J. Roman, James A. Ginnetti, John Murray, Dick Merchant, Corinne Hellerman, Stephen A. Stites, or Wade Hoefling, and (ii) with respect to Buyer, the actual knowledge, after due inquiry, of Sarah Wright, Scott Helm, Andrew Singer, Steve Herman or Rahul Advani.

 "Laws" means all laws, rules, statutes, regulations, codes, injunctions, judgments, orders, decrees, rulings, interpretations, constitution, ordinance, common law, or treaty, of any Governmental Authority or any foreign, international, or multinational government or administration and related agencies.

"Leased Vehicles" is defined in Section 2.1(j).

"Leases" is defined in Section 2.1(c).

"Liability" or "Liabilities" means any liability or obligation (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether incurred or consequential and whether due or to become due), including any liability for Taxes.

"Lien" means any mortgage, pledge, lien, security interest, charge, claim, equitable interest, encumbrance, restriction on transfer, conditional sale or other title retention device or arrangement (including, without limitation, a capital lease), transfer for security for the payment of any Indebtedness, or restriction on the creation of any of the foregoing, whether relating to any property or right or the income or profits therefrom.

"Load Asset" is defined in Section 5.13(b).

"Local" means the International Brotherhood of Electrical Workers, Local Union No. 455.

"Losses" is defined in Section 9.3.

"Major Loss" is defined in Section 5.10(b).

"Market Participant" has the meaning set forth in Section I of the ISO New England Inc. Transmission, Markets and Services Tariff, FERC Electric Tariff No. 3.

"Market Rules and Procedures" means all criteria, rules, tariff provisions, standards, procedures, manuals, business practices or other documentation, obligations or understandings that are imposed by a power pool, independent system operator, regional transmission organization or other similar entity applicable to the Assets and obligations associated therewith.

"Material Adverse Effect" means with respect to any Person or entity, any change, effect, event, occurrence or state of facts that, individually or together with all such other changes, effects, events, occurrences or facts, (i) is, or would reasonably be expected to be, materially adverse to the business, assets, properties, financial condition or results of operations of such Person and its subsidiaries taken as a whole or such entity or (ii) prevents, or can reasonably be expected to prevent, the performance by the affected Party of any of its material obligations under this Agreement or the consummation of the transactions contemplated by this Agreement; provided that Material Adverse Effect shall not include any change, event, effect or occurrence (or changes, events, effects or occurrences taken together) generally affecting the international, national, regional or local wholesale or retail elect ric or gas industry as a whole or electric generating facilities or their operations or operators as a whole that does not affect the Facility or the Parties in any manner or degree significantly different than the industry as a whole, including but not limited to:  (a) changes in markets for electric power, natural gas or fuel used in connection with the Facility, (b) changes in market design and pricing (including but not limited to either the implementation of, or the failure to implement, an alternative capacity pricing mechanism such as but not limited to the mechanism accepted by FERC on June 16, 2006 in Devon Power LLC, 115FERC¶ 61,340,(c) changes resulting from or associated with acts of war or terrorism or changes imposed by a Governmental Authority associated with additional security to address the events of September 11, 2001 or similar acts of terrorism, or (d) changes (individually or taken together) in the North American, national, regional or local electric transmission systems or operations thereof; and provided, further, that any loss, claim, occurrence, change or effect that is cured prior to the Closing Date shall not be considered a Material Adverse Effect.

"Moody’s" means Moody’s Investors Service, Inc. or any successor thereto.

"Multiemployer Plan" is defined in ERISA §3(37).

"NGC SPA" means that certain stock purchase agreement, dated as of the date hereof, between NU Enterprises, Inc. and NE Energy, Inc., an Affiliate of Buyer, pursuant to which NE Energy, Inc. agreed to purchase all of the issued and outstanding stock of Northeast Generation Company on the terms and conditions set forth herein.

"NGS" is defined in the Recitals.

"Non-Represented Plant Employees" is defined in Section 5.7(b).

"Non-Represented Support Employees" is defined in Section 5.7(c).

"NU" means Northeast Utilities, a Massachusetts business trust.

"NUSCO" is defined in the Recitals.

"Offsite Disposal Facility" means a location, other than the Facility or the Site, that receives or received Hazardous Substances for storage and/or disposal by Seller prior to the Closing Date or by Buyer on or after the Closing Date.

"Party" and "Parties" are defined in the introductory paragraph.

"Permits" means all certificates, licenses, permits, registrations, authorizations, approvals, consents, orders, decisions and other actions of a Governmental Authority pertaining to a particular Acquired Asset, Facility or Site or the ownership, operation or use thereof.

"Permitted Encumbrances" means any of the following: (i) Liens for Taxes or other charges or assessments by any Governmental Authority to the extent that the payment thereof is not in arrears or otherwise due or is being contested in good faith (in the case of any such contest in good faith, where adequate reserves have been established to the extent required by GAAP); (ii) encumbrances on real property in the nature of zoning restrictions, building and land use laws, ordinances, orders, decrees, restrictions or any other conditions imposed by any Governmental Authority on the real property if the same do not have a materially adverse effect on the value, operation or use of such property in the Business of Seller as conducted on the Effective Date; (iii) easements (including without limitation, the Reserved Easements and any other easement or like right granted by an instrument executed in connection with this Agreeme nt or the Ancillary Agreements or the transactions contemplated hereby or thereby but excluding such encumbrances that secure Indebtedness), rights, restrictions, title imperfections and similar matters if the same do not materially detract from the operation or use of such property in the business of Seller as conducted on the Effective Date; (iv) statutory or common law liens in favor of carriers, warehousemen, mechanics and materialmen, statutory or common law liens to secure claims for labor, materials or supplies and other like liens, that, in the case of clauses (i) through (iv), inclusive, secure obligations to the extent that payment thereof is not in arrears or otherwise due and that have been incurred under Good Industry Practices; (v) any Lien with respect to the Acquired Assets that arises under Good Industry Practices (other than any Lien in favor of Seller or any Affiliate of Seller) and the foreclosure of which is not material to the operation or use of the Acquired Assets in the business of S eller as conducted on the Effective Date; (vi) any Lien or title imperfection with respect to the Acquired Assets created by or resulting from any act or omission of Buyer; (vii) all exceptions set forth in the "Title Commitments"; and (viii) matters set forth on Schedule 2.1(a)(ii).

"Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, a limited liability company, an unincorporated organization, or a Governmental Authority (or any department, agency, or political subdivision thereof).

"Power Contracts" means those contracts or transactions set forth on Schedule 2.1(h).

"Pre-Approved Capital Expenditures" means those capital expenditures set forth on Schedule 5.3.

"Property Tax Allocation Agreement" means the agreement between Seller and Buyer in the form attached hereto as Exhibit E.

"Proposed Acquisition Transaction" is defined in Section 5.16.

"Proprietary Information" means all information about either Party (the "Disclosing Party") or its properties or operations furnished to the other Party (the "Receiving Party") or its Representatives by the Disclosing Party or its Representatives, regardless of the manner or medium in which it is furnished, provided that from and after the Closing Date any information regarding the Facility, Acquired Assets or Assumed Liabilities shall be deemed Proprietary Information of Buyer and not Proprietary Information of Seller and to the extent such information is in the possession of Seller, Seller shall be deemed to have received such information from Buyer on a confidential basis.  Proprietary Information does not include information that (a) is or becomes generally available to the public, other than as a result of a disclosure by the Receiving Party or its Representativ es in violation of this Agreement; (b) was available to the Receiving Party on a nonconfidential basis prior to its disclosure by the Disclosing Party or its Representatives; (c) becomes available to the Receiving Party on a nonconfidential basis from a Person, other than the Disclosing Party or its Representatives, who, to the Receiving Party’s actual knowledge, is not otherwise bound by a confidentiality agreement with the Disclosing Party or its Representatives, or is not otherwise under any obligation to the Disclosing Party or any of its Representatives not to transmit the information to the Receiving Party or its Representatives; or (d) Buyer or its Affiliates disclose to their actual or potential financing sources (including lenders and agents therefor), actual or potential commodity hedge or interest rate swap providers or rating agencies and their respective attorneys, consultants and advisors, provided that this clause (d) shall permit the disclosure of such information by Buyer and its Affili ates only to the parties enumerated in this clause (d).

"Purchase Price" is defined in Section 2.5.

"Purchase Price Adjustment" is defined in Section 2.6.

"Real Property" is defined in Section 2.1(a).

"Receiving Party" is defined in the definition of Proprietary Information.

"Related Purchase Agreement" means the agreement among NE Energy, Inc., an Affiliate of Buyer, NGS, Select Energy, Inc. and Northeast Utilities Service Company to sell to NE Energy, Inc. certain assets related to the pumped storage, conventional hydro, and jet fuel generating facilities purchased by NE Energy, Inc. in the NGC SPA.

"Related Transactions" means the transactions described in and contemplated by the NGC SPA and the Related Purchase Agreement.

"Release" means any actual, threatened or alleged spilling, leaking, pumping, pouring, emitting, dispersing, emptying, discharging, injecting, escaping, leaching, dumping, or disposing of any Hazardous Substance into the Environment that may cause an Environmental Liability (including the disposal or abandonment of barrels, containers, tanks or other receptacles containing or previously containing any Hazardous Substance).

"Remediation" means any or all of the following activities to the extent required to address the presence or Release of Hazardous Substances: (a) monitoring, investigation, assessment, treatment, cleanup containment, removal, mitigation, response or restoration work as

well as obtaining any permits, consents, approvals or authorizations of any Governmental Authority necessary to conduct any such activity; (b) preparing and implementing any plans or studies for any such activity; (c) obtaining a written notice (or an oral notice that is appropriately documented or memorialized) from a Governmental Authority with competent jurisdiction under Environmental Laws or a written opinion of (i) a Licensed Site Professional (as defined in M.G.L. c21A § 19 et seq.), as contemplated by the relevant Environmental Laws and in lieu of a written notice from a Governmental Authority, that no material additional work is required; and (d) any other activities reasonably determined by a Party to be necessary or appropriate or required under Environmental Laws.

"Representative" means, as to any Person, such Person’s Affiliates and actual or prospective lenders and its and their directors, officers, employees, agents, advisors (including, without limitation, financial advisors, counsel and accountants).

 "Represented Employees" is defined in Section 5.7(a).

"Reserved Easements" means easements to be reserved by Seller or its Affiliates with respect to certain T&D Assets and associated telecommunications facilities located on the Site of the Acquired Assets, as set forth in Schedule 2.1(a)(i) hereto, to be reserved in the Deed.

"Restoration Costs" is defined in Section 5.10(a).

"S&P" means Standard & Poor’s Rating Group, a division of McGraw-Hill Corporation, or any successor thereto.

"Schedule" means a schedule to this Agreement.

"Schedule Update" is defined in Section 5.5(b).

"SEC" means the Securities and Exchange Commission.

"Securities Act" means the Securities Act of 1933, as amended.

"Securities Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Select" is defined in the Recitals.

"Select Master Agreements" means the EEI Master Power Purchase and Sale Agreement between Select Energy, Inc. and Constellation Energy Commodities Group, Inc. effective as of October 24, 2003 and the EEI Master Power Purchase and Sale Agreement between Select Energy, Inc. and UBS AG effective as of July 11, 2005.

"Seller" is defined in the introductory paragraph.

"Seller Employee Benefit Plan" is defined in Section 2.4.

"Seller Guaranty" means a guaranty issued by NU, substantially in the form attached hereto as Exhibit L, or such other form of performance assurance that is acceptable to Buyer in its sole discretion.  

"Seller Indemnified Parties" is defined in Section 9.4.

"Seller’s Regulatory Approvals" means those consents, approvals, orders or authorizations of, or registrations, declarations or filings with, all Governmental Authorities required in connection with the execution, delivery or performance hereof by Seller set forth on Schedule 6.2(c) attached hereto.

"Site" means the Real Property and Improvements forming a part of, or used or usable in connection with, the Facility.  Any reference to the Site shall include, by definition, the surface and subsurface elements, including the soils and groundwater present at the Site, and any reference to items "at the Site" shall include all items "at, on, in, upon, over, across, under and within" the Site.

"T&D" means the transmission and distribution of electricity.

"T&D Assets" means the transmission, distribution, communication, substation and other assets necessary to current or future T&D Operations of Seller or its Affiliates.

"T&D Operations" means the process of conducting and supporting T&D.

"Taking" is defined in Section 5.10.

"Tax" or "Taxes" means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code §59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar, including FICA), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not and any payments to any federal, state, local or foreign taxing authorities in lieu of any such tax.

"Tax Return" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

"Third Party" means a Person who is not a Party or an Affiliate of a Party.

"Third Party Claim" is defined in Section 9.7(a).

"Threshold" is defined in Section 9.5(a).

"Title and Authority Representations" is defined in Section 9.1.

"Title Commitments" is defined in Section 3.5(a).

"Trademarks" means any trademarks, service marks, trade dress, and logos, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith.

"Transferable Permits" is defined in Section 2.1(d).

"WARN Act" means the Federal Worker Adjustment Retraining and Notification Act of 1988, as amended.

2.

Acquisition of Assets by Buyer.

2.1.

Purchase and Sale of Assets.  Seller agrees to sell, assign and transfer, or cause to be sold, assigned and transferred to Buyer, and Buyer agrees to purchase from Seller at the Closing, subject to and upon the terms and conditions contained herein, free and clear of any Lien, except for Permitted Encumbrances, all of the right, title and interest of Seller or an Affiliate of Seller in and to the following properties and assets owned by Seller or such Affiliates used or held for use in the operation of, the Facility (collectively, the "Acquired Assets"):

(a)

the real property, Improvements thereon, easements and other rights in real property described in Schedule 2.1(a)(i), but subject to the exceptions and encumbrances set forth in the Title Commitments and subject to the Permitted Encumbrances, including the matters set forth in Schedule 2.1(a)(ii) (the "Real Property");

(b)

the machinery, equipment, furniture, boats, vehicles, Intellectual Property and other personal property owned by or on behalf of Seller and located at the Facility or related primarily to the operation of the Facility and Inventories (including without limitation the items of personal property described in Schedule 2.1(b)), all applicable warranties against manufacturers or vendors, to the extent that such warranties are transferable, and all items of personal property due under applicable warranties), in each case as in existence on the Effective Date, but excluding such items disposed of by Seller in the ordinary course of business during the Interim Period in accordance with this Agreement, and including such additional items as may be acquired by Seller for use in connection with the Acquired Assets in the ordinary course of business during the Interim Period in accordance with this Agreement;

(c)

all rights with respect to leasehold interests and subleases and rights thereunder relating to real property set forth on Schedule 2.1(c) (the "Leases");

(d)

all Permits relating to ownership or operation of the Facility including, but not limited to, the Permits listed on Schedule 2.1(d), but only if and to the extent that such Permits are transferable by Seller to Buyer by assignment or otherwise (including, without limitation, upon request or application to a Governmental Authority, or which will pass to Buyer as successor in title to the Acquired Assets by operation of Law) (the "Transferable Permits");

(e)

except as set forth in Section 2.2, those contracts, agreements and personal property leases which are related to the ownership, use or operation of the Facility and which are set forth in Schedule 2.1(e) (the "Contracts"), and all other contracts which relate primarily to the operation of the Facility; provided that Seller or its Affiliates, as applicable, shall retain the rights and interests under any Contract to the extent such rights and interests provide for indemnity and exculpation rights for pre-Closing occurrences for which Seller or its Affiliates remain liable under this Agreement;

(f)

subject to the right of Seller to retain copies for its use, all books, operating records, engineering designs, blueprints, as-built plans, specifications, procedures, studies, reports and equipment repair, safety, maintenance or service records of Seller (or NGS on its behalf) relating primarily to the operation of the Facility, including the Acquired Assets Employees’ Records but expressly excluding financial records, employees records (other than the Acquired Assets Employees’ Records) and books of account;

(g)

the rights of Seller to the use of the name of the Facility set forth in Schedule 2.1(g);

(h)

except as specifically set forth in Section 2.2(c), the contracts relating to the sale by Select of electric energy from the Facility (which electric energy Select acquires under the terms of the HP&E-Select Agreement) under wholesale rates set forth on Schedule 2.1(h) (the "Power Contracts"), provided that the Power Contracts assigned to Buyer pursuant to this Agreement shall be governed by the Buyer Master Agreements, not the Select Master Agreements;

(i)

all rights of Seller or its Affiliates in and to any causes of action against a Third Party relating to any Acquired Asset or Assumed Liability, whether received as a payment or credit against future liabilities, including, without limitation, insurance proceeds, condemnation awards and cash payments under warranties to the extent such payments relate to Acquired Assets or Assumed Liabilities;

(j)

all right, title and interest of Seller in the leased vehicles set forth on Schedule 2.1(j) (the "Leased Vehicles"),  to the extent that Seller or its Affiliates have purchased or otherwise taken title to such Leased Vehicles as of the Closing Date, subject to the Purchase Price adjustment set forth in Section 2.6(a); and

(k)

except as set forth in Section 2.2(g) and subject to Section 5.15 and only to the extent transferable, the Air Emissions Credits and Allowances set forth on Schedule

2.1(k) and all rights to future Air Emissions Credits and Allowances allocated with respect to the Facility.

2.2.

Excluded Assets.  Notwithstanding anything to the contrary in this Agreement, there shall be excluded from the Acquired Assets to be sold, assigned, transferred, conveyed or delivered to Buyer hereunder, and to the extent in existence on the Closing Date, there shall be retained by Seller or its Affiliates, any and all right, title or interest to the following assets, properties and rights (collectively, the "Excluded Assets"):

(a)

as identified on Schedule 2.2(a) or in the Asset Demarcation Agreement, or any document or exhibit referred to or incorporated in the Asset Demarcation Agreement, (i) the property comprising or constituting any or all of the T&D Assets located at the Site (whether or not regarded as a "transmission", "distribution" or "generation" asset for regulatory or accounting purposes), including all switchyard facilities, substation facilities and support equipment, as well as all Permits and contracts, that relate primarily to the T&D Assets, and (ii) those certain assets and facilities identified for use or used by Seller or others pursuant to an agreement or agreements with Seller or its Affiliates for telecommunications purposes;

(b)

all Cash, accounts and notes receivable, checkbooks and canceled checks, bank deposits and property or income tax receivables or any other Tax refunds to the extent allocable to a period ending on or before the Closing Date;

(c)

the Select Master Agreements, including but not limited to any parent guaranties or other performance assurance provided by Seller, Select or their parent or Affiliates in connection therewith;

(d)

any and all of Seller’s rights in any contract or arrangement representing an intercompany transaction, agreement or arrangement between Seller and an Affiliate of Seller, whether or not such transaction, agreement or arrangement relates to the provisions of goods or services, payment arrangements, intercompany charges or balances or the like, including but not limited to the HWP-NGS M&OA, the HP&E-Select Agreement, the HWP-HP&E Agreement, the HWP-Select Agency Agreement and the HWP-NUSCO Services Agreement (collectively, the "Intercompany Agreements");

(e)

all rights of Seller or its Affiliates in and to any causes of action against a Third Party relating to any period ending on the Closing Date, whether received as a payment or credit against future liabilities, including, without limitation, any rights or interests in respect of any refunds relating to property Taxes paid by Seller for periods ending on the Closing Date, as such Taxes are to be prorated in accordance with Section 2.8, insurance proceeds, condemnation awards and cash payments under warranties covering the Acquired Assets to the extent such payments relate to Acquired Assets repaired or replaced prior to the Closing Date, Excluded Assets or Excluded Liabilities, but excluding any such rights of Seller to the extent the associated Third Party claims relate to an Assumed Liability;

(f)

all rights of Seller to the words "HWP", "Holyoke Water Power Company", "HP&E" and "Holyoke Power and Electric Company" and any Trademarks which are composed of or comprise any derivative; and

(g)

subject to Section 5.15, all Air Emissions Credits and Allowances required to satisfy Seller’s obligations under applicable Environmental Laws with respect to its ordinary course operation of the Facility prior to and on the Closing Date, as determined by Seller and reasonably agreed to by Buyer.

2.3.

Assumption of Liabilities.  On the terms and subject to the conditions set forth herein, from and after the Closing, Buyer will assume and satisfy or perform all of the Liabilities of Seller or its Affiliates in respect of, or otherwise arising from the operation or use of the Acquired Assets, other than the Excluded Liabilities (as set forth in Section 2.4 below), including, without limitation, the following Liabilities (the "Assumed Liabilities"):

(a)

all Environmental Liabilities, other than the Excluded Liabilities (as set forth in Section 2.4 below);

(b)

all Liabilities under (i) the Contracts, the Leases, the Transferable Permits, and the Power Contracts (including but not limited to the obligation to provide performance and credit assurance) in accordance with the terms thereof, (ii) the other contracts, leases and other agreements included in the Acquired Assets, and (iii) the contracts, leases, commitments and other agreements entered into by or on behalf of Seller with respect to the Acquired Assets during the Interim Period consistent with the terms of this Agreement (including, without limitation, Capital Commitments and agreements with respect to Liabilities for real or personal property Taxes on any of the Acquired Assets, in each case, entered into in accordance with  the provisions of Section 5.3) in each case, to the extent such Liabilities, but for a breach or default by Seller, would have been paid, performed or otherwise di scharged on or prior to the Closing Date, or to the extent the same arise out of any such breach or default, or to the extent the same relate to performance rendered to or by Seller prior to the Closing Date;

(c)

all Liabilities under the Permitted Encumbrances other than under or with respect to the exercise of the Reserved Easements;

(d)

all Liabilities relating to employees for which Buyer is responsible under Section 5.7;

(e)

subject to Section 5.15, all Liabilities for the calendar year in which the Closing occurs for timely submitting to the relevant Governmental Authorities all compliance filings and reports regarding air emissions from the Facility as required by applicable Environmental Laws;

(f)

all Liabilities with respect to claims and causes of action set forth on Schedule 3.10 as of the date hereof; and

(g)

all other Liabilities of any nature whatsoever to the extent arising from the ownership or operation of the Facility, the Assumed Liabilities and the Acquired Assets, unless expressly excluded pursuant to Section 2.4.

2.4.

Excluded Liabilities.  Buyer shall not assume or be responsible for the performance of any of the following Liabilities (collectively, the "Excluded Liabilities"):

(a)

any Liability of Seller in respect of or otherwise arising from the operation or use of the Excluded Assets or any other assets of Seller or any Affiliate of Seller that are not Acquired Assets;

(b)

any Liability of Seller to any Affiliate of Seller or any officer, director or shareholder of Seller, including without limitation, pursuant to Intercompany Agreements, except as specifically provided in Section 5.7;

(c)

any Liability of Seller or any Affiliate of Seller in respect of any Indebtedness;

(d)

Liability for accounts or notes payable or outstanding checks or drafts, to  the extent allocable to a period ending on or before the Closing Date;

(e)

any Liability of Seller including, without limitation, any Environmental Liability, in respect of or otherwise arising from the exercise of the Reserved Easements;

(f)

(i) any Liability relating to the treatment, disposal, storage, discharge, Release, recycling or the arrangement for such activities at, or the transportation to, any Offsite Disposal Facility, by Seller, prior to the Closing Date, of Hazardous Substances that were generated at the Site, provided that for purposes of this Section, "Offsite Disposal Facility" does not include any location to which Hazardous Substances disposed of or Released at or from the Acquired Assets have migrated;

(g)

any Liability of Seller arising from the making or performance of this Agreement or an Ancillary Agreement or the transactions contemplated hereby or thereby;

(h)

any Liability of Seller in respect of obligations for goods delivered or services rendered prior to the Closing Date or other Liabilities under contracts, leases or Permits which Buyer has not assumed pursuant to Section 2.3(b);

(i)

any Liability arising out of or in connection with any Employee Benefit Plan established or maintained by Seller or to which Seller contributes or otherwise has any Liabilities with respect to (each such plan, a "Seller Employee Benefit Plan") or any Liability for the termination of, any such Seller Employee Benefit Plan;

(j)

any Liability for any compensation or benefits accruing prior to the Closing Date, under the terms or provisions of any Seller Employee Benefit Plan or the Collective Bargaining Agreement, or otherwise relating to any of the Acquired Assets Employees, other than the Liabilities assumed by Buyer under Section 5.7;

(k)

any Liability relating to any employees of Seller or its Affiliates who do not become Acquired Assets Employees pursuant to Section 5.7;

(l)

except as otherwise expressly set forth in this Agreement, any Liability of Seller relating to any claim or cause of action in respect of the operation or use of the Facility or the Acquired Assets on or prior to the Closing Date, regardless of when such action is commenced, other than the claims and causes of action set forth on Schedule 3.10 as of the date hereof;

(m)

except as otherwise expressly set forth in this Agreement, any Liability of Seller relating to (x) any investigation or proceeding pending on or prior to the Closing Date or relating to events occurring or conditions arising on or prior to the Closing Date or (y) illegal acts, violation of Permits or willful misconduct of Seller on or prior to the Closing Date; and

(n)

any Liability in respect of Taxes imposed on or attributable to the Acquired Assets for taxable periods ending on or before the Closing Date as such Taxes are to be pro rated in accordance with Section 2.8, or any Liability in respect of Taxes imposed on Seller (or any member of an affiliated group of corporations within the meaning of Section 1504 of the Code of which Seller is or has been a member) for any taxable period, except those Taxes for which Buyer is liable pursuant to Section 8.

2.5.

Purchase Price.  Buyer agrees to assume the Assumed Liabilities and pay to Seller at the Closing an aggregate amount equal to $140,000,000 (the "Initial Purchase Price") plus or minus amounts to account for (i) the Estimated Adjustment to the Initial Purchase Price to be made as of the Closing under Section 2.6(c), and (ii) the pro rations to be made as of the Closing under Section 2.8(a), (the Initial Purchase Price, as so adjusted, shall be referred to herein as the "Closing Purchase Price").  The Closing Purchase Price shall be payable at the Closing in cash by wire transfer to Seller in accordance with written instructions of Seller given to Buyer at least three (3) Business Days prior to the Closing.  Following the Closing, the Closing Purchase Price shall be subject to adjustment pursuant to Sections 2.6(d) and 2.8(b), and the Closing Purchase Price, as so adjusted pursuant to such Sections, shall be herein referred to as the "Purchase Price."  

On the Effective Date, Buyer shall deliver to Seller an Acceptable Guaranty and an Acceptable Letter of Credit and shall, pursuant to Section 5.12, cause such Acceptable Guaranty and such Acceptable Letter of Credit to be maintained to secure the payment of the Purchase Price through the Closing Date.

2.6.

Adjustments to Initial Purchase Price  The Initial Purchase Price shall be increased or reduced as set forth in Sections 2.6(a), (b) and (c), and the Closing Purchase Price shall be subject to adjustment as set forth in Section 2.6(c).  Such increases or reductions, as the case may be, shall be referred to herein as the "Purchase Price Adjustment" and shall be determined and paid as set forth below:

(a)

The Initial Purchase Price shall be increased to account for the following items:  (i) the net book value of all Inventories (which, in the case of fuel inventories

shall include all Taxes and transportation expenses related to such fuel inventories) held and paid for in full by Seller as of the Closing Date; (ii) any amount paid by or on behalf of Seller in connection with the purchase of the Leased Vehicles;  (iii) any Pre-Approved Capital Expenditures paid by or on behalf of Seller during the Interim Period, including without limitation any pre-payments made in connection with such Pre-Approved Capital Expenditures; and (iv) any other capital expenditures paid by or on behalf of Seller during the Interim Period necessitated by Good Utility Practices paid in accordance with Section 5.3(f) that were not made as a result of an Event of Loss.

(b)

At least twenty (20) Business Days prior to the Closing Date, Seller shall prepare and deliver to Buyer an estimated Closing Statement (the "Estimated Closing Statement") that shall set forth Seller’s best estimate of all adjustments to the Initial Purchase Price required by Section 2.6(a) (the "Estimated Adjustment").  The Initial Purchase Price shall be adjusted (the "Closing Adjustment") for the Closing by the amount of the Estimated Adjustment.

(c)

Within ninety (90) days following the Closing Date, Seller shall prepare and deliver to Buyer a closing statement that shall set forth Seller’s computation of the final Purchase Price Adjustment based on Sections 2.6(a) and (b) and the components thereof taking into account actual data (the "Closing Statement").  Within twenty (20) days following the delivery of the Closing Statement by Seller to Buyer, Buyer may object to the Closing Statement in writing.  Seller agrees to cooperate with Buyer to provide to Buyer or Buyer’s Representatives information used to prepare the Closing Statement and information relating thereto.  If Buyer objects to the Closing Statement, the Parties shall attempt to resolve such dispute by negotiation.  If the Parties are unable to resolve such dispute within twenty (20) days of any objection by Buyer, the Parties shal l appoint PricewaterhouseCoopers, or, if PricewaterhouseCoopers is not available, another nationally recognized accounting firm not associated with either Party, mutually agreed upon by the Parties, who shall, at Seller’s and Buyer’s joint expense, review the Closing Statement and determine the appropriate Purchase Price Adjustment under this Section 2.6.  The agreed upon Closing Statement or the finding of such accounting firm, as the case may be, shall be used to determine the Purchase Price Adjustment and shall be binding on the Parties.  Upon the determination of the Purchase Price Adjustment, the Party owing a balance on account of the Purchase Price Adjustment shall deliver the balance due to the other Party no later than two (2) Business Days after such determination in immediately available funds or in any other manner as reasonably requested by the payee.  The balance due shall be determined by offsetting against each Party’s credits and debits arising from the Purchase Price Adjustment the credits and debits accorded to each Party in the Closing Statement on account of the Estimated Adjustment.  The acceptance by Buyer and Seller of the Purchase Price Adjustment shall not constitute or be deemed to constitute a waiver of the rights of such Party in respect of any other provision of this Agreement.

2.7.

Allocation of Purchase Price.  Buyer and Seller shall use their good faith best efforts to agree upon an allocation among the Acquired Assets of the sum of the Purchase Price and the Assumed Liabilities consistent with Section 1060 of the Code and the Treasury Regulations thereunder within sixty (60) days after the Closing Date (or such later date as the

Parties may mutually agree).  Buyer and Seller may jointly agree to obtain the services of an independent engineer or appraiser (the "Independent Appraiser") to assist the Parties in determining the fair value of the Acquired Assets solely for purposes of such allocation under this Section 2.7.  If such an appraisal is made, both Buyer and Seller agree to accept the Independent Appraiser’s determination of the fair value of the Acquired Assets.  The cost of the appraisal shall be borne equally by Buyer and Seller.  Each of Buyer and Seller agrees to file Internal Revenue Service Form 8594 ("Form 8594") and all federal, state, local and foreign Tax Returns in accordance with such agreed allocation (giving effect to mutually-agreed upon adjustments as a result of adjustments to the Closing Purchase Price pursuant to Section 2.6).  Each of Buyer and Seller shall report the transactions contemplated by this Agreement and the Ancillary Agreements for federal Income Tax and all other Tax purposes in a manner consistent with the allocation, if agreed-upon or determined by the Independent Appraiser in each case pursuant to this Section 2.7.  Each of Buyer and Seller agrees to provide the other promptly with any other information required to complete Form 8594.  Each of Buyer and Seller shall notify and provide the other with reasonable assistance in the event of an examination, audit or other proceeding regarding the agreed upon allocation of the Purchase Price.

2.8.

Proration

(a)

Buyer and Seller agree that all of the items listed below and such others as are mutually agreed to by the Parties, relating to the business and operations of the Acquired Assets, will be prorated as of the Closing Date, with Seller liable to the extent such items relate to any period through the Closing Date, and Buyer liable to the extent such items relate to periods after the Closing Date: (i) personal property, Real Property, occupancy and water Taxes, assessments and other charges, if any, on or associated with the Acquired Assets; (ii) rent and other items payable by or to Seller under any of the Contracts or Leases assigned to and assumed by Buyer hereunder; (iii) any Permit, license, registration or fees with respect to any Transferable Permit associated with the Acquired Assets; (iv) sewer rents and charges for water, telephone, electricity and other utilities; (v) the value of capaci ty or transition payment under the FERC Capacity Settlement or prevailing capacity market rules for the month within which the Closing occurs; and (vi) charges from ISO New England allocated to the owner of the Load Asset and/or Generation Asset with respect to the Facility for the month in which the Closing occurs.  Subject to Section 2.8(b), below, not less than five (5) Business Days prior to the Closing Date, the Parties shall agree upon the sum of the net amount of the prorated amounts to which either Seller or Buyer shall be entitled pursuant to this Section 2.8(a) and the Initial Purchase Price shall be adjusted to reflect such net amount.

(b)

If the amount of one or more Taxes, fees or other liabilities, including without limitation the payments and charges described in Section 2.8(a)(v) and Section 2.8(a)(vi) to be prorated in accordance with Section 2.8(a) is not known or determinable on or prior to the Closing Date, the amounts to be prorated upon the Closing in accordance with Section 2.8(a) shall (i) in the case of Taxes, fees or other liabilities (other than such amounts described in Section 2.8(a)(v) and Section 2.8(a)(vi)), be based upon the actual Taxes, fees or other liabilities for the preceding year (or appropriate period) for which such actual Taxes, fees or liabilities are available, and (ii) in the case of the payments and charges described in Section 2.8(a)(v) and Section 2.8(a)(vi), be based

on reasonable estimate of such charges by Seller.  The amount of Taxes, fees or other liabilities prorated upon the Closing pursuant to Section 2.8(a), including without limitation the payments and charges described in Section 2.8(a)(v) and Section 2.8(a)(vi), shall be adjusted upon the request of either Seller, on the one hand, or Buyer, on the other hand, made within sixty (60) days of the date the actual amounts become available.  Seller and Buyer agree to furnish each other with such documents and other records that may be reasonably requested in order to confirm all adjustment and proration calculations made pursuant to this Section 2.8.

2.9.

The Closing.  Unless otherwise agreed to by the Parties, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Day, Berry & Howard LLP, 185 Asylum Street, Hartford, CT, commencing at 9:00 a.m. Eastern time on the date that is five (5) Business Days following the date on which all of the conditions set forth in Sections 6.1 and 6.2 have either been satisfied or waived by the Party for whose benefit such condition exists, such satisfaction or waiver to conform to Section 11.12.  The Closing shall take place contemporaneously with the closing of the transactions contemplated by the NGC SPA and the Related Purchase Agreement.  The date of Closing is hereinafter called the "Closing Date" and shall be effective for all purposes herein as of 12:01 a.m. Eastern time on the Closing Date. < /P>

2.10.

Deliveries by Seller at the Closing.  At the Closing, Seller shall deliver the following to Buyer, duly executed and properly acknowledged, if appropriate:

(a)

the deed for the Real Property and Improvements, substantially in the form attached hereto as Exhibit A and otherwise in a form suitable for recording;

(b)

the Bill of Sale, substantially in the form attached hereto as Exhibit B, for the personal property included in the Acquired Assets;

(c)

the Assignment and Assumption Agreement, substantially in the form attached hereto as Exhibit C, in recordable form if necessary;

(d)

the Property Tax Allocation Agreement, substantially in the form attached hereto as Exhibit E;

(e)

the Interconnection Agreement, in the form attached hereto as Exhibit D;

(f)

the Asset Demarcation Agreement, in the form attached hereto as Exhibit G;

(g)

[Reserved];

(h)

a FIRPTA Affidavit executed by Seller;

(i)

certificates of title for the vehicles and boats which are part of the Acquired Assets;

(j)

all attornment agreements, notices and other documents and instruments required for the assignment or other transfer of the Leases from Seller to Buyer, which agreements, notices, documents and instruments shall, upon the reasonable request of Buyer, be in recordable form;

(k)

copies of all consents, waivers or approvals obtained by Seller with respect to the Acquired Assets, the transfer of the Transferable Permits or the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements, to the extent specifically required under this Agreement or the Ancillary Agreements;

(l)

a certificate from an authorized officer of Seller, dated the Closing Date, to the effect that, to such officer’s Knowledge, the conditions set forth in Sections 6.1(a), (b), and (d) and Section 6.2(c) have been satisfied;

(m)

a copy, certified by the Secretary or an Assistant Secretary of Seller, of corporate resolutions authorizing the execution and delivery of this Agreement and the Ancillary Agreements and instruments attached as exhibits hereto and thereto, and the consummation of the transactions contemplated hereby and thereby;

(n)

a certificate of the Secretary or an Assistant Secretary of Seller which shall identify by name and title and bear the signature of the officers of Seller authorized to execute and deliver this Agreement and the Ancillary Agreements and instruments attached as exhibits hereto and thereto;

(o)

an opinion or opinions from one or more counsel to Seller (any of whom may be an employee of Seller or its Affiliates), dated the Closing Date and reasonably satisfactory in form to Buyer and its counsel, covering substantially the matters set forth in Schedule 2.10(o); and

(p)

copies of the other Ancillary Agreements duly executed by Seller or an Affiliate of Seller, as applicable, and all such other instruments of sale, transfer, conveyance, assignment or assumption as Buyer and its counsel may reasonably request in connection with the sale of the Acquired Assets, provided that this Section 2.10(p) shall not require Seller to prepare or obtain any surveys relating to the Real Property other than those previously provided to Buyer.

2.11.

Deliveries by Buyer at the Closing.  At the Closing, Buyer shall deliver to Seller, properly executed and acknowledged, if appropriate:

(a)

the Closing Purchase Price;

(b)

the Assignment and Assumption Agreement, substantially in the form attached hereto as Exhibit C to this Agreement, duly executed by Buyer, and if necessary or desirable to Seller, in recordable form;

(c)

the Property Tax Allocation Agreement, substantially in the form attached hereto as Exhibit E;

(d)

the Interconnection Agreement, in the form attached hereto as Exhibit D;

(e)

the Asset Demarcation Agreement, in the form attached hereto as Exhibit G;

(f)

evidence of the Buyer Master Agreements;

(g)

a certificate from an authorized officer of Buyer, dated the Closing Date, to the effect that, to such officer’s Knowledge, the conditions set forth in Section 6.1(c) and Sections 6.2(a), (b) and (d) have been satisfied;

(h)

a copy, certified by the Secretary or Assistant Secretary of Buyer, of resolutions authorizing the execution and delivery of this Agreement and the Ancillary Agreements and instruments attached as exhibits hereto and thereto, and the consummation of the transactions contemplated hereby and thereby;

(i)

a certificate of the Secretary or Assistant Secretary of Buyer which shall identify by name and title and bear the signature of the officers of Buyer authorized to execute and deliver this Agreement and the Ancillary Agreements and instruments attached as exhibits hereto and thereto;

(j)

one or more opinions from counsel to Buyer, dated the Closing Date and reasonably satisfactory in form to Seller and its counsel, covering substantially the matters set forth in Schedule 2.11(j);

(k)

evidence of Buyer’s (or its agent’s)  status as a Market Participant; and

(l)

all such other instruments of purchase, sale, transfer, conveyance, delivery, receipt, assignment or assumption as Seller and its counsel may reasonably request in connection with the sale or purchase of the Acquired Assets or assumption of the Assumed Liabilities.

3.

Representations, Warranties and Disclaimers of Seller  

Seller represents and warrants to Buyer that each of the statements set forth below is true and correct in all respects as of the Effective Date and will be true and correct as of the Closing Date, provided that an exception or qualification set forth in any Schedule with respect to a particular representation and warranty shall be deemed to be an exception or qualification with respect to all other applicable representations and warranties to the extent the description of the facts regarding the event, item or matter disclosed is adequate so as to make reasonably clear that such exception or qualification is applicable to such other representations and warranties whether or not such exception or qualification is so numbered:

3.1.

Organization of Seller.  Seller is duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts.  Copies of the charter and by-laws of Seller, each as amended to date, have been heretofore made available to Buyer and are accurate and complete.

3.2.

Authorization of Transaction.  Seller has the power and authority (including full corporate power and authority) to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and, subject to receipt of all Seller’s Regulatory Approvals, to perform its obligations hereunder and thereunder.  All corporate actions or proceedings to be taken by or on the part of Seller to authorize and permit the due execution and valid delivery by Seller of this Agreement and the Ancillary Agreements to which it is a party and the instruments required to be duly executed and validly delivered by Seller pursuant hereto and thereto, the performance by Seller of its obligations hereunder and thereunder, and the consummation by Seller of the transactions contemplated herein and therein, have been duly and properly taken.  This Agreement and the Ancillary Agreements to which Seller is a party have been duly executed and validly delivered by Seller and constitute the legal, valid and binding obligation of Seller, enforceable in accordance with their terms and conditions.

3.3.

Noncontravention.  Subject to Seller obtaining the Seller’s Regulatory Approvals, neither the execution and the delivery of this Agreement or any of the Ancillary Agreements, nor the consummation of the transactions contemplated hereby and thereby (including the assignments and assumptions referred to in Sections 2.10(p) and 2.11(l) above), will (a) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, license or other restriction of any Governmental Authority to which Seller or any of its property is subject or any provision of the charter or by-laws of Seller, or (b) assuming receipt of all necessary filings, waivers, approvals, consents and authorizations set forth on Schedule 3.3, conflict with, result in a breach of, constitute a default under, result in the acceleration of, trigger any right of first refusal under, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under (with or without the giving of notice, the lapse of time, or both) any agreement, contract, lease, license, instrument, or other arrangement to which Seller is bound (including without limitation, the Contracts) or to which any of the Acquired Assets is subject (or result in the imposition of any Lien, upon any of the Acquired Assets), except for matters that will not have a Material Adverse Effect on the Facility, Acquired Assets or the Seller or as otherwise disclosed in Schedule 3.3.

3.4.

Brokers’ Fees.  Seller has no Liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which Buyer could become liable or obligated.

3.5.

Title to Acquired Assets.  Except for the Permitted Encumbrances, Seller has title to the Real Property to the extent, and only to the extent, specified in the title policy commitments attached hereto on Schedule 3.5 (the "Title Commitments").  Except as set forth in Schedule 3.5 and except for Permitted Encumbrances, Seller or its Affiliates have good and valid title to the other Acquired Assets. Except as set forth in Schedule 3.5(b), the Acquired Assets, constitute all assets used or held for use by Seller and its Affiliates in, and necessary and sufficient for the operation of the Facility as presently operated, except as could not be reasonably be expected to have a Material Adverse Effect on the Facility or the Acquired Assets.

3.6.

Legal and Other Compliance; Permits

(a)

Seller is in compliance with all current Laws applicable to the Acquired Assets or Seller’s operation of the Acquired Assets the violation of which could have a

Material Adverse Effect on the Facility or the Acquired Assets, other than as disclosed in Schedule 3.6 and other than with respect to matters covered by Section 3.12 below.

(b)

Schedule 2.1(d) sets forth all Permits that are material to the ownership or operation of the Facility.  Except as would not cause a Material Adverse Effect on the Facility or the Acquired Assets and as set forth on Schedule 3.6(b): (i) all such Permits are in full force and effect and the Seller is in compliance with all such Permits in all material respects and (ii) the Seller has not received any written notification from any Governmental Authority alleging that it is in material violation of any such Permits and, to Seller’s Knowledge, there is no such material violation.

3.7.

Taxes.  Seller has filed all material Tax Returns that it was required to file, and such Tax Returns are true, correct and complete in all material respects.  Seller has paid all material Taxes, except where Seller is contesting the same in good faith by appropriate proceedings and has made adequate provision for the payment of such contested taxes.  Seller has made adequate provision for the payment of material Taxes not yet due and payable for all periods through and including the Closing Date.  There is no unpaid Tax due and payable that could have a Material Adverse Effect on Buyer’s ownership, operation or use of the Acquired Assets for which Buyer could become liable.  Except as set forth on Schedule 3.7, no audits, examinations or administrative or judicial proceedings with respect to material Taxes of Seller are ongoing, pending or proposed in writing by any taxing authority.  None of the Acquired Assets is "tax-exempt use property" within the meaning of Section 168(h) of the Code, directly or indirectly secures any debt the interest on which is tax-exempt under Section 103(a) of the Code, or is property required to be treated as being owned by any other person pursuant to the "safe harbor lease" provisions of former Section 168(f)(8) of the Code.

3.8.

Contracts and Leases.

(a)

Except for (w) the agreements and contracts listed on Schedule 2.1(c), 2.1(e) or 2.1(h), (x) contracts that will expire prior to Closing (y) contracts or agreements that are immaterial and (z) contracts entered into between signing and Closing in accordance with this Agreement, the Seller is not a party to (with respect to the Facility or the Acquired Assets), and none of the Facility or Acquired Assets are subject to or bound by, any written contract or agreement that provides for the sale of any amount of capacity, ancillary services or energy from any of the Acquired Assets (whether or not entered into in the ordinary course of business), any interconnection agreement, coal supply or delivery agreement, operation and maintenance agreement, hedging (or similar) agreement, long term maintenance agreement, non-competition agreement restricting the operation of the Facility, agreement evidencing Indebtedness, agreement that provides for payments in excess of $1,000,000 per year, real estate lease, easement and other contract material to the Real Property, tax abatement agreement, partnership or joint venture or similar agreement, agreement of guarantee, surety, indemnification (other than standard indemnification provisions entered into in the ordinary course of business of Seller).

(b)

Except as disclosed in Schedule 3.8(b), (i) each of the Contracts, Leases and Power Contracts constitutes a valid and binding obligation of Seller or its Affiliates and, to such Seller’s Knowledge, each other party thereto, (ii) Seller is not in material breach or default in any material respect under any of the Contracts, Leases and Power Contracts and, to Seller’s Knowledge, the other parties to the Contracts, Leases or Power Contracts are not in material breach or default in any material respect under any thereof (and in each such case no event exists that with the passage of time or the giving of notice would constitute such material breach or default), (iii) subject to receipt of any necessary consents, the Contracts, Leases and Power Contracts may be transferred to Buyer pursuant to this Agreement and will continue in full force and effect there after, in each case without breaching the terms thereof or resulting in the forfeiture or impairment of any material rights thereunder and (iv) the Seller has not received notice from any other party to any Contract, Lease or Power Contract of any threatened termination of such Contract, Lease or Power Contract.  Seller has delivered or made available to Buyer true, correct and complete copies of all of the Contracts, Leases or Power Contracts and all amendments thereto.  

3.9.

Insurance.  Except as set forth in Schedule 3.9, all material policies, binders and bonds of fire, liability and other forms of insurance owned or held by Seller or its Affiliates insuring the Acquired Assets are in full force and effect, all premiums with respect thereto covering all periods up to and including the date as of which this representation is being made have been paid (other than retroactive premiums that may be payable with respect to comprehensive general liability and worker’s compensation insurance policies), and no written notice of cancellation or termination has been received with respect to any such policy that was not replaced on substantially similar terms prior to the date of such cancellation.  Except as described in Schedule 3.9, Seller has not been refused any material insurance with respect to the Acquired Assets nor has its coverage been lim ited in any material respect by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance, in each case, during the last twelve months.

3.10.

Litigation.  Except as disclosed in Schedule 3.10, no action, suit, claim, demand or other proceeding is pending or, to Seller’s Knowledge, threatened that would be reasonably likely to result in a Material Adverse Effect on the Facility or the Acquired Assets or that questions the validity of this Agreement or the Ancillary Agreements or of any action taken or to be taken pursuant to or in connection with the provisions of this Agreement or the Ancillary Agreements.  Except as disclosed in Schedule 3.10, there are no judgments, orders, decrees, citations, fines or penalties heretofore assessed against Seller that would reasonably be expected to have a Material Adverse Effect on the Facility or Acquired Assets or that impair, estop, impede, restrain, ban or otherwise materially adversely affect Seller’s ability to satisfy or perform any of the its obligations pursu ant to this Agreement under any federal, state or local Law.

3.11.

Employees and Employee Benefit Plans.  

(a)

The Collective Bargaining Agreement is the only collective bargaining agreement that governs the terms and conditions of employment of the Represented

Employees at Mt. Tom Station.  A true and correct copy of the Collective Bargaining Agreement has heretofore been made available to Buyer.  Except as described in Schedule 3.11(a), and except as to such matters as will not have a Material Adverse Effect on the Facility or the Acquired Assets: (i) Seller has not experienced any labor strikes or work stoppages by such employees due to labor disagreements during the two-year period preceding the Effective Date and to Seller’s Knowledge, none is currently pending; (ii) to Seller’s Knowledge, Seller is in compliance with all applicable Laws respecting employment and employment practices, equal employment opportunity, occupational health and safety, affirmative action, terms and conditions of employment and wages and hours; (iii) Seller has not received written notice from any Governmental Authority of any unfair l abor practice charge, complaint or proceeding against Seller pending or threatened before the National Labor Relations Board or any other Governmental Authority with respect to such employees; (iv) no arbitration, grievance or proceeding arising out of or under the Collective Bargaining Agreement are pending against Seller or its Affiliates; (v) Seller is in compliance in all material respects with the Collective Bargaining Agreement; and (vi) no charges of discrimination, harassment, or retaliation, or lawsuits by or on behalf of current or former employees employed at or in support of the Facility are pending, or, to the Seller’s Knowledge, threatened against the Seller or its Affiliates.

(b)

Schedule 3.11(b) contains a true and complete list of each Seller Employee Benefit Plan under which any of the Acquired Assets Employees has, as of the Effective Date, any present or future right to benefits. With respect to each such Seller Employee Benefit Plan, Seller has made available to Buyer a current, accurate and complete copy (or, to the extent no such copy exists, an accurate description) thereof and, to the extent applicable any related trust agreement or other funding instrument and any currently applicable summary plan description with respect thereto.

(c)

(i) Each Seller Employee Benefit Plan has been established and administered in accordance with its terms, and in compliance with the applicable provisions of ERISA, the Code and other applicable laws, rules and regulations, (ii) no event has occurred and no condition exists with respect to any Seller Employee Benefit Plan that would be reasonably likely to subject Buyer or its Affiliates to any material Liability, and (iii) no Seller Employee Benefit Plan is a Multiemployer Plan.

3.12.

Environmental Matters.  

(a)

During the three year period preceding the Effective Date, except as disclosed in Schedule 3.12, and except where such matters, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Seller, (i) Seller has not received any written notice from any Governmental Authority that it is not in compliance with Environmental Laws or failed to obtain material Permits required for the ownership or operation of any Asset under Environmental Laws; (ii) Seller has not received any written notice from any Governmental Authority that any Site is listed under the Comprehensive Environmental Response,

Compensation Liability Information Systems or any similar state list; (iii) Seller has not received any notice from any Person alleging Liability for any Environmental Claims; (iv) to Seller’s Knowledge, no Hazardous Substances have been Released or are threatened to be Released at the Facility or by Seller at any other location; and (v) Seller has not been required by any applicable Environmental Laws to place any use or activities restrictions or any institutional controls on any Assets.  

(b)

Seller has no Knowledge of any matters that could give rise to Environmental Liabilities that would reasonably be expected to have a Material Adverse Effect on Seller that are not described in Schedule 3.12 or in the Phase I and Phase II Reports referred to in Schedule 3.12.

(c)

To the Knowledge of Seller, except as described in Schedule 3.12 or in the Phase I and Phase II Reports referred to in Schedule 3.12, during the two year period preceding the Effective Date, Seller has been in compliance with all applicable Environmental Laws except where noncompliance would not reasonably be expected to have a Material Adverse Effect on Seller.

(d)

To Seller’s Knowledge, all emission reduction credits or air emission allowances held by Seller as of the Effective Date pursuant to applicable provisions of the Clean Air Act or similar State Laws are identified on Schedule 3.12.

3.13.

Condemnation.  Except as set forth in Schedule 3.13, Seller has received no written notice from any Governmental Authority of any pending or threatened proceeding to condemn or take by power of eminent domain or otherwise, by any Governmental Authority, all or any material part of the Acquired Assets.  To Seller’s Knowledge, none of the Real Property is subject to any material threatened or impending tribal claims.

3.14.

Surveys of Facility.  The surveys of the Facility provided by Seller to Buyer show the locations of all of the material electric generating buildings and related facilities located at the Facility.

3.15.

Intellectual Property.  Schedule 2.1(b) discloses all material Intellectual Property owned, licensed or leased by Seller or its Affiliates and used for the operation of the Facility as presently operated in all material respects. Seller or its Affiliates have all right, title and interest in or valid, binding and irrevocable rights to use such Intellectual Property without material limitation, Liens (except for Permitted Encumbrances) or royalty burdens.  To Seller’s Knowledge, none of such Intellectual Property included in the Acquired Assets is being infringed by any other Person, and Seller, to its Knowledge, is not infringing and has not received notice that it is infringing (or allegedly infringing) any Intellectual Property of any other Person in connection with the operation of the Facility, which in either case could reasonably be expected to have a Material Adverse Ef fect on the Facility or the Acquired Assets and Assumed Liabilities.  

3.16.

No Undisclosed Liabilities. The Assumed Liabilities do not include any material Liabilities (including, without limitation, Indebtedness), of the type required to be reflected as liabilities on a balance sheet prepared in accordance with GAAP, except as set forth in Schedule 3.16 and except for current liabilities incurred in the ordinary course of business that individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect on the Facility or the Acquired Assets.  

3.17.

Sales by Seller.  Seller represents that no rate or charge for, or in connection with, the construction of the Facility, or for electric energy produced by the Facility (other than any portion of a rate or charge which represents recovery of the cost of a wholesale rate or charge) was in effect under the laws of any state as of October 24, 1992.

3.18.

Disclaimers Regarding Acquired Assets.  EXCEPT FOR ANY REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS SECTION 3, THE ACQUIRED ASSETS ARE SOLD "AS IS, WHERE IS," AND SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO LIABILITIES, OPERATIONS OF THE FACILITY, TITLE, CONDITION, VALUE OR QUALITY OF THE ACQUIRED ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE), RISKS AND OTHER INCIDENTS OF THE ACQUIRED ASSETS INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO THE ACTUAL OR RATED GENERATING CAPABILITY OF THE FACILITY OR THE ABILITY OF BUYER TO SELL FROM THE FACILITY ELECTRIC ENERGY, CAPACITY OR OTHER PRODUCTS RECOGNIZED BY ISO NEW ENGLAND FROM TIME TO TIME, AND SELLER SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, OR SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE ACQUIRED AS SETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS, OR AS TO THE CONDITION OF THE ACQUIRED ASSETS, OR ANY PART THEREOF, INCLUDING, WITHOUT LIMITATION, WHETHER SELLER POSSESSES SUFFICIENT REAL PROPERTY OR PERSONAL PROPERTY TO OPERATE THE ACQUIRED ASSETS, IN EACH CASE EXCEPT AS SET FORTH HEREIN.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLER FURTHER SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY REGARDING THE ABSENCE OF HAZARDOUS SUBSTANCES OR LIABILITY OR POTENTIAL LIABILITY ARISING UNDER ENVIRONMENTAL LAWS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS EXPRESSLY PROVIDED HEREIN, SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF ANY KIND REGARDING THE CONDITION OF THE ACQUIRED ASSETS OR THE SUITABILITY OF THE FACILITY FOR OPERATION AS A POWER PLANT OR AS A SITE FOR THE DEVELOPMENT OF ADDITIONAL OR REPLACEMENT GENERATION CAPACITY AND NO MATERIAL O R INFORMATION PROVIDED BY OR COMMUNICATIONS MADE BY SELLER, OR BY ANY BROKER OR INVESTMENT BANKER, INCLUDING WITHOUT LIMITATION ANY INFORMATION OR MATERIAL CONTAINED IN THE DESCRIPTIVE

MEMORANDUM DATED AS OF FEBRUARY, 2006, AS SUPPLEMENTED, INFORMATION PROVIDED DURING DUE DILIGENCE, INCLUDING BUT NOT LIMITED TO INFORMATION IN THE DATA ROOM, AND ANY ORAL, WRITTEN OR ELECTRONIC RESPONSE TO ANY INFORMATION REQUEST PROVIDED TO BUYER, WILL CAUSE OR CREATE ANY WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY OF THE ACQUIRED ASSETS THAT IS NOT SET FORTH HEREIN.  NOTHING IN THIS DISCLAIMER OR THIS AGREEMENT SHALL BE DEEMED TO AFFECT THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER ANY ANCILLARY AGREEMENT FOR A BREACH OF ANY REPRESENTATION, WARRANTY OR COVENANT CONTAINED IN SUCH ANCILLARY AGREEMENT.

4.

Representations and Warranties of Buyer.  Buyer represents and warrants to Seller that the statements contained in this Section 4 are true and correct as of the Effective Date and will be true and correct as of the Closing Date.

4.1.

Organization of Buyer.  Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware.  Copies of the organizational documents and bylaws of Buyer, each as amended to date, have been heretofore delivered to Seller and are accurate and complete.

4.2.

Authorization of Transaction.  Buyer has the power and authority (including full corporate power and authority) to execute and deliver this Agreement and the Ancillary Agreements and, subject to receipt of all Buyer’s Regulatory Approvals, to perform its obligations hereunder and thereunder.  All corporate actions or proceedings to be taken by or on the part of Buyer to authorize and permit the due execution and valid delivery by Buyer of this Agreement, the Ancillary Agreements and the instruments required to be duly executed and validly delivered by Buyer pursuant hereto and thereto, the performance by Buyer of its obligations hereunder and thereunder, and the consummation by Buyer of the transactions contemplated herein and therein, have been duly and properly taken.  This Agreement and the Ancillary Agreements have been duly executed and validly delivered by Buyer and consti tute the valid and legally binding obligations of Buyer, enforceable in accordance with their terms and conditions.

4.3.

Noncontravention.  Subject to Buyer obtaining the Buyer’s Regulatory Approvals, neither the execution and the delivery of this Agreement or any of the Ancillary Agreements, nor the consummation of the transactions contemplated hereby and thereby (including the assignments and assumptions referred to in Sections 2.10(p) and 2.11(l) above), will (a) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any Governmental Authority to which Buyer is subject or any provision of the organizational documents or bylaws of Buyer or (b) assuming receipt of all necessary filings, waivers, approvals, consents and authorizations, conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice (with o r without the giving of notice, the lapse of time, or both) under any agreement, contract, lease, license, instrument, or other arrangement to which Buyer is a party or by which it is bound or to which any of its assets is subject, except for matters that will not be material to Buyer.

4.4.

Brokers’ Fees.  Buyer has no Liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which Seller could become liable or obligated.

4.5.

Litigation.  No action, suit, claim, demand or other proceeding is pending or, to the Buyer’s Knowledge, threatened that would be reasonably likely to result in a Material Adverse Effect on Buyer or that questions the validity of this Agreement or the Ancillary Agreements or of any action taken or to be taken pursuant to or in connection with the provisions of this Agreement or the Ancillary Agreements.  There are no judgments, orders, decrees, citations, fines or penalties heretofore assessed against Buyer that have a Material Adverse Effect on Buyer or impair, estop, impede, restrain, ban or otherwise adversely affect Buyer’s ability to satisfy or perform any of the Assumed Liabilities under any federal, state or local Law.

4.6.

Availability of Funds.  At Closing, assuming that all conditions set forth in Section 6.1 have been satisfied or waived by Buyer in its sole discretion, Buyer will have sufficient funds available to it to pay the Closing Purchase Price on the Closing Date and to enable Buyer to perform all of its obligations under this Agreement.

4.7.

"As Is" Sale.  The representations and warranties set forth in Section 3 constitute the sole and exclusive representations and warranties of Seller in connection with the transactions contemplated hereby.  There are no representations, warranties, covenants, understandings or agreements among the Parties regarding the Acquired Assets or their transfer other than those incorporated in this Agreement and the Ancillary Agreements.  Except for the representations and warranties expressly set forth in Section 3, Buyer disclaims reliance on any representations, warranties or guarantees, either express or implied, by Seller including but not limited to any representation or warranty expressed or implied in any oral, written or electronic response to any information request provided to Buyer.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, BUYER ACKNOWLEDGES AND AGREES THAT THE ACQUIRED ASSETS ARE BEING ACQUIRED "AS IS, WHERE IS" ON THE CLOSING DATE, AND IN THEIR CONDITION ON THE CLOSING DATE.  BUYER FURTHER ACKNOWLEDGES AND AGREES THAT THE REPRESENTATIONS AND WARRANTIES OF SELLER SET FORTH IN THIS AGREEMENT TERMINATE AS SET FORTH IN SECTION 9.1 OR TERMINATION OF THIS AGREEMENT PURSUANT TO SECTION 10.1, AND THAT FOLLOWING SUCH TERMINATION OF THE REPRESENTATIONS AND WARRANTIES, BUYER SHALL HAVE NO RECOURSE AGAINST SELLER OR ITS AFFILIATES WITH RESPECT TO ANY BREACH OF SUCH REPRESENTATIONS AND WARRANTIES.

4.8.

Affiliate Guaranty.  If Buyer assigns its rights and interests to an Affiliate or Affiliates pursuant to Section 11.5 hereof, Buyer shall be deemed to have made the representations and warranties in this Section 4 on behalf of itself and any such Affiliate as if such Affiliate were a signatory to this Agreement.

4.9.

Qualified Buyer.  To Buyer’s Knowledge, Buyer is qualified to obtain any Permits and the Buyer Regulatory Approvals necessary for Buyer to own and operate the Facilities as of the Closing, to the extent such operation is either required by any Ancillary Agreement or this

Agreement, or is contemplated by Buyer and for Buyer to consummate the transactions contemplated pursuant to this Agreement.

5.

Covenants.  The Parties agree as follows:

5.1.

General.  Prior to the Closing, each of the Parties will use its Commercially Reasonable Efforts to take all actions and to do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements as soon as practicable after the Effective Date (including satisfaction, but not waiver, of the closing conditions set forth in Section 6).

5.2.

Notices, Consents and Approvals

(a)

Seller and Buyer shall each file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed under the Hart-Scott-Rodino Act and the rules and regulations promulgated thereunder with respect to the transactions contemplated hereby.  The Parties shall use Commercially Reasonable Efforts to make such filings, as promptly as possible after the Effective Date, to respond promptly to any requests for additional information made by either of such agencies, and to cause the waiting periods under the Hart-Scott-Rodino Act to terminate or expire at the earliest possible date after the date of filing.  Buyer will pay all filing fees under the Hart-Scott-Rodino Act, but each Party will bear its own costs for the preparation of any filing.  Both Parties shall use Commercially Reasonable Efforts to cause any waitin g period under the Hart-Scott-Rodino Act with respect to the transactions contemplated by this Agreement and the Ancillary Agreements to expire or terminate at the earliest possible time.

(b)

Prior to the Closing, Seller and Buyer shall cooperate with each other and use all Commercially Reasonable Efforts to (i) promptly prepare, support, assist in preparing, join in and file any filings, applications and all other necessary documentation, (ii) effect all necessary applications, notices, petitions and filings and execute all agreements and documents, (iii) obtain the transfer or reissuance to Buyer of all necessary Permits and (iv) obtain and not oppose, directly or indirectly, all necessary consents, approvals and authorizations of all other parties necessary or advisable to consummate the transactions contemplated by this Agreement or in any of the Ancillary Agreements (including, without limitation, Seller’s Regulatory Approvals, Buyer’s Regulatory Approvals and consents to assign the Power Contracts and the Glencore Contracts to Buyer) or required by the terms of any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument to which Seller or Buyer is a party or by which any of them is bound, provided that no Party shall amend any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument or agree on any restriction on the Business of the Company in obtaining such consents, approvals and authorizations. Seller and Buyer shall have the right to review in advance all characterizations of the information relating to the transactions contemplated by this Agreement or in any of the Ancillary Agreements that appear in any filing made in connection with the transactions contemplated hereby or thereby.  Notwithstanding the foregoing, Seller is not obligated to

assign or transfer any interest in any Transferable Permits, including, without limitation, those obtained pursuant to the applicable requirements of Environmental Laws, if the consent or approval of the third Person for such assignment or transfer cannot be obtained.

(c)

Buyer shall have primary responsibility for securing the transfer or reissuance of the Permits (including the Transferable Permits) effective as of the Closing Date.  Seller shall cooperate with Buyer’s efforts in this regard and Seller shall use Commercially Reasonable Efforts to assist in the transfer or reissuance.  If the Parties are unable to secure the transfer or reissuance of one or more Permits effective on the Closing Date, Seller shall continue to reasonably cooperate with Buyer’s efforts to secure such transfer or reissuance following the Closing Date.

5.3.

Operation of Business. During the Interim Period, Seller will operate and maintain the Acquired Assets in the ordinary course consistent with Good Industry Practices (including the continued scheduling and performance of regular and customary maintenance and maintenance overhauls), unless otherwise contemplated by this Agreement or with the prior written consent of Buyer.  Without limiting the generality of the foregoing, Seller shall not, without the prior written consent of Buyer (which consent shall not be unreasonably withheld, delayed or conditioned), during the Interim Period, with respect to the Acquired Assets and Assumed Liabilities:

(a)

except for Acquired Assets used, consumed or replaced in the ordinary course of business consistent with Good Industry Practices, sell, lease (as lessor), license (as licensor), transfer or otherwise dispose of any of the Acquired Assets, or sale of power as, or encumber, pledge, mortgage or suffer to be imposed on any of the Acquired Assets any Lien other than Permitted Encumbrances;

(b)

make any material change in the levels of Inventories (including spare parts) customarily maintained by Seller with respect to the Acquired Assets, except for in the ordinary course of business consistent with Good Industry Practices;

(c)

terminate, materially amend or otherwise materially modify any material Contract, Lease, Power Contract or Permit other than in the ordinary course of business; provided that nothing in this clause shall inhibit the ability of Seller to terminate, amend or modify contracts as required by a Governmental Authority, or as may be required by other applicable Law; provided that the Parties acknowledge that the Intercompany Agreements, may be modified or terminated on or before the Closing Date, at Seller’s sole discretion;

(d)

enter into or materially amend, or otherwise materially modify any real or personal property Tax agreement, treaty or settlement (except for entering into the payment in lieu of Taxes agreement between Seller and the City of Holyoke, provided that such agreement is not materially different than the form of agreement disclosed to Buyer, and any Tax agreement between Seller and any of its Affiliates);

(e)

enter into any new commitment for the purchase or sale of fuel or any

other new contract or lease that would be required to be listed on Schedule 2.1(c), 2.1(e) or 2.1(h) if such contract or Lease had been in effect on the Effective Date other than in the ordinary course of business except commitments, contracts or leases (A) the aggregate payments under all such new commitments of which would not be expected to exceed Five Million Dollars ($5,000,000) or (B) which are terminable either (x) automatically on the Closing Date; or (y) by option of Buyer at any time after the Closing Date without any payments in connection therewith;

(f)

make any capital expenditures that are not Pre-Approved Capital Expenditures or enter into a Capital Commitment with respect thereto, except (i) for those capital expenditures or Capital Commitments necessitated by Good Industry Practice that do not exceed $1,000,000 individually and $5,000,000 in the aggregate, with respect to which Seller shall notify Buyer of the proposed incurrence thereof not less than ten days prior to the time the capital expenditures are to be made or a Capital Commitment with respect thereto undertaken or (ii) as may be necessitated by an emergency situation;

(g)

increase the level of wages, overall compensation or other benefits of any NGS employees referenced in Section 5.7(a), (b) or (c) (except for increases in salary or hourly wage rates, in the ordinary course of business consistent with past practice or the payment of accrued or earned but unpaid bonuses);

(h)

compromise or settle any material litigation, dispute, claim or other material Liability;

(i)

sell or enter into any contract to sell any emission reduction credits or air emission allowances held by or for the account of the Facility; or

(j)

agree or commit to do any of the foregoing.

Notwithstanding anything in this Section 5.3 to the contrary, Seller may, in its sole discretion, make Pre-Approved Capital Expenditures or incur a Capital Commitment with respect thereto.  

5.4.

Full Access.

(a)

During the Interim Period, Seller will (i) permit Buyer and Representatives of Buyer during normal business hours to have access upon reasonable notice, in a manner so as not to interfere with the normal business operations of Seller, to all premises, properties, management, personnel, books, records (including Tax, records) and documents associated with the Acquired Assets and permit Buyer and such Representatives to make such reasonable inspections thereof as Buyer may reasonably request, including, without limitation, to obtain Phase 1 environmental reports (provided, however, that Buyer shall not be entitled to collect any air, soil, surface water or ground water samples nor to perform any invasive or destructive sampling on the Sites), surveys and title policy commitments for the Real Property, and otherwise as needed in connection with Buyer’s financing of the transact ions contemplated pursuant to this Agreement; (ii) subject to the receipt of any required consents and in accordance with applicable Laws, provide Buyer with such information and records regarding the

employees employed at or in support of the Facility as Buyer reasonably deems necessary to comply with the obligations of Section 5.7; (iii) furnish Buyer with a copy of each material report, schedule or other document filed or received by it with respect to the Acquired Assets with a Governmental Authority.  Notwithstanding the foregoing, and without limiting the generality of the confidentiality provisions set forth in Section 7, Seller shall not: (A) provide any information that Seller or Seller’s counsel believes constitutes or could be deemed to constitute a waiver of the attorney-client privilege, or (B) supply Buyer with any information or records that Seller is under a legal obligation not to supply.

(b)

During the Interim Period, at the sole cost and expense of Buyer, Seller will permit designated employees or Representatives of Buyer (the "Buyer’s Observers") to observe all operations of Seller related to the Acquired Assets and such observation shall be permitted on a cooperative basis in the presence of personnel of Seller during normal business hours of Seller; provided that Buyer’s Observers shall not interfere with the operation of the Acquired Assets by Seller.

5.5.

Interim Period Notice; Schedule Update

(a)

Each Party shall notify the other promptly if any information comes to its attention prior to the Closing that is likely to (i) excuse it from the performance of its obligations under this Agreement or any Ancillary Agreement or (ii) cause any condition to close set forth in Sections 6.1 or 6.2 not to be satisfied.

(b)

From time to time prior to the Closing Date, Seller may at its option supplement or amend and deliver updates to the Schedules (each a "Schedule Update") that are necessary to complete or correct any information in such Schedules or in any representation or warranty of Seller that has been rendered inaccurate since the Effective Date.  Without limiting Buyer’s rights under Section 10.1(b)(v), if (i) Buyer has the right to terminate the Agreement thereunder and does not exercise such right as a result of such Schedule Update (together with all other Schedule Updates delivered pursuant to this Section 5.5(b) and notices given pursuant to Section 5.5(a) and (ii) the Schedule Update pursuant to this Section 5.5(b) relates to events occurring or conditions arising after the Effective Date, then such Schedule Update shall be deemed to have amended the appropriate Schedule or Schedules as of the Effective Date, to have qualified the representations and warranties contained in Section 3 as of the Effective Date, and to have cured any misrepresentation or breach of warranty that otherwise might have existed hereunder by reason of the existence of such matter for purposes of the closing conditions set forth in Section 6.1 (but, for the avoidance of doubt, not for purposes of the indemnification obligations of Seller set forth in Article 9). Any Schedule Updates delivered pursuant to this Section 5.5(b) that relate to events occurring or conditions existing on or prior to the Effective Date shall not qualify the representations and warranties, or cure any misrepresentation or breach of warranty hereunder.

(c)

Buyer may elect at any time to notify Seller of the existence of any matter that if in existence on the Effective Date or the Closing Date would or might cause any of the representations or warranties in Section 4 to be untrue or incorrect.  Except as set

forth in the following sentence, unless (i) Seller has the right to terminate this Agreement pursuant to Section 10.1(c)(v) by reason of such notice (together with all other notices given pursuant to Section 5.5(a) and this Section 5.5(c)) and (ii) exercises that right within the period of fifteen (15) days referred to in Section 10.1(c)(v), if the written notice given by Buyer pursuant to this Section 5.5(c) relates to events occurring or conditions arising after the Effective Date, then such written notice shall be deemed to have amended the appropriate Schedule or Schedules as of the Effective Date, to have qualified the representations and warranties contained in Section 4 as of the Effective Date, and to have cured any misrepresentation or breach of warranty that otherwise might have existed hereunder by reason of the existence of such matter for purposes of the closing conditions set forth in Section 6.2 (but, for the avoidance of doubt, not for purposes of the indemnification obligations of Buyer set forth in Article 9).  Any notices delivered pursuant to this Section 5.5(c) that relate to events occurring or conditions existing on or prior to the Effective Date shall not qualify the representations and warranties, or cure any misrepresentation or breach of warranty hereunder.

5.6.

Further Assurances.

(a)

At any time and from time to time after the Closing, at the request of a Party, the other Party will execute and deliver such instruments of sale, transfer, conveyance, assignment and confirmation and take such action as Seller and Buyer may both reasonably agree is necessary to transfer, convey and assign to Buyer, and to confirm Buyer’s title to or interest in the Acquired Assets and Assumed Liabilities or to put Buyer in actual possession and operating control of the Acquired Assets, and otherwise to consummate and give effect to the transactions contemplated pursuant to this Agreement.

(b)

In the event that any asset that is an Acquired Asset shall not have been conveyed to Buyer at the Closing, Seller shall, subject to Sections 5.6(c), (d) and (e), use its Commercially Reasonable Efforts to convey such asset to Buyer as promptly as is practicable after the Closing.

(c)

To the extent that Seller’s rights under any Contract, Lease or Power Contract may not be assigned without the consent of another Person which consent has not been obtained by the Closing Date, this Agreement shall not constitute an agreement to assign the same if an attempted assignment would constitute a breach thereof or be unlawful, and Seller and Buyer shall cooperate and shall each use their Commercially Reasonable Efforts to obtain any such required consent(s) as promptly as possible.  Seller and Buyer agree that if any consent to an assignment shall not be obtained, or if any attempted assignment would be ineffective or would impair Buyer’s rights and obligations under the Contract, Lease or Power Contract in question, so that Buyer would not in effect acquire the benefit and burden of all such rights and obligations, Seller, to the maximum extent permitted by law and su ch Contract, Lease or Power Contract, shall, after the Closing, appoint Buyer to be Seller’s agent with respect to such Contract, Lease or Power Contract, and Seller shall, to the maximum extent permitted by law and such Contract, Lease or Power Contract, enter into such reasonable arrangements with Buyer as are necessary to provide Buyer with the benefits and obligations of such Contract,

Lease or Power Contract (which, in the case of the Power Contracts or the Glencore Contracts, includes but is not limited to any necessary back-to-back power purchase and/or sales arrangements).  Seller and Buyer shall cooperate and shall each use their Commercially Reasonable Efforts after the Closing to obtain an assignment of such Contract, Lease or Power Contract to Buyer.

(d)

To the extent that Seller’s rights under any warranty or guaranty described in Section 2.1(b) may not be assigned without the consent of another Person, which consent has not been obtained by the Closing Date, this Agreement shall not constitute an agreement to assign the same, if an attempted assignment would constitute a breach thereof, or be unlawful.  Seller and Buyer agree that if any consent to an assignment of any such warranty or guaranty would be ineffective or would impair Buyer’s rights and obligations under the warranty or guaranty in question, so that Buyer would not in effect acquire the benefit of all such rights and obligations, Seller shall use Commercially Reasonable Efforts, at Buyer’s sole cost and expense, to the extent permitted by law and such warranty or guaranty, to enforce such warranty or guaranty for the benefit of Buyer so as to the maximum exte nt possible to provide Buyer with the benefits and obligations of such warranty or guaranty.  Notwithstanding the foregoing, Seller shall not be obligated to bring or file suit against any Third Party, provided that if Seller shall determine not to bring or file suit after being requested by Buyer to do so, Seller shall assign, to the extent permitted by law or any applicable agreement or contract, its rights in respect of the claims so that Buyer may bring or file such suit.

(e)

To the extent that any personal property lease cannot be assigned to Buyer or is not subject to arrangements described in Section 5.6(c), upon Buyer’s reasonable request and at Buyer’s sole expense, Seller will use Commercially Reasonable Efforts to acquire the assets relating to such lease and to include them in the Acquired Assets before the Closing Date.

5.7.

Employee Matters.

(a)

Represented Employees.  Buyer shall offer employment, commencing as of midnight on the Closing Date, to all employees of NGS who are represented by the Local and who were employed in the operation of the Acquired Assets as of the Effective Date as set forth on Schedule 5.7(a), under terms and conditions in accordance with the Collective Bargaining Agreement.  For the avoidance of doubt, Buyer shall recognize all increases in wages made in the ordinary course of business and in accordance with the Collective Bargaining Agreement between the Effective Date and the Closing Date.  Those employees who accept such offer of employment are hereinafter referred to as the "Represented Employees."  All such offers of employment shall be made in accordance with all applicable laws and regulations and the Collective Bargaining Agreement.  Effec tive as of the Closing Date, Buyer shall agree to be bound by the Collective Bargaining Agreement, and to thereafter comply with all applicable obligations thereunder, subject to changes negotiated with the Local in accordance with the terms of the Collective Bargaining Agreement.

(b)

Non-Represented Plant Employees.  Schedule 5.7(b) lists the NGS employees employed in the operation of the Acquired Assets and located at the Facility as of the Effective Date who are not represented by the Local.  No later than 10 Business Days prior to the Closing, Buyer shall provide Seller a written list of such employees to whom Buyer wishes to offer employment.  Within 7 days following Buyer’s delivery of such list to Seller, Buyer shall offer employment to such employees commencing as of midnight on the Closing Date for a period of at least twelve months (the "Minimum Employment Period"), at aggregate levels of wages and overall compensation substantially comparable, in the aggregate (excluding equity-based compensation and benefits under any defined benefit pension plan or post-retirement health or welfare plan), to the level of wages and overall compensation in effect for such employees as of the Effective Date; provided that Buyer shall recognize all increases in wages made in the ordinary course of business between the Effective Date and the Closing Date and provided further that during the Minimum Employment Period, Buyer shall provide to each Non-Represented Plant Employee (as defined below) a pension benefit substantially comparable to the pension benefit applicable to each such Non-Represented Plant Employee under the retirement plan of Seller or its Affiliates as of the Closing Date (and, for the avoidance of doubt, the parties acknowledge and agree that Buyer may provide such substantially comparable pension benefits pursuant to a defined contribution, rather than a defined benefit pension plan).  Those employees who accept such offer of employment are hereinafter referred to as the "Non-Represented Plant Employees."  All such offers of employment shall be made in accordance with al l applicable laws.  Notwithstanding anything herein to the contrary, all Non-Represented Plant Employees will be employed as at-will employees whose employment may be terminated at any time with or without cause or reason by either the employee or Buyer; provided that if Buyer terminates any Non-Represented Plant Employee during the Minimum Employment Period for any reason other than for cause, Buyer shall pay any such terminated Non-Represented Plant Employee (i) an amount equal to such terminated Non-Represented Plant Employee’s salary for the remainder of the Minimum Employment Period, plus (ii) Enhanced Severance; provided that such terminated Non-Represented Plant Employee executes and delivers to Buyer a general release and covenant not to sue in favor of Buyer, Seller and their respective Affiliates in a form reasonably acceptable to Buyer and Seller.

(c)

Non-Represented Support Employees.  Schedule 5.7(c) lists the NGS employees employed in support positions with respect to the Acquired Assets as of the Effective Date and who are not represented by the Local.  No later than 10 Business Days prior to the Closing, Buyer shall provide Seller a written list of such employees to whom Buyer wishes to offer employment.  Within 7 days following Buyer’s delivery of such list to Seller, Buyer shall offer employment to such employees commencing as of midnight on the Closing Date for the Minimum Employment Period, at aggregate levels of wages and overall compensation substantially comparable, in the aggregate (excluding equity-based compensation and benefits under any defined benefit pension plan or post-retirement health or welfare plan), to the level of wages and overall compensation in effect for such employees as of the Effective Date; provided that Buyer shall recognize all increases in wages made in the ordinary course of business between the Effective Date and the Closing Date, and provided further that during the Minimum Employment

Period, Buyer shall provide to each Non-Represented Support Employee (as defined below) a pension benefit substantially comparable to the pension benefit applicable to each such Non-Represented Support Employee under the retirement plan of Seller or its Affiliates as of the Closing Date (and, for the avoidance of doubt, the parties acknowledge and agree that Buyer may provide such substantially comparable pension benefits pursuant to a defined contribution, rather than a defined benefit pension plan).  Those employees who accept such offer of employment are hereinafter referred to as the "Non-Represented Support Employees", and together with the Non-Represented Plant Employees and the Represented Employees are hereafter referred to as the "Acquired Assets Employees".  All such offers of employment shall be made in accordance with all applicab le laws.  Notwithstanding anything herein to the contrary, all Non-Represented Support Employees will be employed as at-will employees whose employment may be terminated at any time with or without cause or reason by either the employee or Buyer; provided that if Buyer terminates any Non-Represented Support Employee during the Minimum Employment Period for any reason other than for cause, Buyer shall pay any such terminated Non-Represented Support Employee (i) an amount equal to such terminated Non-Represented Support Employee’s salary for the remainder of the Minimum Employment Period, plus (ii) Enhanced Severance; provided that such terminated Non-Represented Support Employee executes and delivers to Buyer a general release and covenant not to sue in favor of Buyer, Seller and their respective Affiliates in a form reasonably acceptable to Buyer and Seller.

(d)

Buyer shall apply each Acquired Assets Employee’s prior service with Seller or its Affiliates toward any eligibility, vesting or other waiting period requirements under Buyer’s Employee Benefit Plans to the extent such conditions were satisfied under the corresponding Seller Employee Benefit Plans prior to the Closing Date.  In addition, Buyer shall waive all limitations with respect to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements under Buyer’s Employee Benefit Plans and credit each Acquired Assets Employee for any co-payments and deductibles paid prior to the Closing Date under any such plans in which each Acquired Assets Employee participates to the extent such limitations and such amounts are credited under the corresponding Seller Employee Benefit Plan prior to the Closing Date.  

(e)

Seller shall provide and remain liable for any and all continuation of coverage under the Seller Employee Benefit Plans as required under §§601 through 608 of ERISA and §4980B of the Code with respect to any person as to whom a "qualifying event" as defined in §4980 of the Code occurred on or prior to the Closing Date.

(f)

Effective as of 12:01 a.m. on the Closing Date, the Acquired Assets Employees shall cease to be employees of Seller or its Affiliates and Seller or its Affiliates shall be solely responsible for the payment of (i) all wages and compensation, (ii) except with respect to Represented Employees, severance payments and vacation pay, and (iii) other amounts thereupon legally owing to or with respect to the Acquired Assets Employees prior to 12:01 a.m. on the Closing Date, or as a result of such separation.  Such amounts shall be paid in accordance with Seller’s policies and practices and applicable Law.   Seller and/or the applicable Seller Employee Benefit Plan shall retain

sole responsibility for any Liabilities with respect to welfare plans and workers compensation claims incurred on or prior to the Closing Date.

(g)

Seller agrees to timely perform and discharge all requirements under the WARN Act and under applicable state and local Laws for the notification of its employees arising from the sale of the Acquired Assets to Buyer up to and including the Closing Date, including those employees who will become Acquired Assets Employees effective as of the Closing Date.  After the Closing Date, Buyer shall be responsible for performing and discharging all requirements under the WARN Act and under applicable state and local laws and regulations for the notification of its employees, whether Acquired Assets Employees or otherwise.  All severance and other costs associated with workforce restructuring activities associated with (i) the Acquired Assets and/or the Acquired Assets Employees subsequent to the Closing Date shall be borne solely by Buyer and (ii) any NGS employees not hired by Buyer pursuant to (a), (b) or (c) above shall be borne solely by Seller.

(h)

This Section 5.7 shall survive the Closing for the period necessary to give full effect to its terms. The parties specifically acknowledge and agree that Section 11.2 hereof shall apply to this Section 5.7.

(i)

Notwithstanding anything to the contrary in this Section 5.7, Buyer shall have the right to use a third party operator or an Affiliate to hire Acquired Assets Employees and to perform certain actions on behalf of Buyer under this Section 5.7; provided that in no event will such use of or performance by a third party operator release Buyer from any of its obligations under this Section 5.7.

5.8.

Access after Closing.

(a)

Records.  For a period of three (3) years after the Closing Date, each Party shall have reasonable access to all of the records, books and documents related to the Acquired Assets of the other Party to the extent that such access may reasonably be required in connection with matters relating to or affected by the operations of Seller prior to the Closing Date or the operations of Buyer after the Closing Date (including without limitation liabilities with respect to Taxes); provided that Seller shall have the right, at its sole cost and expense to retain copies of such records, books and documents, subject to its obligation to keep such information confidential in accordance with Section 7.  Such access shall be afforded upon receipt of reasonable advance notice and during normal business hours.  The Party seeking such access shall be solely responsible for a ny costs or expenses incurred by it pursuant to this Section 5.8(a).  If a Party shall desire to dispose of any records, books or documents that may relate to operation of the Acquired Assets before the Closing prior to the expiration of such three-year period, such Party shall, prior to such disposition, give to the other Party a reasonable opportunity, at the other Party’s expense, to segregate and remove such records, books or documents as the requesting Party may select.

(b)

Employees.  For a period of three (3) years after the Closing Date, Seller shall have reasonable access to the Acquired Assets Employees (to the extent employed

by Buyer) and Buyer shall have reasonable access to Seller’s employees, for purposes of consultation or otherwise, to the extent that such access may reasonably be required by Seller or Buyer in connection with matters relating to or affected by the operations of Seller prior to the Closing or the operations of Buyer following the Closing, so long as the duration of any employee’s time commitment with respect thereto is not extensive and does not materially impair said employee’s performance of his or her duties.

5.9.

Market Participant.  At the Closing, Buyer or its agent shall be a Market Participant in good standing with ISO New England.  

5.10.

Risk of Loss.  Except as otherwise provided in this Section 5.10, during the Interim Period all risk of loss or damage to the property included in the Acquired Assets shall, as between Buyer and Seller, be borne by Seller.  If during the Interim Period the Acquired Assets are damaged by fire or other casualty (each such event, an "Event of Loss"), or are taken by a Governmental Authority by exercise of the power of eminent domain (each, a "Taking"), then the following provisions of this Section 5.10 shall apply:

(a)

The occurrence of (i) any one or more Events of Loss, as a result of which the aggregate costs to restore, repair or replace the Facility or the Acquired Assets subject to such Event of Loss to a condition reasonably comparable to their prior condition, and the amount of any lost profits reasonably expected to accrue after Closing as a result of such Event of Loss, less any insurance proceeds received by the Seller in connection with such Event or Events of Loss (provided that any insurance proceeds received in connection with an Event or Events of Loss are either used to restore, repair or replace such Event or Events of Loss or made available to Buyer) (collectively, "Restoration Costs") and/or (ii) any one or more Takings, as a result of which the value of the property subject to such Taking and the amount of any lost profits reasonably expected to accrue after Closi ng as a result of such Taking, less any condemnation award received by the Buyer (provided that any such condemnation award is made available to Buyer) (collectively, the "Condemnation Value"), if the sum of all Restoration Costs and Condemnation Value (together with any Restoration Costs and Condemnation Values under and as defined in the NGC SPA), in the aggregate, is less than or equal to $20,000,000, shall have no effect on the transactions contemplated hereby.

(b)

Subject to the termination right of Buyer set forth in clause (d) below, upon the occurrence of any one or more Events of Loss and/or Takings involving aggregate Restoration Costs and Condemnation Value (together with any Restoration Costs and Condemnation Values under and as defined in the NGC SPA), in excess of $20,000,000 (a "Major Loss"), Seller shall have, in the case of a Major Loss relating solely to one or more Events of Loss, the option, exercised by notice to Buyer, to restore, repair or replace the damaged Acquired Assets prior to Closing to a condition reasonably comparable to their prior condition.  If Seller elects to so restore, repair or replace the Acquired Assets relating to a Major Loss, which election shall be made by notice to Buyer prior to the Closing Date and as soon as practicable following the occurrence of the Major Loss, Seller will complete or cause to be completed the repair, replacement or restoration of the damaged Acquired Assets prior to the Closing and the Closing Date shall be postponed for the amount of time reasonably necessary to complete the

restoration, repair or replacement of such damages Acquired Assets such time period to be agreed upon by Buyer and Seller.  If Seller elects not to cause the restoration, repair or replacement of the Acquired Assets affected by a Major Loss, or such Major Loss is the result in whole or in part of one or more Takings or is otherwise not capable of being restored, repaired or replaced, the provisions of Section 5.10(c) will apply.

(c)

Subject to the termination right of Buyer set forth in clause (d) below, in the event that Seller elects not to cause the restoration, repair or replacement of a Major Loss, or in the event that Seller, having elected to cause repair, replacement or restoration of the Major Loss, fails to cause its completion within the period of time agreed upon by the Parties pursuant to the penultimate sentence of Section 5.10(b), or in the event that a Major Loss is the result in whole or in part of one or more Takings or is otherwise not capable of being restored, repaired or replaced, then the Parties shall, within thirty (30) days following Seller’s election not to cause the restoration, repair or replacement, failure to complete, or the occurrence of such Major Loss, as the case may be, adjust the Purchase Price by the aggregate Restoration Cost and Condemnation Value related thereto, as mitigated by any repair, replacement or restoration work actually completed by Seller, on the Acquired Assets being sold to Buyer, and proceed to Closing (in which case all insurance proceeds and/or condemnation awards related to such Major Loss shall be assigned to Buyer).  To assist Buyer in its evaluation of any and all Events of Loss, Seller shall provide Buyer such access to the Acquired Assets and such information as Buyer may reasonably request in connection therewith.

(d)

In the event that the aggregate Restoration Costs and Condemnation Value with respect to one or more Events of Loss and/or Takings with respect to the Northfield Mountain Station and/or the Cabot Station (together with Restoration Costs and Condemnation Value with respect to one or more Events of Loss and/or Takings with respect to the Mt. Tom Station, with the foregoing capitalized terms used in this parenthetical clause having the meanings ascribed to them in this Agreement), equals an amount in excess of fifteen percent (15%) of the sum of the Combined Purchase Price (as defined in and pursuant to the NGC SPA) and the Initial Purchase Price pursuant to this Agreement, then, in addition to Buyer’s rights pursuant to Section 5.10(b) and (c) above, Buyer shall have the right to terminate this Agreement pursuant to Section 10.1(b)(vi).

5.11.

Discharge of Environmental Liabilities.  Buyer agrees to provide to Seller draft copies of all material plans and studies prepared in connection with any Site investigation or Remediation associated with pre-Closing occurrences prior to their submission to the Governmental Authority with jurisdiction under Environmental Laws.  Seller shall have the right, without the obligation, to observe all meetings between Buyer, its agents or representatives, and such Governmental Authorities.  Buyer shall promptly provide to Seller copies of all material written information, plans, documents and correspondence submitted to or received from such Governmental Authorities relating to Buyer’s discharge of any Environmental Liabilities assumed pursuant to this Agreement associated with pre-Closing occurrences.  

5.12.

Acceptable Guaranty; Acceptable Letter of Credit.  On the Effective Date Buyer shall deliver to Seller an Acceptable Guaranty and at all times thereafter until payment in full of

the Purchase Price Buyer shall maintain such Acceptable Guaranty in full force and effect.  On the Effective Date Buyer shall deliver to Seller an Acceptable Letter of Credit and at all times thereafter until the Closing date Buyer shall maintain such Acceptable Letter of Credit in full force and effect.  Seller shall draw upon the Acceptable Letter of Credit only in accordance with the terms and conditions thereof.  Seller shall return the Acceptable Letter of Credit (including any amendments thereto) to the issuer thereof or to Buyer (i) on the Closing Date, (ii) within five Business Days after the earliest date on which all three of the Agreements shall have been terminated in accordance with their respective terms (unless one or more of the Beneficiaries in good faith believes that a Buyer still has unsatisfied monetary obligations to one or more of the Beneficiaries under one or more of the Agreements, in which case Seller shall so return the Acceptable Letter of Credit not later than the date that is five Business Days after the date all such unsatisfied monetary obligations have been satisfied) or (iii) otherwise within five Business Days after the Expiry Date.  As used in the immediately preceding sentence, the terms "Closing Date," "Business Days," "Agreements," Beneficiaries," "Buyer" and "Expiry Date" have the meanings ascribed to such terms in the Acceptable Letter of Credit.

5.13.

CONVEX and ISO New England Transition  

(a)

Prior to the Closing and to the extent reasonably necessary after the Closing, Buyer and Seller shall cooperate in good faith, use Commercially Reasonable Efforts and take all steps reasonably necessary to facilitate the transition of the Facility’s CONVEX and ISO New England responsibilities to Buyer effective as of the Closing Date or as soon as practicable thereafter.  

(b)

Without limiting the generality of the foregoing, to the extent that Seller or one of its Affiliates is the holder of the "Load Asset" or "Generation Asset" (as such term is defined in the Market Rules and Procedures) in connection with the Assets, the Parties shall cooperate in good faith and take all steps reasonably necessary to transfer such Load Assets and Generation Assets to Buyer in accordance with the Market Rules and Procedures as of the Closing Date and, to the extent reasonably necessary, as expeditiously as possible after the Closing Date and, to the extent reasonably necessary, as expeditiously as possible after the Closing Date.  

5.14.

Buyer Master Agreements.  As soon as practicable following the Effective Date, Buyer shall use its Commercially Reasonable Efforts to (i) negotiate in good faith and enter into Buyer Master Agreements with each of the counterparties to the Power Contracts that will govern the Power Contracts as of the Closing Date, and (ii) in cooperation with Seller, obtain from such counterparties to the Power Contracts any required consents to assign the Power Contracts to Buyer and a release of Seller and it Affiliates in a form acceptable to Seller.

5.15.

Air Emissions Reporting Obligations  Following the Closing Date, Buyer shall, at its own expense, take all action and provide all information necessary for Seller to comply with all applicable Environmental Laws regarding filings and reporting requirements for air emissions from the Facility during the calendar year in which the Closing occurs, including compliance for the portion of such year that is on or prior to the Closing Date.  Without limiting the generality of the foregoing, Buyer shall at its own expense (a) prepare for execution by Seller the filings and

reports with Governmental Entities necessary for Seller to demonstrate compliance with the applicable Environmental Laws regarding filings and reporting requirements for air emissions from the Facility for the year in which the Closing occurs and (b) file such filings and reports with the appropriate Governmental Entities prior to the deadline therefor.  All filings and reports prepared by Buyer pursuant to this Section 5.15 shall be provided to Seller at least ten (10) days prior to the deadline date when such filing or registration must be filed with a Governmental Entity.  The Parties will use Commercially Reasonable Efforts to cooperate to effect the purposes of this Section 5.15. This Section 5.15 shall survive the Closing for the period necessary to give full effect to its terms.

5.16.

No Negotiations.  During the Interim Period, Seller shall not, and shall cause its Affiliates and its and their respective directors, officers, employees, and Representatives, not to, initiate or solicit, directly or indirectly, any inquiries or the making of any proposal with respect to, engage in negotiations concerning, provide any confidential information or data to any Person with respect to, or have any discussions with any Person (excepting out the transactions contemplated by this Agreement and the Related Transactions) relating to, a proposal to directly or indirectly acquire all or a portion of the Acquired Assets or to engage in any similar transaction with Seller or any of its Affiliates (each such transaction being referred to herein as a "Proposed Acquisition Transaction"), and shall immediately cease and cause to be terminated any existing activities, discussion s or negotiations with any Persons conducted prior to the date hereof with respect to any of the foregoing.  Seller shall not, and shall cause its Affiliates not to, release any third party from, or waive any provision of, any confidentiality or standstill agreement with respect to the foregoing to which Seller or any of its Affiliates is a party.

5.17.

Insurance.  Seller shall maintain or cause to be maintained in full force and effect the insurance policies material to the operation of the Facility until the Closing.

5.18.

Cooperation Regarding Financial Information

(a)

Seller hereby agrees that Seller may use, and hereby waives any confidentiality provisions with respect to, the financial information regarding the Facility contained in the Descriptive Memorandum dated February 2006, as supplemented, to permit Buyer and its Affiliates to provide such information to their potential financing sources; provided, however, that Buyer acknowledges and agrees that Seller shall not be required to make any representations or warranties to such potential financing sources with respect to such financial information. 

(b)

Subject to and in accordance with Section 5.4 hereof, from and after the date hereof, Seller shall, and shall cause its Affiliates to, grant reasonable access to Buyer and its Affiliates to conduct an accounting audit of the Facility, the Acquired Assets and their Assumed Liabilities at Buyer's expense, and Seller shall (whether before or after the Closing) reasonably cooperate with Buyer and its Affiliates in connection therewith.

6.

Conditions to Obligation to Close.

6.1.

Conditions to Obligation of Buyer to Close.  The obligation of Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:

(a)

Representations and Warranties.  The representations and warranties set forth in Section 3 that are not qualified by materiality or Material Adverse Effect shall be true and correct in all material respects, and all other representations and warranties that are so qualified shall be true and correct in all respects, in each case at and as of the Closing Date;

(b)

Performance by Seller.  Seller shall have performed and complied in all material respects with all of its covenants, agreements and obligations hereunder through the Closing;

(c)

Buyer’s Regulatory Approvals; Consents; Permits.  Buyer shall have received (i) the Buyer’s Regulatory Approvals, with such terms and conditions as may be included therein except for such terms and conditions that, either singly or in the aggregate are reasonably likely to be materially adverse to Buyer or the Acquired Assets or Assumed Liabilities, (ii) those Permits that are material to the operation of the Facility consistent with current practices, and (iii) those Third Party consents without the receipt of which would be reasonably likely to have a Material Adverse Effect on the Facility.

(d)

Seller’s Regulatory Approvals.  Seller shall have received Seller’s Regulatory Approvals, with such terms and conditions as may be included therein except for such terms and conditions that, either singly or in the aggregate are reasonably likely to be materially adverse to Buyer or the Acquired Assets or Assumed Liabilities;

(e)

Absence of Litigation.  There shall not be any litigation, proceeding, injunction, judgment, order, decree or ruling in effect or pending that would prevent or inhibit consummation of the transactions contemplated by this Agreement or the Ancillary Agreements;

(f)

Antitrust Matters.  All applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated;

(g)

No Material Adverse Effect.  Since the Effective Date, there shall not be any Material Adverse Effect with respect to the Acquired Assets and Assumed Liabilities taken as a whole, the Facility or Buyer;

(h)

Related Transaction.  The conditions to the obligations of Buyer, Seller and Seller’s Affiliates to close the Related Transaction (as further specified in the NGC SPA and the Related Purchase Agreement) shall have been, or contemporaneously with the occurrence of the Closing shall be, satisfied;

(i)

Deliveries.  Seller shall have complied in all material respects with the delivery requirements of Section 2.10.

Buyer may waive any condition specified in this Section 6.1 in its sole discretion if it executes a writing so stating at or prior to the Closing and such waiver shall not be considered a waiver of any other provision in this Agreement unless the writing specifically so states.

6.2.

Conditions to Obligation of Seller to Close.  The obligation of Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:

(a)

Representations and Warranties.  The representations and warranties set forth in Section 4 that are not qualified by materiality or Material Adverse Effect shall be true and correct in all material respects, and all other representations and warranties that are so qualified shall be true and correct in all respects, in each case at and as of the date hereof and the Closing Date;

(b)

Performance by Buyer.  Buyer shall have performed and complied in all material respects with all of its covenants, agreements and obligations hereunder through the Closing;

(c)

Seller’s Regulatory Approvals.  Seller shall have received the Seller’s Regulatory Approvals, with such terms and conditions as may be included therein except for such terms and conditions that, either singly or in the aggregate are reasonably likely to be materially adverse to Seller or any of its Affiliates;

(d)

Buyer’s Regulatory Approvals.  Buyer shall have received (i) the Buyer’s Regulatory Approvals, with such terms and conditions as may be included therein except for such terms and conditions that, either singly or in the aggregate are reasonably likely to be materially adverse to Seller or any of its Affiliates;

(e)

Absence of Litigation.  There shall not be any injunction, judgment, order, decree or ruling in effect or pending that would prevent or inhibit consummation of the transactions contemplated by this Agreement or the Ancillary Agreements;

(f)

Antitrust Matters.  All applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated;

(g)

Deliveries.  Buyer shall have complied in all material respects with the delivery requirements of Section 2.11; and

(h)

Market Participant.  Buyer or its agent shall be a Market Participant in good standing with ISO New England.

Seller may waive any condition specified in this Section 6.2 in its sole discretion if it executes a writing so stating at or prior to the Closing and such waiver shall not be considered a waiver of any other provision in this Agreement unless the writing specifically so states.

7.

Confidentiality.

7.1.

Confidentiality

(a)

Each Receiving Party and each Representative thereof will treat and hold as confidential all of the Proprietary Information, and refrain from using any of the Proprietary Information except in connection with this Agreement and the Ancillary Agreements and transactions contemplated hereby and thereby.  In the event that the Receiving Party or any Representative thereof is requested or required (including, without limitation, (i) pursuant to any rule or regulation of any stock exchange or other self-regulatory organization upon which any of the Receiving Party’s securities are listed or (ii) by oral question or request for information or documents in any legal proceeding, including without limitation the Buyer’s Regulatory Approval and the Seller’s Regulatory Approval processes, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Propriet ary Information, the Receiving Party will notify the Disclosing Party promptly of the request or requirement so that the Disclosing Party may seek an appropriate protective order or waive compliance with the provisions of this Section 7.  If, in the absence of a protective order or the receipt of a waiver hereunder, the Receiving Party or any Representative thereof is, on the advice of counsel, compelled to disclose any Proprietary Information pursuant to any such request or requirement, then the Receiving Party or such Representative may disclose the Proprietary Information so requested or required to be disclosed; provided that the Receiving Party shall use its reasonable best efforts to obtain, at the request of the Disclosing Party, an order or other assurance that confidential treatment will be accorded to such portion of the Proprietary Information required to be disclosed as the Disclosing Party shall designate.  If this Agreement is terminated pursuant to Section 10.1, then each Rece iving Party shall deliver promptly to the Disclosing Party or destroy, at the request and option of the Disclosing Party, all tangible embodiments (and all copies) of the Proprietary Information that are in its possession.

(b)

The obligations of the Parties contained in this Section 7 shall be in full force and effect for three years from the date hereof and will survive the termination of this Agreement, the discharge of all other obligations owed by the Parties to each other and any transfer of title to the Acquired Assets.  Nothing in this Section 7 shall in any way alter Buyer’s obligations under the Confidentiality Agreement dated February 25, 2006 by and between Energy Capital Partners and NUSCO as agent for HWP and NUEI, which Confidentiality Agreement shall terminate automatically upon the Closing Date and shall be of no further force and effect.  

(c)

Upon the Disclosing Party’s prior written approval (which will not be unreasonably withheld), the Receiving Party may provide Proprietary Information to the FERC, the SEC, the United States Department of Justice, the United States Federal Trade Commission or any other Governmental Authority with jurisdiction, as necessary, to obtain any consents, waivers or approvals as may be required for the Receiving Party to undertake the transactions contemplated herein.  The Receiving Party will seek confidential treatment for such Proprietary Information provided to any such Governmental Authority (if such confidential treatment is available from the appropriate

Governmental Authority) and the Receiving Party will notify the Disclosing Party as far in advance as is practicable of its intention to release to any such Governmental Authority any such Proprietary Information.

8.

Taxes.

(a)

All transfer Taxes incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by Buyer, including, without limitation, Massachusetts state sales tax, and Buyer, at its own expense, will file, to the extent required by applicable Laws, all necessary Tax Returns and other documentation with respect to all such transfer or sales Taxes, and, if required by applicable Laws, Seller will join in the execution of any such Tax Returns or other documentation.  

(b)

With respect to Taxes to be prorated in accordance with Section 2.8 of this Agreement only, Buyer shall prepare and timely file all Tax Returns required to be filed after the Closing with respect to the Acquired Assets, if any, and, subject to Seller’s compliance with this Section 8(b), shall duly and timely pay all such Taxes shown to be due on such Tax Returns.  Buyer’s preparation of any such Tax Returns shall be subject to Seller’s approval, which approval shall not be unreasonably withheld.  No later than ten (10) Business Days prior to the due date of any such Tax Return, Buyer shall make such Tax Return available for Seller’s review and approval.  Seller shall respond no later than five (5) Business Days prior to the due date for filing such Tax Return.  With respect to such Tax Return, no later than the due date for filing such Tax Return, Seller shall pay to Buyer its appropriate share of the amount shown as due on the Tax Return determined in accordance with Section 2.8 of this Agreement.

(c)

Each of Buyer and Seller shall provide the other with such assistance as may reasonably be requested by the other Party in connection with the preparation of any Tax Return, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liability for Taxes, and each will retain and provide the requesting Party with any records or information for a period of three (3) years which may be relevant to such Tax Return, audit or examination, proceedings or determination.  Any information obtained pursuant to this Section 8 or pursuant to any other Section hereof providing for the sharing of information or review of any Tax Return or other schedule relating to Taxes shall be deemed to be and shall be Proprietary Information.

9.

Survival of Representations and Warranties: Effect of Closing and Indemnification.

9.1.

Survival of Representations and Warranties; Survival of Covenants and Agreements.  The representations and warranties of Seller set forth in Section 3 (other than (i) the representations and warranties set forth in Sections 3.1, 3.2 and 3.4 (collectively, the "Title and Authority Representations"), which shall survive the Closing indefinitely, (ii) the representations and warranties set forth in Section 3.12 (environmental matters), which shall survive the Closing for a period of two (2) years, and (iii) the representations and warranties set forth in Section 3.7 (taxes), which shall survive the Closing for 60 days following the expiration of the applicable statute of limitations) and the representations and warranties of Buyer set forth in Sections 4, shall survive the Closing for a period of twelve (12) months, provided that all such

representations and warranties of the Parties shall terminate upon a termination of this Agreement pursuant to Section 10.1.  The covenants of the Parties contained in this Agreement, other than those that by their terms survive the Closing and/or termination of this Agreement, (and other than (i) the covenants set forth in Section 5.3 (operation of business), which shall survive the Closing for a period of twelve (12) months and (ii) the covenants set forth in Section 8, which shall survive the Closing for 60 days following the expiration of the applicable statute of limitations), shall terminate 30 days after the Closing or at the termination of this Agreement pursuant to Section 10.1, except as set forth in such Section.

9.2.

Effect of Closing.  Upon the Closing, any condition to the obligations of either Party hereunder that has not been satisfied, or, except (i) to the extent such breaches or failures to satisfy are indemnified hereunder, (ii) with respect to claims for fraud or deceit and (iii) as provided in Section 11.17, any representation, warranty or covenant that has been breached or left unsatisfied by either Party will be deemed waived by the Parties, and each Party will be deemed to fully release and forever discharge the other Party on account of any and all claims, demands or charges, known or unknown, with respect to the same.  Nothing in this Section 9.2 shall be deemed to affect any provision herein that expressly survives the Closing (including pursuant to Section 9.1) or pertains to matters that will occur after the Closing.

9.3.

Indemnity by Seller.  Seller shall indemnify, defend and hold harmless Buyer, its Affiliates, its and their successors and permitted assignees, and all of its and their respective stockholders, trustees, partners, members, directors, officers, employees, agents and representatives (collectively, "Buyer Indemnified Parties") against and in respect of all Liabilities, obligations, judgments, Liens (except for Permitted Encumbrances), injunctions, charges, orders, decrees, rulings, damages, assessments, Taxes, losses, fines, penalties, damages, expenses, fees, costs, and amounts paid in settlement (including reasonable consultants’, attorneys’ and expert witness fees and disbursements in connection with investigating, defending or settling any action or threatened action) (collectively, the "Losses"), that result from, arise out of, or relate to:

(a)

any Excluded Liability;

(b)

any breach by Seller of any representation or warranty set forth in this Agreement; or

(c)

any breach by Seller of any of its covenants contained in this Agreement.

9.4.

Indemnity by Buyer.  Buyer hereby agrees to indemnify, defend and hold harmless Seller, its Affiliates, its and their successors and permitted assigns, and all of their respective stockholders, trustees, partners, members, directors, officers, employees, agents and representatives (collectively, "Seller Indemnified Parties") against and in respect of all Losses that result from, arise out of, or relate to:

(a)

any Third Party Claim against Seller based on or relating to Buyer’s ownership or operation of the Facility or the Acquired Assets after the Closing Date;

(b)

any breach by Buyer of any representation or warranty set forth in this Agreement;

(c)

the Assumed Liabilities; or

(d)

any breach by Buyer of any of its covenants contained in this Agreement.

9.5.

Limitations on Liability.

(a)

The aggregate liability of Seller to Buyer Indemnified Parties under this Section 9 (other than pursuant to Section 9.3(a) and 9.3(c), and other than any such liability with respect to the Title and Authority Representations) shall be limited to ten percent (10%) of the Initial Purchase Price, and the aggregate liability of Buyer to Seller Indemnified Parties under this Section 9 (other than pursuant to Section 9.4(a), 9.4(c) or 9.4(d)) shall be limited to ten percent (10%) of the Initial Purchase Price.  In addition, none of Seller Indemnified Parties or Buyer Indemnified Parties shall make any claim against an indemnifying party under this Section 9 (other than pursuant to Section 9.3(a), 9.3(c), 9.4(a), 9.4(c) or 9.4(d) (except in the case of Sections 9.4(a) and 9.4(c), to the extent related solely to a breach by Seller of its representations and warranties in this Agreement and in the case of Sections 9.3(a) to the extent related solely to a breach by Buyer of its representations and warranties in this Agreement) and other than with respect to Title and Authority Representations) (i) with respect to any individual claim or series of related claims for less than two hundred thousand dollars ($200,000) and (ii) unless and until the aggregate amount of all such claims (excluding all individual claims or series of related claims for less than two hundred thousand dollars ($200,000) each) against the indemnifying party exceeds one percent (1%) of the Initial Purchase Price (the "Threshold"), whereupon a Seller Indemnified Party or Buyer Indemnified Party, as the case may be, may make claims under this Section 9 for any and all such amounts (including the amount of the Threshold); provided that each Party shall notify the other Party of all claims covered by this Section 9 whether or not the Threshold has been exceeded.

(b)

None of Buyer Indemnified Parties nor Seller Indemnified Parties shall be entitled to recover from Seller or Buyer, respectively, for any Losses arising under this Agreement or in connection with or with respect to the transactions contemplated in this Agreement, any amount in excess of the actual compensatory damages, court costs and reasonable attorneys fees, suffered by such Party.  Buyer on behalf of each of Buyer Indemnified Parties and Seller on behalf of each of Seller Indemnified Parties waives any right to recover incidental, indirect, special, exemplary, punitive or consequential damages, including lost revenues or profits, even if such damages are foreseeable or the damaged Party has advised the other Party of the possibility of such damages and regardless of whether any such damages are deemed to result from the failure or inadequacy of any exclusive or other remedy. Notwithst anding the foregoing, the limitations set forth in this Section 9.5(a) with respect to indirect or consequential damages, including lost profits, shall not apply in the event of a breach by Seller of its representation in Section 3.13 (Condemnation).

(c)

Except as set forth in Section 9.7(c) and 9.7(d), no Party entitled to indemnification hereunder shall settle, compromise or take any other action with respect to any claim, demand, assertion of liability or legal proceeding that could materially

prejudice or otherwise materially adversely affect the ability of the Party providing such indemnification to defend or otherwise settle or compromise with respect to such claim, demand, assertion of liability or legal proceeding without the prior written consent of the Party providing such indemnification, which consent shall not be unreasonably withheld.

(d)

Each Party entitled to indemnification hereunder or otherwise to reimbursement for Losses in connection with the transactions contemplated in this Agreement shall use Commercially Reasonable Efforts to mitigate all Losses upon becoming aware of any event or circumstance that could reasonably be expected to give rise to any Losses that are indemnifiable or recoverable hereunder or in connection herewith.

(e)

After the Closing, notice of any assertion by any Buyer Indemnified Party that Seller is liable to any Buyer Indemnified Party in connection with the transactions contemplated hereby pursuant to (i) Sections 9.3(b) and 9.3(c) must be made by Buyer in writing and must be given to Seller, on or prior to the time of expiration set forth in Section 9.1, and (ii) Section 9.3(a) must be made by Buyer in writing and must be given to Seller on or prior to the expiration of applicable statute of limitations for such claim or such claim will be forever barred.

(f)

After the Closing, notice of any assertion by any Seller Indemnified Party that Buyer is liable to any Seller Indemnified Party pursuant to (i) Sections 9.4(b) and 9.4(d) in connection with the transactions contemplated hereby must be given to Buyer on or prior to the time of expiration set forth in Section 9.1, and (ii) Sections 9.4(a) and 9.4(c) must be made by Seller in writing and must be given to Buyer on or prior to the expiration of the applicable statute of limitations for such claim or such claim will be forever barred.

(g)

Any notice provided under this Section 9.5 shall state the facts known to the asserting Party that give rise to such notice in sufficient detail to allow the other Party to evaluate the assertion.

9.6.

Exclusive Remedy.  Except as provided in Section 11.17 and except with respect to claims for fraud or deceit, from and after the Closing, the remedies set forth in this Section 9 shall constitute the sole and exclusive remedies for any and all claims, damages, complaints, demands, causes of action, investigations, hearings, actions, suits or other proceedings relating to this Agreement and are in lieu of any and all other rights and remedies that the Seller Indemnified Parties or Buyer Indemnified Parties may have under this Agreement or otherwise for monetary relief with respect to any breach or failure to perform or with respect to the Assumed or Excluded Liabilities.  Each Party waives any provision of law to the extent that it would limit or restrict the agreements contained in this Section 9.  Nothing herein shall prevent either Party from terminating this Agreement in acco rdance with Section 10.

9.7.

Matters Involving Third Parties.

(a)

If any Third Party shall notify any Party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") that may give rise to a claim for

indemnification against any other Party (the "Indemnifying Party") under this Section 9, then the Indemnified Party shall promptly notify the Indemnifying Party thereof in writing; provided that no delay on the part of the Indemnified Party in notifying the Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party is prejudiced thereby.

(b)

Any Indemnifying Party will have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as (i) within fifteen (15) days after receiving such notice, the Indemnifying Party shall give written notice to the Indemnified Party stating whether it disputes the claim for indemnification and whether it will defend against any Third Party Claim or liability at its own cost and expense, (ii) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief, settlement of, or an adverse judgment with respect to, and the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice adverse to the continuing business interests of the Indemnified Party, and (iii) the Indemnifying Party conducts th e defense of the Third Party Claim actively and diligently; provided that if the claim is one that cannot by its nature be defended solely by the Indemnifying Party, the Indemnified Party shall make available all information and assistance reasonably available and necessary for the defense of the Third Party Claim as the Indemnifying Party may reasonably request and shall cooperate with the Indemnifying Party in such defense.

(c)

So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with Section 9.7(b), (i) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, (ii) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (which consent shall not unreasonably be withheld), and (iii) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim unless written agreement is obtained releasing the Indemnified Party from all liability thereunder and such judgment or settlement is not reasonably likely to have a material adverse effect on the operations of the Indemnified Party or any of it s Affiliates.

(d)

In the event any of the conditions in Section 9.7(b) is or becomes unsatisfied, however, (i) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any Indemnifying Party in connection therewith), (ii) the Indemnifying Party will reimburse the Indemnified Party promptly and periodically for the reasonable costs of defending against the Third Party Claim (including reasonable attorneys’ fees and expenses), and (iii) the Indemnifying Party will remain responsible for any Losses the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this Section 9.

9.8.

Net of Insurance.  Any calculation of a Loss under this Section 9 shall, in each case, give full effect to any and all insurance proceeds actually received by the Indemnified Party in respect of the Loss (net of the costs of collecting such proceeds).  The Indemnified Party shall use its Commercially Reasonable Efforts to collect any insurance proceeds payable to the Indemnified Party in respect of such Loss.  If any such insurance proceeds are collected after an indemnification payment is made pursuant to this Section 9, the Indemnified Party shall pay to the Indemnifying Party the amount of such received insurance proceeds (net of the costs of collecting such proceeds), up to the amount of the indemnification payment previously made hereunder.  The Parties agree to treat any indemnity payment made pursuant to this Agreement as an adjustment to the Purchase Price, unless otherw ise required by Law. Any such Loss shall not take into account, and shall not be increased to reflect, the Tax consequences to the Indemnified Party of the receipt of (or the right to receive) the indemnification payments.

9.9.

No Recourse.  To the extent the transfer, conveyance, assignment and delivery of the Acquired Assets to Buyer as provided in this Agreement is accomplished by deeds, assignments, easements, leases, licenses, bills of sale, or other instruments of transfer and conveyance, whether executed at the Closing or thereafter, these instruments are made without representation or warranty by, or recourse against, Seller or its Affiliates, except as expressly provided in this Agreement or in any such instrument.

10.

Termination.

10.1.

Termination of Agreement.  The Parties may terminate this Agreement as provided below:

(a)

the Parties may terminate this Agreement by mutual written consent at any time prior to the Closing;

(b)

Buyer may terminate this Agreement by giving written notice to Seller at any time prior to the Closing if any of the following has occurred: (i) Seller has breached any representation, warranty or covenant contained in this Agreement in any material respect, Buyer has notified Seller of the breach, and the breach has continued without cure for a period of sixty (60) days after the notice of breach; (ii) the Closing shall not have occurred on or before (A) the date that is nine (9) months following the Effective Date by reason of the failure of any condition precedent under Section 6.1 (other than the conditions to Closing set forth in Section 6.1(c) or Section 6.1(d)), unless the failure results primarily from Buyer itself breaching any representation, warranty, or covenant or failing to fulfill any of its obligation contained in this Agreement, or (B) the date that is twelve (12) months follo wing the Effective Date by reason of the failure of any condition precedent under Section 6.1(c) or Section 6.1(d), unless the failure results primarily from Buyer itself breaching any representation, warranty, or covenant or failing to fulfill any of its obligations contained in this Agreement; (iii) one or more courts of competent jurisdiction shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the Closing, which order, judgment or decree shall not have been terminated, lifted, vacated or otherwise rendered irrelevant within ninety (90) days of the issuance thereof; (iv) any statute, rule or regulation shall have been enacted by any Governmental Authority that, directly or indirectly, prohibits the consummation

of the transactions contemplated hereby; (v) (W) Seller has within the then previous fifteen (15) days given Buyer any notice pursuant to Section 5.5(a) or (b) or delivered a Schedule Update pursuant to Section 5.5(b) and the matter that is the subject of such notice, if in existence on the Effective Date or the Closing Date, would cause the representations and warranties of Seller set forth in Section 3 not to be true and correct, (X) such matter (together with the matters that are subject of any or all previous notices given pursuant to such Sections 5.5(a) or (b) or Schedule Updates delivered pursuant to Section 5.5(b)) would have a Material Adverse Effect on Buyer, (Y) Buyer has notified Seller of its intent to terminate pursuant to this Section 10.1(b), and (Z) the matter that is the subject of such notice continues to exist for a period of sixty (60) consecutive days af ter such notice by Buyer; (vi) the event described in Section 5.10(d) as giving rise to Buyer having the right to terminate this Agreement shall have occurred; or (vii) the NGC SPA or the Related Purchase Agreement has been terminated; and

(c)

Seller may terminate this Agreement by giving written notice to Buyer at any time prior to the Closing if any of the following has occurred: (i) Buyer has breached any representation, warranty, or covenant contained in this Agreement in any material respect, Seller has notified Buyer of the breach, and the breach has continued without cure for a period of sixty (60) days after the notice of breach; (ii) the Closing shall not have occurred on or before (A) the date that is nine (9) months following the Effective Date by reason of the failure of any condition precedent under Section 6.2 (other than Section 6.2(c) or Section 6.2(d)), unless the failure results primarily from Seller itself breaching any representation, warranty, or covenant or failing to fulfill any of its obligations contained in this Agreement, or (B) the date that is twelve (12) months following the Effective Date by reason of the failure of any condition precedent under Section 6.2(c) or Section 6.2(d) unless the failure results primarily from Seller itself breaching any representation, warranty, or covenant or failing to fulfill any of its obligations contained in this Agreement; (iii) one or more courts of competent jurisdiction shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the Closing, which order, judgment or decree shall not have been terminated, lifted, vacated or otherwise rendered irrelevant within ninety (90) days of the issuance thereof; (iv) any statute, rule or regulation shall have been enacted by any Governmental Authority that, directly or indirectly, prohibits the consummation of the transactions contemplated hereby; (v) (W) Buyer has within the then previous fifteen (15) days given Seller any notice pursuant to Section 5.5(a) or (b) and the matter that is the subject of such notice, if in existence on the Effective Date or the Closing Date, would c ause the representations and warranties of Buyer set forth in Section 4 not to be true and correct, (X) such matter (together with the matters that are the subject of any or all previous notices given pursuant to such Section 5.5(a) or (b)) would have a Material Adverse Effect on Seller, (Y) Seller has notified Buyer of its intent to terminate pursuant to this Section 10.1(c)(v), and (Z) the matter that is the subject of such notice continues to exist for a period of sixty (60) consecutive days after such notice by Seller; or (vi) the NGC SPA or the Related Purchase Agreement has been terminated.

10.2.

Effect of Termination.  If either Party terminates this Agreement pursuant to Section 10.1, all rights and obligations of the Parties hereunder shall terminate without any Liability of either Party to the other Party (except for any Liability of any Party with respect to

breach of this Agreement occurring prior to termination and except as otherwise expressly provided herein) provided that Sections 7, 10.2 and 11 shall survive such termination. Notwithstanding anything to the contrary in this Agreement, and for the avoidance of doubt, the Parties agree that in the event of a termination of this Agreement as a result of the breach of this Agreement by any Party, the non-breaching Party shall be entitled to recover from the breaching Party the direct out-of-pocket fees, expenses and costs incurred by the non-breaching Party in connection with this Agreement and the transactions contemplated hereby.  In the case of the Buyer, such direct out-of-pocket fees, expenses and costs shall include all fees, expenses and other costs incurred in connection with (i) the organization, formation and capitalization of the Buyer and its subsidiaries, (ii) the due diligence investigat ion of the Company, the Facilities and the Assets, (iii) the negotiation, execution, satisfaction of the conditions, performance of the obligations and covenants and termination of, under or with respect to this Agreement, the Ancillary Agreements and any agreements or commitments related to or required by the financing of the transactions contemplated hereby, including without limitation in the case of (i), (ii) or (iii) the fees, expenses and other costs of any consultants, advisors, counsel and accountants of Buyer as well as the costs of such financing sources and their respective consultants, accountants, advisors and counsel to the extent borne by Buyer.  In the case of Seller, such direct out-of-pocket fees, expenses and costs shall include all fees, expenses and other costs incurred in connection with (i) the auction process, including but not limited to investment banker fees, and (ii) the negotiation, execution, satisfaction of the conditions, performance of the obligations and covenants and termination of, under or with respect to this Agreement and the Ancillary Agreements, including without limitation in the case of (i) or (ii) the fees, expenses and other costs of any consultants, advisors, counsel and accountants of the Seller.

11.

Miscellaneous.

11.1.

Press Releases and Public Announcements.  No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement without first affording the non-disclosing Party the opportunity to review and comment on such press release or public announcement; provided that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will provide the other Party with the opportunity to review in advance the disclosure).  The Parties shall cooperate, using Commercially Reasonable Efforts, as to the timing and contents of any such disclosure, including any such disclosure required by applicable law or the rules of any stock exchange.  Notwithstanding the above, the Parties shall agree as to the tim ing and contents of the first press release.

11.2.

No Third Party Beneficiaries.  This Agreement shall not confer any rights or remedies upon any Third Party.   For the avoidance of doubt, no provision of this Agreement shall create any third party beneficiary rights in any employee or former employee of any Seller or its Affiliates (including any beneficiary or dependent thereof) in respect of continued employment or resumed employment, and no provision of this Agreement shall create any rights in any such Persons in respect of any benefits that may be provided, directly or indirectly, under any employee benefit plan or arrangement.  

11.3.

No Joint Venture.  Nothing in this Agreement creates or is intended to create an association, trust, partnership, joint venture or other entity or similar legal relationship between the Parties, or impose a trust, partnership or fiduciary duty, obligation, or liability on or with respect to either Party.  Neither Party is or shall act as or be the agent or representative of the other Party.

11.4.

Entire Agreement.  This Agreement (including the Exhibits and Schedules hereto), together with the Ancillary Agreements constitute the entire agreement between the Parties and supersede any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they relate in any way to the subject matter hereof, provided that the Confidentiality Agreement dated as of February 25, 2006 shall remain in full force and effect without regard to any provision of this Agreement until the Closing Date (except as contemplated by the definition of Proprietary Information herein), and shall terminate automatically on the Closing Date.  All conflicts or inconsistencies between the terms hereof and the terms of any of the Ancillary Agreements, if any, shall be resolved in favor of this Agreement.

11.5.

Succession and Assignment.  This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any Party, including by operation of law, without the prior written consent of the other Parties, such consent not to be unreasonably withheld or delayed.  Any assignment in contravention of the foregoing sentence shall be null and void and without legal effect on the rights and obligations of the Parties hereunder.  Notwithstanding the foregoing, but subject to all applicable Laws, (i) Buyer or its permitted assignee may assign, transfer, pledge or otherwise dispose of (absolutely or as security) its rights and interests hereunder to a trustee, lending institutions or other party for the p urposes of leasing, financing or refinancing the Acquired Assets, and (ii) Buyer or its permitted assignee may assign, transfer, pledge or otherwise dispose of (absolutely or as security) its rights and interests hereunder to an Affiliate of Buyer so long as such Affiliate makes the representations and warranties set forth in Section 4 to the same extent as Buyer and provides Acceptable Guaranty to Seller; provided in each case that no such assignment shall relieve or discharge the assigning Party from any of its obligations hereunder or shall be made if it would reasonably be expected to prevent or materially impede, interfere with or delay the transactions contemplated by this Agreement or materially increase the cost of the transactions contemplated by this Agreement.  Each Party agrees, at the assigning Party’s expense, to execute and deliver such documents as may be reasonably necessary to accomplish any such assignment, transfer, pledge or other disposition of rights and interests here under so long as the nonassigning Party’s rights under this Agreement are not thereby materially altered, amended, diminished or otherwise impaired.  

11.6.

Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.

11.7.

Headings.  The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

11.8.

Notices.  All notices, requests, demands, claims and other communications hereunder will be in writing.  Any notice, request, demand, claim or other communication hereunder shall be deemed duly given (i) upon confirmation of facsimile, (ii) one Business Day following the date sent when sent by overnight delivery and (iii) five Business Days following the date mailed when mailed by registered or certified mail return receipt requested and postage prepaid at the following address:

If to Seller:

Holyoke Water Power Company

c/o Northeast Utilities Services Company

107 Selden Street

Berlin, CT  06307

Attn: NUSCO Manager of Corporate Planning

Copy to:

Senior Vice President and General Counsel

Northeast Utilities Services Company

107 Selden Street

Berlin, CT  06307

If to Buyer:

Mt. Tom Generating Company LLC

51 John F. Kennedy Parkway, Suite 200

Short Hills, NJ 07078

Attn: General Counsel

Mt. Tom Generating Company LLC

11943 El Camino Real #220

San Diego, CA 92130

Attn: Andrew Singer

Copy to:

Latham & Watkins LLP

885 Third Avenue

New York, NY 10022

Attn: Edward Sonnenschein and David Kurzweil

Either Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail),

but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient.  For purposes of this Agreement, messages delivered by electronic mail shall be deemed to constitute "writings."  Either Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth.

11.9.

Governing Law.  This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Connecticut without giving effect to any choice or conflict of law provision or rule (whether of the State of Connecticut or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Connecticut.

11.10.

Recourse.  Except as expressly provided in the Acceptable Guaranty and in the Seller Guaranty, neither Party shall have recourse whatsoever under this Agreement against any of the trustees, general or limited partners, members, shareholders, directors, officers, employees or representatives of the other Party (including for such purposes, the trustees, general or limited partners, members, shareholders, directors, officers,  employees or representatives of any Affiliate of a Party).  Without limiting the generality of the foregoing, except as expressly provided in the Acceptable Guaranty and the Seller Guaranty, Buyer, on behalf of itself, its Affiliates and Buyer Indemnified Parties, and Seller, on behalf of itself, its Affiliates and Seller Indemnified Parties, each hereby fully and irrevocably waives any right, claim or entitlement whatsoever against such trustees, general or limi ted partners, members, shareholders, directors, officers, employees or representatives relating to any and all Losses suffered or incurred by any of them arising from, based upon, related to, or associated with this Agreement or any Ancillary Agreement or the transactions contemplated hereby or thereby (including any breach, termination or failure to consummate such transactions) in each case whether based on contract, tort, strict liability other laws or otherwise and whether by piercing of the corporate veil, by claim on behalf of or by a Party hereto or other Person or otherwise.

11.11.

Consent to Jurisdiction.  Each of Seller and Buyer consents to the nonexclusive jurisdiction of any state or federal court located within the City of Hartford, Connecticut, for adjudication of any suit, claim, action or other proceeding at law or in equity relating to this Agreement, or to any transaction contemplated hereby.  Seller and Buyer each accept, generally and unconditionally, the nonexclusive jurisdiction of the aforesaid courts and waive any objection as to venue, and any defense of forum non conveniens.

11.12.

Amendments and Waivers.  No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by Buyer and Seller.  No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

11.13.

Severability.  Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of

the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.  

11.14.

Expenses.  Each of Buyer and Seller will bear its own costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby (including legal and accounting fees and expenses, except as otherwise provided in Section 9 above), except that Buyer shall bear the entire cost (other than legal fees of Seller) of (i) all filings by both Seller and Buyer under the Hart-Scott-Rodino Act and (ii) the joint application for authorization pursuant to Sections 203 and 205 of the Federal Power Act.

11.15.

Construction.  Ambiguities or uncertainties in the wording of this Agreement will not be construed for or against any Party, but will be construed in the manner that most accurately reflects the Parties’ intent as of the Effective Date.  The Parties acknowledge that they have been represented by counsel in connection with the review and execution of this Agreement, and, accordingly, there shall be no presumption that this Agreement or any provision hereof be construed against the Party that drafted this Agreement.

11.16.

Incorporation of Exhibits and Schedules.  The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof.

11.17.

Specific Performance.  Each of the Parties acknowledges and agrees that the other Party would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached.  Accordingly, each of the Parties agrees that the other Party shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter in addition to any other remedy to which it may be entitled, at law or in equity.

11.18.

Bulk Transfer Laws.  The Parties hereby waive compliance with the bulk sales act or comparable statutory provisions of each applicable jurisdiction.

11.19.

Good Faith Covenant.  The Parties agree that their actions and dealings with each other shall be subject to an express covenant of good faith and fair dealing.

11.20.

Dispute Resolution.  

(a)

Negotiation between Executives:  The Parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement, promptly by negotiation between executives who have authority to settle the controversy.  Any Party may give the other Party written notice of any dispute not resolved in the normal course of business.  Such notice shall include: (a) a statement of that Party’s position and a summary of arguments supporting that position; and (b) the name and title of the executive who will be representing that Party and of any other person who will accompany the executive.  Within fifteen (15) days after delivery of the notice, the receiving Party shall respond with:  (a) a statement of that Party’s position and a summary of arguments supporting that position; and (b) the name and title of the executive who will represent that Party an d of any other person who will accompany the

executive.  Within thirty (30) days after delivery of the initial notice, the executives of both Parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute.  All reasonable requests for information made by one Party to the other will be honored.  All negotiations pursuant to this clause are confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.

(b)

Mediation:  If the dispute has not been resolved by negotiation within forty-five (45) days of the disputing Party’s notice, or if the Parties failed to meet within thirty (30) days, the Parties shall endeavor to settle the dispute by mediation under the then current International Institute for Conflict Prevention and Resolution ("CPR") Mediation Procedure; provided that if one Party fails to participate as provided herein, the other Party can initiate mediation prior to the expiration of the forty-five (45) days.  Unless otherwise agreed, the Parties will select a mediator from the CPR Panels of Distinguished Neutrals.

(c)

Arbitration:  Any dispute arising out of or relating to this Agreement, including the breach, termination or validity thereof, that has not been resolved by a non-binding procedure as provided herein within ninety (90) days of the initiation of such procedure, shall be finally resolved by arbitration in accordance with the then current CPR Rules for Non-Administered Arbitration by a sole arbitrator, for disputes involving amounts in the aggregate under three million dollars ($3,000,000), or three arbitrators, for disputes involving amounts in the aggregate equal to or greater than three million dollars ($3,000,000), of whom each Party shall designate one in accordance with the "screened" appointment procedure provided in Rule 5.4; provided that if either Party will not participate in a non-binding procedure, the other may initiate arbitration before expiration of t he above period.  The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16, and judgment upon the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof.  The place of arbitration shall be Hartford, Connecticut.

(d)

The arbitrator(s) are not empowered to award damages in violation of any limitations on damages provided for in this Agreement and each Party expressly waives and foregoes any right to punitive, exemplary or similar damages unless a statute requires that compensatory damages be increased in a specified manner.

[SIGNATURE PAGE FOLLOWS]

[Signature Page to Purchase and Sale Agreement]

IN WITNESS WHEREOF, the Parties have duly executed and delivered this Agreement as of the date first written above.

HOLYOKE WATER POWER COMPANY

By: /s/ David R. McHale

Name: David R. McHale

Title:  Senior Vice President and Chief Financial Officer at Northeast Utilities Service Company, as agent for Holyoke Water Power Company

[Signature Page to Purchase and Sale Agreement]

IN WITNESS WHEREOF, the Parties have duly executed and delivered this Agreement as of the date first written above.

MT. TOM GENERATING COMPANY LLC

By:/s  Sarah Wright

Name:  Sarah Wright

Title:    Executive Vice President

EX-10.33.1

Exhibit 10.33.1

7/24/06

EXHIBIT F TO MT TOM PURCHASE AND SALE AGREEMENT

FORM OF ACCEPTABLE GUARANTY

GUARANTY

This unconditional guaranty of payment and performance ("Guaranty") dated July 24, 2006, of ENERGY CAPITAL PARTNERS I, LP, a limited partnership organized under the laws of the State of Delaware ("Guarantor"), is for the benefit of and delivered to Holyoke Water Power Company, a Massachusetts business corporation ("Counterparty").

Guarantor does hereby irrevocably guarantee the full and prompt payment and performance by its subsidiary, Mt. Tom Generating Company LLC, a Delaware limited liability company ("Subsidiary"), of all of its obligations, including, without limitation, all payment and indemnification obligations ("Guaranteed Obligations"), under the Purchase and Sale Agreement between the Counterparty and Subsidiary, dated July 24, 2006 (as the same may be amended from time to time, the "Agreement"), at the times and in the manner provided therein; provided that the maximum aggregate amount payable by the Guarantor hereunder, under the Acceptable Guaranty as defined in the Related Purchase Agreement (as defined in the Agreement) and under the Acceptable Guaranty as defined in the NGC SPA (as defined in the Agreement) shall not exceed $53,600,000 (the "Cap").  The parties agree that this Guaranty may not be enforced without giving effect to the Cap.  In addition, Guarantor hereby agrees to pay any and all costs and expenses (including reasonable fees and disbursements of counsel) incurred by Counterparty in enforcing and/or attempting to enforce any rights under this Guaranty.

This Guaranty may only be amended or modified by a writing signed by the parties hereto and is subject to, and its terms are governed by and must be interpreted under the laws of the State of Connecticut except for its choice of laws rules.

The Counterparty acknowledges and agrees that

(a)

this Guaranty shall be the sole and exclusive remedy of Counterparty for,

(b)

Guarantor, and any past, present or future directors, officers, employees, incorporators, members, partners, stockholders, Affiliates, agents, trustees, attorneys or representatives of Guarantor or any of their respective Affiliates, shall otherwise have no liability or obligation for, and

(c)

Counterparty shall not otherwise make any claim for,

in each case, any matter under, relating to or arising out of, the transactions contemplated pursuant to the Agreement or any Ancillary Agreement (including the breach, termination or failure to consummate such transactions, and whether by piercing of the corporate veil, by a claim by or on behalf of Subsidiary, or otherwise), whether based on contract, tort, strict liability, other laws or otherwise, or any action, suit, arbitration, claim, litigation, investigation or proceeding based on, in respect of, or by reason of any of the foregoing, provided that nothing in this Guaranty shall limit the rights, remedies or claims of the Counterparty (a) under the Agreement against Subsidiary, (b) under any Ancillary Agreement (as defined in the Agreement), other than this Guaranty, against Subsidiary or any other party to such Ancillary Agreement or (c) under the Acceptable Letter of Credit (as defined in the Agreement).

Guarantor’s obligation pursuant to this Guaranty (subject to the Cap) is an unconditional guaranty of payment and performance and not of collectibility.  This Guaranty shall remain in full force and effect until, and shall otherwise terminate at, the earliest of:

(i)

completion of the Closing;

(ii)

such time as each and all of the Guaranteed Obligations (subject to the Cap) shall have been fully paid and performed in accordance with the terms and provisions of the Agreement; and

(iii)

the date that is six (6) months following the termination of the Agreement, unless prior to such date the Counterparty shall have commenced proceedings to enforce this Guaranty, in which case this Guaranty shall terminate upon and in accordance with the final completion of such proceedings and payment of the Guaranteed Obligations (subject to the Cap).

Counterparty shall have no obligation to assert any claim or demand or to enforce any remedy under the Agreement or to proceed first against Subsidiary or any other person or entity, or resort to any security or make any effort to obtain payment and/or performance by Subsidiary or any other person or entity.  No delay or omission by Counterparty to exercise any right under this Guaranty shall impair any right, nor shall it be construed to be a waiver thereof.  No waiver of any single breach or default under this Guaranty shall be deemed a waiver of any other breach or default.

The liability of Guarantor under this Guaranty (subject to the Cap) shall be absolute, unconditional and irrevocable, irrespective of, except as expressly set forth herein: (a) any change in time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other amendment to, modification of (including, without limitation, change orders), waiver of, or any consent to departure from, the Agreement, (b) any change in ownership of Guarantor or Subsidiary; (c) any bankruptcy, insolvency, or reorganization of, or other similar proceedings involving

Subsidiary; or (d) any other circumstances that might otherwise constitute a legal or equitable discharge of a surety or guarantor.

If a claim is made upon Counterparty at any time for repayment or recovery of any amounts received by Counterparty from any source on account of any of the Guaranteed Obligations, and the Counterparty, pursuant to a court order or applicable law, repays or returns any amounts so received, then Guarantor shall remain liable for the amounts so repaid (such amounts being deemed part of the Guaranteed Obligations) to the same extent as if such amounts had never been received by Counterparty, notwithstanding any termination hereof or the cancellation of any instrument or agreement evidencing any of the Guaranteed Obligations.

Guarantor hereby irrevocably, unconditionally and expressly waives, to the fullest extent permitted by applicable law, promptness, diligence, presentment, notice of acceptance and other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that Counterparty protect, secure or perfect any security interest or exhaust any right or first proceed against Subsidiary or any other person or entity.

The Counterparty may, without affecting any of its rights hereunder, receive and hold collateral or security from Subsidiary or from Guarantor or any other party to secure the payment and performance of the obligations of Subsidiary or Guarantor and may release such collateral or security or any part thereof, at any time, in its discretion, with or without the substitution of any other collateral or security, and likewise in its sole discretion Counterparty may, without notice to Guarantor and without affecting in any way its rights hereunder:

(a)

modify or otherwise change any terms of all or any part of the Agreement (so long as any such modification or other change is in a writing signed by Subsidiary) or grant any extension(s) or renewal(s) for any period or periods of time for payment and/or performance or grant any other indulgence(s) with respect thereto and effect any release, compromise or settlement with respect thereto;

(b)

enter into any agreement of forbearance with respect to all or any part of any payment and/or performance due under the Agreement, or with respect to all or any part of the collateral securing the payment and/or performance by Subsidiary or Guarantor of its obligations, and change the terms of any such agreement;

(c)

call for or forbear from calling for additional collateral or security from Subsidiary to secure its obligations;

(d)

enter into any agreement or agreements with Subsidiary concerning then existing or additional obligations; and/or

(e)

release or effect any settlement or compromise with respect to the payment and/or performance of the Agreement by Subsidiary or any other party primarily or secondarily liable for the payment and/or performance of the Agreement.

Without limiting Guarantor’s own defenses and rights hereunder, Guarantor hereby reserves to itself all rights, setoffs, counterclaims and other defenses to which Subsidiary is or may be entitled arising from or out of the Agreement, except for defenses arising out of bankruptcy, insolvency, dissolution or liquidation of Subsidiary.

Guarantor represents and warrants to the Counterparty that:

(a)

Guarantor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has full power and legal right to execute and deliver this Guaranty and to perform the provisions of this Guaranty on its part to perform;

(b)

The execution, delivery and performance of this Guaranty by Guarantor have been and remain duly authorized by all necessary action, corporate or otherwise, and do not contravene any provision of its organizational documents or any law, regulation or contractual restriction binding on it or its assets;

(c)

No notice to or filing with, any governmental authority having jurisdiction is required for the execution, delivery and performance of this Guaranty; and

(d)

This Guaranty constitutes the legal, valid and binding obligation of Guarantor enforceable against it in accordance with its terms, except as enforcement hereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights or by general equity principles.

This Guaranty shall be binding upon Guarantor and its successors and permitted assigns and inure to the benefit of and be enforceable by Counterparty and its successors and permitted assigns.  Guarantor may not assign this Guaranty without the prior written consent of Counterparty, which consent may be withheld for any reason, and any assignment by Guarantor in violation of the foregoing shall be null and void.  The Counterparty may assign this Agreement, without the consent of Guarantor, to any assignee of the Counterparty’s rights under the Agreement.

Until payment in full of all Guaranteed Obligations, Guarantor hereby waives, releases, and relinquishes any claim, right, or remedy that Guarantor may now have or hereafter acquire against Subsidiary, or any of its assets or property that arises hereunder or from the performance by Guarantor hereunder, including, without limitation, any claim, right, or remedy of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim, right, or remedy that Guarantor may have against Subsidiary or any collateral for the Guaranteed Obligations that Guarantor now

has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law, or otherwise.

All notices or communications to Guarantor shall be in writing and shall be directed by registered or certified mail or overnight delivery service to Guarantor’s principle office located at:

Energy Capital Partners I, LP

c/o Energy Capital Partners, LLC

51 John F. Kennedy Parkway, Suite 200

Short Hills, NJ 07078

Attn: General Counsel

Copy to:

Energy Capital Partners, LLC

11943 El Camino Real #220

San Diego, CA 92130

Attn: Andrew Singer

Copy to:

Latham & Watkins LLP

885 Third Avenue

New York, NY 10022

Attn: Ted Sonnenschein and David Kurzweil

or such other address as Guarantor shall from time to time specify in writing to Counterparty.

GUARANTOR HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF CONNECTICUT FOR ENFORCEMENT OF ALL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY AND THE TRANSACTIONS CONTEMPLATED HEREBY.  GUARANTOR HEREBY IRREVOCABLY WAIVES AND RELEASES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (a) ANY OBJECTION TO THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT; AND (b) ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

IF GUARANTOR DOES NOT MAINTAIN A REGISTERED AGENT IN CONNECTICUT, COUNTERPARTY MAY SERVE GUARANTOR BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE CORPORATE SECRETARY OF GUARANTOR AT THE

ADDRESS SET FORTH ABOVE, WHICH SERVICE SHALL BE ACCEPTED BY GUARANTOR.

GUARANTOR HEREBY WAIVES AND RELEASES ITS RIGHT TO CLAIM A TRIAL BY JURY WITH RESPECT TO ANY ACTION ARISING HEREUNDER.

Guarantor hereby (a) consents to being joined as a party and/or a witness in any dispute resolution proceeding under the Agreement and/or related thereto; and (b) waives and releases, to the fullest extent permitted by applicable law, any objection, right or other claim that Guarantor cannot be compelled or otherwise has no obligation to participate in any such proceeding, as a party, witness or otherwise.

[Signature Page to follow]

IN WITNESS WHEREOF, this Guaranty has been executed by a duly authorized officer of Guarantor as of the date first written above.

ENERGY CAPITAL PARTNERS I, LP, Guarantor

By: /s/ Scott Helm

Name:  Energy Capital Partners GP I, LLC

Its:       General Partner

By: /s/ Scott Helm

Name:  Energy Capital Partners, LLC

Its:       Managing Member

Accepted and acknowledged:

HOLYOKE WATER POWER COMPANY

By: /s/ David R. McHale

Name: David R. McHale

Title:  Senior Vice President and Chief Financial Officer

           at Northeast Utilities Service Company, as agent for

           Holyoke Water Power Company

EX-10.33.2

Exhibit 10.33.2

7/24/06

EXHIBIT L TO MT TOM PURCHASE AND SALE AGREEMENT

FORM OF SELLER GUARANTY

GUARANTY

This unconditional guaranty of payment and performance (“Guaranty”) dated July 24, 2006, of NORTHEAST UTILITIES, a Massachusetts business trust (“Guarantor”), is for the benefit of and delivered to MT. TOM GENERATING COMPANY LLC, a Delaware limited liability company (“Counterparty”).

Guarantor does hereby irrevocably guarantee the full and prompt payment and performance by its subsidiary, Holyoke Water Power Company, a Massachusetts business corporation (“Subsidiary”), of all of its obligations, including, without limitation, all payment and indemnification obligations (“Guaranteed Obligations”), under the Purchase and Sale Agreement between the Counterparty and the Subsidiary, dated as of July 24, 2006 (as the same may be amended from time to time, the “Agreement”), at the times and in the manner provided therein.  In addition, Guarantor hereby agrees to pay any and all costs and expenses (including reasonable fees and disbursements of counsel) incurred by Counterparty in enforcing and/or attempting to enforce any rights under this Guaranty.

This Guaranty may only be amended or modified by a writing signed by the parties hereto and is subject to, and its terms are governed by and must be interpreted under the laws of the State of Connecticut except for its choice of laws rules.

No shareholder or trustee of Guarantor shall be held to any liability whatever for any obligation under this Guaranty, and such Guaranty shall not be enforceable against any such trustee in their or his or her individual capacities or capacity.  This Guaranty shall be enforceable against the trustees of Guarantor only as such, and every person, firm, association, trust or corporation having any claim or demand arising under this Guaranty and relating to Guarantor, its shareholders or trustees shall look solely to the trust estate of Guarantor for the payment or satisfaction thereof.

Guarantor’s obligation pursuant to this Guaranty is an unconditional guaranty of payment and performance and not of collectibility.  This Guaranty shall remain in full force and effect until, and shall otherwise terminate at, the earliest of:

(i)

such time as each and all of the Guaranteed Obligations shall have been fully paid and performed in accordance with the terms and provisions of the Agreement;

(ii)

the date that is six (6) months following the termination of the Agreement, unless prior to such date the Counterparty shall have commenced proceedings to enforce this Guaranty, in which case this Guaranty shall terminate upon and in accordance with the final completion of such proceedings and payment of the Guaranteed Obligations;

(iii)

with respect to all Guaranteed Obligations other than Environmental-Related Guaranteed Obligations (as defined in clause (iv) below) and Special Guaranteed Obligations (as defined in clause (v) below), the date that is twelve (12) months following the Closing Date (as defined in the Agreement), except to the extent that prior to such date the Counterparty shall have commenced proceedings to enforce this Guaranty with respect to any Guaranteed Obligations covered by this clause (iii), in which case this Guaranty shall with respect to such Guaranteed Obligations terminate upon and in accordance with the final completion of such proceedings and payment of such Guaranteed Obligations;

(iv)

solely with respect to Guaranteed Obligations in respect of the Subsidiary’s representations and warranties contained in Section 3.12 of the Agreement and any claims for indemnification in respect of the foregoing pursuant to Section 9.3(b) of the Agreement (collectively, “Environmental-Related Guaranteed Obligations”), the date that is twenty-four (24) months following the Closing Date (as defined in the Agreement), except to the extent that prior to such date the Counterparty shall have commenced proceedings to enforce this Guaranty with respect to any Environmental-Related Guaranteed Obligations, in which case this Guaranty shall with respect to such Environmental-Related Guaranteed Obligations terminate upon and in accordance with the final completion of such proceedings and payment of such Environmental-Related Guaranteed Obligations; and

(v)

solely with respect to Guaranteed Obligations in respect of the Subsidiary’s Title and Authority Representations (as defined in the Agreement), Excluded Liabilities (as defined in the Agreement) and the representations, warranties and covenants contained in Sections 3.7 and 8 of the Agreement and any claims for indemnification for a breach of such Sections pursuant to Section 9.3 of the Agreement (collectively, “Special Guaranteed Obligations”), the date that is thirty-six (36) months following the Closing Date (as defined in the Agreement), except to the extent that prior to such date the Counterparty shall have commenced proceedings to enforce this Guaranty with respect to any Special Guaranteed Obligations, in which case this Guaranty shall with respect to such Special Guaranteed Obligations terminate upon and in accordance with the

final completion of such proceedings and payment of such Special Guaranteed Obligations.

Counterparty shall have no obligation to assert any claim or demand or to enforce any remedy under the Agreement or to proceed first against Subsidiary or any other person or entity, or resort to any security or make any effort to obtain payment and/or performance by Subsidiary or any other person or entity.  No delay or omission by Counterparty to exercise any right under this Guaranty shall impair any right, nor shall it be construed to be a waiver thereof.  No waiver of any single breach or default under this Guaranty shall be deemed a waiver of any other breach or default.

The liability of Guarantor under this Guaranty shall be absolute, unconditional and irrevocable, irrespective of, except as expressly set forth herein: (a) any change in time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other amendment to, modification of (including, without limitation, change orders), waiver of, or any consent to departure from, the Agreement, (b) any change in ownership of Guarantor or Subsidiary; (c) any bankruptcy, insolvency, or reorganization of, or other similar proceedings involving Subsidiary; or (d) any other circumstances that might otherwise constitute a legal or equitable discharge of a surety or guarantor.

If a claim is made upon Counterparty at any time for repayment or recovery of any amounts received by Counterparty from any source on account of any of the Guaranteed Obligations, and the Counterparty, pursuant to a court order or applicable law, repays or returns any amounts so received, then Guarantor shall remain liable for the amounts so repaid (such amounts being deemed part of the Guaranteed Obligations) to the same extent as if such amounts had never been received by Counterparty, notwithstanding any termination hereof or the cancellation of any instrument or agreement evidencing any of the Guaranteed Obligations.

Guarantor hereby irrevocably, unconditionally and expressly waives, to the fullest extent permitted by applicable law, promptness, diligence, presentment, notice of acceptance and other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that Counterparty protect, secure or perfect any security interest or exhaust any right or first proceed against the Subsidiary or any other person or entity.

The Counterparty may, without affecting any of its rights hereunder, receive and hold collateral or security from the Subsidiary or from Guarantor or any other party to secure the payment and performance of the obligations of the Subsidiary or Guarantor and may release such collateral or security or any part thereof, at any time, in its discretion, with or without the substitution of any other collateral or security, and likewise in its sole discretion Counterparty may, without notice to Guarantor and without affecting in any way its rights hereunder:

(a)

modify or otherwise change any terms of all or any part of the Agreement (so long as any such modification or other change is in a writing signed by the Subsidiary) or grant any extension(s) or renewal(s) for any period or periods of time for payment and/or performance or grant any other indulgence(s) with respect thereto and effect any release, compromise or settlement with respect thereto;

(b)

enter into any agreement of forbearance with respect to all or any part of any payment and/or performance due under the Agreement, or with respect to all or any part of the collateral securing the payment and/or performance by the Subsidiary or Guarantor of its obligations, and change the terms of any such agreement;

(c)

call for or forbear from calling for additional collateral or security from the Subsidiary to secure its obligations;

(d)

enter into any agreement or agreements with the Subsidiary concerning then existing or additional obligations; and/or

(e)

release or effect any settlement or compromise with respect to the payment and/or performance of the Agreement by Subsidiary or any other party primarily or secondarily liable for the payment and/or performance of the Agreement.

Without limiting Guarantor’s own defenses and rights hereunder, Guarantor hereby reserves to itself all rights, setoffs, counterclaims and other defenses to which Subsidiary is or may be entitled arising from or out of the Agreement, except for defenses arising out of bankruptcy, insolvency, dissolution or liquidation of Subsidiary.

Guarantor represents and warrants to the Counterparty that:

(a)

Guarantor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has full power and legal right to execute and deliver this Guaranty and to perform the provisions of this Guaranty on its part to perform;

(b)

The execution, delivery and performance of this Guaranty by Guarantor have been and remain duly authorized by all necessary action, corporate or otherwise, and do not contravene any provision of its organizational documents or any law, regulation or contractual restriction binding on it or its assets;

(c)

No notice to or filing with, any governmental authority having jurisdiction is required for the execution, delivery and performance of this Guaranty; and

(d)

This Guaranty constitutes the legal, valid and binding obligation of Guarantor enforceable against it in accordance with its terms, except as

enforcement hereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights or by general equity principles.

This Guaranty shall be binding upon Guarantor and its successors and permitted assigns and inure to the benefit of and be enforceable by Counterparty and its successors and permitted assigns.  Guarantor may not assign this Guaranty without the prior written consent of Counterparty, which consent may be withheld for any reason, and any assignment by Guarantor in violation of the foregoing shall be null and void.  The Counterparty may assign this Agreement, without the consent of Guarantor, to any assignee of the Counterparty’s rights under the Agreement.

Until payment in full of all Guaranteed Obligations, Guarantor hereby waives, releases, and relinquishes any claim, right, or remedy that Guarantor may now have or hereafter acquire against the Subsidiary, or any of its assets or property that arises hereunder or from the performance by Guarantor hereunder, including, without limitation, any claim, right, or remedy of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim, right, or remedy that Guarantor may have against the Subsidiary or any collateral for the Guaranteed Obligations that Guarantor now has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law, or otherwise.

All notices or communications to Guarantor shall be in writing and shall be directed by registered or certified mail or overnight delivery service to Guarantor’s principle office located at:

Northeast Utilities

107 Selden Street

Berlin, CT 06037-1616

Attention: Ms. Patricia C. Cosgel, Assistant Treasurer – Finance

or such other address as Guarantor shall from time to time specify in writing to Counterparty.

GUARANTOR HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF CONNECTICUT FOR ENFORCEMENT OF ALL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY AND THE TRANSACTIONS CONTEMPLATED HEREBY.  GUARANTOR HEREBY IRREVOCABLY WAIVES AND RELEASES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (a) ANY OBJECTION TO THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT; AND (b) ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

IF GUARANTOR DOES NOT MAINTAIN A REGISTERED AGENT IN CONNECTICUT, COUNTERPARTY MAY SERVE GUARANTOR BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE CORPORATE SECRETARY OF GUARANTOR AT THE ADDRESS SET FORTH ABOVE, WHICH SERVICE SHALL BE ACCEPTED BY GUARANTOR.

GUARANTOR HEREBY WAIVES AND RELEASES ITS RIGHT TO CLAIM A TRIAL BY JURY WITH RESPECT TO ANY ACTION ARISING HEREUNDER.

Guarantor hereby (a) consents to being joined as a party and/or a witness in any dispute resolution proceeding under the Agreement and/or related thereto; and (b) waives and releases, to the fullest extent permitted by applicable law, any objection, right or other claim that Guarantor cannot be compelled or otherwise has no obligation to participate in any such proceeding, as a party, witness or otherwise.

[Signature page follows]

IN WITNESS WHEREOF, this Guaranty has been executed by a duly authorized officer of Guarantor as of the date first written above.

NORTHEAST UTILITIES, Guarantor

By: /s/ David R. McHale

Name: David R. McHale

Title:   Senior Vice President and Chief Financial Officer

Accepted and acknowledged:

MT. TOM GENERATING COMPANY LLC

By: /s/ Sarah Wright

Name:  Sarah Wright

Title:  Executive Vice President

EX-10.34

Exhibit 10.34

EXECUTION COPY

STOCK PURCHASE AGREEMENT

BETWEEN

NU ENTERPRISES, INC.

and

NE ENERGY, INC.

JULY 24, 2006

EXHIBITS

Exhibit A	– Opinion of Counsel of Seller
Exhibit B	– Opinion of Counsel of Buyer
Exhibit C	– Interconnection Agreements
Exhibit D	– The Facilities
Exhibit E	– Station Service Agreements
Exhibit F	– Form of Acceptable Guaranty
Exhibit G	– Form of Local Service Agreement
Exhibit H	– Interim Services
Exhibit I	– Form of Interim Services Agreement
Exhibit J	– Form of NGC-Select Agreement Assignment,
	Assumption and Release Agreement
Exhibit K	– Form of Acceptable Letter of Credit
Exhibit L	– Form of Seller Guaranty

SCHEDULES

Schedule 1	– Company Contracts
Schedule 2	– Intercompany Agreements
Schedule 3	– Pre-Approved Capital Expenditures
Schedule 3.2	– Incorporation and Legal Existence of the Company
Schedule 3.6	– Noncontravention
Schedule 3.8(a)	– Permitted Encumbrances
Schedule 3.8(b)	– Real Property
Schedule 3.8(c)	- Title Commitments
Schedule 3.8(d)	– Sufficiency
Schedule 3.9(a)	– Legal Compliance
Schedule 3.9(b)	– Permits
Schedule 3.10(b)	– Contract Defaults
Schedule 3.11	– Insurance
Schedule 3.12	– Litigation
Schedule 3.14	– Environmental Matters
Schedule 3.15	– Condemnation
Schedule 3.17	– Intellectual Property
Schedule 3.21	– No Undisclosed Liabilities
Schedule 3.22	– Taxes
Schedule 4	– Seller’s Regulatory Approvals
Schedule 5	– Buyer’s Regulatory Approvals
Schedule 5.12	– Facilities Requiring Local Service Agreements
Schedule 5.13(b)	– Allocation of Purchase Price for Tax Purposes

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement (the "Agreement") is entered into on July 24, 2006, by and between NU Enterprises, Inc., a Connecticut corporation ("Seller"), and NE Energy, Inc., a Delaware corporation ("Buyer").  Buyer and Seller are each referred to herein as a "Party" or, collectively as the "Parties."

WHEREAS, Seller is the sole shareholder of Northeast Generation Company, a Connecticut corporation (the "Company"), and the Company is engaged in the business of owning the pumped storage, conventional hydro, and jet fuel generating facilities listed on Exhibit D (the "Facilities") for the purpose of generation of electricity (the "Business");

WHEREAS, Seller desires to sell, and Buyer desires to purchase, all of the issued and outstanding shares of capital stock of the Company (the "Shares") on the terms and conditions set forth in this Agreement;

WHEREAS, Northeast Generation Services Company ("NGS") manages, operates, and maintains the Facilities on behalf of and as agent for the Company and provides administrative services to the Company pursuant to the Northeast Generation Company – Northeast Generation Services Company Management and Operation Agreement, dated as of January 1, 2000, as amended (the "NGC-NGS M&OA");

WHEREAS, the Company sells 100% of the net output of the Facilities to its affiliate Select Energy, Inc. ("Select") pursuant to the Select Energy, Inc. and NGC Power Purchase and Sales Agreement, dated as of December 27, 1999, as amended (the "NGC-Select Power Agreement"), and Select provides certain asset management services to the Company pursuant to the Agency Agreement between the Company and Select, dated June 18, 2004 (the "NGC-Select Agency Agreement");

WHEREAS, Northeast Utilities Services Company ("NUSCO") provides certain corporate center services to the Company pursuant to the Service Contract between the Company and NUSCO, dated January 4, 1999, as amended (the "NGC-NUSCO Services Agreement");

WHEREAS, effective no later than the Closing Date (as defined below), the NGC-NGS M&OA, the NGC-Select Agency Agreement, the NGC-NUSCO Services Agreement and certain other Intercompany Agreements (as defined below) will be terminated;

WHEREAS, effective on the Closing Date, Buyer or an Affiliate thereof would assume all of Select’s rights and obligations pursuant to the NGC-Select Power Agreement;

WHEREAS, contemporaneously with the execution of this Agreement, Buyer has entered into an agreement  to acquire certain assets from NGS, Select and NUSCO related to the operation of the Business (the "Related Purchase Agreement");

WHEREAS, contemporaneously with the execution of this Agreement, the Company and the other parties thereto have executed the Interconnection Agreements and the Station Service Agreements (each as defined below);

WHEREAS, the Company, NGS, Select, NUSCO and Seller are each wholly-owned direct or indirect subsidiaries of NU (as defined below); and

WHEREAS, Seller and Buyer contemplate that the Related Transaction will close contemporaneously with the Closing hereunder of the sale and purchase of the Shares;

NOW THEREFORE, in consideration of the covenants, representations, warranties, and mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1.

Definitions.

For purposes of this Agreement, the following terms have the meanings specified or referred to in this Section 1:

"Acceptable Guarantor" means Energy Capital Partners I, LP, a Delaware limited partnership, or a substitute entity acceptable to Seller in its sole discretion.

"Acceptable Guaranty" means a guaranty issued by an Acceptable Guarantor, substantially in the form attached hereto as Exhibit F, or such other form of performance assurance that is acceptable to Seller in its sole discretion.  

"Acceptable Letter of Credit" means a letter of credit in the form attached hereto as Exhibit K.

"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934, as amended.

"Agreement" is defined in the introductory paragraph.

"Ancillary Agreements" means, collectively, the Interconnection Agreements, the Station Service Agreements, the Local Services Agreement, the Interim Services Agreement, the NGC-Select Agreement Assignment, Assumption and Release Agreement, the Acceptable Guaranty and the Seller Guaranty.

"Annual Financial Statements" is defined in Section 3.19.

"Assets" means all the properties and assets (whether real, personal, or mixed, whether tangible or intangible) that the Company purports to own, including all of the properties and assets reflected in the balance sheet included in the Interim Financial Statements or purchased or acquired by the Company since the date of the balance sheet included in the Interim Financial Statements.

"Assumed Closing Net Working Capital Amount" means negative $3,097,000, which is equal to Net Working Capital determined as of March 31, 2006 based upon the balance sheet included in the Interim Financial Statements.

"Business" is defined in the Recitals.

"Business Day" means any day other than a Saturday, Sunday or day on which banks are legally closed for business in Hartford, Connecticut or New York, New York.

"Buyer" is defined in the introductory paragraph.

"Buyer Indemnified Parties" is defined in Section 9.3.

"Buyer’s Observers" is defined in Section 5.4(b).

"Buyer’s Regulatory Approvals" means those consents, approvals, orders or authorizations of, or registrations, declarations or filings with, all Governmental Authorities required in connection with the execution, delivery or performance hereof by Buyer set forth in Schedule 5.

"Capital Commitments" means all binding contractual commitments to make capital expenditures relating to the Assets, the Facilities or the Sites incurred by or on behalf of the Company during the Interim Period that extend beyond the Closing Date, whether or not relating to the Pre-Approved Capital Expenditures.

"Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of a partnership or limited liability company, partnership or membership interests or units (whether general or limited), and (iii) any other interest or participation that confers on a person the right to receive a share of the profits and losses of, or distribution of assets of, the issuing entity.

"Cash Equivalents" means cash equivalents as determined in accordance with GAAP and consistent with the Company’s past practices used in the preparation of the balance sheets included in the Financial Statements.

"CL&P" means The Connecticut Light and Power Company.

"Closing" is defined in Section 2.2.

"Closing Cash" means cash and Cash Equivalents of the Company, determined as of the time of the Closing and immediately after giving effect to the transactions contemplated by this Agreement to occur prior to or simultaneously with the Closing.

"Closing Date" is defined in Section 2.2.

"Closing Net Working Capital" means Net Working Capital determined as of the time of the Closing and immediately after giving effect to the transactions contemplated by this Agreement to occur prior to or simultaneously with the Closing.

"Closing Purchase Price" is defined in Section 2.1(b).

"Closing Statement" is defined in Section 2.3(b).

"Code" means the Internal Revenue Code of 1986 as amended from time to time or any successor law, and regulations issued by the IRS pursuant to the Internal Revenue Code as amended from time to time or any successor law.

"Combined Purchase Price" is defined in Section 9.5(a).

"Commercially Reasonable Efforts" means efforts that are reasonably within the contemplation of the Parties at the Effective Date and that do not require the performing Party to expend any funds other than expenditures that are customary and reasonable in transactions of the kind and nature contemplated by this Agreement in order for the performing Party to satisfy its obligations hereunder.

"Common Stock" is defined in Section 3.4.

"Company" is defined in the Recitals.

"Company Bond Indenture" means the indenture dated as of October 18, 2001 between the Company and The Bank of New York, as supplemented by a First Supplemental Indenture thereto dated October 18, 2001.

"Company Bonds" means the bonds issued by the Company pursuant to the Company Bond Indenture.

"Company Contracts" means the contracts and agreements listed in Schedule 1.

"Company Plans" means any employee benefit or compensation plans, programs, agreements or arrangements (a) maintained by or contributed to by the Company or (b) maintained by or contributed to by Seller or any of its Affiliates for the benefit of any employees or former employees of the Company.

"Condemnation Value" is defined in Section 5.10(a).

 "Controlled Group" means a controlled group of organizations within the meaning of Sections 414(b), (c), (m) or (o) of the Code.

"CPR" is defined in Section 11.19(b).

"DEP Land Sale" means the sale of the property from the Company to the State of Connecticut as reflected in the letter from the State of Connecticut Department of Environmental Protection to the Company regarding 2.80 Acres Located off Forty Acre Mountain Road, Danbury, CT, dated May 30, 2006 and the draft quitclaim deed referenced therein.

"Disclosing Party" is defined in the definition of Proprietary Information.

"Effective Date" means the date on which this Agreement has been duly executed and validly delivered by the Parties.

"Environment" means soil, land surface or subsurface strata, real property, surface waters, groundwater, wetlands, sediments, drinking water supply, ambient air (including indoor air), plant and animal life (including fish and all other aquatic life) and any other environmental medium or natural resource.

"Environmental Claim" means a claim by any Person based upon a breach of Environmental Laws or an Environmental Liability alleging loss of life, injury to persons, property or business, damage to natural resources or trespass to property, whether or not such loss, injury, damage or trespass arose or was made manifest before the Closing Date or arises or becomes manifest after the Closing Date.

"Environmental Laws" means all applicable Laws and any binding administrative or judicial interpretations thereof relating to: (a) the regulation, protection and use of the Environment; (b) the conservation, management, development, control and/or use of land, natural resources and wildlife; (c) the management, manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal, release, threatened release, abatement, removal, remediation, or handling of, or exposure to, any Hazardous Substances; or (d) noise; and includes, without limitation, the following federal statutes (and their implementing regulations): the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. §9601 et seq; the Solid Waste Disposal Act, as amended, 42 U.S.C. §6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended, 33 U .S.C. §1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §2601 et. seq.; the Clean Air Act of 1966, as amended, 42 U.S.C. §7401 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act, as amended, 7 U.S.C. §136 et seq.; the Coastal Zone Management Act of 1972, as amended, 16 U.S.C. §1451 et seq.; the Oil Pollution Act of 1990, as amended, 33 U.S.C. §2701 et. seq.; the Rivers and Harbors Act of 1899, as amended, 33 U.S.C. §401 et seq.; the Hazardous Materials Transportation Act, as amended, 49 U.S.C. § 1801 et seq.; the Endangered Species Act of 1973, as amended, 16 U.S.C. §1531 et. seq.; the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §651 et seq.; and the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. §300(f) et seq.; and all analogous or comparable state statutes and regulations, including, without limitation, the Connecticut Transfer Act, as amended, C.G.S. §22a-134 et seq.; the C onnecticut Remediation Standard Regulations, RCSA §22a-133k-1 et seq.; and the Massachusetts Oil and Hazardous Release Prevention and Response Act, as amended, M.G.L. c. 21E.

"Environmental Liabilities" means any Liability under or related to Environmental Laws arising as a result of or in connection with (i) any violation or alleged violation of Environmental Law, prior to, on or after the Closing Date, with respect to the ownership, operation or use of the Assets; (ii) any Environmental Claims caused (or allegedly caused) by the presence or Release of Hazardous Substances at, on, in, under, adjacent to or migrating from the Assets prior to, on or after the Closing Date; (iii) the investigation and/or Remediation (whether or not such investigation or Remediation commenced before the Closing Date or commences after the Closing Date) of Hazardous Substances that are present or have been Released prior to, on or after the Closing Date at, on, in, under, adjacent to or migrating from the Assets; (iv) compliance with Environmental Laws on or after the Closing Date with r espect to the ownership, operation or use of the Assets; (v) any Environmental Claim arising from or relating to the off-site disposal, treatment, storage, transportation, discharge, Release or recycling, or the arrangement

for such activities, of Hazardous Substances, on or after the Closing Date, in connection with the ownership, operation or use of the Assets; and (vi) the investigation and/or remediation of Hazardous Substances that are generated, disposed, treated, stored, transported, discharged, Released, recycled, or the arrangement of such activities, on or after the Closing Date, in connection with the ownership, operation or use of the Assets, at any Offsite Disposal Facilities.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

"Estimated Closing Statement" is defined in Section 2.3(a).

"Estimated Net Adjustment Amount" is defined in Section 2.3(a).

"Event of Loss" is defined in Section 5.10.

"Exhibits" means the exhibits to this Agreement.

 "Facilities" is defined in the Recitals.

"FERC" means the Federal Energy Regulatory Commission, or its regulatory successor, as applicable.

"Final Purchase Price Adjustment Amount" is defined in Section 2.3(b).

"Financial Statements" is defined in Section 3.19.

"GAAP" means United States generally accepted accounting principles as in effect from time to time.

"Generation Asset" is defined in Section 5.15(b).

"Good Industry Practices" means any of the practices, methods and acts engaged in or approved by a significant portion of the power generation industry during the relevant time period, or any of the practices, methods or acts that, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition.  Good Industry Practices are not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be acceptable practices, methods or acts generally accepted in the region or as required by any Governmental Authority or standards setting agency including but not limited to FERC, ISO New England, the North American Electric Reliability Council, the Northeast Power Coor dinating Council, and the Electric Reliability Organization.

"Governmental Authority" means any federal, state, local or other governmental, regulatory or administrative agency, commission, department, board, or other governmental subdivision, court, tribunal, arbitral body or other governmental authority.

"Governing Documents" means (a) the articles or certificate of incorporation and the bylaws of a corporation; (b) any similar documents adopted or filed in connection with the

creation, formation, or organization of a Person that is not a corporation; and (c) any amendment to any of the foregoing.

"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

"Hazardous Substance" means (a) any petrochemical or petroleum products, oil, waste oil, asbestos in any form that is or could become friable, urea formaldehyde foam insulations, lead-based paint and polychlorinated biphenyls; (b) any products, mixtures, compounds, materials or wastes, air emissions, toxic substances, wastewater discharges and any chemical, material or substance that may give rise to liability pursuant to, or is listed or regulated under, or the human exposure to which or the Release of which is controlled or limited by applicable Environmental Laws; and (c) any materials or substances defined in Environmental Laws as "hazardous", "toxic", "pollutant", or "contaminant", or words of similar meaning or regulatory effect.

"Improvements" means all buildings, structures (including all fuel handling and storage facilities), utility facilities, machinery and equipment, fixtures, construction work in progress, including all piping, cables and similar equipment forming part of the mechanical, electrical, plumbing or HVAC infrastructure of any building, structure or equipment, and including all generating units, located on and affixed to a Site.

"Indebtedness" means any of the following: (a) any indebtedness for borrowed money; (b) any obligations evidenced by bonds, debentures, notes or other similar instruments; (c) any obligations to pay the deferred purchase price of property or services, except trade accounts payable and other current liabilities arising in the ordinary course of business; (d) any obligations as lessee under capitalized leases; (e) any indebtedness created or arising under any conditional sale or other title retention agreement with respect to acquired property; (f) any obligations, contingent or otherwise, under acceptance, letters of credit or similar facilities; (g) any obligations under commodity swap agreements, commodity cap agreements, interest rate cap agreements, interest rate swap agreements, foreign currency exchange agreements and other similar agreements; and (h) any guaranty of any of the foregoing.

"Indemnified Party" is defined in Section 9.7(a).

"Indemnifying Party" is defined in Section 9.7(a).

"Initial Purchase Price" is defined in Section 2.1(b).

 "Intercompany Agreement" means any contract representing an intercompany transaction or agreement between the Company and an Affiliate of the Company, whether or not such transaction or agreement relates to the provisions of goods or services, payment arrangements, intercompany charges or balances or the like, including but not limited to those agreements listed in Schedule 2.

"Interconnection Agreements" means the interconnection agreements for each of the Facilities, between the Company and either CL&P or WMECO, as applicable, listed on Exhibit C.

"Interim Financial Statements" is defined in Section 3.19.

"Interim Period" means that period of time commencing on the Effective Date and ending at the time of the Closing.

"Interim Period Company Bond Payment Amount" is defined in the definition of Net Adjustment Amount.

"Interim Services Agreement" means the Interim Services Agreement substantially in the form of Exhibit I, to be effective at Closing between the Company and NUSCO, pursuant to which NUSCO will provide to the Company the services listed on Exhibit H hereto (for the fees listed on such Exhibit H hereto).

"Inventory" or "Inventories" means all inventory or inventories of the Company.

"Investment Grade" means a rating of at least BBB- by S&P or Baa3 by Moody’s.

"IRS" means the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury.

"ISO New England" means ISO New England, Inc.

"Knowledge" means (i) with respect to Seller, the actual knowledge, after due inquiry, of Dennis R. Brown, John J. Roman, James A. Ginnetti, Stephen A. Stites or Wade Hoefling, or (ii) with respect to Buyer, the actual knowledge, after due inquiry, of Sarah Wright, Scott Helm, Andrew Singer, Steve Herman or Rahul Advani.

"Laws" means all laws, rules, statutes, regulations, codes, injunctions, judgments, orders, decrees, rulings, interpretations, constitution, ordinance, common law, or treaty, of any Governmental Authority or any foreign, international, or multinational government or administration and related agencies.

"Liability" or "Liabilities" means any liability or obligation (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether incurred or consequential and whether due or to become due), including any liability for Taxes.

"Lien" means any mortgage, pledge, lien, security interest, charge, claim, equitable interest, encumbrance, restriction on transfer, conditional sale or other title retention device or arrangement (including, without limitation, a capital lease), transfer for security for the payment of any Indebtedness, or restriction on the creation of any of the foregoing, whether relating to any property or right or the income or profits therefrom.

"Load Asset" is defined in Section 5.15(b).

"Local Service Agreement" means an agreement between NUSCO and Buyer as described in Section 5.12, substantially in the form of Exhibit G attached hereto.

"Losses" is defined in Section 9.3.

"Major Loss" is defined in Section 5.10(b).

"Market Rules and Procedures" means all criteria, rules, tariff provisions, standards, procedures, manuals, business practices or other documentation, obligations or understandings that are imposed by a power pool, independent system operator, regional transmission organization or other similar entity applicable to the Assets and obligations associated therewith.

"Material Adverse Effect" means, with respect to any Person or entity, any change, effect, event, occurrence or state of facts that, individually or together with all such other changes, effects, events, occurrences or facts, (i) is, or would reasonably be expected to be, materially adverse to the business, assets, properties, financial condition, or results of operations of such Person and its subsidiaries taken as a whole or such entity or (ii) prevents, or can reasonably be expected to prevent, the performance by the affected Party of any of its material obligations under this Agreement or the consummation of the transactions contemplated by this Agreement; provided that Material Adverse Effect shall not include any change, event, effect or occurrence (or changes, events, effects or occurrences taken together) generally affecting the international, national, regional or local wholesale or retail electric or gas industry as a whole or electric generating facilities or their operations or operators as a whole that does not affect the Facilities, the Company or the Parties in any manner or degree significantly different than the industry as a whole: (a) changes in markets for electric power, natural gas or fuel (including water, as applicable) used in connection with the Facilities, (b) changes in market design and pricing (including without limitation either the implementation of, or the failure to implement, an alternative capacity pricing mechanism such as but not limited to the mechanism accepted by FERC on June 16, 2006 in Devon Power LLC, 115FERC¶ 61,340, (c) changes resulting from or associated with acts of war or terrorism or changes imposed by a Governmental Authority associated with additional security to address the events of September 11, 2001 or similar acts of terrorism, or (d) changes (individually or taken together) in the North American, national, regional or local elec tric transmission systems or operations thereof; and provided, further, that any loss, claim, occurrence, change or effect that is cured prior to the Closing Date shall not be considered a Material Adverse Effect.

"Moody’s" means Moody’s Investors Service, Inc. or any successor thereto.

"Mt. Tom Purchase Agreement" means that certain Purchase and Sale Agreement, between Holyoke Water Power Company and Mt. Tom Generating Company LLC, an Affiliate of Buyer, dated as of the date hereof.

"Net Adjustment Amount" means the aggregate (without duplication) of the following:

(a)

the amount by which Closing Net Working Capital differs from the Assumed Closing Net Working Capital Amount (if Closing Net Working Capital is greater than Assumed Closing Net Working Capital Amount then the amount determined in accordance with this clause (a) shall be expressed as a positive number; if Closing Net Working Capital is less than Assumed Closing Net Working Capital Amount then the

amount determined in accordance with this clause (a) shall be expressed as a negative number), plus

(b)

Closing Cash, plus

(c)

the amount of any payments of principal on the Company Bonds made by or on behalf of the Company since the date of the balance sheet included in the Interim Financial Statements (the "Interim Period Company Bond Payment Amount"), plus

(d)

the amount of any Pre-Approved Capital Expenditures paid by or on behalf of the Company during the Interim Period, including without limitation any pre-payments made in connection with such Pre-Approved Capital Expenditures, plus

(e)

the amount of any other capital expenditures paid by or on behalf of the Company during the Interim Period in accordance with Section 5.3(g) that were not made as a result of an Event of Loss, minus

(f)

the amount of any accrued and unpaid interest on the Company Bonds as of the Closing Date.

"Net Working Capital" means, at any time, the result of (a) current assets of the Company, minus (b) current liabilities of the Company; excluding, in each case however, (i) cash and Cash Equivalents, (ii) amounts receivable and payable between the Company and NU or any direct or indirect subsidiary of NU, (iii) assets and liabilities related to income Taxes and (iv) accrued interest on the Company Bonds.

"New Easements" means the easements being granted by the Company to (i) CL&P pursuant to (a) the Purchase and Sale Agreement for Additional Easement at Stevenson Hydro Project between the Company and CL&P dated as of May 30, 2006, and (b) the Purchase and Sale Agreement for Additional Easement at the Bulls Bridge Hydro Project between the Company and CL&P dated as of May 30, 2006, and (ii) WMECO pursuant to the Purchase and Sale Agreement for Additional Easement at the Northfield Mountain Hydro Project between the Company and WMECO, dated as of May 30, 2006.

"NGC-NGS M&OA" is defined in the Recitals.

"NGC-NUSCO Services Agreement" is defined in the Recitals.

"NGC-Select Agency Agreement" is defined in the Recitals.

"NGC-Select Power Agreement" is defined in the Recitals.

"NGC-Select Agreement Assignment, Assumption and Release Agreement" means the assignment, assumption and release agreement between Select and Buyer in the form of Exhibit J.

"NGS" is defined in the Recitals.

"Northeast Utilities Companies" means, collectively, CL&P, WMECO, Public Service Company of New Hampshire, Holyoke Water Power Company and Holyoke Power and Electric Company.

"NU" means Northeast Utilities, a Massachusetts business trust.

"NU System Money Pool" means that certain money pool administered by NUSCO relating to certain contributions by, and monies made available by loan to, certain affiliates of NU pursuant to the Terms of the NU System Money Pool,  revised January 2006, reflecting SEC Order 35-28052, October 28, 2005.

"NUSCO" is defined in the Recitals.

 "Offsite Disposal Facility" means a location, other than a Facility or a Site, that receives or received Hazardous Substances for storage and/or disposal by the Company.

"Order" means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

"Original Interconnection Agreements" means (i) the Interconnection Agreement by and between WMECO and the Company dated July 2, 1999, as amended and (ii) the Interconnection Agreement by and between CL&P and the Company dated July 2, 1999, as amended.

"Party" and "Parties" are defined in the introductory paragraph.

"Permits" means all certificates, licenses, permits, registrations, authorizations, approvals, consents, orders, decisions and other actions of a Governmental Authority pertaining to a particular Asset, Facility or Site, or the ownership, operation or use thereof.

"Permitted Encumbrance" means any of the following:  (i) Liens for Taxes or other charges or assessments by any Governmental Authority to the extent that the payment thereof is not in arrears or otherwise due or is being contested in good faith (in the case of any such contest in good faith, where adequate reserves have been established to the extent required by GAAP); (ii) encumbrances on real property in the nature of zoning restrictions, building and land use laws, ordinances, orders, decrees restrictions or any other conditions imposed by any Governmental Authority on the real property if the same do not have a materially adverse effect on the operation or use of such property in the Business of the Company as conducted on the Effective Date; (iii) easements (including without limitation, the New Easements and any other easement or like right granted by an instrument executed in connect ion with this Agreement, the Ancillary Agreements, the Related Transaction or the transactions contemplated hereby or thereby, but excluding such encumbrances that secure Indebtedness), rights, restrictions, title imperfections and similar matters including such matters as are set forth in any applicable FERC license or exemption on the uses of property if the same do not materially detract from the operation or use of such property in the business of Seller or the Company as conducted on the Effective Date; (iv)statutory or common law liens in favor of carriers, warehousemen, mechanics and materialmen, statutory or common law liens to secure claims for labor, materials or supplies and other like liens, that, in the case of foregoing clauses (i) through (iv), inclusive, secure obligations to the extent that payment thereof is not in arrears or otherwise due and that have

been incurred under Good Industry Practices; (v) any Lien with respect to the Facilities that arises under Good Industry Practices (other than any Lien in favor of Seller or any Affiliate of Seller) and the foreclosure of which is not material to the operation or use of the Facilities in the business of the Company as conducted on the Effective Date; (vi) any Lien or title imperfection with respect to the Facilities created by or resulting from any act or omission of Buyer; (viii) all exceptions set forth in the "Title Commitments"; and (ix) matters set forth on a Schedule, including but not limited to Schedule 3.8(a).

"Person" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, a limited liability company, an unincorporated organization, or a Governmental Authority (or any department, agency, or political subdivision thereof).

"Pre-Approved Capital Expenditures" means those capital expenditures set forth in Schedule 3.

"Pre-Closing Tax Liabilities" means all Taxes of the Company to the extent that such Taxes are attributable to or were realized or assessed during or became due and payable during a taxable period or portion thereof ending on or prior to the Closing Date (based on a closing of the books as of the Closing Date), and any other Taxes for which the Company may be held liable by virtue of such entity (or a predecessor of such entity) being a member of any affiliated, combined or other Tax group at any time on or prior to the Closing Date.  

"Proposed Acquisition Transaction" is defined in Section 5.17.

"Proprietary Information" means all information about either Party (the "Disclosing Party") or its or the Company’s properties or operations furnished to the other Party (the "Receiving Party") or its Representatives by the Disclosing Party or its Representatives, regardless of the manner or medium in which it is furnished, provided that from and after the Closing Date any information regarding the Company or its properties or operations shall be deemed Proprietary Information of Buyer and not Proprietary Information of Seller and to the extent such information is in the possession of Seller, Seller shall be deemed to have received such information from Buyer on a confidential basis.  Proprietary Information does not include information that (a) is or becomes generally available to the public, other than as a result of a disclosure by the Receiv ing Party or its Representatives in violation of this Agreement; (b) was available to the Receiving Party on a nonconfidential basis prior to its disclosure by the Disclosing Party or its Representatives; (c) becomes available to the Receiving Party on a nonconfidential basis from a Person, other than the Disclosing Party or its Representatives, who, to the Receiving Party’s actual knowledge, is not otherwise bound by a confidentiality agreement with the Disclosing Party or its Representatives, or is not otherwise under any obligation to the Disclosing Party or any of its Representatives not to transmit the information to the Receiving Party or its Representatives; (d) the Disclosing Party discloses after the Closing to others on a non-confidential basis; or (e) Buyer or its Affiliates disclose to their actual or potential financing sources (including lenders and agents therefor), actual or potential commodity hedge or interest rate swap providers or rating agencies and their respective attorneys, consu ltants and advisors, provided that this clause (e) shall permit the disclosure of such information by Buyer and its Affiliates only to the parties enumerated in this clause (e).

"Purchase Price" is defined in Section 2.1(b).

"Purchase Price Adjustment" is defined in Section 2.3.

"Real Property" is defined in Section 3.8.

"Receiving Party" is defined in the definition of Proprietary Information.

"Related Assets" means the "Related Assets" as defined in the Related Purchase Agreement.

"Related Buyer" means "Buyer" as defined in the Related Purchase Agreement.

"Related Buyer Indemnified Party" means "Buyer Indemnified Party" as defined in the Related Purchase Agreement.

"Related Liabilities" means the "Assumed Liabilities" as defined in the Related Purchase Agreement.

"Related Purchase Agreement" is defined in the Recitals.

"Related Seller" means each "Seller" as defined in the Related Purchase Agreement.

"Related Seller Indemnified Party" means "Seller Indemnified Party" as defined in the Related Purchase Agreement.

"Related Transaction" means the transactions described in and contemplated by the Related Purchase Agreement and the Mt. Tom Purchase Agreement.

"Release" means any actual, threatened or alleged spilling, leaking, pumping, pouring, emitting, dispersing, emptying, discharging, injecting, escaping, leaching, dumping, or disposing of any Hazardous Substance into the Environment that may cause an Environmental Liability (including the disposal or abandonment of barrels, containers, tanks or other receptacles containing or previously containing any Hazardous Substance).

"Remediation" means any or all of the following activities to the extent required to address the presence or Release of Hazardous Substances:  (a) monitoring, investigation, assessment, treatment, cleanup containment, removal, mitigation, response or restoration work as well as obtaining any permits, consents, approvals or authorizations of any Governmental Authority necessary to conduct any such activity; (b) preparing and implementing any plans or studies for any such activity; (c) obtaining a written notice (or an oral notice that is appropriately documented or memorialized) from a Governmental Authority with competent jurisdiction under Environmental Laws or a written opinion of (i) a Licensed Environmental Professional (as defined in C.G.S. § 22a-133v.) or (ii) a Licensed Site Professional (as defined in M.G.L. c21A § 19 et seq.), as contemplated by the relevant Environm ental Laws and in lieu of a written notice from a Governmental Authority, that no material additional work is required; and (d) any other activities reasonably determined by a Party to be necessary or appropriate or required under Environmental Laws.

"Representative" means, as to any Person, such Person’s Affiliates and actual or prospective lenders and its and their directors, officers, employees, agents, advisors (including, without limitation, financial advisors, counsel and accountants).

"Restoration Cost" is defined in Section 5.10(a).

"S&P" means Standard & Poor’s Rating Group, a division of McGraw-Hill Corporation, or any successor thereto.

"Schedule" means a schedule to this Agreement.

"Schedule Update" is defined in Section 5.5(b).

"SEC" means the Securities and Exchange Commission.

"Section 338 Election" is defined in Section 5.13(a).

"Securities Act" is defined in Section 4.9.

"Select" is defined in the Recitals.

"Seller" is defined in the introductory paragraph.

"Seller Guaranty" means a guaranty issued by NU, substantially in the form attached hereto as Exhibit L, or such other form of performance assurance that is acceptable to Buyer in its sole discretion.  

"Seller Indemnified Parties" is defined in Section 9.4.

"Seller’s Regulatory Approvals" means those consents, approvals, orders or authorizations of, or registrations, declarations or filings with, all Governmental Authorities required in connection with the execution, delivery or performance hereof by Seller or the Company set forth in Schedule 4.

"Shares" is defined in the Recitals.

"Shoreline Management Plan" means the comprehensive plan for managing reservoir shorelines and riverfront lands within the Housatonic Project No. 2576 boundary at each of the project developments as required by the FERC license issued on June 23, 2004.

"Site" means the Real Property and Improvements forming a part of, or used or usable in connection with, a Facility.  Any reference to a Site shall include, by definition, the surface and subsurface elements, including the soils and groundwater present at such Site, and any reference to items "at a Site" shall include all items "at, on, in, upon, over, across, under and within" such Site.

"Station Service Agreements" means the station service agreements applicable to each Facility, between the Company and either CL&P or WMECO, as applicable, listed on Exhibit E attached hereto.

"Stock Acquisition Right" means any option, warrant, right (preemptive or otherwise), call, commitment, conversion right, right of exchange, right of first offer or refusal, tag-along or drag-along right, redemption, subscription plan or other agreement or Contract of any character providing for the purchase, issuance, redemption, transfer or sale of any securities.

"Surviving Intercompany Agreements" means the Intercompany Agreements marked as those that will survive Closing on Schedule 2.

"Taftville Land Sale and License" means the transaction contemplated by the Purchase and Sale Agreement between the Company and Ponemah Riverbank, LLC, dated June 15, 2006.

"Taking" is defined in Section 5.10.

"Tariff" is defined in Section 5.12.

"Tax" or "Taxes" means (i) any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code §59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar, including FICA), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not and any payments to any federal, state, local or foreign taxing authorities in lieu of any such tax and (ii) any Liability for amounts described in clause (i) as a result of the application of Treasury Regulation Section 1.1502-6 (or any similar provision of foreign, state or local law) transferee liability, by Law, by contract or otherwise.

"Tax Audit" is defined in Section 8.1(f).

"Tax Returns" means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

"Third Party" means a Person who is not a Party or an Affiliate of a Party.

"Third Party Claim" is defined in Section 9.7(a).

"Threshold" is defined in Section 9.5(a).

"Title and Authority Representations" is defined in Section 9.1.

"Title Commitments" is defined in Section 3.8(c).

"Transfer Taxes" is defined in Section 8.1(i).

"Transmission Companies" is defined in Section 5.12.

"WMECO" means Western Massachusetts Electric Company.

2.

Purchase And Sale Of Shares.

2.1

Purchase and Sale of Shares.

(a)

In exchange for the consideration described in Section 2.1(b), Seller shall sell, assign, transfer and deliver the Shares to Buyer free and clear of all Liens, and Buyer shall accept the Shares from Seller.  The certificate(s) representing the Shares shall be duly endorsed in blank, or accompanied by stock powers duly executed in blank, by Seller.

(b)

In consideration for the sale, assignment, transfer and delivery described in Section 2.1(a), at the Closing Buyer shall pay to Seller, and Seller shall accept from Buyer, an aggregate amount of $879,465,000 (the "Initial Purchase Price"), plus the Estimated Net Adjustment Amount determined pursuant to Section 2.3(a) (the Initial Purchase Price, as so adjusted, shall be referred to herein as the "Closing Purchase Price").  The Closing Purchase Price shall be payable at the Closing in cash by wire transfer to Seller in accordance with written instructions of Seller given to Buyer at least three (3) Business Days prior to the Closing.  Following the Closing, the Closing Purchase Price shall be subject to adjustment pursuant to Section 2.3(b), and the Closing Purchase Price, as so adjusted, shall be herein referred to as the &qu ot;Purchase Price."

(c)

On the Effective Date, Buyer shall deliver to Seller an Acceptable Guaranty and an Acceptable Letter of Credit and shall, pursuant to Section 5.9, cause such Acceptable Guaranty and such Acceptable Letter of Credit to be maintained to secure the payment of the Purchase Price through the Closing Date.

2.2

Closing.  Unless otherwise agreed to by the Parties, the purchase and sale of the Shares contemplated by this Agreement (the "Closing") shall take place at the offices of Day, Berry & Howard LLP, 185 Asylum Street, Hartford, CT, commencing at 9:00 a.m. Eastern time on the date that is five (5) Business Days following the date on which all of the conditions set forth in Sections 6.1 and 6.2 have either been satisfied or waived by the Party for whose benefit such condition exists, such satisfaction or waiver to conform to Section 11.12.  The Closing shall take place contemporaneously with the closing of the transactions contemplated by the Related Purchase Agreement and the Mt. Tom Purchase Agreement.  The date of Closing is hereinafter called the "Closing Date" and shall be effective for all purposes herein as of 12:01 a.m. E astern time on the Closing Date.

2.3

Adjustments to Initial Purchase Price  The Initial Purchase Price shall be adjusted as set forth in Section 2.3(a) and the Closing Purchase Price shall be subject to adjustment as set forth in Section 2.3(b).  Such adjustments shall be referred to herein as the "Purchase Price Adjustment" and shall be determined and paid as set forth below:

(a)

At least twenty (20) Business Days prior to the Closing Date, Seller shall prepare and deliver to Buyer an estimated Closing Statement (the "Estimated

Closing Statement") that shall set forth Seller’s best estimate of the Net Adjustment Amount (the "Estimated Net Adjustment Amount").  The Initial Purchase Price shall be adjusted by the Estimated Net Adjustment Amount to determine the Closing Purchase Price.

(b)

Within ninety (90) days following the Closing Date, Seller shall prepare and deliver to Buyer a statement (the "Closing Statement") of the Net Adjustment Amount as of 12:01 a.m. Eastern time on the Closing Date, listing in detail all the components of Net Adjustment Amount, and setting forth a calculation of the difference between the Net Adjustment Amount and the Estimated Net Adjustment Amount (the amount of such difference being the "Final Purchase Price Adjustment Amount").  Seller shall prepare the Closing Statement in accordance with GAAP and consistent with the Company’s past practices used in the preparation of the balance sheets included in the Financial Statements.  Buyer will, and will cause the Company to, assist Seller in the preparation of the Closing Statement and will, and will cause the Company to, provide Seller and its indep endent auditors access at all reasonable times to Buyer’s and the Company’s personnel and properties, books and records with respect to the Company for such purpose.  Within twenty (20) days following the delivery of the Closing Statement by Seller to Buyer, Buyer may object to the Closing Statement in writing.  Seller agrees to cooperate with Buyer to provide to Buyer or Buyer’s Representatives information used to prepare the Closing Statement and information relating thereto.  If Buyer objects to the Closing Statement, the Parties shall attempt to resolve such dispute by negotiation.  If the Parties are unable to resolve such dispute within twenty (20) days of any objection by Buyer, the Parties shall appoint PricewaterhouseCoopers, or, if PricewaterhouseCoopers is not available another nationally recognized accounting firm not associated with either Party mutually agreed upon by the Parties, who shall, at Seller’s and Buyer’s joint expense, review the Closing S tatement and determine the appropriate Purchase Price Adjustment under this Section 2.3.  The agreed upon Closing Statement or the finding of such accounting firm, as the case may be, shall be used to determine the Purchase Price Adjustment and shall be binding on the Parties.  Not later than two (2) Business Days after the final determination of the Final Purchase Price Adjustment Amount: (i) (x) if the Net Adjustment Amount is greater than the Estimated Net Adjustment Amount, then Buyer shall pay to Seller the Final Purchase Price Adjustment Amount, or (y) if the Net Adjustment Amount is less than the Estimated Net Adjustment Amount, then Seller shall pay to Buyer the Final Purchase Price Adjustment Amount.  Such payments shall be without interest, and shall be made by wire transfer of immediately available funds to such account as shall be directed by the receiving party.  The acceptance by Buyer and Seller of the Purchase Price Adjustment shall not constitute or be deemed to constitut e a waiver of the rights of such Party in respect of any other provision of this Agreement.

3.

Representations And Warranties Of Seller.

Seller represents and warrants to Buyer that each of the statements set forth below is true and correct in all respects as of the Effective Date and will be true and correct as of the Closing

Date, provided that an exception or qualification set forth in any Schedule with respect to a particular representation and warranty shall be deemed to be an exception or qualification with respect to all other applicable representations and warranties to the extent the description of the facts regarding the event, item or matter disclosed is adequate so as to make reasonably clear  that such exception or qualification is applicable to such other representations and warranties whether or not such exception or qualification is so numbered:

3.1

Ownership of Shares.  Seller is the record and beneficial owner of the Shares, free and clear of all Liens.

3.2

Incorporation and Legal Existence of Company The Company is duly organized and legally existing under the laws of the State of Connecticut, with full corporate power and authority to conduct its business as it is now being conducted and to own or use the properties and assets that it owns or uses.  The Company is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, except where the absence of qualification could not reasonably be expected to have a Material Adverse Effect on the Company.  Schedule 3.2 contains a complete and accurate list of the states in which the Company is qualified to do business as a foreign corporation.

3.3

Organization of Seller.  Seller is duly organized, validly existing and in good standing under the laws of the State of Connecticut.  Copies of the charter and by-laws of Seller and the Company, each as amended to date, have been heretofore made available to Buyer and are accurate and complete.

3.4

Capital Stock.  The Company’s authorized Capital Stock consists of twenty thousand (20,000) shares of common stock, with a par value of $1.00 per share ("Common Stock").  The Shares consist of six (6) shares of Common Stock of the Company, constituting all of the issued and outstanding shares of Common Stock.  No other shares of Capital Stock of the Company are issued or outstanding, and there are no outstanding Stock Acquisition Rights for, or agreements with respect to voting of, securities of the Company other than sale to Buyer as contemplated by this Agreement.  All of the Shares have been duly authorized and validly issued and are fully paid and non-assessable.  No Capital Stock of the Company is reserved for issuance.

3.5

Authorization of Transaction.  Seller has the power and authority (including full corporate power and authority) to execute and deliver this Agreement and, subject to receipt of all the Seller’s Regulatory Approvals, to perform its obligations hereunder and thereunder.  All corporate actions or proceedings to be taken by or on the part of Seller to authorize and permit the due execution and valid delivery by Seller of this Agreement and the instruments required to be duly executed and validly delivered by Seller pursuant hereto and thereto, the performance by Seller of its obligations hereunder and thereunder, and the consummation by Seller of the transactions contemplated herein and therein, have been duly and properly taken.  This Agreement has been duly executed and validly delivered by Seller and constitutes the legal, valid and binding obligation of Se ller, enforceable in accordance with its terms and conditions.

3.6

Noncontravention.  Subject to Seller obtaining the Seller’s Regulatory Approvals, neither the execution and the delivery of this Agreement or any of the Ancillary Agreements, nor the consummation of the transactions contemplated hereby and thereby, will (a) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, license or other restriction of any Governmental Authority to which Seller, the Company or any of their property is subject or any provision of the charter or by-laws of Seller or the Company, or (b) assuming receipt of all necessary filings, waivers, approvals, consents and authorizations set forth on Schedule 3.6, conflict with, result in a breach of, constitute a default under, result in the acceleration of, trigger any right of first refusal under, create in any party the right to accelerate, termin ate, modify, or cancel, or require any notice under (with or without the giving of notice, the lapse of time, or both) any agreement, contract, lease, license, instrument, or other arrangement to which Seller or the Company is bound (including, without limitation the Company Contracts) or to which any of the Assets is subject (or result in the imposition of any Lien upon any of the Assets), except for matters that will not have a Material Adverse Effect to the Company or as otherwise disclosed in Schedule 3.6.

3.7

Brokers’ Fees.  Seller has no Liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which Buyer could become liable or obligated.

3.8

Title to Assets.  Except for the Permitted Encumbrances, including the matters set forth in Schedule 3.8(a), the Company has title to the real property, Improvements thereon, easements and other rights in real property described in Schedule 3.8(b) (the "Real Property"), to the extent, and only to the extent, specified in the title policy commitments attached hereto in Schedule 3.8(c) (the "Title Commitments").  The Company has good and sufficient title to all other material Assets of the Company.  Except as set forth in Schedule 3.8(d), together with the Related Assets, the Company owns, leases or licenses all Assets used or held for use in, and necessary and sufficient for the operation of the Facilities as presently operated except, as could not be reasonably be expected to have a Material Adverse E ffect on the Company.

3.9

Legal and Other Compliance; Permits

(a)

The Company is in compliance with all current Laws applicable to the Assets, the violation of which could have a Material Adverse Effect on the Company, other than as disclosed in Schedule 3.9(a) and other than with respect to matters covered by Section 3.14.

(b)

Schedule 3.9(b) sets forth all Permits that are material to the ownership or operation of the Facilities.  Except as would not cause a Material Adverse Effect on the Company and as set forth on Schedule 3.9(b): (i) all such Permits are in full force and effect and the Company is in compliance with all such Permits and (ii) and the Company has not received any written notification from any Governmental Authority alleging that it is in violation of any such Permits and, to Seller’s Knowledge, there is no such violation.

3.10

Company Contracts.

(a)

Except for (v) the agreements and contracts listed on Schedule 1, Schedule 2 or Schedule 2.1(b) or 2.1(d) to the Related Purchase Agreement, (w) the NGC-Select Power Agreement, (x) contracts or agreements that will expire prior to the Closing, (y) contracts or agreements that are immaterial and (z) contracts entered into between signing and Closing in accordance with this Agreement, the Company is not a party to, and none of the Assets of the Company are bound by, (i) any written contract or agreement that provides for the sale of any amount of capacity, ancillary services or energy from any of the Facilities (whether or not entered into in the ordinary course of business), any interconnection agreement, water supply and processing agreement, operation and maintenance agreement, hedging (or similar) agreement, long term maintenance agreement, non-compet ition agreement restricting the Company, agreement evidencing Indebtedness, agreement restricting the ability of the Company to make distributions of cash or Assets, agreement that provides for payments in excess of $1,000,000 per year, real estate lease, easement and other contract material to the Real Property, tax abatement agreement, partnership or joint venture or similar agreement, agreement of guarantee, surety, indemnification (other than standard indemnification provisions entered into in the ordinary course of business of the Company) and (ii) any Intercompany Agreement.

(b)

Except as disclosed in Schedule 3.10(b) and except for the NGC-Select Power Agreement, (i) each of the Company Contracts constitutes a valid and binding obligation of the Company and, to Seller’s Knowledge, each other party thereto, (ii) the Company is not in material breach or default in any material respect under any of the Company Contracts, and, to Seller’s Knowledge, the other parties to the Company Contracts are not in material breach or default in any material respect under any thereof (and in each such case no event exists that with the passage of time or the giving of notice would constitute such material breach or default), and (iii) the Company has not received notice from any other party to any Company Contract of any threatened termination of such Company Contract.  Seller has delivered or made available to Buyer true, correct and comple te copies of all of the Company Contracts and all amendments thereto.

3.11

Insurance.  Except as set forth in Schedule 3.11, all material policies, binders and bonds of fire, liability, and other forms of insurance owned or held by the Company or its Affiliates insuring the Assets or the Related Assets are in full force and effect, all premiums with respect thereto covering all periods up to and including the date as of which this representation is being made have been paid (other than retroactive premiums that may be payable with respect to comprehensive general liability and worker’s compensation insurance policies), and no written notice of cancellation or termination has been received with respect to any such policy that was not replaced on substantially similar terms prior to

the date of such cancellation.  Except as described in Schedule 3.11, the Company has not been refused any material insurance with respect to the Assets nor has its coverage been limited in any material respect by any insurance carrier to which it has applied for any such insurance or with which it has carried insurance, in each case during the last twelve months.

3.12

Litigation.  Except as disclosed in Schedule 3.12, no action, suit, claim, demand or other proceeding is pending or, to Seller’s Knowledge, threatened that would be reasonably likely to result in a Material Adverse Effect on the Company or that questions the validity of this Agreement or the Ancillary Agreements or of any action taken or to be taken pursuant to or in connection with the provisions of this Agreement or the Ancillary Agreements.  Except as disclosed on Schedule 3.12, there are no judgments, orders, decrees, citations, fines or penalties heretofore assessed against Company that would reasonably be expected to have a Material Adverse Effect on the Company or that impair, estop, impede, restrain, ban or otherwise materially adversely affect Seller’s ability to satisfy or perform any of its obligations pursuant to this Agreement und er any federal, state or local Law.

3.13

Employees and Employee Benefits.  The Company does not have, nor has it ever had, any employees.  The Company does not have, nor has it ever had, any Company Plans, and it does not have any Liability (whether absolute or contingent) with respect to any Company Plans, including any such Liability pursuant to Title IV of ERISA. No event has occurred, and to Seller’s Knowledge, no condition exists that could reasonably be expected to subject the Company, either directly or by reason of its affiliation with any member of its Controlled Group, to any Lien, Tax or other Liability imposed by ERISA, the Code or other applicable Laws.

3.14

Environmental Matters.  

(a)

During the three year period preceding the Effective Date, except as disclosed in Schedule 3.14, and except where such matters, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company, (i) the Company has not received any written notice from any Governmental Authority that it is not in compliance with Environmental Laws or failed to obtain material Permits required for the ownership or operation of any Asset under Environmental Laws; (ii) the Company has not received any written notice from any Governmental Authority that any Site is listed under the Comprehensive Environmental Response, Compensation Liability Information Systems or any similar state list; (iii) the Company has not received any notice from any Person alleging Liability for any Environmental Claims; (iv) to Seller’s Knowledge, no Hazar dous Substances have been Released or are threatened to be Released either at any of the Facilities or Sites or by the Company at any other location; and (v) the Company has not been required by any applicable Environmental Laws to place any use or activities restrictions or any institutional controls on any Assets.  

(b)

Seller has no Knowledge of any matters that could give rise to Environmental Liabilities that would reasonably be expected to have a

Material Adverse Effect on the Company that are not described in Schedule 3.14 or in the Phase I and Phase II Reports referred to in Schedule 3.14.

(c)

To the Knowledge of Seller, except as described in Schedule 3.14 or in the Phase I and Phase II Reports referred to in Schedule 3.14, during the two year period preceding the Effective Date, the Company has been in compliance with all applicable Environmental Laws except where noncompliance would not reasonably be expected to have a Material Adverse Effect on the Company.

(d)

To Seller’s Knowledge, all emission reduction credits or air emission allowances held by the Company as of the Effective Date pursuant to applicable provisions of the Clean Air Act or similar State Laws are identified on Schedule 3.14.

3.15

Condemnation.  Except as set forth in Schedule 3.15, the Company has received no written notice from any Governmental Authority of any pending or threatened proceeding to condemn or take by power of eminent domain or otherwise, by any Governmental Authority, all or any material part of the Assets.  Except as set forth on Schedule 3.15, None of the Real Property is subject to any threatened or impending tribal claims that could reasonably be expected to have a Material Adverse Effect on the Company.

3.16

Surveys of Sites.  The surveys of the Sites provided by Seller to Buyer show the locations of all of the material electric generating buildings and related facilities located at the Sites.

3.17

Intellectual Property.  To Seller’s Knowledge, the Company has not interfered with, infringed upon, misappropriated, or violated any intellectual property right of any Person.  To Seller’s Knowledge, no Person has interfered with, infringed upon, misappropriated, or violated any intellectual property right of the Company.  The Company does not own any unexpired patents or any pending patent applications.  The Company does not own any federal registrations for any material trademarks or service marks used in connection with the Business.  Schedule 3.17 describes any material registered copyrights used in connection with the Business.  Schedule 3.17 describes the material principal software systems used in connection with the Business that are not included in the Related Assets, excluding off-the-shelf commercially available software.

3.18

Subsidiaries and Investments.  The Company has no subsidiaries, and does not own, directly or indirectly, any Capital Stock or Stock Acquisition Rights or other equity or ownership or proprietary interest in, and is not a party to any contract to acquire, any other Person or other entity, or a material portion of the assets of any business.

3.19

Company Financials.  The Company has delivered to Buyer the audited financial statements of the Company for each of the years ended December 31, 2003 through December 31, 2005, in each case including a balance sheet as of such date and the related statements of income, comprehensive income, common stockholders equity and cash flows for each of the respective periods then ended (collectively, the "Annual Financial

Statements") and the unaudited financial statements of the Company as of and for the three (3) months ended March 31, 2006, in each case including a balance sheet as of such date and the related statements of income, comprehensive income, common stockholders equity and cash flows for the three (3) month period then ended (collectively, the "Interim Financial Statements," and together with the Annual Financial Statements, the "Financial Statements").  The Financial Statements have been prepared in accordance with GAAP consistently applied throughout the periods covered thereby and fairly present in all material respects the assets and liabilities (including all reserves) and the financial condition, results of operations and cash flows of the Company as of the respective dates and for the respective periods thereof, except tha t the Interim Financial Statements are subject to normally recurring year-end adjustments (the effect of which will not, individually or in the aggregate, be materially adverse) and may not include all notes and disclosures required by GAAP.

3.20

Books and Records.  The minute book of the Company, as previously made available to Buyer and its representatives, includes accurate records of all meetings of the board of directors (and committees thereof) and shareholders of the Company.  The books of account and other financial records of the Company, which have been made available to Buyer, are complete and correct in all material respects and represent actual, bona fide transactions.

3.21

No Undisclosed Liabilities. Except as set forth in Schedule 3.21 and in the balance sheet included in the Interim Financial Statements, the Company has no material Liabilities (including, without limitation, Indebtedness) of the type required to be reflected as liabilities on a balance sheet prepared in accordance with GAAP, and no such Liabilities are included in the Related Liabilities, except for current liabilities incurred in the ordinary course of business since the date of the balance sheet included in the Interim Financial Statements, that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect on the Company taken as a whole.  

3.22

Taxes.  The Company has filed or caused to be filed, within the times and manners prescribed by Laws (taking into account all properly granted extensions), all Tax Returns required to be filed by, or with respect to, it.  All Taxes payable by or due from the Company have been fully paid or are being contested in good faith, are adequately disclosed and fully provided for in the books and financial statements of the Company and disclosed on Schedule 3.22.  Except as set forth in Schedule 3.22: (i) no examination of any Tax Return of the Company is currently in progress or proposed in writing; (ii) there are no outstanding agreements, consents, or waivers extending the statutory period of limitations applicable to any Tax Return of the Company; (iii) there are no tax sharing agreements or contracts to which the Company is a party that will be in effe ct after the Closing Date; (iv) there is no suit, audit, claim or assessment pending or proposed in writing with respect to Taxes of the Company; (v) all deficiencies asserted or assessments made as a result of any examinations with respect to Taxes of the Company have been fully paid; and (vi) there are no written assessments of Taxes from any taxing authority against the Company.  The Company has not received written notice from any Governmental Authority in a jurisdiction in which it does not file a Tax Return stating that it is or may be subject to taxation by that jurisdiction.  Except for the group of which Seller is presently a member, the Company has never been a member of an affiliated group of corporations, within the meaning of Section 1504 of the

Code.  The Company nor any of its Affiliates or predecessors by merger or consolidation has within the past three (3) years been a party to a transaction intended to qualify under Section 355 of the Code or under so much of Section 356 of the Code as relates to Section 355 of the Code.  To Seller’s Knowledge, the Company will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (a) change in method of accounting for a taxable period (or portion thereof) ending on or prior to the Closing Date, (b) disposition made on or prior to the Closing Date, (c) intercompany transaction or excess loss account described in the Treasury Regulations promulgated under Section 1502 of the Code (or any corresponding or similar provision of state , local or foreign income Tax law) or (d) prepaid amount received on or prior to the Closing Date.  Seller (and the common parent of the affiliated group within the meaning of Section 1504(a) of the Code which includes Seller) are eligible to make an election under Section 338(h)(10) of the Code (and any corresponding election under state or local Tax law) with respect to the purchase and sale of the stock of the Company hereunder.

3.23

Absence of Certain Changes.  Since December 31, 2005, no event has occurred or condition existed that would, either individually or in the aggregate (a) reasonably be expected to have a Material Adverse Effect on the Company or (b) reasonably be expected to prevent Seller from consummating the transactions contemplated by this Agreement.

3.24

Disclaimers Regarding Assets.  EXCEPT FOR ANY REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS SECTION 3, THE ASSETS ARE "AS IS, WHERE IS," AND SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO LIABILITIES, OPERATIONS OF THE FACILITIES, TITLE, CONDITION, VALUE OR QUALITY OF THE ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE), RISKS AND OTHER INCIDENTS OF THE ASSETS OR THE COMPANY INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO THE ACTUAL OR RATED GENERATING CAPABILITY OF THE FACILITIES OR THE ABILITY OF THE COMPANY TO SELL FROM THE FACILITIES ELECTRIC ENERGY, CAPACITY OR OTHER PRODUCTS RECOGNIZED BY ISO NEW ENGLAND FROM TIME TO TIME, AND SELLER SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, OR SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE ASSETS , OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS, OR AS TO THE CONDITION OF THE ASSETS, OR ANY PART THEREOF, INCLUDING, WITHOUT LIMITATION, WHETHER THE COMPANY POSSESSES SUFFICIENT REAL PROPERTY OR PERSONAL PROPERTY TO OPERATE THE FACILITIES, IN EACH CASE EXCEPT AS SET FORTH HEREIN. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLER FURTHER SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY REGARDING THE ABSENCE OF HAZARDOUS SUBSTANCES OR LIABILITY OR POTENTIAL LIABILITY ARISING UNDER ENVIRONMENTAL LAWS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS EXPRESSLY

PROVIDED HEREIN, SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF ANY KIND REGARDING THE CONDITION OF THE ASSETS OR THE SUITABILITY OF THE FACILITIES FOR OPERATION AS POWER PLANTS OR AS SITES FOR THE DEVELOPMENT OF ADDITIONAL OR REPLACEMENT GENERATION CAPACITY AND NO MATERIAL OR INFORMATION PROVIDED BY OR COMMUNICATIONS MADE BY SELLER, OR BY ANY BROKER OR INVESTMENT BANKER, INCLUDING WITHOUT LIMITATION ANY INFORMATION OR MATERIAL CONTAINED IN THE DESCRIPTIVE MEMORANDUM DATED AS OF FEBRUARY, 2006, AS SUPPLEMENTED, INFORMATION PROVIDED DURING DUE DILIGENCE, INCLUDING BUT NOT LIMITED TO INFORMATION IN THE DATA ROOM, AND ANY ORAL, WRITTEN OR ELECTRONIC RESPONSE TO ANY INFORMATION REQUEST PROVIDED TO BUYER, WILL CAUSE OR CREATE ANY WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY OF THE ASSETS THAT IS NOT SET FORTH HEREIN. NOTHING IN THIS DISCLAIMER OR THIS AGREEMENT SHALL BE DEEMED TO AFFECT THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER ANY ANCILLARY AGREEMENT FOR A BREACH OF ANY REPRESENTATION, WARRANTY OR COVENANT CONTAINED IN SUCH ANCILLARY AGREEMENT.

4.

Representations And Warranties Of Buyer

Buyer represents and warrants to Seller that the statements contained in this Section 4 are true and correct as of the Effective Date and will be true and correct as of the Closing Date.

4.1

Organization of Buyer.  Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  Copies of the organizational documents and bylaws of Buyer, each as amended to date, have been heretofore delivered to Seller and are accurate and complete.

4.2

Authorization of Transaction.  Buyer has the power and authority (including full corporate power and authority) to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and, and to perform its obligations hereunder and thereunder.  All corporate actions or proceedings to be taken by or on the part of Buyer to authorize and permit the due execution and valid delivery by Buyer of this Agreement, the Ancillary Agreements to which it is a party, and the instruments required to be duly executed and validly delivered by Buyer pursuant hereto and thereto, the performance by Buyer of its obligations hereunder and thereunder, and the consummation by Buyer of the transactions contemplated herein and therein, have been duly and properly taken.  This Agreement and the Ancillary Agreements to which Buyer is a party constitutes the legal, vali d and binding obligation of Buyer, enforceable against Buyer in accordance with its terms and conditions.

4.3

Noncontravention.  Subject to Buyer obtaining the Buyer’s Regulatory Approvals, neither the execution and the delivery of this Agreement or any of the Ancillary Agreements, nor the consummation of the transactions contemplated hereby and thereby, will (a) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any Governmental Authority to which Buyer is subject

or any provision of the organizational documents or bylaws of Buyer or (b) assuming receipt of all necessary filings, waivers, approvals, consents and authorizations, conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice (with or without the giving of notice, the lapse of time, or both) under any agreement, contract, lease, license, instrument, or other arrangement to which Buyer is a party or by which it is bound or to which any of its assets is subject, except for matters that will not be material to Buyer.

4.4

Brokers’ Fees.  Buyer has no Liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which Seller could become liable or obligated.

4.5

Litigation.  No action, suit, claim, demand or other proceeding is pending or, to Buyer’s Knowledge, threatened that would be reasonably likely to result in a Material Adverse Effect on Buyer or that questions the validity of this Agreement or the Ancillary Agreements or of any action taken or to be taken pursuant to or in connection with the provisions of this Agreement or the Ancillary Agreements.  There are no judgments, orders, decrees, citations, fines or penalties heretofore assessed against Buyer that have a Material Adverse Effect on Buyer or impair, estop, impede, restrain, ban or otherwise adversely affect Buyer’s ability to satisfy or perform any of the Assumed Liabilities under any federal, state or local Law.

4.6

Availability of Funds.  At Closing, assuming that all conditions set forth in Section 6.1 have been satisfied or waived by Buyer in its sole discretion, Buyer will have sufficient funds available to it to pay the Closing Purchase Price on the Closing Date and to enable Buyer to perform all of its obligations under this Agreement.

4.7

"As Is" Sale.  The representations and warranties set forth in Section 3 constitute the sole and exclusive representations and warranties of Seller in connection with the transactions contemplated hereby.  There are no representations, warranties, covenants, understandings or agreements among the Parties regarding the Shares, the Company or the Assets or their transfer other than those incorporated in this Agreement and the Ancillary Agreements.  Except for the representations and warranties expressly set forth in Section 3, Buyer disclaims reliance on any representations, warranties or guarantees, either express or implied, by Seller including but not limited to any representation or warranty expressed or implied in any oral, written or electronic response to any information request provided to Buyer.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREI N, BUYER ACKNOWLEDGES AND AGREES THAT THE ASSETS ARE "AS IS, WHERE IS" ON THE CLOSING DATE, AND IN THEIR CONDITION ON THE CLOSING DATE.  BUYER FURTHER ACKNOWLEDGES AND AGREES THAT THE REPRESENTATIONS AND WARRANTIES OF SELLER SET FORTH IN THIS AGREEMENT TERMINATE AS SET FORTH IN SECTION 9.1 OR TERMINATION OF THIS AGREEMENT PURSUANT TO SECTION 10.1, AND THAT FOLLOWING SUCH TERMINATION OF THE REPRESENTATIONS AND WARRANTIES BUYER SHALL HAVE NO RECOURSE AGAINST SELLER WITH RESPECT TO ANY BREACH OF SUCH REPRESENTATIONS AND WARRANTIES.

4.8

Affiliate Guaranty.  If Buyer assigns its rights and interests to an Affiliate or Affiliates pursuant to Section 11.5, Buyer shall be deemed to have made the representations and warranties in this Section 4 on behalf of itself and any such Affiliate as if such Affiliate were a signatory to this Agreement.

4.9

Purchase for Investment.  Buyer acknowledges that the Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act") or under any state securities laws.  Buyer is not an "underwriter" (as such term is defined in the Securities Act), and is purchasing the Shares solely for investment with no present intention to distribute any of the Shares to any Person, and Buyer will not sell or otherwise dispose of any of the Shares, except in compliance with the registration requirements or exemption provisions under the Securities Act and the rules and regulations thereunder and any applicable state securities laws.  Buyer is an "accredited investor" as defined under Regulation D promulgated under the Securities Act.

4.10

Qualified Buyer.  To Buyer’s Knowledge, Buyer is qualified to obtain any Permits and the Buyer Regulatory Approvals necessary for Buyer to own and operate the Facilities as of the Closing, to the extent such operation is either required by any Ancillary Agreement or this Agreement, or is contemplated by Buyer and for Buyer to consummate the transactions contemplated pursuant to this Agreement.

5.

Covenants

The Parties agree as follows:

5.1

General.  Prior to the Closing, each of the Parties will use its Commercially Reasonable Efforts to take all actions and to do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements as soon as practicable after the Effective Date (including satisfaction, but not waiver, of the closing conditions set forth in Section 6).

5.2

Notices, Consents and Approvals  

(a)

Seller and Buyer shall each file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed under the Hart-Scott-Rodino Act and the rules and regulations promulgated thereunder with respect to the transactions contemplated hereby.  The Parties shall use Commercially Reasonable Efforts to make such filings, as promptly as possible after the Effective Date, to respond promptly to any requests for additional information made by either of such agencies, and to cause the waiting periods under the Hart-Scott-Rodino Act to terminate or expire at the earliest possible date after the date of filing.  Buyer will pay all filing fees under the Hart-Scott-Rodino Act, but each Party will bear its own costs for the preparation of any filing.  Both Parties shall use Commercially Reasonable Effor ts to cause any waiting period under the Hart-Scott-Rodino Act with respect to the

transactions contemplated by this Agreement and the Ancillary Agreements to expire or terminate at the earliest possible time.

(b)

Prior to the Closing, Seller and Buyer shall cooperate with each other and use all Commercially Reasonable Efforts to (i) promptly prepare, support, assist in preparing, join in and file any filings, applications and all other necessary documentation, (ii) effect all necessary applications, notices, petitions and filings and execute all agreements and documents, (iii) obtain the transfer or reissuance to Buyer of all necessary Permits and (iv) obtain and not oppose, directly or indirectly, all necessary consents, approvals and authorizations of all other parties necessary or advisable to consummate the transactions contemplated by this Agreement or in any of the Ancillary Agreements (including, without limitation, the Seller’s Regulatory Approvals and the Buyer’s Regulatory Approvals) or required by the terms of any note, bond, mortgage, indenture, deed of trust , license, franchise, permit, concession, contract, lease or other instrument to which the Company, Seller or Buyer is a party or by which any of them is bound, provided that no Party shall amend any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument or agree on any restriction on the Business of the Company in obtaining such consents, approvals and authorizations.  Seller and Buyer shall have the right to review in advance all characterizations of the information relating to the transactions contemplated by this Agreement or in any of the Ancillary Agreements that appear in any filing made in connection with the transactions contemplated hereby or thereby.

(c)

Buyer shall have primary responsibility for securing the transfer or reissuance of the Permits effective as of the Closing Date.  Seller shall cooperate with Buyer’s efforts in this regard and Seller shall use Commercially Reasonable Efforts to assist in the transfer or reissuance. If the Parties are unable to secure the transfer or reissuance of one or more Permits effective on the Closing Date, Seller shall continue to reasonably cooperate with Buyer’s efforts to secure such transfer or reissuance following the Closing Date.

(d)

Buyer shall cooperate with Seller and its Affiliates in obtaining and not oppose, directly or indirectly, all necessary consents, approvals and authorizations necessary or advisable in connection with the New Easements and the Shoreline Management Plan.

5.3

Operation of Business.  During the Interim Period, Seller will cause the Company to operate and maintain the Assets in the ordinary course consistent with Good Industry Practices (including the continued scheduling and performance of regular and customary maintenance and maintenance overhauls), unless otherwise contemplated by this Agreement or with the prior written consent of Buyer; provided that Seller may cause the Company, from time to time prior to or simultaneously with the Closing, to pay or otherwise distribute to Seller cash or Cash Equivalents as and to the extent permitted by Section 5.4 of

the First Supplemental Indenture to the Company Bond Indenture.  Without limiting the generality of the foregoing, Seller shall not, without the prior written consent of Buyer (which consent shall not be unreasonably withheld, delayed or conditioned), during the Interim Period, with respect to the Assets cause or permit the Company to:

(a)

amend its charter or bylaws or take any action with respect to any such amendment or any recapitalization, reorganization or liquidation;

(b)

except for Assets used, consumed or replaced in the ordinary course of business consistent with Good Industry Practices and except for the Taftville Land Sale and License, the DEP Land Sale and the New Easements, sell, lease (as lessor), transfer, remove, convey, distribute or otherwise dispose of, any of the Assets (including any emission allowances), or encumber, pledge, mortgage or suffer to be imposed on any of the Assets any Lien other than Permitted Encumbrances;

(c)

make any material change in the levels of Inventories (including spare parts) customarily maintained by the Company with respect to the Assets, except for in the ordinary course of business consistent with Good Industry Practices;

(d)

terminate, materially amend or otherwise materially modify any material Company Contract, Lease or Permit or enter into a new contract or Lease that would be required to be listed on Schedule 1 or on Schedule 2.1(b) or 2.1(d) to the Related Agreement if such contract or Lease had been in effect on the Effective Date, other than in the ordinary course of business consistent with Good Industry Practices with respect to (i) contracts or Leases that will be fully performed by the Closing Date or (ii) contracts or Leases that involve aggregate payments by or to the Company or the applicable Related Seller of not more than $25,000,000 in the aggregate for all such contracts or Leases, provided that nothing in this clause (d) shall inhibit the ability of Seller to (i) terminate, amend or modify contracts as required by a Governmental Authority, or as may be required by other applicable Law, or (ii) implement the Shoreline Management Plan; provided that the Parties acknowledge that Seller may cause or permit the Company to modify, amend or terminate any Intercompany Agreement, other than the NGC-Select Power Agreement and the Surviving Intercompany Agreements, at Seller’s sole discretion;

(e)

enter into or materially amend, or otherwise materially modify any real or personal property Tax agreement, treaty or settlement;

(f)

settle any material Tax liability or make any new, or change any existing, material Tax election in each case that could adversely affect Buyer or its Affiliates for a taxable period or portion thereof beginning after the Closing Date;

(g)

make any capital expenditures that are not Pre-Approved Capital Expenditures or enter into a Capital Commitment with respect thereto, except (i) for those capital expenditures or Capital Commitments necessitated by Good Industry Practice that do not exceed $5,000,000 individually and $10,000,000 in the aggregate, with respect to which Seller shall advise Buyer of the proposed incurrence thereof not less than ten days prior to the time the capital expenditures are to be made or a Capital Commitment with respect thereto undertaken or (ii) as may be necessitated by an emergency situation involving safety considerations or a threat of property damage;

(h)

incur or guarantee any Indebtedness, except for any Indebtedness to Affiliates of the Company that will be settled in full on or prior to the Closing Date;

(i)

merge or consolidate with any other Person;

(j)

acquire any Capital Stock or Stock Acquisition Rights of, or substantially all of the assets of, any other Person or business;

(k)

compromise or settle any material litigation, dispute, claim or other material Liability;

(l)

fail to discharge any material Liability as it becomes due, except in connection with a good faith dispute if adequate reserves therefor have been established in accordance with GAAP, to the extent required by GAAP, if any;

(m)

except as may be required by GAAP, change any accounting method or practice;

(n)

issue, reserve for issuance, pledge or otherwise encumber or enter into any contract with respect to Capital Stock or Stock Acquisition Rights of the Company;

(o)

sell or enter into any contract to sell any emission reduction credits or air emission allowances held by or for the account of the Company; or

(p)

agree or commit to do any of the foregoing.

Notwithstanding anything in this Section 5.3 to the contrary, Seller may, in its sole discretion, make or permit the Company to make Pre-Approved Capital Expenditures or incur a Capital Commitment with respect thereto.

5.4

Full Access.

(a)

During the Interim Period, Seller will cause the Company to (i) permit Buyer and Representatives of Buyer during normal business hours to have access upon reasonable notice, in a manner so as not to interfere with the normal business operations of the Company, to all premises, properties, management, personnel, books, records (including Tax, records) and documents associated with the Assets or the Related Assets and to permit Buyer and such Representatives to make such reasonable inspections thereof as Buyer may reasonably request, including, without limitation, to obtain Phase 1 environmental reports (provided, however, that Buyer shall not be entitled to collect any air, soil, surface water or ground water samples nor to perform any invasive or destructive sampling on the Sites), surveys and title policy commitments for the Company’s real properties, and otherwise as needed in connection with Buyer’s financing of the transactions contemplated pursuant to this Agreement and (ii) furnish Buyer with a copy of each material report, schedule or other document filed or received by Seller or the Company with respect to the Assets or the Related Assets with a Governmental Authority.  Notwithstanding the foregoing, and without limiting the generality of the confidentiality provisions set forth in Section 7, Seller shall not be obligated to cause the Company to: (A) provide any information that the Company or the Company’s counsel believes constitutes or could be deemed to constitute a waiver of the attorney-client privilege, or (B) supply Buyer with any information or records that the Company or its Affiliates are under a legal obligation not to supply.

(b)

During the Interim Period, at the sole cost and expense of Buyer, Seller will cause the Company to permit designated employees or Representatives of Buyer (the "Buyer’s Observers") to observe all operations of the Company related to the Assets or the Related Assets and such observation shall be permitted on a cooperative basis in the presence of personnel of Seller during normal business hours of the Company; provided that Buyer’s Observers shall not interfere with the operation of the Assets by the Company or its Affiliates.

5.5

Interim Period Notice; Schedule Update.  

(a)

Each Party shall notify the other promptly if any information comes to its attention prior to the Closing that is likely to (i) excuse it from the performance of its obligations under this Agreement or any Ancillary Agreement or (ii) cause any condition to close set forth in Sections 6.1 or 6.2 not to be satisfied.

(b)

From time to time prior to the Closing Date, Seller may at its option supplement or amend and deliver updates to the Schedules (each a "Schedule Update") that are necessary to complete or correct any information in such Schedules or in any representation or warranty of Seller

that has been rendered inaccurate since the Effective Date.  Without limiting Buyer's rights under Section 10.1(b)(v), if (i) Buyer has the right to terminate the Agreement thereunder and does not exercise such right as a result of such Schedule Update (together with all other Schedule Updates delivered pursuant to this Section 5.5(b) and notices given pursuant to Section 5.5(a)) and (ii) the Schedule Update pursuant to this Section 5.5(b) relates to events occurring or conditions arising after the Effective Date, then such Schedule Update shall be deemed to have amended the appropriate Schedule or Schedules as of the Effective Date, to have qualified the representations and warranties contained in Section 3 as of the Effective Date, and to have cured any misrepresentation or breach of warranty that otherwise might have existed hereunder by reason of the exis tence of such matter for purposes of the closing conditions set forth in Section 6.1 (but, for the avoidance of doubt, not for purposes of the indemnification obligations of Seller set forth in Article 9).  Any Schedule Updates delivered pursuant to this Section 5.5(b) that relate to events occurring or conditions existing on or prior to the Effective Date shall not qualify the representations and warranties, or cure any misrepresentation or breach of warranty hereunder.    

(c)

Buyer may elect at any time to notify Seller of the existence of any matter that if in existence on the Effective Date or the Closing Date would or might cause any of the representations or warranties in Section 4 to be untrue or incorrect.  Except as set forth in the following sentence, unless (i) Seller has the right to terminate this Agreement pursuant to Section 10.1(c)(v) by reason of such notice (together with all other notices given pursuant to Section 5.5(a) and this Section 5.5(c)) and (ii) exercises that right within the period of fifteen (15) days referred to in Section 10.1(c)(v), if the written notice given by Buyer pursuant to this Section 5.5(c) relates to events occurring or conditions arising after the Effective Date, then such written notice shall be deemed to have amended the appropriate Schedule or Schedules as of the Effective Date, to have quali fied the representations and warranties contained in Section 4 as of the Effective Date, and to have cured any misrepresentation or breach of warranty that otherwise might have existed hereunder by reason of the existence of such matter for purposes of the closing conditions set forth in Section 6.2 (but, for the avoidance of doubt, not for purposes of the indemnification obligations of Buyer set forth in Article 9).  Any notices delivered pursuant to this Section 5.5(c) that relate to events occurring or conditions existing on or prior to the Effective Date shall not qualify the representations and warranties, or cure any misrepresentation or breach of warranty hereunder.

5.6

Further Assurances.  At any time and from time to time after the Closing, at the request of a Party, the other Party will execute and deliver such instruments of sale, transfer, conveyance, assignment and confirmation and take such action as Seller and Buyer may both reasonably agree is necessary to transfer, convey and assign to Buyer, and to confirm Buyer’s title to or interest in the Shares, and otherwise to consummate and give effect to the transactions contemplated pursuant to this Agreement.

5.7

Access after Closing.  For a period of three (3) years after the Closing Date, each Party shall have reasonable access to all of the records, books and documents of the other Party related to the Company or the Related Assets or Related Liabilities to the extent that such access may reasonably be required in connection matters relating to or affected by the operations of the Company prior to the Closing Date (including, without limitation, liabilities with respect to Taxes); provided that Seller shall have the right, at its sole cost and expense to retain copies of such records, books and documents, subject to its obligation to keep such information confidential in accordance with Section 7.  Such access shall be afforded upon receipt of reasonable advance notice and during normal business hours.  The Party seeking such access shall be solely responsible for any costs or expenses incurred by it pursuant to this Section 5.7.  If a Party shall desire to dispose of any records, books or documents that may relate to operations of the Company before the Closing prior to the expiration of such three-year period, such Party shall, prior to such disposition, give to the other Party a reasonable opportunity, at the other Party’s expense, to segregate and remove such records, books or documents as the requesting Party may select.

5.8

Discharge of Environmental Liabilities. Buyer agrees to provide to Seller draft copies of all material plans and studies prepared in connection with any Site investigation or Remediation associated with pre-Closing occurrences prior to their submission to the Governmental Authority with jurisdiction under Environmental Laws.  Seller shall have the right, without the obligation, to observe all meetings between Buyer, its agents or representatives, and such Governmental Authorities.  Buyer shall promptly provide to Seller copies of all material written information, plans, documents and correspondence submitted to or received from such Governmental Authorities relating to Buyer’s or the Company’s discharge of any Environmental Liabilities associated with pre-Closing occurrences.  Without limitation of the foregoing, Buyer agrees that certain Sites on whic h some or all of the Facilities are located are "establishments" within the meaning of the Connecticut Transfer Act (C.G.S. §22a-134 et seq.), and that it is Buyer’s sole and exclusive responsibility (i) to determine the "establishment" status for each Site and each Facility; (ii) to comply, at its sole cost and expense, with any and all requirements for executing appropriate forms and making necessary submissions in connection with the Connecticut Transfer Act; (iii) to comply, at its sole cost and expense, with any requirement under the Connecticut Transfer Act for investigations or Remediation of Hazardous Substances Released at or emanating from the Sites or the Facilities; and (iv) to pay any transfer fees due the Connecticut Department of Environmental Protection and other related fees or costs.   Seller shall reasonably cooperate and shall cause the Company to reasonably cooperate with Buyer in the preparation of any necessary submissions pursuant to the Connect icut Transfer Act.  

5.9

Acceptable Guaranty; Acceptable Letter of Credit.  On the Effective Date Buyer shall deliver to Seller an Acceptable Guaranty and at all times thereafter until the Closing Date Buyer shall maintain such Acceptable Guaranty in full force and effect.  On the Effective Date Buyer shall deliver to Seller an Acceptable Letter of Credit and at all times thereafter until the Closing Date Buyer shall maintain such Acceptable Letter of Credit in full force and effect.  Seller shall draw upon the Acceptable Letter of Credit only in accordance with the terms and conditions thereof.  Seller shall return the Acceptable Letter of Credit (including any amendments thereto) to the issuer thereof or to Buyer (i) on the Closing Date, (ii) within five Business Days after the earliest date on which all three of the Agreements shall have been terminated in accordance with their respective terms (unless one or more of the Beneficiaries in good faith believes that a Buyer still has unsatisfied monetary obligations to one or more of the Beneficiaries under one or more of the Agreements, in which case Seller shall so return the Acceptable Letter of Credit not later than the date that is five Business Days after the date all such unsatisfied monetary obligations have been satisfied) or (iii) otherwise within five Business Days after the Expiry Date.  As used in the immediately preceding sentence, the terms "Closing Date," "Business Days," "Agreements," Beneficiaries," "Buyer" and "Expiry Date" have the meanings ascribed to such terms in the Acceptable Letter of Credit.

5.10

Risk of Loss.  Except as otherwise provided in this Section 5.10, during the Interim Period all risk of loss or damage to the property included in the Assets or the Related Assets shall, as between Buyer and Seller, be borne by Seller.  If during the Interim Period the Assets or the Related Assets are damaged by fire or other casualty (each such event, an "Event of Loss"), or are taken by a Governmental Authority by exercise of the power of eminent domain (each, a "Taking"), then the following provisions of this Section 5.10 shall apply:

(a)

The occurrence of (i) any one or more Events of Loss, as a result of which the aggregate costs to restore, repair or replace the Assets or the Related Assets, as the case may be, subject to such Event of Loss to a condition reasonably comparable to their prior condition, and the amount of any lost profits reasonably expected to accrue after Closing as a result of such Event of Loss, less any insurance proceeds received by the Company or Seller or the applicable Related Seller, as the case may be, in connection with such Event or Events of Loss (provided that any insurance proceeds received in connection with an Event or Events of Loss are either used to restore, repair or replace such Event or Events of Loss or made available to Buyer) (collectively, "Restoration Costs") and/or (ii) any one or more Takings, as a result of which the value of the property subject to suc h Taking and the amount of any lost profits reasonably expected to accrue after Closing as a result of such Taking, less any condemnation award received by the Company or Buyer (provided that any such condemnation award is made available to Buyer) (collectively, the "Condemnation Value"), if the sum of all Restoration Costs and Condemnation Value (together with any Restoration Costs and Condemnation Values under and as defined in the Mt. Tom Agreement), in the aggregate, is less than or equal to $20,000,000, shall have no effect on the transactions contemplated hereby.

(b)

Subject to the termination right of Buyer set forth in clause (d) below, upon the occurrence of any one or more Events of Loss and/or Takings involving aggregate Restoration Costs and Condemnation Value (together with any Restoration Costs and Condemnation Values under and as defined in the Mt. Tom Agreement), in excess of $20,000,000 (a "Major Loss"), Seller shall have, in the case of a Major Loss relating solely to one or more Events of Loss, the option, exercised by notice to Buyer, to cause the Company or the applicable Related Seller as the case may be, to restore, repair or replace the damaged Assets and/or Related Assets, as the case may be, prior to Closing to a condition reasonably comparable to their prior condition.  If Seller elects to cause the Company or the applicable Related Seller to so restore, repair or replace the Assets and/or Related Assets, as the case may be, relating to a Major Loss, which election shall be made by notice to Buyer prior to the Closing Date and as soon as practicable following the occurrence of the Major Loss, Seller will complete or cause to be completed the repair, replacement or restoration of the damaged Assets and/or Related Assets, as the case may be, prior to the Closing and the Closing Date shall be postponed for the amount of time reasonably necessary to complete the restoration, repair or replacement of such damages Assets and/or Related Assets, as the case may be, such time period to be agreed upon by Buyer and Seller.  If Seller elects not to cause the restoration, repair or replacement of the Assets and/or the Related Assets affected by a Major Loss, or such Major Loss is the result in whole or in part of one or more Takings or is otherwise not capable of being restored, repaired or replaced, the provisions of Section 5.10(c) will apply.

(c)

Subject to the termination right of Buyer set forth in clause (d) below, in the event that Seller elects not to cause the restoration, repair or replacement of a Major Loss, or in the event that Seller, having elected to cause repair, replacement or restoration of the Major Loss, fails to cause its completion within the period of time agreed upon by the Parties pursuant to the penultimate sentence of Section 5.10(b), or in the event that a Major Loss is the result in whole or in part of one or more Takings or is otherwise not capable of being restored, repaired or replaced, then the Parties shall, within thirty (30) days following Seller’s election not to cause the restoration, repair or replacement, failure to complete, or the occurrence of such Major Loss, as the case may be, adjust the Combined Purchase Price by the aggregate Restoration Cost and Condemnation Value related thereto, a s mitigated by any repair, replacement or restoration work actually completed by Seller, on the Assets and/or Related Assets, as the case may be, being sold to Buyer, and proceed to Closing (in which case all insurance proceeds and/or condemnation awards related to such Major Loss shall be assigned to Buyer).  To assist Buyer in its evaluation of any and all Events of Loss, Seller shall provide Buyer such access to the Assets and/or Related Assets, as the case may be, and such information as Buyer may reasonably request in connection therewith.

(d)

In the event that the aggregate Restoration Costs and Condemnation Value with respect to one or more Events of Loss and/or Takings with respect to the Northfield Mountain Station and/or the Cabot Station (together with Restoration Costs and Condemnation Value with respect to one or more Events of Loss and/or

Takings with respect to the Mt. Tom Station, with the foregoing capitalized terms used in this parenthetical clause having the meanings ascribed to them in the Mt. Tom Purchase Agreement), equals an amount in excess of fifteen percent (15%) of the sum of the Initial Purchase Price (as defined in and pursuant to the Mt. Tom Purchase Agreement) and the Combined Purchase Price pursuant to this Agreement, then, in addition to Buyer’s rights pursuant to Section 5.10(b) and (c) above, Buyer shall have the right to terminate this Agreement pursuant to Section 10.1(b)(vi).

5.11

Company Bond Indenture.  During the Interim Period and at Closing, Buyer shall cooperate with Seller and with Seller’s Affiliates (including NU) in order to satisfy the condition set forth in Section 6.2(g).  Without limitation of the foregoing, Buyer shall (i) deposit or cause to be deposited with the trustee under the Company Bond Indenture such cash, permitted investments, acceptable letter of credit or acceptable guarantee as shall be required under the terms of the Company Bond Indenture to satisfy the debt service reserve requirements of Section 5.4 of the First Supplemental Indenture to the Company Bond Indenture and effect release of NU’s related guarantee, or (ii) if such debt service reserve requirement cannot be satisfied by Buyer on the Closing Date in accordance with Section 4.1 of the Indenture, deposit in an escrow account reasonably satisfac tory to Buyer and Seller such cash, permitted investments, acceptable letter of credit or acceptable guarantee as shall be required under the terms of the Company Bond Indenture to satisfy the debt service reserve requirements and use such cash, permitted investments, acceptable letter of credit or acceptable guarantee in the escrow account to effect the release of NU’s guarantee as soon as practicable following the Closing Date.  During the Interim Period, Seller shall provide to Buyer any written notices provided by the Company or any of its Affiliates to the holders of the Company Bonds.

5.12

Local Service Agreements.  Pursuant to Schedule 21 and Schedule 21-NU of ISO New England, Inc. FERC Electric Tariff No. 3 (the "Tariff"), Buyer shall enter into a Local Service Agreement with NUSCO, as agent for the Northeast Utilities Companies (the "Transmission Companies"), for Local Network Transmission Service (as defined in the Tariff) over the Transmission Companies’ Non-Pool Transmission Facilities (as defined in the Tariff) for each Facility listed in Schedule 5.12, which agreements shall be effective as of the Closing Date.

5.13

Section 338 Election.

(a)

Seller will, and will cause the common parent of the affiliated group within the meaning of Section 1504(a) of the Code of which Seller is a member, to join with Buyer in timely making an election under Section 338(h)(10) of the Code (and any corresponding election under state or local Tax law) with respect to the purchase and sale of the stock of the Company hereunder (a "Section 338 Election").  

(b)

The Purchase Price shall be allocated among the assets as provided in Schedule 5.13(b), which shall be prepared by Buyer prior to Closing, and in a form that is acceptable to Seller.  Such allocation shall be reported on IRS Form 8883 (giving effect to mutually agreed upon

modifications to Schedule 5.13(b) to take into account adjustments to the Purchase Price pursuant to this Agreement) and filed in the manner required by the IRS.  Such allocation is intended to comply with the allocation method required by Sections 1060 and 338 of the Code and the regulations thereunder, and the parties shall cooperate to comply with all procedural requirements of Sections 1060 and 338 and such regulations.  Buyer and Seller agree that they will not take nor will they permit any affiliated Person to take any tax position inconsistent with the allocation made pursuant to Schedule 5.13(b), provided that (i) Buyer’s cost for the assets may differ from the total amount allocated thereunder to reflect Buyer’s capitalized transaction costs not included in the amount allocated, and (ii) Seller’s amount realiz ed on the sale of the assets may differ from the total amount so allocated to reflect Seller’s transaction costs that reduce the amount realized.

5.14

Use of Name.  Buyer and its Affiliates (including the Company following the Closing) are prohibited from using the name "Northeast Generation Company" for any purpose following the Closing, provided that (i) Buyer shall have thirty (30) days after the Closing Date to eliminate the name on the Assets of the Company (provided that Buyer shall not be required to damage any real property or structures to eliminate any such names) and (ii) Buyer and its Affiliates (including the Company) shall be permitted to use the name "Northeast Generation Company" solely for the purpose of communicating Buyer’s acquisition of the Company and the history of the Company.

5.15

CONVEX and ISO New England Transition.  

(a)

Prior to the Closing and to the extent reasonably necessary after the Closing, Buyer and Seller shall cooperate in good faith, use Commercially Reasonable Efforts and take all steps reasonably necessary to facilitate the transition of the Company’s CONVEX and ISO New England responsibilities to Buyer effective as of the Closing Date or as soon as practicable thereafter.  

(b)

Without limiting the generality of the foregoing, to the extent that Seller or its Affiliates is the holder of the "Load Asset" or "Generation Asset" (as such term is defined in the Market Rules and Procedures) in connection with the Assets, the Parties shall cooperate in good faith and take all steps reasonably necessary to transfer such Load Assets and Generation Assets to Buyer in accordance with the Market Rules and Procedures as of the Closing Date and, to the extent reasonably necessary, as expeditiously as possible after the Closing Date.  

5.16

Air Emissions Reporting Obligations.  Following the Closing, Buyer shall cause the Company, at its own expense, to take all action and provide all information necessary for the Company to comply with all applicable Environmental Laws regarding filings and reporting requirements for air emissions from the Facilities during the calendar year in which the Closing occurs, including compliance for the portion of such year that is on or prior to the Closing Date.  Without limiting the generality of the foregoing, Buyer shall

cause the Company, at its own expense (a) to prepare for review by Seller the filings and reports with Governmental Entities necessary for the Company to demonstrate compliance with the applicable Environmental Laws regarding filings and reporting requirements for air emissions from the Facilities for the year in which the Closing occurs, and (b) to file such filings and reports with the appropriate Governmental Entities prior to the deadline therefor.  All filings and reports prepared by Buyer pursuant to this Section 5.16 shall be provided to Seller at least ten (10) days prior to the deadline date when such filing or registration must be filed with a Governmental Entity.  The Parties will use Commercially Reasonable Efforts to cooperate to effect the purposes of this Section 5.16. This Section 5.16 shall survive the Closing for the period necessary to give full effect t o its terms.

5.17

No Negotiations.  During the Interim Period, Seller shall not, and shall cause its Affiliates and its and their respective directors, officers, employees, and Representatives, not to, initiate or solicit, directly or indirectly, any inquiries or the making of any proposal with respect to, engage in negotiations concerning, provide any confidential information or data to any Person with respect to, or have any discussions with any Person (excepting out the transactions contemplated by this Agreement, the Related Agreement and the Mt Tom Purchase Agreement) relating to, a proposal to directly or indirectly acquire all or a portion of the Shares or a material portion of the Assets of the Company or the Related Assets or to engage in any similar transaction with Seller or any of its Affiliates (each such transaction being referred to herein as a "Proposed Acquisition Transaction"), and shall immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Persons conducted prior to the date hereof with respect to any of the foregoing.  Seller shall not, and shall cause its Affiliates not to, release any third party from, or waive any provision of, any confidentiality or standstill agreement with respect to the foregoing to which Seller or any of its Affiliates is a party.  

5.18

Release of Intercompany Indebtedness and other Liabilities; NGC-Select Power Agreement.  On or prior to the Closing, Seller shall cause (i) all Intercompany Agreements (other than the NGC-Select Power Agreement and the Surviving Intercompany Agreements) to be terminated, (ii) all Indebtedness (including with respect to the NU System Money Pool) and any other amounts payable or receivable among the Company, on the one hand, and Seller or any of its Affiliates (other than the Company), on the other hand, to be paid in full or otherwise discharged or cancelled and (iii) Company to be fully and irrevocably released prior to Closing from all Indebtedness, any other guaranty of Liabilities or any other mutual Liabilities relating to Seller, any of its Affiliates (other than the Company), or any Intercompany Agreement (other than with respect to any Surviving Intercompany Agreem ents).  At the Closing, Seller shall cause Select to assign to Buyer or a designated Affiliate of Buyer all of Select’s rights and obligations under the NGC-Select Power Agreement, and the Company, Buyer and such Affiliate of Buyer, and all of their Affiliates shall fully and irrevocably release, indemnify, defend and hold harmless Select, Seller and all of their Affiliates from any and all Liabilities or obligations relating to the NGC-Select Agreement pursuant to the NGC-Select Agreement Assignment, Assumption and Release Agreement.

5.19

Indebtedness.  Except for the Company Bonds, prior to or at the Closing, Seller shall cause any and all Indebtedness of the Company to be paid in full and any and all

Liens securing any such Indebtedness to be released such that Buyer shall take title to the Company free of any such Indebtedness or any such Liens.

5.20

Insurance.  Seller shall maintain or cause to be maintained in full force and effect the material insurance policies until the Closing .

6.

Conditions To Obligation To Close

6.1

Conditions to Obligation of Buyer to Close.  The obligation of Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:

(a)

Representations and Warranties.  The representations and warranties set forth in Section 3 that are not qualified by materiality or Material Adverse Effect shall be true and correct in all material respects, and all other representations and warranties that are so qualified shall be true and correct in all respects, in each case at and as of the Closing Date;

(b)

Performance by Seller.  Seller shall have performed and complied in all material respects with all of its covenants, agreements and obligations hereunder through the Closing;

(c)

Buyer’s Regulatory Approvals; Consents; Permits.  Buyer shall have received the Buyer’s Regulatory Approvals, with such terms and conditions as may be included therein except for such terms and conditions that, either singly or in the aggregate are reasonably likely to be materially adverse to Buyer or the Company; those Permits that are material to the operation of the Facilities consistent with current operations; and those Third Party consents without the receipt of which would be reasonably likely to have a Material Adverse Effect on the Company.

(d)

Seller’s Regulatory Approvals.  Seller shall have received (i) the Seller’s Regulatory Approvals, with such terms and conditions as may be included therein except for such terms and conditions that, either singly or in the aggregate are reasonably likely to be materially adverse to Buyer or the Company;

(e)

Absence of Litigation.  There shall not be any litigation, proceeding, injunction, judgment, order, decree or ruling in effect or pending that would prevent or inhibit consummation of the transactions contemplated by this Agreement, the Ancillary Agreements, the Related Purchase Agreement or the Mt. Tom Purchase Agreement;

(f)

Antitrust Matters.  All applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated;

(g)

No Material Adverse Effect.  Since the Effective Date, there shall not be any Material Adverse Effect with respect to the Company, the Related Assets and the Related Liabilities taken as a whole;

(h)

Related Transaction.  The conditions to the obligations of Buyer, Seller and Seller’s Affiliates to close the Related Transaction (as further specified in the Related Purchase Agreement and the Mt. Tom Purchase Agreement) shall have been, or contemporaneously with the occurrence of the Closing shall be, satisfied; and

(i)

Seller’s Closing Deliveries.  Seller shall deliver to Buyer one or more certificates evidencing the Shares, duly endorsed for transfer, and shall deliver each of the following documents, duly executed by Seller where applicable, to Buyer:

(1)

a certificate of existence for the Company from the State of Connecticut, dated as of a recent date;

(2)

a certificate of existence for Seller from the State of Connecticut, dated as of a recent date;

(3)

a certificate, dated as of the Closing Date, signed by a duly authorized officer of Seller, certifying that the conditions specified in Sections 6.1(a), 6.1(b) and 6.1(d) have been fulfilled;

(4)

resignations of the officers and directors of the Company, effective as of the Closing Date;

(5)

copies of the requisite resolutions or actions of Seller’s board of directors approving the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, certified by the Secretary of Seller as being duly adopted and in full force and effect;

(6)

an opinion or opinions from one or more counsel to Seller (any of whom may be an employee of Seller or its Affiliates), dated the Closing Date and reasonably satisfactory in form to Buyer and its counsel, covering substantially the matters set forth in Exhibit A;

(7)

a signed IRS Form 8023, Elections under Section 338 for Corporations Making Qualified Stock Purchases to be prepared by Buyer;

(8)

 an affidavit, stating under penalty of perjury, that the indicated number is Seller’s United States taxpayer identification number and that Seller is not a foreign person, pursuant to Section 1445(b)(2) of the Code;

(9)

copies of the Ancillary Agreements (except for the Acceptable Guaranty), duly executed by Seller or an Affiliate of Seller; and

(10)

such other documents as Buyer may reasonably request in connection with the purchase of the Shares.

(j)

Repayment of Intercompany Indebtedness; Release of Liens.  Seller shall have delivered to Buyer evidence of (i) cancellation of any intercompany Indebtedness between the Company, on the one hand, and Seller or any Affiliate of Seller (other than the Company) on the other hand, and (ii) release of all Liens, other than Permitted Encumbrances, on the Assets of the Company and the Shares, in each case in form and substance reasonably satisfactory to Buyer.

Buyer may waive any condition specified in this Section 6.1 in its sole discretion if it executes a writing so stating at or prior to the Closing and such waiver shall not be considered a waiver of any other provision in this Agreement unless the writing specifically so states.

6.2

Conditions to Obligation of Seller to Close.  The obligation of Seller to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:

(a)

Representations and Warranties.  The representations and warranties set forth in Section 4 that are not qualified by materiality or Material Adverse Effect shall be true and correct in all material respects, and all other representations and warranties that are so qualified shall be true and correct in all respects, in each case at and as of the Closing Date;

(b)

Performance by Buyer.  Buyer shall have performed and complied in all material respects with all of its covenants, agreements and obligations hereunder through the Closing;

(c)

Seller’s Regulatory Approvals.  Seller shall have received the Seller’s Regulatory Approvals, with such terms and conditions as may be included therein except for such terms and conditions that, either singly or in the aggregate are reasonably likely to be materially adverse to Seller or any of its Affiliates;

(d)

Buyer’s Regulatory Approvals.  Buyer shall have received (i) the Buyer’s Regulatory Approvals, with such terms and conditions as may be included therein except for such terms and conditions that, either singly or in the aggregate are reasonably likely to be materially adverse to Seller or any of its Affiliates;

(e)

Absence of Litigation.  There shall not be any injunction, judgment, order, decree or ruling in effect or pending that would prevent or inhibit consummation of the transactions contemplated by this Agreement,

the Ancillary Agreements, the Related Purchase Agreement or the Mt. Tom Purchase Agreement;

(f)

Antitrust Matters.  All applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated;

(g)

Release of NU as Guarantor.  NU shall have been released from all of its obligations as guarantor in connection with the debt service reserve requirements under the Company Bond Indenture or Buyer shall have complied with its obligations set forth in clause (ii) of the second sentence of Section 5.11 hereof;

(h)

Related Transaction.  The conditions to the obligations of Seller and Seller’s Affiliates to close the Related Transactions (as further specified in the Related Purchase Agreement and the Mt. Tom Purchase Agreement) shall have been, or contemporaneously with the occurrence of the Closing shall be, satisfied; and

(i)

Buyer’s Closing Deliveries.  Buyer shall make the cash payment of the Closing Purchase Price required to be made by Buyer pursuant to Section 2.1(b) and shall deliver the following documents, each duly executed by Buyer:

(1)

a certificate of good standing for Buyer from the Secretary of State of Delaware, dated as of a recent date;

(2)

a certificate, dated as of the Closing Date, signed by a duly authorized officer of Buyer, certifying that the conditions specified in Sections 6.2(a) and 6.2(b) have been fulfilled;

(3)

copies of the requisite resolutions or actions of Buyer’s board of directors approving the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, certified by the Secretary of Buyer as being duly adopted and in full force and effect;

(4)

one or more opinions from counsel to Buyer, dated the Closing Date and reasonably satisfactory in form to Seller and its counsel, covering substantially the matters set forth in Exhibit B;

(5)

amendments to the Governing Documents of the Company providing for a change to the Company’s name;

(6)

a signed IRS Form 8023, Elections under Section 338 for Corporations Making Qualified Stock Purchases; and

(7)

such other documents as Seller may reasonably request in connection with the sale of the Shares.

(j)

NGC-Select Power Agreement.  Select, Seller and all of their Affiliates shall have been released from all liabilities and obligations under the NGC-Select Power Agreement pursuant to the NGC-Select Agreement Assignment, Assumption and Release Agreement.

Seller may waive any condition specified in this Section 6.2 in its sole discretion if it executes a writing so stating at or prior to the Closing and such waiver shall not be considered a waiver of any other provision in this Agreement unless the writing specifically so states.

7.

Confidentiality

7.1

Confidentiality.

(a)

Each Receiving Party and each Representative thereof will treat and hold as confidential all of the Proprietary Information, and refrain from using any of the Proprietary Information except in connection with this Agreement and the Ancillary Agreements and transactions contemplated hereby and thereby.  In the event that the Receiving Party or any Representative thereof is requested or required (including, without limitation, (i) pursuant to any rule or regulation of any stock exchange or other self-regulatory organization upon which any of the Receiving Party’s securities are listed or (ii) by oral question or request for information or documents in any legal proceeding, including without limitation the Buyer’s Regulatory Approval and the Seller’s Regulatory Approval processes, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Proprietary Information, the Receiving Party will notify the Disclosing Party promptly of the request or requirement so that the Disclosing Party may seek an appropriate protective order or waive compliance with the provisions of this Section 7.  If, in the absence of a protective order or the receipt of a waiver hereunder, the Receiving Party or any Representative thereof is, on the advice of counsel, compelled to disclose any Proprietary Information pursuant to any such request or requirement, then the Receiving Party or such Representative may disclose the Proprietary Information so requested or required to be disclosed; provided that the Receiving Party shall use its reasonable best efforts to obtain, at the request of the Disclosing Party, an order or other assurance that confidential treatment will be accorded to such portion of the Proprietary Information required to be disclosed as the Disclosing Party shall designate.  If this Agreement is terminated pursuant to Sectio n 10.1, then each Receiving Party shall deliver promptly to the Disclosing Party or destroy, at the request and option of the Disclosing Party, all tangible embodiments (and all copies) of the Proprietary Information that are in his or its possession.

(b)

The obligations of the Parties contained in this Section 7 shall be in full force and effect for three years from the date hereof and will survive the termination of this Agreement, the discharge of all other obligations owed by the Parties to each other and any transfer of title to the Assets.  Nothing in this Section 7 shall in any way alter Buyer’s obligations under the Confidentiality Agreement dated February 25, 2006 by and between Energy Capital Partners and NUSCO as agent for Seller and Holyoke Water Power Company, which Confidentiality Agreement shall terminate automatically upon the Closing Date and shall be of no further force and effect .

(c)

Upon the Disclosing Party’s prior written approval (which will not be unreasonably withheld), the Receiving Party may provide Proprietary Information to the FERC, the SEC, the United States Department of Justice, the United States Federal Trade Commission or any other Governmental Authority with jurisdiction, as necessary, to obtain any consents, waivers or approvals as may be required for the Receiving Party to undertake the transactions contemplated herein.  The Receiving Party will seek confidential treatment for such Proprietary Information provided to any such Governmental Authority (if such confidential treatment is available from the appropriate Governmental Authority) and the Receiving Party will notify the Disclosing Party as far in advance as is practicable of its intention to release to any such Governmental Authority any such Proprietary Information.

8.

Taxes

8.1

Liability for Taxes.

(a)

Seller shall be responsible for, pay and indemnify and hold harmless the Buyer Indemnified Parties against, all Pre-Closing Tax Liabilities and all Taxes payable as a result of a breach of any representation or warranty contained in Section 3.22 of the Agreement.

(b)

Buyer shall be responsible for, pay and indemnify and hold harmless, the Seller Indemnified Parties against, all Taxes of the Company with respect to all periods (or portions thereof) beginning after the Closing Date.

(c)

Buyer shall pay to Seller the amounts of any refund, abatement or credit of Taxes (net of any costs associated therewith) received (i) for which Seller has previously indemnified Buyer and (ii) for Taxes that are attributable to the ownership of the Company for any period or portion thereof ending on or prior to the Closing Date.

(d)

Seller shall pay to Buyer the amounts of any refund, abatement or credit of Taxes received (i) for which Buyer has previously

indemnified Seller and (ii) for Taxes that are attributable to the ownership of the Company for periods (or portions thereof) beginning after the Closing Date.  

(e)

Seller shall prepare and timely file or shall cause to be prepared and timely filed and shall remit or cause to be remitted any Taxes due in respect of the following Tax Returns with respect to the Company or in respect of their businesses, assets or operations; (i) all Tax Returns for any taxable period ending on or before the Closing Date; and (ii) all other Tax Returns required to be filed (taking into account extensions) prior to the Closing Date.  Buyer shall prepare and timely file or shall cause to be prepared and timely filed all Tax Returns that are required to be filed by or with respect to the Company or in respect of their businesses, assets or operations for taxable years or periods beginning and ending after the Closing Date.  Buyer shall remit or cause to be remitted any Taxes due in respect of such Tax Returns.  If Buyer is required to file any Tax Return for a taxable period beginning before and ending after the Closing Date, Buyer shall cause such Tax Return to be filed and shall be responsible for the payment of any Tax for such period.  However, Seller shall pay to Buyer, as an adjustment to the Purchase Price, the amount by which the Tax attributable to the period through the Closing Date exceeds the amount of such Tax paid (including payments of estimated Tax) on or before the Closing Date. For purposes of this Section 8, the Tax attributable to the period through the Closing Date shall be determined using the Tax accounting methods and Tax elections used by the Company before the Closing Date.  Buyer shall compute the amount of the Tax attributable to the period through the Closing Date and shall notify Seller of such amount in writing no later than fifteen (15) days prior to filing the Tax Return.  Within ten (10) days after the date of such notification, Seller shall pay to Buyer or Buyer shall pay to Seller, as appropri ate, the difference between (i) the amount of Tax determined by Buyer as attributable to the portion of the period through the Closing Date, and (ii) the amount of the Tax for the taxable period paid (including payments of estimated Tax) on or before the Closing Date by Seller, unless within five (5) days after such date, Seller notifies Buyer in writing that Seller disagrees with the computation of any such amount.  In that case, Seller and Buyer shall proceed in good faith to determine the correct amount, and Seller’s payment to Buyer, or Buyer’s payment to Seller, shall be due the later of (i) the time specified in the immediately preceding sentence and (ii) ten (10) days after Seller and Buyer agree to the amount payable.  The parties agree that if the Company is permitted but not required under applicable state or local Tax laws to treat the Closing Date as the last day of a taxable period, the parties shall treat such day as the last day of a taxable period. The parties agree that t hey will treat the Company as if it ceased to be part of the affiliated group of corporations of which Seller is a member within the meaning of section 1504 of the Code, and any comparable or similar provision of state, local or foreign laws or regulations, as of the close of business on the Closing Date.

(f)

Buyer and Seller agree to cooperate and share, before, at and after the Closing, all required information on a timely basis in order to timely file all Tax Returns, reports, returns, schedules and any other documents required to be filed with respect to Taxes and all claims for refunds of Taxes and for the preparation of any audit, and for the prosecution or defense of any claim or proceeding relating to any proposed adjustment.  Buyer and Seller agree to retain or cause to be retained all Tax Returns, and books and records pertinent to the Business until the applicable period for assessment under applicable law (giving effect to any and all extensions or waivers) has expired, and to abide by or cause the abidance with all record retention agreements entered into with any Governmental Authority.  Buyer and Seller shall cooperate with each other in the conduct of any audit or other proceedings involving Pre-Closing Taxes.  Seller shall have the right to, at its own expense, control any audit or examination by any Governmental Authority ("Tax Audit") with respect to Pre-Closing Taxes and to employ counsel of its choice at its expense, provided that Buyer shall be entitled to participate in any such Tax Audit and Seller shall not settle any such Tax Audit without Buyer’s consent (not to be unreasonably withheld) to the extent such settlement could adversely affect Buyer or its Affiliates for a taxable period or portion thereof beginning after the Closing Date.  For clarification, Seller may settle any such Tax Audit without Buyer’s consent if such settlement could not adversely affect Buyer or its Affiliates for a taxable period or portion thereof beginning after the Closing Date.  Notwithstanding the foregoing, in the case of a taxable period that begins before and ends after Closing, Seller shall be entitled to participate a t its expense in any Tax Audit relating in any part to Taxes attributable to the portion of such period deemed to end on or before the Closing Date, but Buyer shall control the Tax Audit.  None of Buyer, any of its Affiliates or the Company may settle or otherwise dispose of any Tax Audit for which Seller may have a liability under this Agreement, or that may result in an increase in Seller’s liability under this Agreement, without the prior written consent of Seller, which consent may not be unreasonably withheld.  At Seller’s request, Buyer shall cause the Company to make or join with Seller in making elections with respect to its Tax Returns for periods ending on or before the Closing, provided that the making of such election does not have a materially adverse effect on Buyer or the Company for any post-Closing Tax period (or portion thereof).

(g)

Any payment by Buyer or Seller under this Section 8.1 will, for Tax purposes, be deemed an adjustment to the Purchase Price, unless otherwise required by Law.

(h)

All Tax sharing agreements or similar arrangements with respect to or involving the Company shall exclude the Company effective immediately after the Closing.

(i)

All excise, sales, use, transfer (including real property transfer or gains), stamp, documentary, filing, recordation and other similar taxes, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties (the "Transfer Taxes"), resulting from the transfer of the Shares pursuant to this Agreement shall be borne by Buyer.

(j)

Buyer shall not sell any of the Assets on the Closing Date.

9.

Indemnification; Remedies

9.1

Survival of Representations and Warranties; Survival of Covenants and Agreements.  The representations and warranties of Seller set forth in Section 3 (other than (i) the representation and warranties set forth in Sections 3.1, 3.2, 3.4, 3.5 and 3.7 (collectively, the "Title and Authority Representations"), which shall survive the Closing indefinitely and (ii) the representations and warranties set forth in Section 3.22 (taxes), which shall survive the Closing for 60 days following the expiration of the applicable statute of limitations) and the representations and warranties of Buyer set forth in Section 4, shall survive the Closing for a period of twelve (12) months, provided that all such representations and warranties of the Parties shall terminate upon a termination of this Agreement pursuant to Section 10.1.  The covenants of the Parties contained in this Agreement, other than those that by their terms survive the Closing and/or termination of this Agreement (and other than (i) the covenants set forth in Section 5.3 (operation of business), which shall survive the Closing for a period of twelve (12) months and (ii) the covenants set forth in Section 8, which shall survive the Closing for 60 days following the expiration of the applicable statute of limitations), shall terminate 30 days after the Closing or at the termination of this Agreement pursuant to Section 10.1, except as set forth in such Section.

9.2

Effect of Closing.  Upon the Closing, any condition to the obligations of either Party hereunder that has not been satisfied, or, except (i) to the extent such breaches or failures to satisfy are subject to indemnification hereunder, (ii) with respect to claims for fraud or deceit and (iii) as provided in Section 11.17, any representation, warranty or covenant that has been breached or left unsatisfied by either Party, will be deemed waived by the Parties, and each Party will be deemed to fully release and forever discharge the other Party on account of any and all claims, demands or charges, known or unknown, with respect to the same.  Nothing in this Section 9.2 shall be deemed to affect any provision herein that expressly survives the Closing (including pursuant to Section 9.1) or pertains to matters that will occur after the Closing.

9.3

Indemnity by Seller.  Seller shall indemnify, defend and hold harmless Buyer, its Affiliates, its and their successors and permitted assignees, and all of its and their respective stockholders, trustees, partners, members, directors, officers, employees, agents and representatives (collectively, "Buyer Indemnified Parties") against and in respect of all Liabilities, obligations, judgments, Liens (except for Permitted Encumbrances), injunctions, charges, orders, decrees, rulings, damages, assessments, Taxes, losses, fines, penalties, damages, expenses, fees, costs, and amounts paid in settlement (including reasonable consultants’, attorneys’ and expert witness fees and disbursements in connection with

investigating, defending or settling any action or threatened action), (collectively, the "Losses"), that result from, arise out of or relate to:

(a)

any breach by Seller of any representation or warranty set forth in this Agreement; or

(b)

any breach by Seller of any of its covenants contained in this Agreement.

9.4

Indemnity by Buyer.  Buyer hereby agrees to indemnify, defend and hold harmless Seller, its Affiliates, its and their successors and permitted assigns, and all of their respective stockholders, trustees, partners, members, directors, officers, employees, agents and representatives (collectively, "Seller Indemnified Parties") against and in respect of all Losses that result from, arise out of or relate to:

(a)

any Third Party Claim against Seller based on or relating to Buyer’s ownership or operation of the Company after the Closing Date;

(b)

any breach by Buyer of any representation or warranty set forth in this Agreement;

(c)

all Environmental Liabilities, whether arising before, on or after the Closing Date; or

(d)

any breach by Buyer of any of its covenants contained in this Agreement.

9.5

Limitations on Liability.

(a)

The aggregate liability of (i) Seller to Buyer Indemnified Parties under this Section 9 (other than pursuant to Section 9.3(b), and other than any such liability with respect to the Title and Authority Representations) and Section 8.1(a) and (ii) the Related Sellers to Related Buyer Indemnified Parties pursuant to Section 9 of the Related Purchase Agreement (other than pursuant to Sections 9.3(a) and 9.3(c) of the Related Purchase Agreement and other than any such liability with respect to "Authority Representations," as defined in the Related Purchase Agreement) shall be limited to ten percent (10%) of the sum of the Initial Purchase Price pursuant to this Agreement and the Initial Purchase Price as defined in and pursuant to the Related Purchase Agreement (the "Combined Purchase Price").  The aggregate liability of (x) Buyer to Seller I ndemnified Parties under this Section 9 (other than pursuant to Section 9.4(a), 9.4(c) or 9.4(d) and other than any such liability with respect to the Title and Authority Representations) and Section 8.1(b) and (y) Related Buyer to Related Buyer Indemnified Parties pursuant to Section 9 of the Related Purchase Agreement (other than pursuant to Section 9.4(a), 9.4(c) or 9.4(d) of the Related Purchase Agreement and other than any such liability with respect to "Authority Representations," as defined in the Related Purchase Agreement) shall be

limited to ten percent (10%) of the Combined Purchase Price.  In addition, (x) none of Seller Indemnified Parties or Buyer Indemnified Parties shall make any claim against an indemnifying party under this Section 9 (other than pursuant to Sections 9.3(b), 9.4(a), 9.4(c) and 9.4(d) (except in the case of Sections 9.4(a) and 9.4(c), to the extent related solely to a breach by Seller of its representations and warranties in this Agreement), and other than with respect to Title and Authority Representations) or Section 8.1(a) or 8.1(b) and (y) none of Related Seller Indemnified Parties or Related Buyer Indemnified Parties shall make any claim against an indemnifying party under Section 9 of the Related Purchase Agreement (other than pursuant to Section 9.3(a), 9.3(c), 9.4(a), 9.4(c) or 9.4(d) (except in the case of Sections 9.4(a) and 9.4(c), to the extent relate d solely to a breach by Seller of its representations and warranties in the Related Purchase Agreement and in the case of Section 9.3(a) to the extent related solely to a breach by Buyer of its representations and warranties in the Related Purchase Agreement) of the Related Purchase Agreement and other than with respect to "Authority Representations," as defined in the Related Purchase Agreement) (i) with respect to any individual claim or a series of related claims for less than two hundred thousand dollars ($200,000) and (ii) unless and until the aggregate amount of all such claims (excluding all individual claims or series of related claims for less than two hundred thousand dollars ($200,000) each) against the indemnifying party exceeds one percent (1%) of the Combined Purchase Price (the "Threshold"), whereupon (A) a Seller Indemnified Party or Buyer Indemnified Party, as the case may be, may make claims under this Section 9 or Section 8.1(a) or 8.1(b) and (B) Related Seller I ndemnified Party or Related Buyer Indemnified Parties, as the case may be, may make claims under Section 9 of the Related Purchase Agreement, in each case for any and all such amounts (including the amount of the Threshold); provided that each Party shall notify the other Party of all claims covered by this Section 9 or Section 8.1(a) or 8.1(b) and each party to the Related Purchase Agreement shall notify the other parties to the Related Purchase Agreement of all claims covered by Section 9 of the Related Agreement whether or not the Threshold has been exceeded.  Notwithstanding the foregoing, the limitations in this Section 9.5(a) shall not apply to Seller’s obligation to indemnify the Buyer Indemnified Parties against any Taxes of Seller or any other member of any affiliated, combined or other Tax group of which the Company was a member at any time on or prior to the Closing Date (other than Taxes, within the meaning of clause (i) only of the definition thereof, of the Company).

(b)

None of Buyer Indemnified Parties nor Seller Indemnified Parties shall be entitled to recover from Seller or Buyer, respectively, for any Losses arising under this Agreement or in connection with or with respect to the transactions contemplated in this Agreement, any amount in excess of the actual compensatory damages, court costs and reasonable attorneys fees, suffered by such Party.  Buyer on behalf of each of Buyer Indemnified Parties and Seller on behalf of each of Seller Indemnified Parties waives any right to recover incidental, indirect, special, exemplary, punitive or consequential

damages, including lost revenues or profits, even if such damages are foreseeable or the damaged Party has advised the other Party of the possibility of such damages and regardless of whether any such damages are deemed to result from the failure or inadequacy of any exclusive or other remedy.  Notwithstanding the foregoing, the limitations set forth in this Section 9.5(b) with respect to indirect, consequential damages, including lost profits, shall  not apply in the event of a breach by Seller of its representation in Section 3.15 (Condemnation).  

(c)

Except as set forth in Sections 9.7(c) and 9.7(d), no Party entitled to indemnification hereunder shall settle, compromise or take any other action with respect to any claim, demand, assertion of liability or legal proceeding that could materially prejudice or otherwise materially adversely affect the ability of the Party providing such indemnification to defend or otherwise settle or compromise with respect to such claim, demand, assertion of liability or legal proceeding without the prior written consent of the Party providing such indemnification, which consent shall not be unreasonably withheld.

(d)

Each Party entitled to indemnification hereunder or otherwise to reimbursement for Losses in connection with the transactions contemplated in this Agreement shall use Commercially Reasonable Efforts to mitigate all Losses upon becoming aware of any event or circumstance that could reasonably be expected to give rise to any Losses that are indemnifiable or recoverable hereunder or in connection herewith.

(e)

After the Closing, notice of any assertion by any Buyer Indemnified Party that Seller is liable to any Buyer Indemnified Party in connection with the transactions contemplated hereby pursuant to Sections 9.3(a) and 9.3(b) must be made by Buyer in writing and must be given to Seller, on or prior to the time of expiration set forth in Section 9.1 or such claim will be forever barred.

(f)

After the Closing, notice of any assertion by any Seller Indemnified Party that Buyer is liable to any Seller Indemnified Party pursuant to (i) Sections 9.4(b) and 9.4(d) in connection with the transactions contemplated hereby must be given to Buyer on or prior to the time of expiration set forth in Section 9.1, and (ii) Sections 9.4(a) and 9.4(c) must be made by Seller in writing and must be given to Buyer on or prior to the expiration of the applicable statute of limitations for such claim or such claim will be forever barred.

(g)

Any notice provided under this Section 9.5 shall state the facts known to the asserting Party that give rise to such notice in sufficient detail to allow the other Party to evaluate the assertion.

(h)

Seller acknowledges and agrees that, upon and after the Closing, the Company shall have no liability or obligation to indemnify, save or hold harmless or otherwise reimburse or make Seller whole for or on account of any indemnification claim for any breach of any representation, warranty, covenant or agreement of Seller or the Company, and Seller shall have no right of contribution against the Company.

9.6

Exclusive Remedy.  Except as provided in Section 11.17 and except with respect to claims for fraud or deceit, from and after the Closing, the remedies set forth in this Section 9 and in Section 8 shall constitute the sole and exclusive remedies for any and all claims, damages, complaints, demands, causes of action, investigations, hearings, actions, suits or other proceedings relating to this Agreement and are in lieu of any and all other rights and remedies that Seller Indemnified Parties or Buyer Indemnified Parties may have under this Agreement or otherwise for monetary relief with respect to any breach or failure to perform.  Each Party waives any provision of law to the extent that it would limit or restrict the agreements contained in this Section 9.  Nothing herein shall prevent either Party from terminating this Agreement in accordance with Section 10. & nbsp;

9.7

Matters Involving Third Parties

(a)

If any Third Party shall notify any Party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") that may give rise to a claim for indemnification against any other Party (the "Indemnifying Party") under this Section 9, then the Indemnified Party shall promptly notify the Indemnifying Party thereof in writing; provided that no delay on the part of the Indemnified Party in notifying the Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party is prejudiced thereby.

(b)

Any Indemnifying Party will have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as (i) within fifteen (15) days after receiving such notice, the Indemnifying Party shall give written notice to the Indemnified Party stating whether it disputes the claim for indemnification and whether it will defend against any Third Party Claim or liability at its own cost and expense, (ii) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief, settlement of, or an adverse judgment with respect to, and the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice adverse to the continuing business interests of the Indemnified Party, and (iii) the Indemnif ying Party conducts the defense of the Third Party Claim actively and diligently; provided that if the claim is one that cannot by its nature be defended solely by the Indemnifying Party, the Indemnified Party shall make available all information and assistance reasonably available and necessary for the

defense of the Third Party Claim as the Indemnifying Party may reasonably request and shall cooperate with the Indemnifying Party in such defense.

(c)

So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with Section 9.7(b), (i) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, (ii) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (which consent shall not unreasonably be withheld), and (iii) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim unless written agreement is obtained releasing the Indemnified Party from all liability thereunder and such judgment or settlement is not reasonably likely to have a material adverse effect on the operations of the Indemnif ied Party or any of its Affiliates.

(d)

In the event any of the conditions in Section 9.7(b) is or becomes unsatisfied, however, (i) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any Indemnifying Party in connection therewith), (ii) the Indemnifying Party will reimburse the Indemnified Party promptly and periodically for the reasonable costs of defending against the Third Party Claim (including reasonable attorneys’ fees and expenses), and (iii) the Indemnifying Party will remain responsible for any Losses the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this Section 9.

9.8

Net of Insurance.  Any calculation of a Loss under this Section 9 shall, in each case, give full effect to any and all insurance proceeds actually received by the Indemnified Party in respect of the Loss (net of the costs of collecting such proceeds).  The Indemnified Party shall use its Commercially Reasonable Efforts to collect any insurance proceeds payable to the Indemnified Party in respect of such Loss.  If any such insurance proceeds are collected after an indemnification payment is made pursuant to this Section 9, the Indemnified Party shall pay to the Indemnifying Party the amount of such received insurance proceeds (net of the costs of collecting such proceeds), up to the amount of the indemnification payment previously made hereunder.  The Parties agree to treat any indemnity payment made pursuant to this Agreement as an adjustment to the Purchase Price, unless other wise required by Law.  Any such Loss shall not take into account, and shall not be increased to reflect, the Tax consequences to the Indemnified Party of the receipt of (or the right to receive) the indemnification payments.

10.

Termination

10.1

Termination of Agreement.  The Parties may terminate this Agreement as provided below:

(a)

the Parties may terminate this Agreement by mutual written consent at any time prior to the Closing;

(b)

Buyer may terminate this Agreement by giving written notice to Seller at any time prior to the Closing if any of the following has occurred: (i) Seller has breached any representation, warranty or covenant contained in this Agreement in any material respect, Buyer has notified Seller of the breach, and the breach has continued without cure for a period of sixty (60) days after the notice of breach; (ii) the Closing shall not have occurred on or before (A) the date that is nine (9) months following the Effective Date by reason of the failure of any condition precedent under Section 6.1 (other than the conditions to Closing set forth in Section 6.1(c) or Section 6.1(d)), unless the failure results primarily from Buyer itself breaching any representation, warranty, or covenant or failing to fulfill any of its obligation contained in this Agreement, or (B) the date that is tw elve (12) months following the Effective Date by reason of the failure of any condition precedent under Section 6.1(c) or Section 6.1(d), unless the failure results primarily from Buyer itself breaching any representation, warranty, or covenant or failing to fulfill any of its obligations contained in this Agreement; (iii) one or more courts of competent jurisdiction shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the Closing, which order, judgment or decree shall not have been terminated, lifted, vacated or otherwise rendered irrelevant within ninety (90) days of the issuance thereof; (iv) any statute, rule or regulation shall have been enacted by any Governmental Authority that, directly or indirectly, prohibits the consummation of the transactions contemplated hereby; (v) (W) Seller has within the then previous fifteen (15) days given Buyer any notice pursuant to Section 5.5(a) or (b) or delivered a Schedule Update pursuant to Section 5.5(b) and t he matter that is the subject of such notice, if in existence on the Effective Date or the Closing Date, would cause the representations and warranties of Seller set forth in Section 3 not to be true and correct, (X) such matter (together with the matters that are subject of any or all previous notices given pursuant to such Sections 5.5(a) or (b) or Schedule Updates delivered pursuant to Section 5.5(b)) would have a Material Adverse Effect on the Company or Buyer, (Y) Buyer has notified Seller of its intent to terminate pursuant to this Section 10.1(b), and (Z) the matter that is the subject of such notice continues to exist for a period of sixty (60) consecutive days after such notice by Buyer; (vi) the event described in Section 5.10(d) as giving rise to Buyer having the right to terminate this Agreement shall have occurred; or (vii) the Related Purchase Agreement or the Mt. Tom Purchase Agreement has been terminated;  and  

(c)

Seller may terminate this Agreement by giving written notice to Buyer at any time prior to the Closing if any of the following has occurred: (i) Buyer has breached any representation, warranty, or covenant contained in this Agreement in any material respect, Seller has notified Buyer of the breach, and the breach has continued without cure for a period

of sixty (60) days after the notice of breach; (ii) the Closing shall not have occurred on or before (A) the date that is nine (9) months following the Effective Date by reason of the failure of any condition precedent under Section 6.2 (other than Section 6.2(c) or Section 6.2(d)), unless the failure results primarily from Seller itself breaching any representation, warranty, or covenant or failing to fulfill any of its obligations contained in this Agreement, or (B) the date that is twelve (12) months following the Effective Date by reason of the failure of any condition precedent under Section 6.2(c) or Section 6.2(d), unless the failure results primarily from Seller itself breaching any representation, warranty, or covenant or failing to fulfill any of its obligations contained in this Agreement; (iii) one or more courts of competent jurisdiction shall have is sued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the Closing, which order, judgment or decree shall not have been terminated, lifted, vacated or otherwise rendered irrelevant within ninety (90) days of the issuance thereof; (iv) any statute, rule or regulation shall have been enacted by any Governmental Authority that, directly or indirectly, prohibits the consummation of the transactions contemplated hereby; (v) (W) Buyer has within the then previous fifteen (15) days given Seller any notice pursuant to Section 5.5(a) or (c) and the matter that is the subject of such notice, if in existence on the Effective Date or the Closing Date, would cause the representations and warranties of Buyer set forth in Section 4 not to be true and correct, (X) such matter (together with the matters that are the subject of any or all previous notices given pursuant to such Section 5.5(a) or (c)) would have a Material Adverse Effect on Seller, (Y) Seller has notified Buyer of its int ent to terminate pursuant to this Section 10.1(c), and (Z) the matter that is the subject of such notice continues to exist for a period of sixty (60) consecutive days after such notice by Seller; or (vi) the Related Purchase Agreement or the Mt. Tom Purchase Agreement has been terminated.

10.2

Effect of Termination.  If either Party terminates this Agreement pursuant to Section 10.1, all rights and obligations of the Parties hereunder shall terminate without any Liability of either Party to the other Party (except for any Liability of any Party with respect to breach of this Agreement occurring prior to termination and except as otherwise expressly provided herein); provided that Sections 7, 10.2 and 11 shall survive such termination. Notwithstanding anything in the contrary in this Agreement, and for the avoidance of doubt, the Parties agree that in the event of a termination of this Agreement as a result of the breach of this Agreement by any Party, the non-breaching Party shall be entitled to recover from the breaching Party the direct out-of-pocket fees, expenses and costs incurred by the non-breaching Party in connection with this Agreement and the transac tions contemplated hereby.  In the case of Buyer, such direct out-of-pocket fees, expenses and costs shall include all fees, expenses and other costs incurred in connection with (i) the organization, formation and capitalization of Buyer and its subsidiaries, (ii) the due diligence investigation of the Company, the Facilities and the Assets, (iii) the negotiation, execution, satisfaction of the conditions, performance of the obligations and covenants and termination of, under or with respect to this Agreement, the Ancillary Agreements and any agreements or commitments

related to or required by the financing of the transactions contemplated hereby, including without limitation in the case of (i), (ii) or (iii) the fees, expenses and other costs of any consultants, advisors, counsel and accountants of Buyer as well as the costs of such financing sources and their respective consultants, accountants, advisors and counsel to the extent borne by Buyer.  In the case of Seller, such direct out-of-pocket fees, expenses and costs shall include all fees, expenses and other costs incurred in connection with (i) the auction process, including but not limited to investment banker fees, and (ii) the negotiation, execution, satisfaction of the conditions, performance of the obligations and covenants and termination of, under or with respect to this Agreement and the Ancillary Agreements, including without limitation in the case of (i) or (ii) the fees, expenses and other costs of any consultants, advisors, counsel and accountants of Seller.

11.

Miscellaneous

11.1

Press Releases and Public Announcements.  No Party shall issue any press release or make any public announcement relating to the subject matter of this Agreement without first affording the non-disclosing Party the opportunity to review and comment on such press release or public announcement; provided that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will provide the other Party with the opportunity to review in advance the disclosure).  The Parties shall cooperate, using Commercially Reasonable Efforts, as to the timing and contents of any such disclosure, including any such disclosure required by applicable Law or the rules of any stock exchange.  Notwithstanding the above, the Parties sha ll agree as to the timing and contents of the first press release.  

11.2

No Third Party Beneficiaries.  This Agreement shall not confer any rights or remedies upon any Third Party.  For the avoidance of doubt, no provision of this Agreement shall create any third party beneficiary rights in any employee or former employee of Company, Seller or any of their Affiliates (including any beneficiary or dependent thereof) in respect of continued employment or resumed employment, and no provision of this Agreement shall create any rights in any such Persons in respect of any benefits that may be provided, directly or indirectly, under any employee benefit plan or arrangement.

11.3

No Joint Venture.  Nothing in this Agreement creates or is intended to create an association, trust, partnership, joint venture or other entity or similar legal relationship between the Parties, or impose a trust, partnership or fiduciary duty, obligation, or liability on or with respect to either Party.  Neither Party is or shall act as or be the agent or representative of the other Party.

11.4

Entire Agreement.  This Agreement (including the Exhibits and Schedules hereto), together with the Ancillary Agreements constitute the entire agreement between the Parties and supersede any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they relate in any way to the subject matter hereof, provided that the Confidentiality Agreement dated as of February 25, 2006 shall remain in full force and effect without regard to any provision of this Agreement until the Closing Date (except as contemplated by the definition of Proprietary Information herein), and shall

terminate automatically on the Closing Date.  All conflicts or inconsistencies between the terms hereof and the terms of any of the Ancillary Agreements, if any, shall be resolved in favor of this Agreement.

11.5

Succession and Assignment.  This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any Party, including by operation of law, without the prior written consent of the other Parties, such consent not to be unreasonably withheld or delayed.  Any assignment in contravention of the foregoing sentence shall be null and void and without legal effect on the rights and obligations of the Parties hereunder.  Notwithstanding the foregoing, but subject to all applicable Laws, (i) Buyer or its permitted assignee may assign, transfer, pledge or otherwise dispose of (absolutely or as security) its rights and interests hereunder to a trustee, lending institutions or other party for the purposes of leasing, financing or refinancing the Assets, and (ii) Buyer or its permitted assignee may assign, transfer, pledge or otherwise dispose of (absolutely or as security) its rights and interests hereunder to an Affiliate of Buyer so long as such Affiliate makes the representations and warranties set forth in Section 4 to the same extent as Buyer and provides Acceptable Guaranty to Seller; provided in each case that no such assignment shall relieve or discharge the assigning Party from any of its obligations hereunder or shall be made if it would reasonably be expected to prevent or materially impede, interfere with or delay the transactions contemplated by this Agreement or materially increase the cost of the transactions contemplated by this Agreement.  Each Party agrees, at the assigning Party’s expense, to execute and deliver such documents as may be reasonably necessary to accomplish any such assignment, transfer, pledge or other disposition of rights and i nterests hereunder so long as the nonassigning Party’s rights under this Agreement are not thereby materially altered, amended, diminished or otherwise impaired.

11.6

Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.

11.7

Headings.  The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

11.8

Notices.  All notices, requests, demands, claims and other communications hereunder will be in writing.  Any notice, request, demand, claim or other communication hereunder shall be deemed duly given (i) upon confirmation of facsimile, (ii) one Business Day following the date sent when sent by overnight delivery and (iii) five Business Days following the date mailed when mailed by registered or certified mail return receipt requested and postage prepaid at the following address:

If to Seller:

NU Enterprises, Inc.
107 Selden Street
Berlin, CT  06307
Attn:  NUSCO Manager of Corporate Planning

Copy to:

Senior Vice President and General Counsel
Northeast Utilities Services Company
107 Selden Street
Berlin, CT  06307

If to Buyer:

NE Energy, Inc.

51 John F. Kennedy Parkway, Suite 200

Short Hills, NJ 07078

Attn: General Counsel

NE Energy, Inc.

11943 El Camino Real #220

San Diego, CA 92130

Attn: Andrew Singer

Copy to:

Latham & Watkins LLP

885 Third Avenue

New York, NY 10022

Attn: Edward Sonnenschein and David Kurzweil

Either Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient.  For purposes of this Agreement, messages delivered by electronic mail shall be deemed to constitute "writings."  Either Party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth.

11.9

Governing Law.  This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Connecticut without giving effect to any choice or conflict of law provision or rule (whether of the State of Connecticut or any other

jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Connecticut.

11.10

Recourse.  Except as expressly provided in the Acceptable Guaranty and the Seller Guaranty, neither Party shall have recourse whatsoever under this Agreement against any of the trustees, general or limited partners, members, shareholders, directors, officers, employees or representatives of the other Party (including for such purposes, the trustees, general or limited partners, members, shareholders, directors, officers,  employees or representatives of any Affiliate of a Party).  Without limiting the generality of the foregoing, except as expressly provided in the Acceptable Guaranty and the Seller Guaranty, Buyer, on behalf of itself, its Affiliates and Buyer Indemnified Parties, and Seller, on behalf of itself, its Affiliates and Seller Indemnified Parties, each hereby fully and irrevocably waives any right, claim or entitlement whatsoever against such truste es, general or limited partners, members, shareholders, directors, officers, employees or representatives relating to any and all Losses suffered or incurred by any of them arising from, based upon, related to, or associated with this Agreement or any Ancillary Agreement or the transactions contemplated hereby or thereby (including any breach, termination or failure to consummate such transactions) in each case whether based on contract, tort, strict liability other laws or otherwise and whether by piercing of the corporate veil, by claim on behalf of or by a Party hereto or other Person or otherwise.

11.11

Consent to Jurisdiction.  Each of Seller and Buyer consents to the nonexclusive jurisdiction of any state or federal court located within the City of Hartford, Connecticut, for adjudication of any suit, claim, action or other proceeding at law or in equity relating to this Agreement, or to any transaction contemplated hereby.  Seller and Buyer each accept, generally and unconditionally, the nonexclusive jurisdiction of the aforesaid courts and waive any objection as to venue, and any defense of forum non conveniens.

11.12

Amendments and Waivers.  No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by Buyer and Seller.  No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

11.13

Severability.  Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

11.14

Expenses.  Each of Buyer and Seller will bear its own costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby (including legal and accounting fees and expenses, except as otherwise provided in Section 9), except that Buyer shall bear the entire cost (other than legal fees of Seller) of (i) all filings by both Seller and Buyer under the Hart-Scott-Rodino Act and (ii) the Joint Application for authorization pursuant to Sections 203 and 205 of the Federal Power Act.  To the extent, if any, that prior to the Closing the Company incurs any liabilities for costs or expenses in

connection with this Agreement and the transactions contemplated hereby, such liabilities of the Company, to the extent not satisfied prior to or simultaneously with the Closing, shall be treated as current liabilities of the Company as referred to in clause (b) of the definition of Net Working Capital.

11.15

Construction.  Ambiguities or uncertainties in the wording of this Agreement will not be construed for or against any Party, but will be construed in the manner that most accurately reflects the Parties’ intent as of the Effective Date.  The Parties acknowledge that they have been represented by counsel in connection with the review and execution of this Agreement, and, accordingly, there shall be no presumption that this Agreement or any provision hereof be construed against the Party that drafted this Agreement.

11.16

Incorporation of Exhibits and Schedules.  The Exhibits and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof.

11.17

Specific Performance.  Each of the Parties acknowledges and agrees that the other Party would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached.  Accordingly, each of the Parties agrees that the other Party shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter in addition to any other remedy to which it may be entitled, at law or in equity.

11.18

Good Faith Covenant.  The Parties agree that their actions and dealings with each other shall be subject to an express covenant of good faith and fair dealing.

11.19

Dispute Resolution.

(a)

Negotiation between executives:  The Parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement, promptly by negotiation between executives who have authority to settle the controversy.  Any Party may give the other Party written notice of any dispute not resolved in the normal course of business.  Such notice shall include: (a) a statement of that Party’s position and a summary of arguments supporting that position; and (b) the name and title of the executive who will be representing that Party and of any other person who will accompany the executive.  Within fifteen (15) days after delivery of the notice, the receiving Party shall respond with:  (a) a statement of that Party’s position and a summary of arguments supporting that position; and (b) the name and title of the executive who will represent that Party and of any other person who will accompany the executive.  Within thirty (30) days after delivery of the initial notice, the executives of both Parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute.  All reasonable requests for information made by one Party to the other will be honored.  All negotiations pursuant to this

clause are confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.

(b)

Mediation:  If the dispute has not been resolved by negotiation within forty-five (45) days of the disputing Party’s notice, or if the Parties failed to meet within thirty (30) days, the Parties shall endeavor to settle the dispute by mediation under the then current International Institute for Conflict Prevention and Resolution ("CPR") Mediation Procedure; provided that if one Party fails to participate as provided herein, the other Party can initiate mediation prior to the expiration of the forty-five (45) days.  Unless otherwise agreed, the Parties will select a mediator from the CPR Panels of Distinguished Neutrals.

(c)

Arbitration:  Any dispute arising out of or relating to this Agreement, including the breach, termination or validity thereof, that has not been resolved by a non-binding procedure as provided herein within ninety (90) days of the initiation of such procedure, shall be finally resolved by arbitration in accordance with the then current CPR Rules for Non-Administered Arbitration by a sole arbitrator, for disputes involving amounts in the aggregate under three million dollars ($3,000,000), or three arbitrators, for disputes involving amounts in the aggregate equal to or greater than three million dollars ($3,000,000), of whom each Party shall designate one in accordance with the "screened" appointment procedure provided in Rule 5.4; provided that if either Party will not participate in a non-binding procedure, the other may initiate arbitration before expiration of the above period.  The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16, and judgment upon the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof.  The place of arbitration shall be Hartford, Connecticut.

The arbitrator(s) are not empowered to award damages in violation of any limitations on damages provided for in this Agreement and each Party expressly waives and foregoes any right to punitive, exemplary or similar damages unless a statute requires that compensatory damages be increased in a specified manner.

[Signature Page Follows]

[Signature Page to Stock Purchase Agreement]

IN WITNESS WHEREOF, the Parties have duly executed and delivered this Stock Purchase Agreement as of the date first written above.

SELLER:

NU ENTERPRISES, INC.

By: /s/ David R. McHale

       Name: David R. McHale

       Title: Senior Vice President and Chief

       Financial Officer at Northeast Utilities

       Service Company, as agent for NU

       Enterprises, Inc.

[Signature Page to Stock Purchase Agreement]

IN WITNESS WHEREOF, the Parties have duly executed and delivered this Stock Purchase Agreement as of the date first written above.

BUYER:

NE ENERGY, INC.

By: /s/ Sarah Wright

       Name:  Sarah Wright

       Title:    Executive Vice President

EX-10.34.1

Exhibit 10.34.1

7/24/06

EXHIBIT F TO NGC STOCK PURCHASE AGREEMENT

FORM OF ACCEPTABLE GUARANTY

GUARANTY

This unconditional guaranty of payment and performance ("Guaranty") dated July 24, 2006, of ENERGY CAPITAL PARTNERS I, LP, a limited partnership organized under the laws of the State of Delaware ("Guarantor"), is for the benefit of and delivered to NU Enterprises, Inc., a Connecticut corporation ("Counterparty").

Guarantor does hereby irrevocably guarantee the full and prompt payment and performance by its subsidiary, NE Energy, Inc., a Delaware corporation ("Subsidiary"), of all of its obligations, including, without limitation, all payment and indemnification obligations ("Guaranteed Obligations"), under the Stock Purchase Agreement between the Counterparty and Subsidiary, dated July 24, 2006 (as the same may be amended from time to time, the "Agreement"), at the times and in the manner provided therein; provided that the maximum aggregate amount payable by the Guarantor hereunder, under the Acceptable Guaranty as defined in the Related Purchase Agreement (as defined in the Agreement) and under the Acceptable Guaranty as defined in the Mt. Tom Purchase Agreement (as defined in the Agreement) shall not exceed $53,600,000 (the "Cap").  The parties agree that this Gu aranty may not be enforced without giving effect to the Cap.  In addition, Guarantor hereby agrees to pay any and all costs and expenses (including reasonable fees and disbursements of counsel) incurred by Counterparty in enforcing and/or attempting to enforce any rights under this Guaranty.

This Guaranty may only be amended or modified by a writing signed by the parties hereto and is subject to, and its terms are governed by and must be interpreted under the laws of the State of Connecticut except for its choice of laws rules.

The Counterparty acknowledges and agrees that

(a)

this Guaranty shall be the sole and exclusive remedy of Counterparty for,

(b)

Guarantor, and any past, present or future directors, officers, employees, incorporators, members, partners, stockholders, Affiliates, agents, trustees, attorneys or representatives of Guarantor or any of their respective Affiliates, shall otherwise have no liability or obligation for, and

(c)

Counterparty shall not otherwise make any claim for,

in each case, any matter under, relating to or arising out of, the transactions contemplated pursuant to the Agreement or any Ancillary Agreement (including the breach, termination or failure to consummate such transactions, and whether by piercing of the corporate veil, by a claim by or on behalf of Subsidiary, or otherwise), whether based on contract, tort, strict liability, other laws or otherwise, or any action, suit, arbitration, claim, litigation, investigation or proceeding based on, in respect of, or by reason of any of the foregoing, provided that nothing in this Guaranty shall limit the rights, remedies or claims of the Counterparty (a) under the Agreement against Subsidiary, (b) under any Ancillary Agreement (as defined in the Agreement), other than this Guaranty, against Subsidiary or any other party to such Ancillary Agreement or (c) under the Acceptable Letter of Credit (as defined in the Agreement).

Guarantor’s obligation pursuant to this Guaranty (subject to the Cap) is an unconditional guaranty of payment and performance and not of collectibility.  This Guaranty shall remain in full force and effect until, and shall otherwise terminate at, the earliest of:

(i)

completion of the Closing;

(ii)

such time as each and all of the Guaranteed Obligations (subject to the Cap) shall have been fully paid and performed in accordance with the terms and provisions of the Agreement; and

(iii)

the date that is six (6) months following the termination of the Agreement, unless prior to such date the Counterparty shall have commenced proceedings to enforce this Guaranty, in which case this Guaranty shall terminate upon and in accordance with the final completion of such proceedings and payment of the Guaranteed Obligations (subject to the Cap).

Counterparty shall have no obligation to assert any claim or demand or to enforce any remedy under the Agreement or to proceed first against Subsidiary or any other person or entity, or resort to any security or make any effort to obtain payment and/or performance by Subsidiary or any other person or entity.  No delay or omission by Counterparty to exercise any right under this Guaranty shall impair any right, nor shall it be construed to be a waiver thereof.  No waiver of any single breach or default under this Guaranty shall be deemed a waiver of any other breach or default.

The liability of Guarantor under this Guaranty (subject to the Cap) shall be absolute, unconditional and irrevocable, irrespective of, except as expressly set forth herein: (a) any change in time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other amendment to, modification of (including, without limitation, change orders), waiver of, or any consent to departure from, the Agreement, (b) any change in ownership of Guarantor or Subsidiary; (c) any bankruptcy, insolvency, or reorganization of, or other similar proceedings involving Subsidiary; or (d) any other circumstances that might otherwise constitute a legal or equitable discharge of a surety or guarantor.

If a claim is made upon Counterparty at any time for repayment or recovery of any amounts received by Counterparty from any source on account of any of the Guaranteed Obligations, and the Counterparty, pursuant to a court order or applicable law, repays or returns any amounts so received, then Guarantor shall remain liable for the amounts so repaid (such amounts being deemed part of the Guaranteed Obligations) to the same extent as if such amounts had never been received by Counterparty, notwithstanding any termination hereof or the cancellation of any instrument or agreement evidencing any of the Guaranteed Obligations.

Guarantor hereby irrevocably, unconditionally and expressly waives, to the fullest extent permitted by applicable law, promptness, diligence, presentment, notice of acceptance and other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that Counterparty protect, secure or perfect any security interest or exhaust any right or first proceed against Subsidiary or any other person or entity.

The Counterparty may, without affecting any of its rights hereunder, receive and hold collateral or security from Subsidiary or from Guarantor or any other party to secure the payment and performance of the obligations of Subsidiary or Guarantor and may release such collateral or security or any part thereof, at any time, in its discretion, with or without the substitution of any other collateral or security, and likewise in its sole discretion Counterparty may, without notice to Guarantor and without affecting in any way its rights hereunder:

(a)

modify or otherwise change any terms of all or any part of the Agreement (so long as any such modification or other change is in a writing signed by Subsidiary) or grant any extension(s) or renewal(s) for any period or periods of time for payment and/or performance or grant any other indulgence(s) with respect thereto and effect any release, compromise or settlement with respect thereto;

(b)

enter into any agreement of forbearance with respect to all or any part of any payment and/or performance due under the Agreement, or with respect to all or any part of the collateral securing the payment and/or performance by Subsidiary or Guarantor of its obligations, and change the terms of any such agreement;

(c)

call for or forbear from calling for additional collateral or security from Subsidiary to secure its obligations;

(d)

enter into any agreement or agreements with Subsidiary concerning then existing or additional obligations; and/or

(e)

release or effect any settlement or compromise with respect to the payment and/or performance of the Agreement by Subsidiary or any other party

primarily or secondarily liable for the payment and/or performance of the Agreement.

Without limiting Guarantor’s own defenses and rights hereunder, Guarantor hereby reserves to itself all rights, setoffs, counterclaims and other defenses to which Subsidiary is or may be entitled arising from or out of the Agreement, except for defenses arising out of bankruptcy, insolvency, dissolution or liquidation of Subsidiary.

Guarantor represents and warrants to the Counterparty that:

(a)

Guarantor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has full power and legal right to execute and deliver this Guaranty and to perform the provisions of this Guaranty on its part to perform;

(b)

The execution, delivery and performance of this Guaranty by Guarantor have been and remain duly authorized by all necessary action, corporate or otherwise, and do not contravene any provision of its organizational documents or any law, regulation or contractual restriction binding on it or its assets;

(c)

No notice to or filing with, any governmental authority having jurisdiction is required for the execution, delivery and performance of this Guaranty; and

(d)

This Guaranty constitutes the legal, valid and binding obligation of Guarantor enforceable against it in accordance with its terms, except as enforcement hereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights or by general equity principles.

This Guaranty shall be binding upon Guarantor and its successors and permitted assigns and inure to the benefit of and be enforceable by Counterparty and its successors and permitted assigns.  Guarantor may not assign this Guaranty without the prior written consent of Counterparty, which consent may be withheld for any reason, and any assignment by Guarantor in violation of the foregoing shall be null and void.  The Counterparty may assign this Agreement, without the consent of Guarantor, to any assignee of the Counterparty’s rights under the Agreement.

Until payment in full of all Guaranteed Obligations, Guarantor hereby waives, releases, and relinquishes any claim, right, or remedy that Guarantor may now have or hereafter acquire against Subsidiary, or any of its assets or property that arises hereunder or from the performance by Guarantor hereunder, including, without limitation, any claim, right, or remedy of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim, right, or remedy that Guarantor may have against Subsidiary or any collateral for the Guaranteed Obligations that Guarantor now has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law, or otherwise.

All notices or communications to Guarantor shall be in writing and shall be directed by registered or certified mail or overnight delivery service to Guarantor’s principle office located at:

Energy Capital Partners I, LP

c/o Energy Capital Partners, LLC

51 John F. Kennedy Parkway, Suite 200

Short Hills, NJ 07078

Attn: General Counsel

Copy to:

Energy Capital Partners, LLC

11943 El Camino Real #220

San Diego, CA 92130

Attn: Andrew Singer

Copy to:

Latham & Watkins LLP

885 Third Avenue

New York, NY 10022

Attn: Ted Sonnenschein and David Kurzweil

or such other address as Guarantor shall from time to time specify in writing to Counterparty.

GUARANTOR HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF CONNECTICUT FOR ENFORCEMENT OF ALL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY AND THE TRANSACTIONS CONTEMPLATED HEREBY.  GUARANTOR HEREBY IRREVOCABLY WAIVES AND RELEASES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (a) ANY OBJECTION TO THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT; AND (b) ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

IF GUARANTOR DOES NOT MAINTAIN A REGISTERED AGENT IN CONNECTICUT, COUNTERPARTY MAY SERVE GUARANTOR BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE CORPORATE SECRETARY OF GUARANTOR AT THE ADDRESS SET FORTH ABOVE, WHICH SERVICE SHALL BE ACCEPTED BY GUARANTOR.

GUARANTOR HEREBY WAIVES AND RELEASES ITS RIGHT TO CLAIM A TRIAL BY JURY WITH RESPECT TO ANY ACTION ARISING HEREUNDER.

Guarantor hereby (a) consents to being joined as a party and/or a witness in any dispute resolution proceeding under the Agreement and/or related thereto; and (b) waives and releases, to the fullest extent permitted by applicable law, any objection, right or other claim that Guarantor cannot be compelled or otherwise has no obligation to participate in any such proceeding, as a party, witness or otherwise.

[Signature Page to follow]

IN WITNESS WHEREOF, this Guaranty has been executed by a duly authorized officer of Guarantor as of the date first written above.

ENERGY CAPITAL PARTNERS I, LP, Guarantor

By: /s/ Scott Helm

Name:  Energy Capital Partners GP I, LLC

Its:       General Partner

By: /s/ Scott Helm

Name:  Energy Capital Partners, LLC

Its:       Managing Member

Accepted and acknowledged:

NU ENTERPRISES, INC.

By: /s/ David R. McHale

Name: David R. McHale

Title:  Senior Vice President and Chief Financial Officer

           at Northeast Utilities Service Company, as agent for NU Enterprises, Inc.

EX-10.34.2

Exhibit 10.34.2

7/24/06

EXHIBIT L TO NGC STOCK PURCHASE AGREEMENT

FORM OF SELLER GUARANTY

GUARANTY

This unconditional guaranty of payment and performance ("Guaranty") dated July 24, 2006, of NORTHEAST UTILITIES, a Massachusetts business trust ("Guarantor"), is for the benefit of and delivered to NE ENERGY, INC., a Delaware corporation ("Counterparty").

Guarantor does hereby irrevocably guarantee the full and prompt payment and performance by its subsidiary, NU Enterprises, Inc., a Connecticut corporation ("Subsidiary"), of all of its obligations, including, without limitation, all payment and indemnification obligations ("Guaranteed Obligations"), under the Stock Purchase Agreement between the Counterparty and the Subsidiary, dated as of July 24, 2006 (as the same may be amended from time to time, the "Agreement"), at the times and in the manner provided therein.  In addition, Guarantor hereby agrees to pay any and all costs and expenses (including reasonable fees and disbursements of counsel) incurred by Counterparty in enforcing and/or attempting to enforce any rights under this Guaranty.

This Guaranty may only be amended or modified by a writing signed by the parties hereto and is subject to, and its terms are governed by and must be interpreted under the laws of the State of Connecticut except for its choice of laws rules.

No shareholder or trustee of Guarantor shall be held to any liability whatever for any obligation under this Guaranty, and such Guaranty shall not be enforceable against any such trustee in their or his or her individual capacities or capacity.  This Guaranty shall be enforceable against the trustees of Guarantor only as such, and every person, firm, association, trust or corporation having any claim or demand arising under this Guaranty and relating to Guarantor, its shareholders or trustees shall look solely to the trust estate of Guarantor for the payment or satisfaction thereof.

Guarantor’s obligation pursuant to this Guaranty is an unconditional guaranty of payment and performance and not of collectibility.  This Guaranty shall remain in full force and effect until, and shall otherwise terminate at, the earliest of:

(i)

such time as each and all of the Guaranteed Obligations shall have been fully paid and performed in accordance with the terms and provisions of the Agreement;

(ii)

the date that is six (6) months following the termination of the Agreement, unless prior to such date the Counterparty shall have commenced proceedings to enforce this Guaranty, in which case this Guaranty shall terminate upon and in accordance with the final completion of such proceedings and payment of the Guaranteed Obligations;

(iii)

with respect to all Guaranteed Obligations other than Special Guaranteed Obligations (as defined in clause (iv) below), the date that is twelve (12) months following the Closing Date (as defined in the Agreement), except to the extent that prior to such date the Counterparty shall have commenced proceedings to enforce this Guaranty with respect to any Guaranteed Obligations covered by this clause (iii), in which case this Guaranty shall with respect to such Guaranteed Obligations terminate upon and in accordance with the final completion of such proceedings and payment of such Guaranteed Obligations; and

(iv)

solely with respect to Guaranteed Obligations in respect of the Subsidiary’s Title and Authority Representations (as defined in the Agreement) and the representations, warranties and covenants contained in Sections 3.22, 5.13 and 8 of the Agreement and any claims for indemnification in respect of the foregoing pursuant to Section 9.3 of the Agreement (collectively, "Special Guaranteed Obligations"), the date that is thirty-six (36) months following the Closing Date (as defined in the Agreement), except to the extent that prior to such date the Counterparty shall have commenced proceedings to enforce this Guaranty with respect to any Special Guaranteed Obligations, in which case this Guaranty shall with respect to such Special Guaranteed Obligations terminate upon and in accordance with the final completion of such proceedings and payment of such Special Guaranteed Obligations.

Counterparty shall have no obligation to assert any claim or demand or to enforce any remedy under the Agreement or to proceed first against Subsidiary or any other person or entity, or resort to any security or make any effort to obtain payment and/or performance by Subsidiary or any other person or entity.  No delay or omission by Counterparty to exercise any right under this Guaranty shall impair any right, nor shall it be construed to be a waiver thereof.  No waiver of any single breach or default under this Guaranty shall be deemed a waiver of any other breach or default.

The liability of Guarantor under this Guaranty shall be absolute, unconditional and irrevocable, irrespective of, except as expressly set forth herein: (a) any change in time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other amendment to, modification of (including, without limitation, change orders), waiver of, or any consent to departure from, the Agreement, (b) any change in ownership of Guarantor or Subsidiary; (c) any bankruptcy, insolvency, or reorganization of, or other similar proceedings involving Subsidiary; or (d) any other circumstances that might otherwise constitute a legal or equitable discharge of a surety or guarantor.

If a claim is made upon Counterparty at any time for repayment or recovery of any amounts received by Counterparty from any source on account of any of the Guaranteed Obligations, and the Counterparty, pursuant to a court order or applicable law, repays or returns any amounts so received, then Guarantor shall remain liable for the amounts so repaid (such amounts being deemed part of the Guaranteed Obligations) to the same extent as if such amounts had never been received by Counterparty, notwithstanding any termination hereof or the cancellation of any instrument or agreement evidencing any of the Guaranteed Obligations.

Guarantor hereby irrevocably, unconditionally and expressly waives, to the fullest extent permitted by applicable law, promptness, diligence, presentment, notice of acceptance and other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that Counterparty protect, secure or perfect any security interest or exhaust any right or first proceed against the Subsidiary or any other person or entity.

The Counterparty may, without affecting any of its rights hereunder, receive and hold collateral or security from the Subsidiary or from Guarantor or any other party to secure the payment and performance of the obligations of the Subsidiary or Guarantor and may release such collateral or security or any part thereof, at any time, in its discretion, with or without the substitution of any other collateral or security, and likewise in its sole discretion Counterparty may, without notice to Guarantor and without affecting in any way its rights hereunder:

(a)

modify or otherwise change any terms of all or any part of the Agreement (so long as any such modification or other change is in a writing signed by the Subsidiary) or grant any extension(s) or renewal(s) for any period or periods of time for payment and/or performance or grant any other indulgence(s) with respect thereto and effect any release, compromise or settlement with respect thereto;

(b)

enter into any agreement of forbearance with respect to all or any part of any payment and/or performance due under the Agreement, or with respect to all or any part of the collateral securing the payment and/or performance by the Subsidiary or Guarantor of its obligations, and change the terms of any such agreement;

(c)

call for or forbear from calling for additional collateral or security from the Subsidiary to secure its obligations;

(d)

enter into any agreement or agreements with the Subsidiary concerning then existing or additional obligations; and/or

(e)

release or effect any settlement or compromise with respect to the payment and/or performance of the Agreement by Subsidiary or any other party

primarily or secondarily liable for the payment and/or performance of the Agreement.

Without limiting Guarantor’s own defenses and rights hereunder, Guarantor hereby reserves to itself all rights, setoffs, counterclaims and other defenses to which Subsidiary is or may be entitled arising from or out of the Agreement, except for defenses arising out of bankruptcy, insolvency, dissolution or liquidation of Subsidiary.

Guarantor represents and warrants to the Counterparty that:

(a)

Guarantor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has full power and legal right to execute and deliver this Guaranty and to perform the provisions of this Guaranty on its part to perform;

(b)

The execution, delivery and performance of this Guaranty by Guarantor have been and remain duly authorized by all necessary action, corporate or otherwise, and do not contravene any provision of its organizational documents or any law, regulation or contractual restriction binding on it or its assets;

(c)

No notice to or filing with, any governmental authority having jurisdiction is required for the execution, delivery and performance of this Guaranty; and

(d)

This Guaranty constitutes the legal, valid and binding obligation of Guarantor enforceable against it in accordance with its terms, except as enforcement hereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights or by general equity principles.

This Guaranty shall be binding upon Guarantor and its successors and permitted assigns and inure to the benefit of and be enforceable by Counterparty and its successors and permitted assigns.  Guarantor may not assign this Guaranty without the prior written consent of Counterparty, which consent may be withheld for any reason, and any assignment by Guarantor in violation of the foregoing shall be null and void.  The Counterparty may assign this Agreement, without the consent of Guarantor, to any assignee of the Counterparty’s rights under the Agreement.

Until payment in full of all Guaranteed Obligations, Guarantor hereby waives, releases, and relinquishes any claim, right, or remedy that Guarantor may now have or hereafter acquire against the Subsidiary, or any of its assets or property that arises hereunder or from the performance by Guarantor hereunder, including, without limitation, any claim, right, or remedy of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim, right, or remedy that Guarantor may have against the Subsidiary or any collateral for the Guaranteed Obligations that Guarantor now has or hereafter acquires, whether or not such claim,

right or remedy arises in equity, under contract, by statute, under common law, or otherwise.

All notices or communications to Guarantor shall be in writing and shall be directed by registered or certified mail or overnight delivery service to Guarantor’s principle office located at:

Northeast Utilities

107 Selden Street

Berlin, CT 06037-1616

Attention: Ms. Patricia C. Cosgel, Assistant Treasurer – Finance

or such other address as Guarantor shall from time to time specify in writing to Counterparty.

GUARANTOR HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF CONNECTICUT FOR ENFORCEMENT OF ALL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY AND THE TRANSACTIONS CONTEMPLATED HEREBY.  GUARANTOR HEREBY IRREVOCABLY WAIVES AND RELEASES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (a) ANY OBJECTION TO THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT; AND (b) ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

IF GUARANTOR DOES NOT MAINTAIN A REGISTERED AGENT IN CONNECTICUT, COUNTERPARTY MAY SERVE GUARANTOR BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE CORPORATE SECRETARY OF GUARANTOR AT THE ADDRESS SET FORTH ABOVE, WHICH SERVICE SHALL BE ACCEPTED BY GUARANTOR.

GUARANTOR HEREBY WAIVES AND RELEASES ITS RIGHT TO CLAIM A TRIAL BY JURY WITH RESPECT TO ANY ACTION ARISING HEREUNDER.

Guarantor hereby (a) consents to being joined as a party and/or a witness in any dispute resolution proceeding under the Agreement and/or related thereto; and (b) waives and releases, to the fullest extent permitted by applicable law, any objection, right or other claim that Guarantor cannot be compelled or otherwise has no obligation to participate in any such proceeding, as a party, witness or otherwise.

[Signature page follows]

IN WITNESS WHEREOF, this Guaranty has been executed by a duly authorized officer of Guarantor as of the date first written above.

NORTHEAST UTILITIES, Guarantor

By: /s/ David R. McHale

Name: David R. McHale

Title:

Senior Vice President and Chief Financial Officer

Accepted and acknowledged:

NE ENERGY, INC.

By: /s/ Sarah Wright

Name:  Sarah Wright

Title:  Executive Vice President

EX-10.35

Exhibit 10.35

EXECUTION COPY

PURCHASE AND SALE AGREEMENT

BY AND AMONG

NORTHEAST GENERATION SERVICES COMPANY,

SELECT ENERGY, INC.,

AND

NORTHEAST UTILITIES SERVICE COMPANY

AS SELLERS

AND

NE ENERGY, INC.

JULY 24, 2006

EXHIBITS

Exhibit A	- Form of Bill of Sale
Exhibit B	- Form of Assignment and Assumption Agreement
Exhibit C	- Form of Acceptable Guaranty
Exhibit D	- Form of Acceptable Letter of Credit
Exhibit E	- Form of Seller Guaranty

SCHEDULES

Schedule 1	- NGC Facilities
Schedule 2.1(a)	- Personal Property
Schedule 2.1(b)	- Leases
Schedule 2.1(c)	- Permits
Schedule 2.1(d)	- Contracts
Schedule 2.1(g)	- Leased Vehicles
Schedule 3.3	- Matters of Contravention
Schedule 3.5	- Title
Schedule 3.6	- Compliance
Schedule 3.6(b)	- Compliance (Permits)
Schedule 3.7	- Taxes
Schedule 3.8	- Exceptions to Contract Obligations
Schedule 3.9	- Litigation
Schedule 3.10(a)	- Collective Bargaining Agreements and Related Matters
Schedule 3.10(b)	- Seller Employee Benefit Plans
Schedule 5.6(a)	- NGC Facility personnel represented by the Locals as of the Effective Date
Schedule 5.6(b)	- NGC Facility personnel not represented by the Locals as of the Effective
	Date
Schedule 5.6(c)	- Support personnel as of the Effective Date
Schedule 6.1(c)	- Buyer’s Regulatory Approvals
Schedule 6.2(c)	- Sellers’ Regulatory Approvals

PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement (the “Related Purchase Agreement”) is entered into on July 24, 2006, by and among NE Energy, Inc., a Delaware Corporation (“Buyer”), and Northeast Generation Services Company, a Connecticut corporation (“NGS”), Select Energy, Inc., a Connecticut corporation (“Select”), and Northeast Utilities Service Company, a Connecticut corporation (“NUSCO”) (NGS, Select and NUSCO are each individually referred to herein as a “Seller” and are referred to collectively herein as “Sellers”).  Each of the Sellers and Buyer are referred to herein as a “Party” or collectively as the “Parties.”

WHEREAS, contemporaneously with the execution of this Related Purchase Agreement, Buyer has entered into an agreement (the “NGC SPA”) to purchase from NU Enterprises, Inc. (“NUEI”) all of the issued and outstanding stock of Northeast Generation Company (“NGC”) which owns the pumped storage, conventional hydro, and jet fuel generating facilities listed in Schedule 1 (the “NGC Facilities”);

WHEREAS, NGS manages, operates and maintains the NGC Facilities and provides administrative services to NGC pursuant to the Management and Operation Agreement between NGC and NGS, dated as of January 1, 2000, as amended (the “NGC-NGS M&OA”);

WHEREAS, NGC sells 100% of the net output of the NGC Facilities to Select pursuant to the Select and NGC Power Purchase and Sales Agreement, dated as of December 27, 1999, as amended (the “NGC-Select Power Agreement”), and Select provides certain services to NGC pursuant to the Agency Agreement between NGC and Select, dated June 18, 2004 (the “NGC-Select Agency Agreement”);

WHEREAS, NUSCO provides certain corporate center services to NGC pursuant to the Service Contract between NGC and NUSCO, dated January 4, 1999, as amended (the “NGC-NUSCO Services Agreement”);

WHEREAS, NGS, Select, NUSCO, NGC and NUEI are each wholly-owned direct or indirect subsidiaries of Northeast Utilities;

WHEREAS, the NGC-NGS M&OA, the NGC-Select Agency Agreement and the NGC-NUSCO Services Agreement will be terminated on or before the Closing Date (as defined below);  

WHEREAS, Buyer desires to purchase and assume, and Sellers desire to sell and assign, or cause to be sold or assigned, the Related Assets (as defined in Section 2.1 below) and certain associated liabilities upon the Closing as more fully described herein, upon the terms and conditions set forth in this Related Purchase Agreement;

NOW THEREFORE, in consideration of the covenants, representations, warranties, and mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1.

Definitions.

“Acceptable Guarantor” means Energy Capital Partners I, LP, a Delaware limited partnership or a substitute entity acceptable to the Sellers in their sole discretion.

“Acceptable Guaranty” means a guaranty issued by an Acceptable Guarantor, substantially in the form attached hereto as Exhibit C or such other form of performance assurance that is acceptable to Sellers in their sole discretion.

“Acceptable Letter of Credit” means a letter of credit in the form attached hereto as of Exhibit D.

“Affiliate” has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934, as amended.

“Ancillary Agreements” means, collectively, the Assignment and Assumption Agreement, the Bill of Sale, the Acceptable Guaranty and the Seller Guaranty.

Assignment and Assumption Agreement” means the agreement by which Sellers shall assign or cause to be assigned certain rights, liabilities and obligations and Buyer shall assume the Assumed Liabilities, in substantially the form attached hereto as Exhibit B.

“Assumed Liabilities” is defined in Section 2.3.

“Authority Representations” is defined in Section 9.1.

“Bill of Sale” means the form of bill of sale by which the title to personal property shall be conveyed to Buyer, substantially in the form attached hereto as Exhibit A.

“Business Day” means any day other than a Saturday, Sunday or day on which banks are legally closed for business in Hartford, Connecticut or New York, New York.

“Buyer” is defined in the introductory paragraph.

“Buyer Indemnified Parties” is defined in Section 9.3.

“Buyer’s Regulatory Approvals” means those consents, approvals, orders or authorizations of, or registrations, declarations or filings with, all Governmental Authorities required in connection with the execution, delivery or performance hereof by Buyer set forth on Schedule 6.1(c) attached hereto.

“Cash” means cash and Cash Equivalents (including marketable securities and short term investments) calculated in accordance with GAAP.

“Cash Equivalents” means cash equivalents as determined in accordance with GAAP and consistent with the Sellers’ past practices used in the preparation of the balance sheets and financial statements.

“Closing” is defined in Section 2.9.

“Closing Adjustment” is defined in Section 2.6(b).

“Closing Date” is defined in Section 2.9.

“Closing Month Capacity Payment” is defined in Section 2.8.

“Closing Month ISO Charges” is defined in Section 2.8.

“Closing Purchase Price” is defined in Section 2.5.

“Closing Statement” is defined in Section 2.6(c).

“Code” means the Internal Revenue Code of 1986, as amended from time to time or any successor law, and regulations issued by the IRS pursuant to the Internal Revenue Code as amended from time to time or any successor law.

“Collective Bargaining Agreements” means, collectively, (i) the Agreement between Northeast Utilities Service Company/ Hydro (Cabot Station) and the International Brotherhood of Electrical Workers Local Union 455, dated as of October 1, 2004, and (ii) the Agreement between Northeast Generation Services and Locals Number 420 and 457 of the International Brotherhood of Electrical Workers AFL-CIO, dated as of June 1, 2005.

“Commercially Reasonable Efforts” means efforts that are reasonably within the contemplation of the Parties at the Effective Date and that do not require the performing Party to expend any funds other than expenditures that are customary and reasonable in transactions of the kind and nature contemplated by this Related Purchase Agreement in order for the performing Party to satisfy its obligations hereunder.

“Company” means the Northeast Generation Company, a Connecticut corporation.

 “Contracts” is defined in Section 2.1(d).

“Controlled Group” is defined in Section 3.10(c).

“CPR” is defined in Section 11.20(b).

“Disclosing Party” is defined in the definition of Proprietary Information.

“Effective Date” means the date on which this Related Purchase Agreement has been duly executed and validly delivered by the Parties.

“Employee Benefit Plan” means any (a) nonqualified deferred compensation or retirement plan, program or arrangement which is an Employee Pension Benefit Plan, (b) qualified defined contribution retirement plan, program or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan, program or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan), (d) Employee Welfare Benefit Plan or material fringe benefit plan or program or arrangement, or (e) profit sharing, bonus, stock option, stock purchase, equity, stock appreciation, deferred compensation,

incentive, severance, employment, change in control, fringe benefit, agreement, program, policy or other arrangement whether or not subject to ERISA  .

“Employee Pension Benefit Plan” is defined in ERISA §3(2).

“Employee Welfare Benefit Plan” is defined in ERISA §3(1).

“Enhanced Severance” means with respect to a Non-Represented Plant Employee or a Non-Represented Support Employee (a) an amount equal to two (2) weeks of salary (based on such Person’s base salary immediately preceding the date of termination of employment) for each full year of credited service of such Person with Sellers or their Affiliates and Buyer, measured as continuous service in the case of any year in which such Person was employed by both Sellers or their Affiliates and Buyer, subject to a minimum of twelve (12) weeks and a maximum of fifty-two (52) weeks of such salary paid bi-monthly, less applicable federal, state, Social Security and Medicare Tax withholdings, (b) payment of such employee’s payments for the employee and any applicable dependents of the employee (other than co-pay and deductibles) pursuant to COBRA for a period of six (6) months following termination, and (c) the provision of outplacement services of duration and of a nature consistent with Sellers’ and their Affiliates’ practices with respect to the divestiture of their respective competitive businesses as in effect immediately preceding the Closing.  

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Estimated Adjustment” is defined in Section 2.6(b).

“Estimated Closing Statement” is defined in Section 2.6(b).

“Excluded Assets” is defined in Section 2.2.

“Excluded Liabilities” is defined in Section 2.4.

“Exhibits” means the exhibits to this Related Purchase Agreement.

“FERC” means the Federal Energy Regulatory Commission, or its regulatory successor, as applicable.

“FERC Capacity Settlement” is defined in the definition of Material Adverse Effect.

“FIRPTA Affidavit” means the affidavit to be delivered at Closing pursuant to Section 1445(b)(2) of the Code, to establish that each Seller is not a “foreign person” within the meaning of that Section.

“GAAP” means United States generally accepted accounting principles as in effect from time to time.

“Good Industry Practices” means any of the practices, methods and acts engaged in or approved by a significant portion of the power generation industry during the relevant time period, or any of the practices, methods or acts that, in the exercise of reasonable judgment in

light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition.  Good Industry Practices are not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to be acceptable practices, methods or acts generally accepted in the region or as required by any Governmental Authority or standards setting agency including but not limited to FERC, ISO New England, the North American Electric Reliability Council, the Northeast Power Coordinating Council, and the Electric Reliability Organization.

“Governmental Authority” means any federal, state, local or other governmental, regulatory or administrative agency, commission, department, board, or other governmental subdivision, court, tribunal, arbitral body or other governmental authority, but excluding Buyer and any subsequent owner of the NGC Facilities (if otherwise a Governmental Authority under this definition).

“Indebtedness” means any of the following:  (a) any indebtedness for borrowed money; (b) any obligations evidenced by bonds, debentures, notes or other similar instruments; (c) any obligations to pay the deferred purchase price of property or services, except trade accounts payable and other current liabilities arising in the ordinary course of business; (d) any obligations as lessee under capitalized leases; (e) any indebtedness created or arising under any conditional sale or other title retention agreement with respect to acquired property; (f) any obligations, contingent or otherwise, under acceptance, letters of credit or similar facilities; (g) any obligations under commodity swap agreements, commodity cap agreements, interest rate cap agreements, interest rate swap agreements, foreign currency exchange agreements and other similar agreements; and (h) any guaranty of any of the foregoing.

“Indemnified Party” is defined in Section 9.7(a).

“Indemnifying Party” is defined in Section 9.7(a).

“Independent Appraiser” is defined in Section 2.7.

“Initial Purchase Price” is defined in Section 2.5.

“Intellectual Property” means all (a) patents, patent applications, inventions, discoveries, processes, designs, techniques, developments, technology, and related improvements and know-how, whether or not patented or patentable; (b) copyrights and works of authorship in any media, including computer hardware, software, firmware, applications, files, systems, networks, databases and compilations, documentation and related textual works, graphics, advertising, marketing and promotional materials, photographs, artwork, drawings, articles, textual works, and Internet site content, and all registrations of and applications to register regarding the forgoing; (c) trademarks, service marks, trade names, brand names, corporate names, domain names, logos trade dress and other source indicators, all registrations of and applications to register regarding the foregoing together with all translations, adapt ations, derivations and combinations thereof and including all goodwill of any business symbolized thereby; (d) trade secrets, drawings, blueprints and all non-public, confidential or proprietary information, documents, materials, analyses, research and lists; (e) rights to sue for past, present and future

infringement, misappropriation, dilution or other violations thereof; (f) rights in licenses to or from a third party in any of the foregoing; and (g) all tangible embodiments thereof.

“Intercompany Agreements” is defined in Section 2.2(e).

“Interim Period” means that period of time commencing on the Effective Date and ending on the Closing Date.

“Investment Grade” means a rating of at least BBB- by S&P or Baa3 by Moody’s.

“IRS” means the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of Treasury.

“ISO New England” means ISO New England Inc.

“Knowledge” means (i) with respect to Sellers, the actual knowledge, after due inquiry, of Dennis R. Brown, James A. Ginnetti, John J. Roman, Stephen A. Stites or Wade Hoefling, and (ii) with respect to Buyer, the actual knowledge, after due inquiry, of Sarah Wright, Scott Helm, Andrew Singer, Steve Herman or Rahul Advani.

“Laws” means all laws, rules, statutes, regulations, codes, injunctions, judgments, orders, decrees, rulings, interpretations, constitution, ordinance, common law, or treaty, of any Governmental Authority or any foreign, international, or multinational government or administration and related agencies.

“Leased Vehicles” is defined in Section 2.1(g).

“Leases” is defined in Section 2.1(b).

“Liability” or “Liabilities” means any liability or obligation (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether incurred or consequential and whether due or to become due), including any liability for Taxes.

“Lien” means any mortgage, pledge, lien, security interest, charge, claim, equitable interest, encumbrance, restriction on transfer, conditional sale or other title retention device or arrangement (including, without limitation, a capital lease), transfer for security for the payment of any Indebtedness, or restriction on the creation of any of the foregoing, whether relating to any property or right or the income or profits therefrom.

“Locals” means, collectively, (i) the International Brotherhood of Electrical Workers, Local Union Nos. 420 and 457 and (ii) the International Brotherhood of Electrical Workers, Local Union 455.

“Losses” is defined in Section 9.3.

“Material Adverse Effect” means with respect to any Person or entity, any change, effect, event, occurrence or state of facts that, individually or together with all such other changes,

effects, events, occurrences or facts, (i) is, or would reasonably be expected to be, materially adverse to the business, assets, properties, financial condition or results of operations of such Person and its subsidiaries taken as a whole or such entity or (ii) prevents, or can reasonably be expected to prevent, the performance by the affected Party of any of its material obligations under this Related Purchase Agreement or the consummation of the transactions contemplated by this Related Purchase Agreement; provided that Material Adverse Effect shall not include any change, event, effect, or occurrence (or changes, events, effects or occurrences taken together) generally affecting the international, national, regional, local wholesale or retail electric or gas industry as a whole or electric generating facilities or their operations or operators as a whole that does not affect the NGC Facilities or the Parties in any manner or degree significantly different than the industry as a whole, including but not limited to:  (a) changes in markets for electric power, natural gas or fuel used in connection with the NGC Facilities, (b) changes in market design and pricing (including but not limited to either the implementation of, or the failure to implement, an alternative capacity pricing mechanism such as but not limited to the mechanism accepted by FERC on June 16, 2006 in Devon Power LLC, 115 FERC ¶ 61,340 (c) changes resulting from or associated with acts of war or terrorism or changes imposed by a Governmental Authority associated with additional security to address the events of September 11, 2001 or similar acts of terrorism, or (d) changes (individually or taken together) in the North American, national, regional or local electric transmission systems or operations thereof; and provided, further, that any loss, claim, occurrence, change or effect that is cured prior to the Closing Date shall not be considered a Material Adverse Effect.

“Mt. Tom Purchase Agreement” means that certain Purchase and Sale Agreement, between Holyoke Water Power Company and Mt. Tom Generating Company LLC, an Affiliate of Buyer, dated as of the date hereof.

“Multiemployer Plan” is defined in ERISA §3(37).

“NGC” is defined in the Recitals.

“NGC Assets” means the “Assets” as defined in the NGC SPA.

“NGC Facilities” is defined in the Recitals.

“NGC-NGS M&OA” is defined in the Recitals.

“NGC-NUSCO Services Agreement” is defined in the Recitals.

“NGC-Select Agency Agreement” is defined in the Recitals.

“NGC-Select Power Agreement” is defined in the Recitals.

“NGC SPA” is defined in the Recitals.

“NGC SPA Closing Date” means the date and time defined as the “Closing Date” in the NGC SPA upon which the transaction contemplated by the NGC SPA shall be consummated in accordance with the NGC SPA.

“NGS” is defined in the introductory paragraph.

“Non-Represented Plant Employees” is defined in Section 5.6(b).

“Non-Represented Support Employees” is defined in Section 5.6(c).

“NU” means Northeast Utilities, a Massachusetts business trust.

“NUEI” is defined in the Recitals.

“NUSCO” is defined in the introductory paragraph.

“Party” and “Parties” are defined in the introductory paragraph.

“Permits” means all certificates, licenses, permits, registrations, authorizations, approvals, consents, orders, decisions and other actions of a Governmental Authority pertaining to a particular Related Asset or the NGC Facilities, or the ownership, operation or use thereof.

“Permitted Encumbrances” means any of the following: (i) Liens for Taxes or other charges or assessments by any Governmental Authority to the extent that the payment thereof is not in arrears or otherwise due or is being contested in good faith (in the case of any such contest in good faith, where adequate reserves have been established to the extent required by GAAP); (ii) deposits or pledges made in connection with, or to secure payment of, worker’s compensation, unemployment insurance, old age pension programs mandated under applicable laws or other social security regulations; (iii) statutory or common law liens in favor of carriers, warehousemen, mechanics and materialmen, statutory or common law liens to secure claims for labor, materials or supplies and other like liens, that, in the case of clauses (i) and (iii), inclusive, secure obligations to the extent that payment thereof is no t in arrears or otherwise due and that have been incurred under Good Industry Practices; (iv) any Lien with respect to the Related Assets that arises under Good Industry Practices (other than any Lien in favor of Seller or any Affiliate of Seller) and the foreclosure of which is not material to the operation or use of the Related Assets in the business of Sellers as conducted on the Effective Date; and (vii) any Lien or title imperfection with respect to the Related Assets created by or resulting from any act or omission of Buyer.

“Person” means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, a limited liability company, an unincorporated organization, or a Governmental Authority (or any department, agency, or political subdivision thereof).

“Proprietary Information” means all information about any Party (the “Disclosing Party”) or its properties or operations furnished to the other Party (the “Receiving Party”) or its Representatives by the Disclosing Party or its Representatives, regardless of the manner or medium in which it is furnished, provided that from and after the Closing Date any information regarding the Related Assets shall be deemed Proprietary Information of Buyer and not Proprietary Information of such Seller and to the extent such information is in the possession of such Seller, such Seller shall be deemed to have received such information from the Buyer on a confidential basis.  Proprietary Information does not include information that (a) is or becomes generally available to the public, other than as a result of a disclosure by the Receiving Party or

its Representatives in violation of this Related Purchase Agreement; (b) was available to the Receiving Party on a nonconfidential basis prior to its disclosure by the Disclosing Party or its Representatives; (c) becomes available to the Receiving Party on a nonconfidential basis from a Person, other than the Disclosing Party or its Representatives, who, to the Receiving Party’s actual knowledge, is not otherwise bound by a confidentiality agreement with the Disclosing Party or its Representatives, or is not otherwise under any obligation to the Disclosing Party or any of its Representatives not to transmit the information to the Receiving Party or its Representatives; or (d) Buyer or its Affiliates disclose to their actual or potential financing sources (including lenders and agents therefor), actual or potential commodity hedge or interest rate swap providers or rating agencies and their respectiv e attorneys, consultants and advisors, provided that this clause (d) shall permit the disclosure of such information by Buyer and its Affiliates only to the parties enumerated in this clause (d).

“Purchase Price” is defined in Section 2.5.

“Purchase Price Adjustment” is defined in Section 2.6.

“Receiving Party” is defined in the definition of Proprietary Information.

“Related Assets” is defined in Section 2.1.

“Related Assets Employees” is defined in Section 5.6(c).

“Related Assets Employees’ Records” mean all personnel records maintained by Sellers relating to the Related Assets Employees to the extent such files contain (i) names, addresses, dates of birth, job titles and descriptions; (ii) starting dates of employment; (iii) salary and benefits information; (iv) resumes and job applications; and (v) any other documents that neither Sellers nor their Affiliates are prohibited by Law to deliver to Buyer.  To the extent the consent of a Related Assets Employee is required in order for Sellers or their Affiliates to deliver a document which is part of the Related Assets Employees’ Records to Buyer, Sellers agree to use Commercially Reasonable Efforts to secure such consent.

“Related Purchase Agreement” is defined in the introductory paragraph.

“Related Transactions” means the transactions contemplated by the NGC SPA and Related Purchase Agreement.

“Representative” means, as to any Person, such Person’s Affiliates and actual or prospective lenders and its and their directors, officers, employees, agents, advisors (including, without limitation, financial advisors, counsel and accountants).

“Represented Employees” is defined in Section 5.6(a).

“Schedule” means a schedule to this Related Purchase Agreement.

“Schedule Update” is defined in Section 5.4(c).

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Select” is defined in the introductory paragraph.

“Seller” or “Sellers” is defined in the introductory paragraph.

“Seller Employee Benefit Plan” is defined in Section 2.4(g).

“Seller Guaranty” means a guaranty issued by NU, substantially in the form attached hereto as Exhibit E, or such other form of performance assurance that is acceptable to Buyer in its sole discretion.  

“Seller Indemnified Parties” is defined in Section 9.4.

“Sellers’ Regulatory Approvals” means those consents, approvals, orders or authorizations of, or registrations, declarations or filings with, all Governmental Authorities required in connection with the execution, delivery or performance hereof by Sellers set forth on Schedule 6.2(c)attached hereto.

“Tax” or “Taxes” means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code §59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar, including FICA), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not and any payments to any federal, state, local or foreign taxing authorities in lieu of any such tax .

“Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“Third Party” means a Person who is not a Party or an Affiliate of a Party.

“Third Party Claim” is defined in Section 9.7(a).

“Transferable Permits” is defined in Section 2.1(c).

“WARN Act” means the Federal Worker Adjustment Retraining and Notification Act of 1988, as amended.

2.

Acquisition of Assets by Buyer.

2.1.

Purchase and Sale of Assets.  Each Seller agrees to sell, assign and transfer, or cause to be sold, assigned and transferred to Buyer, and Buyer agrees to purchase from such Sellers at the Closing, subject to and upon the terms and conditions contained herein, free and

clear of any Lien, except for Permitted Encumbrances, all of the right, title and interest of each Seller or an Affiliate of such Seller, as applicable, in and to the following assets owned by Sellers or such Affiliates used or held for use in the operation of, the NGC Facilities (collectively, the “Related Assets”):

(a)

the machinery, equipment, furniture, boats, vehicles and Intellectual Property (subject to Section 2.2(d)) and, with respect to Intellectual Property licensed from a third party, only to the extent assignable to Buyer on commercially reasonable terms), set forth on Schedule 2.1(a), all applicable warranties against manufacturers or vendors, to the extent that such warranties are transferable and all items of personal property due under applicable warranties, in each case as in existence on the Effective Date, but excluding such items disposed of by Sellers in the ordinary course of business during the Interim Period in accordance with this Related Purchase Agreement, and including such additional items as may be acquired by Sellers for use in connection with the Related Assets or the NGC Facilities in the ordinary course of business during the Interim Period in accordance with this Rela ted Purchase Agreement;

(b)

all rights with respect to leasehold interests and subleases and rights thereunder relating to real property set forth on Schedule 2.1(b) (the “Leases”);

(c)

all Permits held by Sellers relating to operation of the NGC Facilities listed on Schedule 2.1(c), but only if and to the extent that such Permits are transferable by Sellers to Buyer by assignment or otherwise (including, without limitation, upon request or application to a Governmental Authority, or which will pass to Buyer as successor in title to the Related Assets by operation of Law (the “Transferable Permits”);

(d)

those contracts, agreements and personal property leases which are related to the ownership, use or operation of the NGC Facilities and which are set forth in Schedule 2.1(d) (the “Contracts”); provided that Sellers shall retain the rights and interests under any Contract to the extent such rights and interests provide for indemnity and exculpation rights for pre-Closing occurrences for which any Seller or any of their Affiliates remain liable under this Related Purchase Agreement;

(e)

all books, operating records, engineering designs, blueprints, as-built plans, specifications, procedures, studies, reports and equipment repair, safety, maintenance or service records of Sellers relating primarily to the operation of the NGC Facilities, including the Related Assets Employees’ Records but expressly excluding financial records, employees records (other than the Related Assets Employees’ Records) and books of account (subject to the right of Sellers and their Affiliates to retain copies of same for their use);

(f)

all rights of Sellers in and to any causes of action against a Third Party relating to any Related Asset or Assumed Liability, whether received as a payment or credit against future liabilities, including, without limitation, insurance proceeds, condemnation awards and cash payments under warranties covering the Related Assets to the extent such payments relate to Related Assets or Assumed Liabilities; and

(g)

all right, title and interest of Sellers in the leased vehicles set forth on Schedule 2.1(g) to the extent that Sellers or their Affiliates have purchased or otherwise taken title to such leased vehicles as of the Closing Date (the “Leased Vehicles”), subject to the Purchase Price adjustment set forth in Section 2.6(a).

2.2.

Excluded Assets.  Notwithstanding anything to the contrary in this Related Purchase Agreement, there shall be excluded from the Related Assets to be sold, assigned, transferred, conveyed or delivered to Buyer hereunder, and to the extent in existence on the Closing Date, there shall be retained by Sellers, as applicable, any and all right, title or interest to the following assets, properties and rights (collectively, the “Excluded Assets”):

(a)

all Cash, accounts and notes receivable, checkbooks and canceled checks, bank deposits and property or income tax receivables or any other Tax refunds to the extent allocable to a period ending on or before the Closing Date;

(b)

all rights of Sellers in and to any causes of action against a Third Party relating to any period ending prior to the Closing Date, whether received as a payment or credit against future liabilities, including, without limitation, any rights or interests in respect of any refunds relating to property Taxes paid by any Seller for periods ending on the Closing Date, as such Taxes are to be prorated in accordance with Section 2.8, insurance proceeds, condemnation awards and cash payments under warranties covering the Related Assets or the NGC Facilities to the extent such payments relate to assets repaired or replaced prior to the Closing Date, Excluded Assets or Excluded Liabilities, but excluding any such rights of Sellers to the extent the associated Third Party claims relate to an Assumed Liability;

(c)

all rights of Sellers, as applicable, to the words “NGS”, “Northeast Generation Services Company”, “Select”, “Select Energy, Inc.”, “Northeast Utilities Service Company”, “NUSCO” and any Trademarks which are composed of or comprise any derivative;

(d)

all rights, benefits and interest in all purchase orders, licenses or contracts not included in Related Assets and not assigned to the Buyer (including without limitation any software licenses or contracts not specifically listed on Schedule 2.1(a)); and

(e)

any and all of Sellers’ rights in any contract representing an intercompany transaction or agreement between a Seller and an Affiliate of such Seller, whether or not such transaction or agreement relates to the provisions of goods or services, payment arrangements, intercompany charges or balances or the like (the “Intercompany Agreements”).

2.3.

Assumption of Liabilities.  On the terms and subject to the conditions set forth herein, from and after the Closing, Buyer will assume and satisfy or perform all of the Liabilities of Sellers, in respect of, or otherwise arising from the operation or use of the Related Assets other than the Excluded Liabilities (as set forth in Section 2.4 below) (the “Assumed Liabilities”):

(a)

all Liabilities under (i) the Contracts, the Leases and the Transferable Permits in accordance with the terms thereof, and (ii) the contracts, leases, commitments and other agreements entered into by Sellers with respect to the NGC Facilities or the Related Assets during the Interim Period consistent with the terms of this Related Purchase Agreement; except in each case, to the extent such Liabilities, but for a breach or default by Sellers, would have been paid, performed or otherwise discharged on or prior to the Closing Date, or to the extent the same arise out of any such breach or default, or to the extent the same relate to performance rendered to Sellers prior to the Closing Date;

(b)

all Liabilities under the Permitted Encumbrances;

(c)

all Liabilities relating to employees for which Buyer is responsible under Section 5.6;

(d)

all Liabilities with respect to claims and causes of action set forth on Schedule 3.9 as of the date hereof; and

(e)

all other Liabilities expressly allocated to Buyer in this Related Purchase Agreement or in any of the Ancillary Agreements.

2.4.

Excluded Liabilities.  Buyer shall not assume or be responsible for the performance of any the following Liabilities (collectively, the “Excluded Liabilities”):

(a)

any Liability of Sellers in respect of or otherwise arising from the operation or use of the Excluded Assets or any other assets of Sellers or any Affiliate of Sellers that are not Related Assets;

(b)

any Liability of Sellers to any Affiliate of Sellers or any officer, director or shareholder of Sellers, including without limitation, pursuant to Intercompany Agreements, except as specifically provided in Section 5.6;

(c)

any Liability of Sellers or any Affiliate of Sellers in respect of any indebtedness;

(d)

Liability for accounts or notes payable or outstanding checks or drafts, to the extent allocable to a period ending on or before the Closing Date;

(e)

any Liability of Sellers arising from the making or performance of this Related Purchase Agreement or an Ancillary Agreement or the transactions contemplated hereby or thereby;

(f)

any Liability of Sellers in respect of obligations for goods delivered or services rendered prior to the Closing Date or other Liabilities under contracts, leases or Permits which Buyer has not assumed pursuant to Section 2.3(a);

(g)

any Liability arising out of or in connection with any Employee Benefit Plan established or maintained by Sellers or to which Sellers contribute or otherwise has

any Liabilities with respect to (each such plan, a “Seller Employee Benefit Plan”) or any Liability for the termination of any such Seller Employee Benefit Plan;

(h)

any Liability for any compensation or benefits accruing prior to the Closing Date, under the terms or provisions of any Seller Employee Benefit Plan or the Collective Bargaining Agreements, or otherwise relating to any of the Related Assets Employees, other than the Liabilities assumed by Buyer under Section 5.6;

(i)

any Liability relating to any employees of Sellers or its Affiliates who do not become Related Assets Employees pursuant to Section 5.6;

(j)

except as otherwise expressly set forth in this Related Purchase Agreement, any Liability of Sellers relating to any claim or cause of action in respect of the operation or use of the NGC Facilities on or prior to the Closing Date, regardless of when such action is commenced, other than the claims and causes of action set forth on Schedule 3.10 as of the date hereof;

(k)

except as otherwise expressly set forth in this Related Purchase Agreement, any Liability of Sellers for any fines or penalties imposed by a Governmental Authority resulting from (x) any investigation or proceeding pending on or prior to the Closing Date or relating to events occurring or conditions arising on or prior to the Closing Date or (y) illegal acts, violation of Permits or willful misconduct of Sellers on or prior to the Closing Date; and

(l)

any Liability in respect of Taxes imposed on or attributable to the Related Assets for taxable periods ending on or before the Closing Date as such Taxes are to be pro rated in accordance with Section 2.8, or any Liability in respect of Taxes imposed on Sellers (or any member of an affiliated group of corporations within the meaning of Section 1504 of the Code of which Sellers are or have been a member) for any taxable period, except those Taxes for which Buyer is liable pursuant to Section 8.

2.5.

Purchase Price.  Buyer agrees to assume the Assumed Liabilities and pay to Sellers at the Closing an aggregate amount equal to Five Hundred and Thirty-Five Thousand Dollars ($535,000) (the “Initial Purchase Price”) plus or minus amounts to account for (i) the Estimated Adjustment to the Initial Purchase Price to be made as of the Closing under Section 2.6(b), and (ii) the pro rations to be made as of the Closing under Section 2.8(a), (the Initial Purchase Price, as so adjusted, shall be referred to herein as the “Closing Purchase Price”).  The Closing Purchase Price shall be payable at the Closing in cash by wire transfer to Sellers in accordance with written instructions of Sellers given to Buyer at least three (3) Business Days prior to the Closing.  Following the Closing, the Closing Purchase Price shall be subject to adjustment pursuant to Sectio ns 2.6(c) and 2.8(b), and the Closing Purchase Price, as so adjusted pursuant to such Sections, shall be herein referred to as the “Purchase Price.”  

On the Effective Date, Buyer shall deliver to Sellers an Acceptable Guaranty and an Acceptable Letter of Credit and shall, pursuant to Section 5.8, cause such Acceptable Guaranty and such Acceptable Letter of Credit to be maintained to secure the payment of the Purchase Price through the Closing Date.  

2.6.

Adjustments to Initial Purchase Price.  The Initial Purchase Price shall be increased or reduced as set forth in Sections 2.6(a) and (b), and the Closing Purchase Price shall be subject to adjustment as set forth in Section 2.6(c).  Such increases or reductions, as the case may be, shall be referred to herein as the “Purchase Price Adjustment” and shall be determined and paid as set forth below:

(a)

The Initial Purchase Price shall be increased to account for any amount paid for in full by Sellers in connection with the purchase of the vehicles identified as Leased Vehicles on Schedule 2.1(g).

(b)

At least twenty (20) Business Days prior to the Closing Date, Sellers shall prepare and deliver to Buyer an estimated Closing Statement (the “Estimated Closing Statement”) that shall set forth Sellers’ best estimate of the adjustments to the Initial Purchase Price required by Section 2.6(a) (the “Estimated Adjustment”).  The Initial Purchase Price shall be adjusted (the “Closing Adjustment”) for the Closing by the amount of the Estimated Adjustment.

(c)

Within ninety (90) days following the Closing Date, Sellers shall prepare and deliver to Buyer a closing statement that shall set forth Sellers’ computation of the final Purchase Price Adjustment based on Sections 2.6(a) and (b) and the components thereof taking into account actual data (the “Closing Statement”).  Within twenty (20) days following the delivery of the Closing Statement by Sellers to Buyer, Buyer may object to the Closing Statement in writing.  Sellers agree to cooperate with Buyer to provide to Buyer or Buyer’s Representatives information used to prepare the Closing Statement and information relating thereto.  If Buyer objects to the Closing Statement, the Parties shall attempt to resolve such dispute by negotiation.  If the Parties are unable to resolve such dispute within twenty (20) days of any objection by Buyer, the Parties sh all appoint PricewaterhouseCoopers, or, if PricewaterhouseCoopers is not available, another nationally recognized accounting firm not the external auditing firm of either Buyer or Sellers, to be mutually agreed upon by the Parties, who shall, at Sellers’ and Buyer’s joint expense, review the Closing Statement and determine the appropriate Purchase Price Adjustment under this Section 2.6.  The agreed upon Closing Statement or the finding of such accounting firm, as the case may be, shall be used to determine the Purchase Price Adjustment and shall be binding on the Parties.  Upon the determination of the Purchase Price Adjustment, the Parties owing a balance on account of the Purchase Price Adjustment shall deliver the balance due to the other Parties no later than two (2) Business Days after such determination in immediately available funds or in any other manner as reasonably requested by the payee.  The balance due shall be determined by offsetting against each Party’s credits and debits arising from the Purchase Price Adjustment the credits and debits accorded to each Party in the Closing Statement on account of the Estimated Adjustment.   The acceptance by Buyer and Sellers of the Purchase Price Adjustment shall not constitute or be deemed to constitute a waiver of the rights of any Party in respect of any other provision of this Related Purchase Agreement.

2.7.

Allocation of Purchase Price.  Buyer and Sellers shall use their good faith best efforts to agree upon an allocation among the Acquired Assets of the sum of the Purchase Price and the Assumed Liabilities consistent with Section 1060 of the Code and the Treasury

Regulations thereunder within sixty (60) days after the Closing Date (or such later date as the Parties may mutually agree).  Buyer and Sellers may jointly agree to obtain the services of an independent engineer or appraiser (the “Independent Appraiser”) to assist the Parties in determining the fair value of the Acquired Assets solely for purposes of such allocation under this Section 2.7.  If such an appraisal is made, Buyer and Sellers agree to accept the Independent Appraiser’s determination of the fair value of the Acquired Assets.  The cost of the appraisal shall be borne equally by Buyer and Sellers, such that Buyer shall pay fifty percent (50%) of such cost and Sellers collectively shall pay fifty percent (50%) of such cost.  Each of Buyer and Sellers agree to file Internal Revenue Service Form 8594 (“Form 8594”) and all federal, st ate, local and foreign Tax Returns in accordance with such agreed allocation (giving effect to mutually-agreed upon adjustments as a result of adjustments to the Closing Purchase Price pursuant to Section 2.6 and Section 2.8).  Each of Buyer and Sellers shall report the transactions contemplated by this Related Purchase Agreement and the Ancillary Agreements for federal Income Tax and all other Tax purposes in a manner consistent with the allocation, if agreed-upon or determined by the Independent Appraiser in each case pursuant to this Section 2.7.  In each case, each of Buyer and Sellers agree to provide the other promptly with any other information required to complete Form 8594.  Each of Buyer and Sellers shall notify and provide the other with reasonable assistance in the event of an examination, audit or other proceeding regarding the agreed upon allocation of the Purchase Price.

2.8.

Proration.

(a)

Buyer and Sellers agree that all of the items listed below and such others as are mutually agreed to by the Parties, relating to the business and operations of the Related Assets, will be prorated as of the Closing Date, with Sellers liable to the extent such items relate to any period through the Closing Date, and Buyer liable to the extent such items relate to periods after the Closing Date: (i) personal property, occupancy and water Taxes, assessments and other charges, if any, on or associated with the Related Assets; (ii) rent and other items payable by or to Sellers under any of the Contracts or Leases assigned to and assumed by Buyer hereunder; (iii) any Permit, license, registration or fees with respect to any Transferable Permit associated with the Related Assets; (iv) the value of capacity or transition payment attributed to the NGC Facilities under the FERC Capacity Settlement or pr evailing capacity market rules for the month in which the Closing occurs (the “Closing Month Capacity Payment”); and (v) charges from ISO New England allocated to any Seller as the owner of the Load Asset and/or Generation Asset with respect to the NGC Facilities for the month in which the Closing occurs (the “Closing Month ISO Charges”). Subject to Section 2.8(b), not less than five (5) Business Days prior to the Closing Date, the Parties shall agree upon the sum of the net amount of the prorated amounts to which either Sellers or Buyer shall be entitled pursuant to this Section 2.8(a) and the Initial Purchase Price shall be adjusted to reflect such net amount.

(b)

If the amount of one or more Taxes, fees or other liabilities, including without limitation the Closing Month Capacity Payment and the Closing Month ISO Charges, to be prorated in accordance with Section 2.8(a) is not known or determinable on or prior to the Closing Date, the amounts to be prorated upon the Closing in accordance with Section 2.8(a) shall (i) in the case of Taxes, fees or other liabilities (other than the Closing Month Capacity Payment and the Closing Month ISO Charges)

be based upon the actual Taxes, fees or other liabilities for the preceding year (or appropriate period) for which such actual Taxes, fees or liabilities are available, and (ii) in the case of the Closing Month Capacity Payment and the Closing Month ISO Charges, be based on a reasonable estimate of such charges by Sellers.  The amount of Taxes, fees or other liabilities prorated upon the Closing pursuant to Section 2.8(a), including without limitation the Closing Month Capacity Payment and the Closing Month ISO Charges, shall be adjusted upon the request of either Sellers, on the one hand, or Buyer, on the other hand, made within sixty (60) days of the date the actual amounts become available.  Sellers and Buyer agree to furnish each other with such documents and other records that may be reasonably requested in order to confirm all adjustment and proration calculations made pursuant to this Section 2.8.

2.9.

The Closing.  Unless otherwise agreed to by the Parties, the closing of the transactions contemplated by this Related Purchase Agreement (the “Closing”) shall take place at the offices of Day, Berry & Howard LLP, 185 Asylum Street, Hartford, CT, on the NGC SPA Closing Date, it being the intent of the Parties that the transactions contemplated by this Related Purchase Agreement close contemporaneously with the closing of the transactions contemplated by the NGC SPA.  The date of Closing is hereinafter called the “Closing Date” and shall be effective for all purposes herein as of 12:01 a.m. Eastern time on the Closing Date.

2.10.

Deliveries by Sellers at the Closing.  At the Closing, Sellers shall deliver the following to Buyer, duly executed and properly acknowledged, if appropriate:

(a)

the Bill of Sale, substantially in the form attached hereto as Exhibit A, for the tangible personal property included in the Related Assets;

(b)

the Assignment and Assumption Agreement, substantially in the form attached hereto as Exhibit B, in recordable form if necessary;

(c)

a FIRPTA Affidavit executed by Sellers;

(d)

certificates of title for the vehicles and boats which are part of the Related Assets;

(e)

all attornment agreements, notices and other documents and instruments required for the assignment or other transfer of the Leases from Sellers to Buyer, which agreements, notices, documents and instruments shall, upon the reasonable request of Buyer, be in recordable form;

(f)

copies of all consents, waivers or approvals obtained by Sellers with respect to the Related Assets, the transfer of the Transferable Permits or the consummation of the transactions contemplated by this Related Purchase Agreement and the Ancillary Agreements, to the extent specifically required under this Related Purchase Agreement or the Ancillary Agreements;

(g)

a certificate from an authorized officer of Sellers, dated the Closing Date, to the effect that, to such officer’s Knowledge, the conditions set forth in Sections 6.1(a), (b) and (c) have been satisfied;

(h)

a copy, certified by the Secretary or an Assistant Secretary of Sellers, of corporate resolutions authorizing the execution and delivery of this Related Purchase Agreement and the Ancillary Agreements and instruments attached as exhibits hereto and thereto, and the consummation of the transactions contemplated hereby and thereby;

(i)

a certificate of the Secretary or an Assistant Secretary of Sellers which shall identify by name and title and bear the signature of the officers of Sellers authorized to execute and deliver this Related Purchase Agreement and the Ancillary Agreements and instruments attached as exhibits hereto and thereto; and

(j)

all such other instruments of sale, transfer, conveyance, assignment or assumption as Buyer and its counsel may reasonably request in connection with the sale of the Related Assets.

2.11.

Deliveries by Buyer at the Closing.  At the Closing, Buyer shall deliver to Sellers, properly executed and acknowledged, if appropriate:

(a)

the Closing Purchase Price;

(b)

the Assignment and Assumption Agreement, substantially in the form attached hereto as Exhibit B to this Related Purchase Agreement, duly executed by Buyer, and if necessary or desirable to Sellers, in recordable form;

(c)

a certificate from an authorized officer of Buyer, dated the Closing Date, to the effect that, to such officer’s Knowledge, the conditions set forth in Sections 6.2(a), (b), and (c) have been satisfied;

(d)

a copy, certified by the Secretary or Assistant Secretary of Buyer, of resolutions authorizing the execution and delivery of this Related Purchase Agreement and the Ancillary Agreements and instruments attached as exhibits hereto and thereto, and the consummation of the transactions contemplated hereby and thereby;

(e)

a certificate of the Secretary or Assistant Secretary of Buyer which shall identify by name and title and bear the signature of the officers of Buyer authorized to execute and deliver this Related Purchase Agreement and the Ancillary Agreements and instruments attached as exhibits hereto and thereto; and

(f)

all such other instruments of purchase, sale, transfer, conveyance, delivery, receipt, assignment or assumption as Sellers and their counsel may reasonably request in connection with the sale or purchase of the Related Assets or assumption of the Assumed Liabilities.

3.

Representations, Warranties and Disclaimers of Sellers.  

Each Seller, severally as to those representations and warranties involving such Seller only, represents and warrants to Buyer that each of the statements set forth below is true and correct in all respects as of the Effective Date and will be true and correct as of the Closing Date, provided that an exception or qualification set forth in any Schedule with respect to a particular

representation and warranty shall be deemed to be an exception or qualification with respect to all other applicable representations and warranties to the extent the description of the facts regarding the event, item or matter disclosed is adequate so as to make reasonably clear that such exception or qualification is applicable to such other representations and warranties whether or not such exception or qualification is so numbered:

3.1.

Organization of Seller.  Such Seller is duly organized, validly existing and in good standing under the laws of the State of Connecticut.  Copies of the charter and by-laws of such Seller, each as amended to date, have been heretofore made available to Buyer and are accurate and complete.

3.2.

Authorization of Transaction.  Such Seller has the power and authority (including full corporate power and authority) to execute and deliver this Related Purchase Agreement and the Ancillary Agreements to which it is a party and, subject to receipt of all Sellers’ Regulatory Approvals, to perform its obligations hereunder and thereunder.  All corporate actions or proceedings to be taken by or on the part of such Seller to authorize and permit the due execution and valid delivery by such Seller of this Related Purchase Agreement and the Ancillary Agreements to which it is a party and the instruments required to be duly executed and validly delivered by such Seller pursuant hereto and thereto, the performance by such Seller of its obligations hereunder and thereunder, and the consummation by such Seller of the transactions contemplated herein and therein, have been duly and properly ta ken.  This Related Purchase Agreement and the Ancillary Agreements to which such Seller is a party have been duly executed and validly delivered by such Seller and constitute the legal, valid and binding obligation of such Seller, enforceable in accordance with their terms and conditions.

3.3.

Noncontravention.  Subject to such Seller obtaining the Sellers’ Regulatory Approvals, neither the execution and the delivery of this Related Purchase Agreement or any of the Ancillary Agreements, nor the consummation of the transactions contemplated hereby and thereby (including the assignments and assumptions referred to in Sections 2.10(j) and 2.11(f) above), will (a) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, license or other restriction of any Governmental Authority to which such Seller or any of its property is subject or any provision of the charter or by-laws of such Seller, or (b) assuming receipt of all necessary filings, waivers, approvals, consents and authorizations set forth on Schedule 3.3, conflict with, result in a breach of, constitute a default under, result in the acceleration of, trigger any right o f first refusal under, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under (with or without the giving of notice, the lapse of time, or both) any agreement, contract, lease, license, instrument, or other arrangement to which such Seller is bound (including without limitation, the Contracts) or to which any of the Related Assets is subject (or result in the imposition of any Lien upon any of the Related Assets), except for matters that will not have a Material Adverse Effect on the NGC Facilities or such Seller or as otherwise disclosed in Schedule 3.3.

3.4.

Brokers’ Fees.  Such Seller has no Liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Related Purchase Agreement for which Buyer could become liable or obligated.

3.5.

Title to Related Assets.  Except as set forth in Schedule 3.5 and except for Permitted Encumbrances, such Seller has good and valid title, or a valid leasehold interest in, such Seller’s Related Assets free and clear of all Liens.

3.6.

Legal and Other Compliance

(a)

Such Seller is in compliance with all current Laws applicable to such Seller’s Related Assets the violation of which could have a Material Adverse Effect on the NGC Facilities, other than as disclosed in Schedule 3.6.

(b)

Schedule 2.1(c) sets forth all Permits held by any Seller that are material to the ownership or operation of NGC Facilities.  Except as would not cause a Material Adverse Effect on the NGC Facilities and as set forth on Schedule 3.6(b): (i) all such Permits are in full force and effect and such Seller is in compliance with all such Permits in all material respects and (ii) such Seller has not received any written notification from any Governmental Authority alleging that it is in material violation of any such Permits and, to such Seller’s Knowledge, there is no such material violation.

3.7.

Taxes.  Such Seller has filed all material Tax Returns that it was required to file, and such Tax Returns are true correct and complete in all material respects.  Such Seller has paid all material Taxes, except where such Seller is contesting the same in good faith by appropriate proceedings and has made adequate provision for the payment of such contested taxes.  Such Seller has made adequate provision for the payment of material Taxes not yet due and payable for all periods through and including the Closing Date.  Except as set forth on Schedule 3.7, no audits, examinations or administrative or judicial proceedings with respect to material Taxes of such Seller are ongoing, pending or proposed in writing by any taxing authority.   None of the Related Assets is “tax-exempt use property” within the meaning of Section 168(h) of the Code, directly or indi rectly secures any debt the interest on which is tax-exempt under Section 103(a) of the Code, or is property required to be treated as being owned by any other person pursuant to the “safe harbor lease” provisions of former Section 168(f)(8) of the Code.

3.8.

Contracts and Leases.  Except as disclosed on Schedule 3.8, (i) each of the Contracts to which such Seller is a party constitutes a valid and binding obligation of such Seller and, to such Seller’s Knowledge, each other party thereto, (ii) such Seller is not in material breach or default in any material respect under any of such Contracts, and, to such Seller’s Knowledge, the other parties to such Contracts are not in material breach or default in any material respect under any thereof (and in each such case no event exists that with the passage of time or the giving of notice would constitute such material breach or default), (iii) subject to receipt of any necessary consents, the Contracts may be transferred to Buyer pursuant to this Related Purchase Agreement and will continue in full force and effect thereafter, in each case without breaching th e terms thereof or resulting in the forfeiture or impairment of any material rights thereunder, and (iii) such Seller has not received notice from any other party to any Contract of any threatened termination of such Contract.  Such Seller has delivered or made available to Buyer true, correct and complete copies of all of the Contracts and all amendments thereto.

3.9.

Litigation.  Except as disclosed in Schedule 3.9, no action, suit, claim, demand or other proceeding is pending or, to such Seller’s Knowledge, threatened that would be reasonably likely to result in a Material Adverse Effect on NGC Facilities or that questions the validity of this Related Purchase Agreement or the Ancillary Agreements or of any action taken or to be taken pursuant to or in connection with the provisions of this Related Purchase Agreement or the Ancillary Agreements.  Except as disclosed on Schedule 3.9, there are no judgments, orders, decrees, citations, fines or penalties heretofore assessed against such Seller that may be material to such Seller or that impair, estop, impede, restrain, ban or otherwise adversely affect Sellers’ ability to satisfy or perform any of its obligations pursuant to this Related Purchase Agreement under any federal, sta te or local Law.

3.10.

Employees.

(a)

The Collective Bargaining Agreements are the only collective bargaining agreement that governs the terms and conditions of employment of the Represented Employees at the NGC Facilities.  A true and correct copy of the Collective Bargaining Agreements have heretofore been made available to Buyer.  Except as described in Schedule 3.10(a), and except as to such matters as will not have a Material Adverse Effect on the NGC Facilities: (i) such Seller has not experienced any labor strikes or work stoppages by such employees due to labor disagreements during the two-year period preceding the Effective Date and to such Seller’s Knowledge, none is currently pending; (ii) to such Seller’s Knowledge, such Seller is in compliance with all applicable Laws respecting employment and employment practices, equal employment opportunity, occupational health and safety, affirmative act ion, terms and conditions of employment and wages and hours; (iii) such Seller has not received written notice from any Governmental Authority of any unfair labor practice charge, complaint or proceeding against such Seller pending or threatened before the National Labor Relations Board or any other Governmental Authority with respect to such employees; (iv) no arbitration, grievance or proceeding arising out of or under the Collective Bargaining Agreement are pending against Seller or its Affiliates; (v) such Seller is in compliance in all material respects with the Collective Bargaining Agreements to which such Seller is a party; and (vi) no charges of discrimination, harassment, or retaliation, or lawsuits by or on behalf of current or former employees employed at or in support of the Facility are pending, or, to the Seller’s Knowledge, threatened against the Seller or its Affiliates.

(b)

Schedule 3.10(b) contains a true and complete list of each Seller Employee Benefit Plan under which any of the Acquired Assets Employees has, as of the Effective Date, any present or future right to benefits as of the Effective Date. With respect to each such Seller Employee Benefit Plan, such Seller has made available to Buyer a current, accurate and complete copy (or, to the extent no such copy exists, an accurate description) thereof and, to the extent applicable any related trust agreement or other funding instrument and any currently applicable summary plan description with respect thereto.

(c)

(i) Each Seller Employee Benefit Plan has been established and administered in accordance with its terms, and in compliance with the applicable provisions of ERISA, the Code and other applicable laws, rules and regulations, (ii) no

event has occurred and no condition exists with respect to any Seller Employee Benefit Plan that would be reasonably likely to subject Buyer or its Affiliates to any material Liability, and (iii) no Seller Employee Benefit Plan is a Multiemployer Plan.

3.11.

Intellectual Property.  Schedule 2.1(a) discloses all material Intellectual Property owned, licensed or leased by such Seller or its Affiliates and used for the operation of the NGC Facilities as presently operated in all material respects that is not included in the Related Assets.  Such Seller or its Affiliates have all right, title and interest in or valid, binding and irrevocable rights to use such Intellectual Property included in the Related Assets without material limitation, Liens (except for Permitted Encumbrances) or royalty burdens.  To the Knowledge of such Seller, none of such Intellectual Property included in the Related Assets is being infringed by any other Person, and such Seller, to its Knowledge, is not infringing and has not received notice that it is infringing (or allegedly infringing) any Intellectual Property of any other Person in connection with the o peration of the Related Assets, that in either case could reasonably be expected to have a Material Adverse Effect on the NGC Facilities.  

3.12.

Disclaimers Regarding Related Assets.  EXCEPT FOR ANY REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS SECTION 3, THE RELATED ASSETS ARE SOLD “AS IS, WHERE IS,” AND EACH SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO LIABILITIES, OPERATIONS OF THE NGC FACILITIES, TITLE, CONDITION, VALUE OR QUALITY OF THE RELATED ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE), RISKS AND OTHER INCIDENTS OF THE RELATED ASSETS INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO THE ACTUAL OR RATED GENERATING CAPABILITY OF THE NGC FACILITIES OR THE ABILITY OF BUYER TO SELL FROM THE NGC FACILITIES ELECTRIC ENERGY, CAPACITY OR OTHER PRODUCTS RECOGNIZED BY ISO NEW ENGLAND FROM TIME TO TIME, AND SELLERS SPECIFICALLY DISCLAIM ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, OR SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE RELATED ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS, OR AS TO THE CONDITION OF THE RELATED ASSETS, OR ANY PART THEREOF, IN EACH CASE EXCEPT AS SET FORTH HEREIN.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, EACH SELLER FURTHER SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY REGARDING THE ABSENCE OF HAZARDOUS SUBSTANCES OR LIABILITY OR POTENTIAL LIABILITY ARISING UNDER ENVIRONMENTAL LAWS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EXCEPT AS EXPRESSLY PROVIDED HEREIN, EACH SELLER EXPRESSLY DISCLAIMS ANY REPRESENTATION OR WARRANTY OF ANY KIND REGARDING THE CONDITION OF THE RELATED ASSETS OR THE SUITABILITY OF THE NGC FACILITIES FOR OPERATION AS POWER PLANTS OR AS SITES FOR THE DEVELOPMENT OF ADDITIONAL OR REPLACEMENT GENERATION CAPACITY AND NO MATERIAL OR INFORMATION PROVIDED BY OR COMMUNICATIONS MADE BY SELLERS, OR BY ANY BROKER OR INVESTMENT BANKER,

INCLUDING WITHOUT LIMITATION ANY INFORMATION OR MATERIAL CONTAINED IN THE DESCRIPTIVE MEMORANDUM DATED AS OF FEBRUARY, 2006, AS SUPPLEMENTED, INFORMATION PROVIDED DURING DUE DILIGENCE, INCLUDING BUT NOT LIMITED TO INFORMATION IN THE DATA ROOM, AND ANY ORAL, WRITTEN OR ELECTRONIC RESPONSE TO ANY INFORMATION REQUEST PROVIDED TO BUYER, WILL CAUSE OR CREATE ANY WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY OF THE RELATED ASSETS THAT IS NOT SET FORTH HEREIN.  NOTHING IN THIS DISCLAIMER OR THIS RELATED PURCHASE AGREEMENT SHALL BE DEEMED TO AFFECT THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER ANY ANCILLARY AGREEMENT FOR A BREACH OF ANY REPRESENTATION, WARRANTY OR COVENANT CONTAINED IN SUCH ANCILLARY AGREEMENT.

4.

Representations and Warranties of Buyer.  Buyer represents and warrants to Sellers that the statements contained in this Section 4 are true and correct as of the Effective Date and will be true and correct as of the Closing Date.

4.1.

Organization of Buyer.  Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware.  Copies of the organizational documents and bylaws of Buyer, each as amended to date, have been heretofore delivered to Sellers and are accurate and complete.

4.2.

Authorization of Transaction.  Buyer has the power and authority (including full corporate power and authority) to execute and deliver this Related Purchase Agreement and the Ancillary Agreements and, subject to receipt of all Buyer’s Regulatory Approvals, to perform its obligations hereunder and thereunder.  All corporate actions or proceedings to be taken by or on the part of Buyer to authorize and permit the due execution and valid delivery by Buyer of this Related Purchase Agreement, the Ancillary Agreements and the instruments required to be duly executed and validly delivered by Buyer pursuant hereto and thereto, the performance by Buyer of its obligations hereunder and thereunder, and the consummation by Buyer of the transactions contemplated herein and therein, have been duly and properly taken.  This Related Purchase Agreement  and the Ancillary Agreements have bee n duly executed and validly delivered by Buyer and constitute the valid and legally binding obligations of Buyer, enforceable against Buyer in accordance with their terms and conditions.

4.3.

Noncontravention.  Subject to Buyer obtaining the Buyer’s Regulatory Approvals, neither the execution and the delivery of this Related Purchase Agreement or any of the Ancillary Agreements, nor the consummation of the transactions contemplated hereby and thereby (including the assignments and assumptions referred to in Sections 2.10(j) and 2.11(f) above), will (a) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any Governmental Authority to which Buyer is subject or any provision of the organizational documents or bylaws of Buyer or (b) assuming receipt of all necessary filings, waivers, approvals, consents and authorizations, conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require a ny notice (with or without the giving of notice, the lapse of time, or both) under any agreement, contract, lease, license,

instrument, or other arrangement to which Buyer is a party or by which it is bound or to which any of its assets is subject, except for matters that will not be material to Buyer.

4.4.

Brokers’ Fees.  Buyer has no Liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Related Purchase Agreement for which any Seller could become liable or obligated.

4.5.

Litigation.  No action, suit, claim, demand or other proceeding is pending or, to the Buyer’s Knowledge, threatened that would be reasonably likely to result in a Material Adverse Effect on Buyer or that questions the validity of this Related Purchase Agreement or the Ancillary Agreements or of any action taken or to be taken pursuant to or in connection with the provisions of this Related Purchase Agreement or the Ancillary Agreements.  There are no judgments, orders, decrees, citations, fines or penalties heretofore assessed against Buyer that have a Material Adverse Effect on Buyer or impair, estop, impede, restrain, ban or otherwise adversely affect Buyer’s ability to satisfy or perform any of the Assumed Liabilities under any federal, state or local Law.

4.6.

Availability of Funds.  At Closing, assuming all conditions set forth in Section 6.1 have been satisfied or waived by Buyer in its sole discretion, Buyer will have sufficient funds available to it to pay the Closing Purchase Price on the Closing Date and to enable Buyer to perform all of its obligations under this Related Purchase Agreement.

4.7.

“As Is” Sale.  The representations and warranties set forth in Section 3 constitute the sole and exclusive representations and warranties of Sellers in connection with the transactions contemplated hereby.  There are no representations, warranties, covenants, understandings or agreements among the Parties regarding the Related Assets or their transfer other than those incorporated in this Related Purchase Agreement and the Ancillary Agreements.  Except for the representations and warranties expressly set forth in Section 3, Buyer disclaims reliance on any representations, warranties or guarantees, either express or implied, by any Seller including but not limited to any representation or warranty expressed or implied in any oral, written or electronic response to any information request provided to Buyer.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, BUYER ACKNOWL EDGES AND AGREES THAT THE RELATED ASSETS ARE BEING ACQUIRED “AS IS, WHERE IS” ON THE CLOSING DATE, AND IN THEIR CONDITION ON THE CLOSING DATE.  BUYER FURTHER ACKNOWLEDGES AND AGREES THAT THE REPRESENTATIONS AND WARRANTIES OF EACH SELLER SET FORTH IN THIS RELATED PURCHASE AGREEMENT TERMINATE AS SET FORTH IN SECTION 9.1 OR TERMINATION OF THIS RELATED PURCHASE AGREEMENT PURSUANT TO SECTION 10.1, AND THAT FOLLOWING SUCH TERMINATION OF THE REPRESENTATIONS AND WARRANTIES, BUYER SHALL HAVE NO RECOURSE AGAINST ANY SELLER OR THEIR AFFILIATES WITH RESPECT TO ANY BREACH OF SUCH REPRESENTATIONS AND WARRANTIES.

4.8.

Affiliate Guaranty.  If Buyer assigns its rights and interests to an Affiliate or Affiliates pursuant to Section 11.5 hereof, Buyer shall be deemed to have made the representations and warranties in this Section 4 on behalf of itself and any such Affiliate as if such Affiliate were a signatory to this Related Purchase Agreement.

4.9.

Qualified Buyer.  To Buyer’s Knowledge, Buyer is qualified to obtain any Permits and the Buyer Regulatory Approvals necessary for Buyer to own and operate the Facilities as of the Closing, to the extent such operation is either required by any Ancillary Agreement or this Agreement, or is contemplated by Buyer and for Buyer to consummate the transactions contemplated pursuant to this Agreement.

5.

Covenants.  The Parties agree as follows:

5.1.

General.  Prior to the Closing, each of the Parties will use its Commercially Reasonable Efforts to take all actions and to do all things necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Related Purchase Agreement and the Ancillary Agreements as soon as practicable after the Effective Date (including satisfaction, but not waiver, of the closing conditions set forth in Section 6).

5.2.

Notices, Consents and Approvals

(a)

Sellers and Buyer shall each file or cause to be filed with the Federal Trade Commission and the United States Department of Justice any notifications required to be filed under the Hart-Scott-Rodino Act and the rules and regulations promulgated thereunder with respect to the transactions contemplated hereby.  The Parties shall use Commercially Reasonable Efforts to make such filings, as promptly as possible after the Effective Date, to respond promptly to any requests for additional information made by either of such agencies, and to cause the waiting periods under the Hart-Scott-Rodino Act to terminate or expire at the earliest possible date after the date of filing.  Buyer will pay all filing fees under the Hart-Scott-Rodino Act, but each Party will bear its own costs for the preparation of any filing.  Both Parties shall use Commercially Reasonable Efforts to cause any waiti ng period under the Hart-Scott-Rodino Act with respect to the transactions contemplated by this Related Purchase Agreement and the Ancillary Agreements to expire or terminate at the earliest possible time.

(b)

Prior to the Closing, Sellers and Buyer shall cooperate with each other and use all Commercially Reasonable Efforts to (i) promptly prepare, support, assist in preparing, join in and file any filings, applications and all other necessary documentation, (ii) effect all necessary applications, notices, petitions and filings and execute all agreements and documents, (iii) obtain the transfer or reissuance to Buyer of all necessary Permits and (iv) obtain and not oppose, directly or indirectly, all necessary consents, approvals and authorizations of all other parties necessary or advisable to consummate the transactions contemplated by this Related Purchase Agreement or in any of the Ancillary Agreements (including, without limitation, Sellers’ Regulatory Approvals and Buyer’s Regulatory Approvals) or required by the terms of any note, bond, mortgage, indenture, deed of trust, license, f ranchise, permit, concession, contract, lease or other instrument to which any Seller or Buyer is a party or by which any of them is bound, provided that no Party shall amend any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument or agree on any restriction on the Business of the Company in obtaining such consents, approvals and authorizations.  Sellers and Buyer shall have the right to review in advance all characterizations of the information relating to the transactions contemplated by this

Related Purchase Agreement or in any of the Ancillary Agreements that appear in any filing made in connection with the transactions contemplated hereby or thereby.  Notwithstanding the foregoing, no Seller is obligated to assign or transfer any interest in any Transferable Permits, including, without limitation, those obtained pursuant to the applicable requirements of Laws, if the consent or approval of the third Person for such assignment or transfer cannot be obtained.

(c)

Buyer shall have primary responsibility for securing the transfer or reissuance of the Permits (including the Transferable Permits) effective as of the Closing Date.  Sellers shall cooperate with Buyer’s efforts in this regard and Sellers shall use Commercially Reasonable Efforts to assist in the transfer or reissuance.  If the Parties are unable to secure the transfer or reissuance of one or more Permits effective on the Closing Date, Sellers shall continue to reasonably cooperate with Buyer’s efforts to secure such transfer or reissuance following the Closing Date.

5.3.

Maintenance of the Related Assets.  During the Interim Period, Sellers will maintain the Related Assets in the ordinary course unless otherwise contemplated by this Related Purchase Agreement or with the prior written consent of Buyer.  Without limiting the generality of the foregoing, Sellers shall not, without prior written consent of Buyer (which consent shall not be unreasonably withheld, delayed or conditioned), during the Interim Period, with respect to the Related Assets and Assumed Liabilities:

(a)

sell, lease (as lessor), license (as licensor), transfer or otherwise dispose of, any of the Related Assets, other than as used, consumed or replaced in the ordinary course of business or encumber, pledge, mortgage or suffer to be imposed on any of the Related Assets any Lien other than Permitted Encumbrances;

(b)

terminate, materially amend otherwise materially modify any material Contract, Lease or Permit other than in the ordinary course of business; provided that nothing in this clause shall inhibit the ability of Sellers to terminate, amend or modify contracts as required by a Governmental Authority, or as may be required by other applicable Law; provided that the Parties acknowledge that Sellers may, and may cause or permit the Company to modify, amend or terminate any Intercompany Agreement at Sellers’ sole discretion;

(c)

increase the level of wages, overall compensation or other benefits of any employees referenced in Section 5.6(a), (b) or (c) (except for increases in salary or hourly wage rates, in the ordinary course of business consistent with past practice or the payment of accrued or earned but unpaid bonuses);

(d)

 compromise or settle any material litigation, dispute, claim or other material Liability; or

(e)

agree or commit to do any of the foregoing.

5.4.

Interim Period Notice; Schedule Update.

(a)

Each Party shall notify the other promptly if any information comes to its attention prior to the Closing that is likely to (i) excuse it from the performance of its obligations under this Related Purchase Agreement or any Ancillary Agreements or (ii) cause any condition to close set forth in Sections 6.1 or 6.2 not to be satisfied.

(b)

From time to time prior to the Closing Date, Sellers may at their option supplement or amend and deliver updates to the Schedules (each a “Schedule Update”) that are necessary to complete or correct any information in such Schedules or in any representation or warranty of any Seller that has been rendered inaccurate since the Effective Date.  Without limiting Buyer’s rights under Section 10.1(b)(v) if (i) Buyer has the right to terminate the Related Purchase Agreement thereunder and does not exercise such right as a result of such Schedule Update (together with all other Schedule Updates delivered pursuant to this Section 5.4(b) and notices given pursuant to Sections 5.4(a) and (ii) the Schedule Update pursuant to this Section 5.4(b) relates to events occurring or conditions arising after the Effective Date, then such Schedule Update shall be deemed to have amended the appropriate Schedule or Schedules as of the Effective Date, to have qualified the representations and warranties contained in Section 3 as of the Effective Date, and to have cured any misrepresentation or breach of warranty that otherwise might have existed hereunder by reason of the existence of such matter for purposes of the closing conditions set forth in Section 6.1 (but, for the avoidance of doubt, not for purposes of the indemnification obligations of Seller set forth in Article 9). Any Schedule Updates delivered pursuant to this Section 5.4(b) that relate to events occurring or conditions existing on or prior to the Effective Date shall not qualify the representations and warranties, or cure any misrepresentation or breach of warranty hereunder.

(c)

Buyer may elect at any time to notify Sellers of the existence of any matter, that if in existence on the Effective Date or the Closing Date would or might cause any of the representations or warranties in Section 4 to be untrue or incorrect.  Except as set forth in the following sentence, unless (i) Sellers have the right to terminate this Related Purchase Agreement pursuant to Section 10.1(c)(v) by reason of such notice (together with all other notices given pursuant to Section 5.4(a) and this Section 5.4(d)) and (ii) exercise that right within the period of fifteen (15) days referred to in Section 10.1(c)(v), if the written notice given by Buyer pursuant to this Section 5.4(d) relates to events occurring or conditions arising after the Effective Date, such written notice shall be deemed to have amended the appropriate Schedule or Schedules as of the Effective Date, to have qualified th e representations and warranties contained in Section 4 as of the Effective Date, and to have cured any misrepresentation or breach of warranty that otherwise might have existed hereunder by reason of the existence of such matter for purposes of the closing conditions set forth in Section 6.2 (but, for the avoidance of doubt, not for purposes of the indemnification obligations of Buyer set forth in Article 9).  Any notices delivered pursuant to this Section 5.4(d) that relate to events occurring or conditions existing on or prior to the Effective Date shall not qualify the representations and warranties, or cure any misrepresentation or breach of warranty hereunder.

5.5.

Further Assurances.

(a)

At any time and from time to time after the Closing, at the request of a Party, the other Party will execute and deliver such instruments of sale, transfer, conveyance, assignment and confirmation and take such action as Sellers and Buyer may both reasonably agree is necessary to transfer, convey and assign to Buyer, and to confirm Buyer’s title to or interest in the Related Assets and Assumed Liabilities or to put Buyer in actual possession and operating control of the Related Assets, and otherwise to consummate and give effect to the transactions contemplated pursuant to this Related Purchase Agreement.

(b)

In the event that any asset that is a Related Asset shall not have been conveyed to Buyer at the Closing, Sellers shall, subject to Sections 5.5(c), (d) and (e), use its Commercially Reasonable Efforts to convey such asset to Buyer as promptly as is practicable after the Closing.

(c)

To the extent that Sellers’ rights under any Contract or Lease may not be assigned without the consent of another Person which consent has not been obtained by the Closing Date, this Related Purchase Agreement shall not constitute an agreement to assign the same if an attempted assignment would constitute a breach thereof or be unlawful, and Sellers and Buyer shall cooperate and shall each use their Commercially Reasonable Efforts to obtain any such required consent(s) as promptly as possible.  Sellers and Buyer agree that if any consent to an assignment shall not be obtained, or if any attempted assignment would be ineffective or would impair Buyer’s rights and obligations under the Contract or Lease in question, so that Buyer would not in effect acquire the benefit and burden of all such rights and obligations, Sellers, to the maximum extent permitted by law and such Contract or Lease shall, after the Closing, appoint Buyer to be Sellers’ agent with respect to such Contract or Lease, and Sellers shall, to the maximum extent permitted by law and such Contract or Lease, enter into such reasonable arrangements with Buyer as are necessary to provide Buyer with the benefits and obligations of such Contract or Lease.  Sellers and Buyer shall cooperate and shall each use their Commercially Reasonable Efforts after the Closing to obtain an assignment of such Contract or Lease to Buyer.

(d)

To the extent that Sellers’ rights under any warranty or guaranty described in Section 2.1(a) may not be assigned without the consent of another Person, which consent has not been obtained by the Closing Date, this Related Purchase Agreement shall not constitute an agreement to assign the same, if an attempted assignment would constitute a breach thereof, or be unlawful.  Sellers and Buyer agree that if any consent to an assignment of any such warranty or guaranty would be ineffective or would impair Buyer’s rights and obligations under the warranty or guaranty in question, so that Buyer would not in effect acquire the benefit of all such rights and obligations, Sellers shall use Commercially Reasonable Efforts, at Buyer’s sole cost and expense, to the extent permitted by law and such warranty or guaranty, to enforce such warranty or guaranty for the benefit of Buyer so as to the maximum extent possible to provide Buyer with the benefits and obligations of such warranty or guaranty.  Notwithstanding the foregoing, Sellers shall not be obligated to bring or file suit against any Third Party, provided that if

Sellers shall determine not to bring or file suit after being requested by Buyer to do so, Sellers shall assign, to the extent permitted by law or any applicable agreement or contract, its rights in respect of the claims so that Buyer may bring or file such suit.

(e)

To the extent that any personal property lease cannot be assigned to Buyer or is not subject to arrangements described in Section 5.5(c), upon Buyer’s reasonable request and at Buyer’s sole expense, Sellers will use Commercially Reasonable Efforts to acquire the assets relating to such lease and to include them in the Related Assets before the Closing Date.

5.6.

Employee Matters.

(a)

Represented Employees.  Buyer shall offer employment, commencing as of midnight on the Closing Date, to all employees of Sellers who are represented by either of the Locals and who were employed in the operation of the NGC Facilities as of the Effective Date as set forth on Schedule 5.6(a), under terms and conditions in accordance with the Collective Bargaining Agreements.  For the avoidance of doubt, Buyer shall recognize all increases in wages made in the ordinary course of business and in accordance with the applicable Collective Bargaining Agreement between the Effective Date and the Closing Date.  Those employees who accept such offer of employment are hereinafter referred to as the “Represented Employees.”  All such offers of employment shall be made in accordance with all applicable laws and regulations and the applicable Collect ive Bargaining Agreements.  Effective as of the Closing Date, Buyer shall agree to be bound by the Collective Bargaining Agreements, and to thereafter comply with all applicable obligations thereunder, subject to changes negotiated with each of the Locals in accordance with the terms of the Collective Bargaining Agreements.

(b)

Non-Represented Plant Employees.  Schedule 5.6(b) list the Sellers’ employees employed in the operation of the NGC Facilities and located at the NGC Facilities as of the Effective Date who are not represented by either Local.  No later than 10 Business Days prior to the Closing, Buyer shall provide Sellers a written list of such  employees to whom Buyer wishes to offer employment.  Within 7 days following Buyer’s delivery of such list to Sellers, Buyer shall offer employment to such employees commencing as of midnight on the Closing Date for a period of at least twelve months (the “Minimum Employment Period”), at aggregate levels of wages and overall compensation substantially comparable, in the aggregate (excluding equity based compensation and benefits under any defined benefit pension plan or post-retirement health o r welfare plan), to the level of wages and overall compensation in effect for such employees as of the Effective Date; provided that Buyer shall recognize all increases in wages made in the ordinary course of business between the Effective Date and the Closing Date and provided further that during the Minimum Employment Period, Buyer shall provide to each Non-Represented Plant Employee (as defined below) a pension benefit substantially comparable to the pension benefit applicable to each such Non-Represented Plant Employee under the retirement plan of Sellers or their Affiliates as of the Closing Date (and, for the avoidance of doubt, the parties acknowledge and agree that Buyer may provide such reasonably comparable pension benefits pursuant to a defined contribution, rather than a defined benefit pension plan).  Those employees who accept

such offer of employment are hereinafter referred to as the “Non-Represented Plant Employees.”  All such offers of employment shall be made in accordance with all applicable laws.  Notwithstanding anything herein to the contrary, all Non-Represented Plant Employees will be employed as at-will employees whose employment may be terminated at any time with or without cause or reason by either the employee or Buyer; provided that if Buyer terminates any Non-Represented Plant Employee during the Minimum Employment Period for any reason other than for cause, Buyer shall pay any such terminated Non-Represented Plant Employee (i) an amount equal to such terminated Non-Represented Plant Employee’s salary for the remainder of the Minimum Employment Period, plus Enhanced Severance; provided that such terminated Non-Represented Plant Employee executes and delivers to Buyer a general release and covenant not to sue in favor of Buyer, Sellers and their respective Affiliates in a form reasonably acceptable to Buyer and Sellers.

(c)

Non-Represented Support Employees.  Schedule 5.6(c) lists the Sellers’ employees employed in support and asset management positions with respect to the NGC Facilities as of the Effective Date and who are not represented by either Local.  No later than 10 Business Days prior to the Closing, Buyer shall provide Sellers a written list of such employees to whom Buyer wishes to offer employment.  Within 7 days following Buyer’s delivery of such list to Sellers, Buyer shall offer employment to such employees commencing as of midnight on the Closing Date for the Minimum Employment Period, at aggregate levels of wages and overall compensation substantially comparable, in the aggregate (excluding equity-based compensation and benefits under any defined benefit pension plan or post-retirement health or welfare plan), to the level of wages and overall compens ation in effect for such employees as of the Effective Date; provided that Buyer shall recognize all increases in wages made in the ordinary course of business between the Effective Date and the Closing Date, and provided further that during the Minimum Employment Period, Buyer shall provide to each Non-Represented Support Employee (as defined below) a pension benefit substantially comparable to the pension benefit applicable to each such Non-Represented Support Employee under the retirement plan of the Sellers or their Affiliates as of the Closing Date (and, for the avoidance of doubt, the parties acknowledge and agree that Buyer may provide such reasonably comparable pension benefits pursuant to a defined contribution, rather than a defined benefit pension plan).  Those employees who accept such offer of employment are hereinafter referred to as the “Non-Represented Support Employees”, and together with the Non-Represented Plant Employees and the Represented Employees ar e hereafter referred to as the “Related Assets Employees”.  All such offers of employment shall be made in accordance with all applicable laws.  Notwithstanding anything herein to the contrary, all Non-Represented Support Employees will be employed as at-will employees whose employment may be terminated at any time with or without cause or reason by either the employee or Buyer; provided that if Buyer terminates any Non-Represented Support Employee during the Minimum Employment Period for any reason other than for cause, Buyer shall pay any such terminated Non-Represented Support Employee (i) an amount equal to such terminated Non-Represented Support Employee’s salary for the remainder of the Minimum Employment Period, plus (ii) Enhanced Severance; provided that such terminated Non-Represented Support Employee executes and delivers to Buyer a general

release and covenant not to sue in favor of Buyer, Sellers and their respective Affiliates in a form reasonably acceptable to Buyer and Sellers.

(d)

Buyer shall apply each Related Assets Employee’s prior service with Sellers or their Affiliates toward any eligibility, vesting or other waiting period requirements under Buyer’s Employee Benefit Plans to the extent such conditions were satisfied under the corresponding Sellers Employee Benefit Plans prior to the Closing Date.  In addition, Buyer shall waive all limitations with respect to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements under Buyer’s Employee Benefit Plans and credit each Related Assets Employee for any co-payments and deductibles paid prior to the Closing Date under any such plans in which each Related Assets Employee participates to the extent such limitations and such amounts are credited under the corresponding Seller Employee Benefit Plan prior to the Closing Date.  

(e)

Sellers shall provide and remain liable for any and all continuation of coverage under the Seller Employee Benefit Plans as required under §§601 through 608 of ERISA and §4980B of the Code with respect to any person as to whom a “qualifying event” as defined in §4980 of the Code occurred on or prior to the Closing Date.

(f)

Effective as of 12:01 a.m. on the Closing Date, the Related Assets Employees shall cease to be employees of Sellers or their Affiliates and Sellers or their Affiliates shall be solely responsible for the payment of (i) all wages and compensation, (ii) except with respect to Represented Employees, severance payments and vacation pay and (iii) other amounts thereupon legally owing to or with respect to the Related Assets Employees prior to 12:01 a.m. on the Closing Date, or as a result of such separation.  Such amounts shall be paid in accordance with Sellers’ policies and practices and applicable Law.  Sellers and/or the applicable Seller Employee Benefit Plan shall retain sole responsibility for any Liabilities with respect to welfare plans and workers compensation claims incurred on or prior to the Closing Date.

(g)

Sellers agree to timely perform and discharge all requirements under the WARN Act and under applicable state and local Laws for the notification of their respective employees arising from the sale of the Related Assets to Buyer up to and including the Closing Date, including those employees who will become Related Assets Employees effective as of the Closing Date.  After the Closing Date, Buyer shall be responsible for performing and discharging all requirements under the WARN Act and under applicable state and local laws and regulations for the notification of its employees, whether Related Assets Employees or otherwise.  All severance and other costs associated with workforce restructuring activities associated with the Related Assets and/or the Related Assets Employees subsequent to the Closing Date shall be borne solely by Buyer.

(h)

This Section 5.6 shall survive the Closing for the period necessary to give full effect to its terms.  The parties specifically acknowledge and agree that Section 11.2 hereof shall apply to this Section 5.6.

(i)

Notwithstanding anything to the contrary in this Section 5.6, Buyer shall have the right to use a third party operator or an Affiliate to hire Acquired Assets Employees and to perform certain actions on behalf of Buyer under this Section 5.6; provided that in no event will such use of or performance by a third party operator release Buyer from any of its obligations under this Section 5.6.

5.7.

Access to Employees after Closing.  For a period of three (3) years after the Closing Date, Sellers shall have reasonable access to the Related Assets Employees (to the extent employed by Buyer) and Buyer shall have reasonable access to Sellers’ employees, for purposes of consultation or otherwise, to the extent that such access may reasonably be required by Sellers or Buyer in connection with matters relating to the Related Assets or the NGC Facilities, so long as the duration of any employee’s time commitment with respect thereto is not extensive and does not materially impair said employee’s performance of his or her duties.

5.8.

Acceptable Guaranty; Acceptable Letter of Credit.  On the Effective Date, Buyer shall deliver to Sellers an Acceptable Guaranty and at all times thereafter until payment in full of the Purchase Price Buyer shall maintain such Acceptable Guaranty in full force and effect.  On the Effective Date Buyer shall deliver to Seller an Acceptable Letter of Credit and at all times thereafter until the Closing Date Buyer shall maintain such Acceptable Letter of Credit in full force and effect.  Seller shall draw upon the Acceptable Letter of Credit only in accordance with the terms and conditions thereof.  Seller shall return the Acceptable Letter of Credit (including any amendments thereto) to the issuer thereof or to Buyer (i) on the Closing Date, (ii) within five Business Days after the earliest date on which all three of the Agreements shall have been terminated in accordance with their respective terms (unless one or more of the Beneficiaries in good faith believes that a Buyer still has unsatisfied monetary obligations to one or more of the Beneficiaries under one or more of the Agreements, in which case Seller shall so return the Acceptable Letter of Credit not later than the date that is five Business Days after the date all such unsatisfied monetary obligations have been satisfied) or (iii) otherwise within five Business Days after the Expiry Date.  As used in the immediately preceding sentence, the terms “Closing Date,” “Business Days,” “Agreements,” “Beneficiaries,” “Buyer,” and “Expiry Date” have the meanings ascribed to such terms in the Acceptable Letter of Credit.

6.

Conditions to Obligation to Close.

6.1.

Conditions to Obligation of Buyer to Close.  The obligation of Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:

(a)

Representations and Warranties.  The representations and warranties set forth in Section 3 that are not qualified by materiality or Material Adverse Effect shall be true and correct in all material respects, and all other representations and warranties that are so qualified shall be true and correct in all respects, in each case at and as of the Closing Date;

(b)

Performance by Sellers.  Sellers shall have performed and complied in all material respects with all of their covenants, agreements and obligations hereunder through the Closing;

(c)

Buyer’s Regulatory Approvals; Consents; Permits.  Buyer shall have received (i) the Buyer’s Regulatory Approvals, with such terms and conditions as may be included therein except for such terms and conditions that, either singly or in the aggregate are reasonably likely to be materially adverse to Buyer or the Related Assets or Assumed Liabilities, (ii) those Permits that are material to the operation of the NGC Facilities consistent with current practices, and (iii) those Third Party consents without the receipt of which would be reasonably likely to have a Material Adverse Effect on the Facility.

(d)

Absence of Litigation.  There shall not be any litigation, proceeding, injunction, judgment, order, decree or ruling in effect or pending that would prevent or inhibit consummation of the transactions contemplated by this Related Purchase Agreement or the Ancillary Agreements;

(e)

Antitrust Matters.  All applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated;

(f)

NGC SPA.  The conditions to the obligations of Buyer to close the Related Transactions (as further specified in the NGC SPA and the Mt. Tom Purchase Agreement) shall have been, or contemporaneously with the Closing shall be, satisfied; and

(g)

Deliveries.  Sellers shall have complied in all material respects with the delivery requirements of Section 2.10.

Buyer may waive any condition specified in this Section 6.1 in its sole discretion if it executes a writing so stating at or prior to the Closing and such waiver shall not be considered a waiver of any other provision in this Related Purchase Agreement unless the writing specifically so states.

6.2.

Conditions to Obligation of Sellers to Close.  The obligation of Sellers to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:

(a)

Representations and Warranties.  The representations and warranties set forth in Section 4 that are not qualified by materiality or Material Adverse Effect shall be true and correct in all material respects, and all other representations and warranties that are so qualified shall be true and correct in all respects, in each case at and as of the date hereof and the Closing Date;

(b)

Performance by Buyer.  Buyer shall have performed and complied in all material respects with all of its covenants, agreements and obligations hereunder through the Closing;

(c)

Absence of Litigation.  There shall not be any injunction, judgment, order, decree or ruling in effect or pending that would prevent or inhibit consummation of the transactions contemplated by this Related Purchase Agreement or the Ancillary Agreements;

(d)

Antitrust Matters.  All applicable waiting periods (and any extensions thereof) under the Hart-Scott-Rodino Act shall have expired or otherwise been terminated;

(e)

NGC SPA.  The conditions and obligations of NUEI to close the NGC SPA (as further specified in the NGC SPA) shall have been, or contemporaneously with the Closing shall be, satisfied; and

(f)

Deliveries.  Buyer shall have complied in all material respects with the delivery requirements of Section 2.11.

Sellers may waive any condition specified in this Section 6.2 in its sole discretion if they execute a writing so stating at or prior to the Closing and such waiver shall not be considered a waiver of any other provision in this Related Purchase Agreement unless the writing specifically so states.

7.

Confidentiality.

(a)

Each Receiving Party and each Representative thereof will treat and hold as confidential all of the Proprietary Information, and refrain from using any of the Proprietary Information except in connection with this Related Purchase Agreement and the Ancillary Agreements and transactions contemplated hereby and thereby.  In the event that the Receiving Party or any Representative thereof is requested or required (including, without limitation, (i) pursuant to any rule or regulation of any stock exchange or other self-regulatory organization upon which any of the Receiving Party’s securities are listed or (ii) by oral question or request for information or documents in any legal proceeding, including without limitation the Buyer’s Regulatory Approval and the Seller’s Regulatory Approval processes, interrogatory, subpoena, civil investigative demand, or similar process) to disc lose any Proprietary Information, the Receiving Party will notify the Disclosing Party promptly of the request or requirement so that the Disclosing Party may seek an appropriate protective order or waive compliance with the provisions of this Section 7.  If, in the absence of a protective order or the receipt of a waiver hereunder, the Receiving Party or any Representative thereof is, on the advice of counsel, compelled to disclose any Proprietary Information pursuant to any such request or requirement, then the Receiving Party or such Representative may disclose the Proprietary Information so requested or required to be disclosed; provided that the Receiving Party shall use its reasonable best efforts to obtain, at the request of the Disclosing Party, an order or other assurance that confidential treatment will be accorded to such portion of the Proprietary Information required to be disclosed as the Disclosing Party shall designate.  If this Related Purchase Agreement is terminated pursua nt to Section 10.1, then each Receiving Party shall deliver promptly to the Disclosing Party or destroy, at the request and option of the Disclosing Party, all tangible embodiments (and all copies) of the Proprietary Information that are in its possession.

(b)

The obligations of the Parties contained in this Section 7 shall be in full force and effect for three years from the date hereof and will survive the termination of this Related Purchase Agreement, the discharge of all other obligations owed by the Parties to each other and any transfer of title to the Related Assets.  Nothing in this

Section 7 shall in any way alter Buyer’s obligations under the Confidentiality Agreement dated February 25, 2006 by and between Energy Capital Partners and NUSCO as agent for HWP and NUEI, which Confidentiality Agreement shall terminate automatically upon the Closing Date and shall be of no further force and effect.

(c)

Upon the Disclosing Party’s prior written approval (which will not be unreasonably withheld), the Receiving Party may provide Proprietary Information to the FERC, the SEC, the United States Department of Justice, the United States Federal Trade Commission or any other Governmental Authority with jurisdiction, as necessary, to obtain any consents, waivers or approvals as may be required for the Receiving Party to undertake the transactions contemplated herein.  The Receiving Party will seek confidential treatment for such Proprietary Information provided to any such Governmental Authority (if such confidential treatment is available from the appropriate Governmental Authority) and the Receiving Party will notify the Disclosing Party as far in advance as is practicable of its intention to release to any such Governmental Authority any such Proprietary Information.

8.

Taxes.

(a)

All transfer Taxes incurred in connection with this Related Purchase Agreement and the transactions contemplated hereby shall be borne by Buyer, including, without limitation, Connecticut and Massachusetts state sales tax, and Buyer, at its own expense, will file, to the extent required by applicable Laws, all necessary Tax Returns and other documentation with respect to all such transfer or sales Taxes, and, if required by applicable Laws, Sellers, as applicable, will join in the execution of any such Tax Returns or other documentation.  

(b)

With respect to Taxes to be prorated in accordance with Section 2.8 of this Related Purchase Agreement only, Buyer shall prepare and timely file all Tax Returns required to be filed after the Closing with respect to the Related Assets, if any, and, subject to Sellers’ compliance with this Section 8(b), shall duly and timely pay all such Taxes shown to be due on such Tax Returns.  Buyer’s preparation of any such Tax Returns shall be subject to Sellers’ approval, which approval shall not be unreasonably withheld.  No later than ten (10) Business Days prior to the due date of any such Tax Return, Buyer shall make such Tax Return available for Sellers’ review and approval.  Sellers shall respond no later than five (5) Business Days prior to the due date for filing such Tax Return.  With respect to such Tax Return, no later than the due date for filing such T ax Return, each Seller, as applicable, shall pay to Buyer its appropriate share of the amount shown as due on the Tax Returns determined in accordance with Section 2.8 of this Related Purchase Agreement.

(c)

Each of Buyer and Sellers shall provide the other with such assistance as may reasonably be requested by the other Party in connection with the preparation of any Tax Return, any audit or other examination by any taxing authority, or any judicial or administrative proceedings relating to liability for Taxes, and each will retain and provide the requesting Party with any records or information for a period of three (3) years which may be relevant to such Tax Return, audit or examination, proceedings or determination.  

Any information obtained pursuant to this Section 8 or pursuant to any other Section hereof providing for the sharing of information or review of any Tax Return or other schedule relating to Taxes shall be deemed to be and shall be Proprietary Information.]

9.

Survival of Representations and Warranties: Effect of Closing and Indemnification.

9.1.

Survival of Representations and Warranties; Survival of Covenants and Agreements.  The representations and warranties of each Seller set forth in Section 3 (other than (i) the representations and warranties set forth in Sections 3.1, 3.2 and 3.4 (collectively, the “Authority Representations”), which shall survive the Closing indefinitely, and (ii) the representations and warranties set forth in Section 3.7 (taxes), which shall survive the Closing for 60 days following the expiration of the applicable statute of limitations) and the representations and warranties of Buyer set forth in Sections 4, shall survive the Closing for a period of twelve (12) months, provided that all such representations and warranties of the Parties shall terminate upon a termination of this Related Purchase Agreement pursuant to Section 10.1.  The covenants of the Parties contained in this Related Purchase Agreement, other than those that by their terms survive the Closing and/or termination of this Related Purchase Agreement (and other than the covenants set forth in Section 5.3 (maintenance of the Related Assets), which shall survive the Closing for a period of twelve (12) months) shall terminate 30 days after the Closing or at the termination of this Related Purchase Agreement pursuant to Section 10.1, except as set forth in such Section.

9.2.

Effect of Closing.  Upon the Closing, any condition to the obligations of either Party hereunder that has not been satisfied, or, except (i) to the extent such breaches or failures to satisfy are subject to indemnification hereunder, (ii) with respect to claims for fraud or deceit and (iii) as provided in Section 11.17, any representation, warranty or covenant that has been breached or left unsatisfied by any Party will be deemed waived by the Parties, and each Party will be deemed to fully release and forever discharge the other Party on account of any and all claims, demands or charges, known or unknown, with respect to the same.  Nothing in this Section 9.2 shall be deemed to affect any provision herein that expressly survives the Closing (including pursuant to Section 9.1) or pertains to matters that will occur after the Closing.

9.3.

Indemnity by Sellers.  Each Seller hereby severally agrees to indemnify, defend and hold harmless Buyer, its Affiliates, its and their successors and permitted assignees, and all of its and their respective stockholders, trustees, partners, members, directors, officers, employees, agents and representatives (collectively, “Buyer Indemnified Parties”) against and in respect of all Liabilities, obligations, judgments, Liens (except for Permitted Encumbrances), injunctions, charges, orders, decrees, rulings, damages, assessments, Taxes, losses, fines, penalties, damages, expenses, fees, costs, and amounts paid in settlement (including reasonable consultants’, attorneys’ and expert witness fees and disbursements in connection with investigating, defending or settling any action or threatened action) (collectively, the “Losses”), that result from, arise o ut of or relate to:

(a)

any such Seller’s Excluded Liability;

(b)

any breach by such Seller of any representation or warranty of such Seller set forth in this Related Purchase Agreement; or

(c)

any breach by such Seller of any of its covenants contained in this Related Purchase Agreement.

9.4.

Indemnity by Buyer.  Buyer hereby agrees to indemnify, defend and hold harmless Sellers, their Affiliates, and their successors and permitted assigns, and all of their respective stockholders, trustees, partners, members, directors, officers, employees, agents and representatives (collectively, “Seller Indemnified Parties”) against and in respect of all Losses that result from, arise out of or relate to:

(a)

any Third Party Claim against any Seller based on  or relating to Buyer’s ownership, operation or use of the Related Assets on or after the Closing Date;

(b)

any breach by Buyer of any representation or warranty set forth in this Related Purchase Agreement;

(c)

the Assumed Liabilities; or

(d)

any breach by Buyer of any of its covenants contained in this Related Purchase Agreement.

9.5.

Limitations on Liability.

(a)

The Parties hereby acknowledge and agree that Section 9.5(a) of the NGC SPA contains certain limitations on the liability of Parties pursuant to Sections 9.3 and 9.4 of this Related Purchase Agreement.

None of Buyer Indemnified Parties nor Seller Indemnified Parties shall be entitled to recover from Seller or Buyer, respectively, for any Losses arising under this Related Purchase Agreement or in connection with or with respect to the transactions contemplated in this Related Purchase Agreement, any amount in excess of the actual compensatory damages, court costs and reasonable attorneys fees, suffered by such Party.  Buyer on behalf of each of Buyer Indemnified Parties and Seller on behalf of each of Seller Indemnified Parties waives any right to recover incidental, indirect, special, exemplary, punitive or consequential damages, including lost revenues or profits, even if such damages are foreseeable or the damaged Party has advised the other Party of the possibility of such damages and regardless of whether any such damages are deemed to result from the failure or inadequacy of any exclusive or other r emedy.

(b)

Except as set forth in Sections 9.7(c) and 9.7(d), no Party entitled to indemnification hereunder shall settle, compromise or take any other action with respect to any claim, demand, assertion of liability or legal proceeding that could materially prejudice or otherwise materially adversely affect the ability of the Party providing such indemnification to defend or otherwise settle or compromise with respect to such claim, demand, assertion of liability or legal proceeding without the prior written consent of the Party providing such indemnification, which consent shall not be unreasonably withheld.

(c)

Each Party entitled to indemnification hereunder or otherwise to reimbursement for Losses in connection with the transactions contemplated in this

Related Purchase Agreement shall use Commercially Reasonable Efforts to mitigate all Losses upon becoming aware of any event or circumstance that could reasonably be expected to give rise to any Losses that are indemnifiable or recoverable hereunder or in connection herewith.

(d)

After the Closing, notice of any assertion by any Buyer Indemnified Party that Sellers are liable to any Buyer Indemnified Party in connection with the transactions contemplated hereby pursuant to (i) Sections 9.3(b) and 9.3(c) must be made by Buyer in writing and must be given to Sellers, on or prior to the time of expiration set forth in Section 9.1,and (ii) Section 9.3(a) must be made by Buyer in writing and must be given to Sellers on or prior to the expiration of applicable statute of limitations for such claim or such claim will be forever barred.

(e)

After the Closing, notice of any assertion by any Seller Indemnified Party that Buyer is liable to any Seller Indemnified Party pursuant to (i) Sections 9.4(b) and 9.4(d) in connection with the transactions contemplated hereby must be given to Buyer on or prior to the time of expiration set forth in Section 9.1, and (ii) Sections 9.4(a) and 9.4(c) must be made by Sellers in writing and must be given to Buyer on or prior to the expiration of the applicable statute of limitations for such claim or such claim will be forever barred.

(f)

Any notice provided under this Section 9.5 shall state the facts known to the asserting Party that give rise to such notice in sufficient detail to allow the other Party to evaluate the assertion.

9.6.

Exclusive Remedy.  Except as provided in Section 11.17, and except with respect to claims for fraud or deceit, from and after the Closing, the remedies set forth in this Section 9 shall constitute the sole and exclusive remedies for any and all claims, damages, complaints, demands, causes of action, investigations, hearings, actions, suits or other proceedings relating to this Related Purchase Agreement and are in lieu of any and all other rights and remedies that the Seller Indemnified Parties or Buyer Indemnified Parties may have under this Related Purchase Agreement or otherwise for monetary relief with respect to any breach or failure to perform or with respect to the Assumed or Excluded Liabilities.  Each Party waives any provision of law to the extent that it would limit or restrict the agreements contained in this Section 9.  Nothing herein shall prevent any Party from termina ting this Related Purchase Agreement in accordance with Section 10.

9.7.

Matters Involving Third Parties

(a)

If any Third Party shall notify any Party (the “Indemnified Party”) with respect to any matter (a “Third Party Claim”) that may give rise to a claim for indemnification against any other Party (the “Indemnifying Party”) under this Section 9, then the Indemnified Party shall promptly notify the Indemnifying Party thereof in writing; provided that no delay on the part of the Indemnified Party in notifying the Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party is prejudiced thereby.

(b)

Any Indemnifying Party will have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as (i) within fifteen (15) days after receiving such notice, the Indemnifying Party shall give written notice to the Indemnified Party stating whether it disputes the claim for indemnification and whether it will defend against any Third Party Claim or liability at its own cost and expense, (ii) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief, settlement of, or an adverse judgment with respect to, and the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice adverse to the continuing business interests of the Indemnified Party, and (iii) the Indemnifying Party conducts th e defense of the Third Party Claim actively and diligently; provided that if the claim is one that cannot by its nature be defended solely by the Indemnifying Party, the Indemnified Party shall make available all information and assistance reasonably available and necessary for the defense of the Third Party Claim as the Indemnifying Party may reasonably request and shall cooperate with the Indemnifying Party in such defense.

(c)

So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with Section 9.7(b), (i) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, (ii) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (which consent shall not unreasonably be withheld), and (iii) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim unless written agreement is obtained releasing the Indemnified Party from all liability thereunder and such judgment or settlement is not reasonably likely to have a material adverse effect on the operations of the Inde mnified Party or any of its Affiliates.

(d)

In the event any of the conditions in Section 9.7(b) is or becomes unsatisfied, however, (i) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any Indemnifying Party in connection therewith), (ii) the Indemnifying Party will reimburse the Indemnified Party promptly and periodically for the reasonable costs of defending against the Third Party Claim (including reasonable attorneys’ fees and expenses), and (iii) the Indemnifying Party will remain responsible for any Losses the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this Section 9.

9.8.

Net of Insurance.  Any calculation of a Loss under this Section 9 shall, in each case, give full effect to any and all insurance proceeds actually received by the Indemnified Party in respect of the Loss (net of the costs of collecting such proceeds).  The Indemnified Party shall use its Commercially Reasonable Efforts to collect any insurance proceeds payable to the Indemnified Party in respect of such Loss.  If any such insurance proceeds are collected after an

indemnification payment is made pursuant to this Section 9, the Indemnified Party shall pay to the Indemnifying Party the amount of such received insurance proceeds (net of the costs of collecting such proceeds), up to the amount of the indemnification payment previously made hereunder.  The Parties agree to treat any indemnity payment made pursuant to this Related Purchase Agreement as an adjustment to the Purchase Price, unless otherwise required by Law.  Any such Loss shall not take into account, and shall not be increased to reflect, the Tax consequences to the Indemnified Party of the receipt of (or the right to receive) the indemnification payments.

9.9.

No Recourse.  To the extent the transfer, conveyance, assignment and delivery of the Related Assets to Buyer as provided in this Related Purchase Agreement is accomplished by deeds, assignments, easements, leases, licenses, bills of sale, or other instruments of transfer and conveyance, whether executed at the Closing or thereafter, these instruments are made without representation or warranty by, or recourse against, Sellers or their Affiliates, except as expressly provided in this Related Purchase Agreement or in any such instrument.

10.

Termination.

10.1.

Termination of Related Purchase Agreement.  The Parties may terminate this Related Purchase Agreement as provided below:

(a)

the Parties may terminate this Related Purchase Agreement by mutual written consent at any time prior to the Closing;

(b)

Buyer may terminate this Related Purchase Agreement by giving written notice to Sellers at any time prior to the Closing if any of the following has occurred: (i) Sellers have breached any representation, warranty or covenant contained in this Related Purchase Agreement in any material respect, Buyer has notified Sellers of the breach, and the breach has continued without cure for a period of sixty (60) days after the notice of breach; (ii) the NGC SPA or the Mt. Tom Purchase Agreement is terminated in accordance with its terms; (iii) one or more courts of competent jurisdiction shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the Closing, which order, judgment or decree shall not have been terminated, lifted, vacated or otherwise rendered irrelevant within ninety (90) days of the issuance thereof; (iv) any statute, rule or regulation s hall have been enacted by any Governmental Authority that, directly or indirectly, prohibits the consummation of the transactions contemplated hereby; (v) (W) Sellers have within the then previous fifteen (15) days given Buyer any notice pursuant to Section 5.4(a) or (b) or delivered a Schedule Update pursuant to Section 5.4(c) and the matter that is the subject of such notice, if in existence on the Effective Date or the Closing Date, would cause the representations and warranties of Sellers set forth in Section 3 not to be true and correct, (X) such matter (together with the matters that are subject of any or all previous notices given pursuant to such Sections 5.4(a) or (b) or Schedule Updates delivered pursuant to Section 5.4(c)) would have a Material Adverse Effect on the NGC Facilities or Buyer, (Y) Buyer has notified Sellers of its intent to terminate pursuant to this Section 10.1(b)(v), and (Z) the matter that is the subject of such notice continues to exist for a period of sixty (60) consecutive day s after

such notice by Buyer; or (vi) the NGC SPA or the Mt. Tom Purchase Agreement has been terminated; and

(c)

Sellers may terminate this Related Purchase Agreement by giving written notice to Buyer at any time prior to the Closing if any of the following has occurred: (i) Buyer has breached any representation, warranty, or covenant contained in this Related Purchase Agreement in any material respect, Sellers have notified Buyer of the breach, and the breach has continued without cure for a period of sixty (60) days after the notice of breach; (ii) the NGC SPA is terminated in accordance with its terms; (iii) one or more courts of competent jurisdiction shall have issued an order, judgment or decree permanently restraining, enjoining or otherwise prohibiting the Closing, which order, judgment or decree shall not have been terminated, lifted, vacated or otherwise rendered irrelevant within ninety (90) days of the issuance thereof; (iv) any statute, rule or regulation shall have been enacted by any Gover nmental Authority that, directly or indirectly, prohibits the consummation of the transactions contemplated hereby; (v) (W) Buyer has within the then previous fifteen (15) days given Sellers any notice pursuant to Section 5.4(a) and 5.4(b) and the matter that is the subject of such notice, if in existence on the Effective Date or the Closing Date, would cause the representations and warranties of Buyer set forth in Section 4 not to be true and correct, (X) such matter (together with the matters that are subject of any or all previous notices given pursuant to such Section 5.4(a) or 5.4(b)) would have a Material Adverse Effect on any Seller, (Y) Sellers have notified Buyer of their intent to terminate pursuant to this Section 10.1(c)(v), and (Z) the matter that is the subject of such notice continues to exist for a period of sixty (60) consecutive days after such notice by Sellers, or (vi) the NGC SPA or the Mt. Tom Purchase Agreement has been terminated.

10.2.

Effect of Termination.  If any Party terminates this Related Purchase Agreement pursuant to Section 10.1, all rights and obligations of the Parties hereunder shall terminate without any Liability of any Party to the other Parties (except for any Liability of any Party with respect to breach of this Agreement occurring prior to termination and except as otherwise expressly provided herein); provided that Sections 7, 10.2 and 11 shall survive such termination. Notwithstanding anything to the contrary in this Related Purchase Agreement, and for the avoidance of doubt, the Parties agree that in the event of a termination of this Related Purchase Agreement as a result of the breach of this Related Purchase Agreement by any Party, the non-breaching Party shall be entitled to recover from the breaching Party the direct out-of-pocket fees, expenses and costs incurred by the non-breaching Party in connection with this Related Purchase Agreement and the transactions contemplated hereby.  In the case of the Buyer, such direct out-of-pocket fees, expenses and costs shall include all fees, expenses and other costs incurred in connection with (i) the organization, formation and capitalization of the Buyer and its subsidiaries, (ii) the due diligence investigation of the Sellers, the NGC Facilities and the Related Assets, (iii) the negotiation, execution, satisfaction of the conditions, performance of the obligations and covenants and termination of, under or with respect to this Related Purchase Agreement, the Ancillary Agreements and any agreements or commitments related to or required by the financing of the transactions contemplated hereby, including without limitation in the case of (i), (ii) or (iii) the fees, expenses and other costs of any consultants, advisors, counsel and accountants of Buyer as well as the costs of such financing sources and their respective consultants, accountants, advisors and counsel to the extent borne by Buyer.  In the case of

Sellers, such direct out-of-pocket fees, expenses and costs shall include all fees, expenses and other costs incurred in connection with (i) the auction process, including but not limited to investment banker fees, and (ii) the negotiation, execution, satisfaction of the conditions, performance of the obligations and covenants and termination of, under or with respect to this Agreement and the Ancillary, including without limitation in the case of (i) or (ii) the fees, expenses and other costs of any consultants, advisors, counsel and accountants of Sellers.

11.

Miscellaneous.

11.1.

Press Releases and Public Announcements  No Party shall issue any press release or make any public announcement relating to the subject matter of this Related Purchase Agreement without first affording the non-disclosing Party the opportunity to review and comment on such press release or public announcement; provided that any Party may make any public disclosure it believes in good faith is required by applicable law or any listing or trading agreement concerning its publicly-traded securities (in which case the disclosing Party will provide the other Party with the opportunity to review in advance the disclosure).  The Parties shall cooperate, using Commercially Reasonable Efforts, as to the timing and contents of any such disclosure, including any such disclosure required by applicable law or the rules of any stock exchange.  Notwithstanding the above, the Parties shall agr ee as to the timing and contents of the first press release.

11.2.

No Third Party Beneficiaries.  This Related Purchase Agreement shall not confer any rights or remedies upon any Third Party.  For the avoidance of doubt, no provision of this Related Purchase Agreement shall create any third party beneficiary rights in any employee or former employee of any Seller or their Affiliates (including any beneficiary or dependent thereof) in respect of continued employment or resumed employment, and no provision of this Related Purchase Agreement shall create any rights in any such Persons in respect of any benefits that may be provided, directly or indirectly, under any employee benefit plan or arrangement.  

11.3.

No Joint Venture.  Nothing in this Related Purchase Agreement creates or is intended to create an association, trust, partnership, joint venture or other entity or similar legal relationship between or among the Parties, or impose a trust, partnership or fiduciary duty, obligation, or liability on or with respect to any Party.  No Party is or shall act as or be the agent or representative of any other Party.

11.4.

Entire Agreement.  This Related Purchase Agreement (including the Exhibits and Schedules hereto), together with the Ancillary Agreements constitute the entire agreement between the Parties and supersede any prior understandings, agreements, or representations by or between the Parties, written or oral, to the extent they relate in any way to the subject matter hereof, provided that the Confidentiality Agreement dated as of February 25, 2006 shall remain in full force and effect without regard to any provision of this Related Purchase Agreement until the Closing Date, and shall terminate automatically on the Closing Date (except as contemplated by the definition of Proprietary Information herein).  All conflicts or inconsistencies between the terms hereof and the terms of any of the Ancillary Agreements, if any, shall be resolved in favor of this Related Purchase Agreement.

11.5.

Succession and Assignment  This Related Purchase Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns, but neither this Related Purchase Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any Party, including by operation of law, without the prior written consent of the other Parties, such consent not to be unreasonably withheld or delayed.  Any assignment in contravention of the foregoing sentence shall be null and void and without legal effect on the rights and obligations of the Parties hereunder.  Notwithstanding the foregoing, but subject to all applicable Laws, (i) Buyer or its permitted assignee may assign, transfer, pledge or otherwise dispose of (absolutely or as security) its rights and interests hereunder to a trustee, lending inst itutions or other party for the purposes of leasing, financing or refinancing the Related Assets, and (ii) Buyer or its permitted assignee may assign, transfer, pledge or otherwise dispose of (absolutely or as security) its rights and interests hereunder to an Affiliate of Buyer so long as such Affiliate makes the representations and warranties set forth in Section 4 to the same extent as Buyer and provides Acceptable Guaranty to Sellers; provided in each case that no such assignment shall relieve or discharge the assigning Party from any of its obligations hereunder or shall be made if it would reasonably be expected to prevent or materially impede, interfere with or delay the transactions contemplated by this Related Purchase Agreement or materially increase the cost of the transactions contemplated by this Related Purchase Agreement.  Each Party agrees, at the assigning Party’s expense, to execute and deliver such documents as may be reasonably necessary to accomplish any such assignment, transfer, pledge or other disposition of rights and interests hereunder so long as the nonassigning Party’s rights under this Related Purchase Agreement are not thereby materially altered, amended, diminished or otherwise impaired.  

11.6.

Counterparts.  This Related Purchase Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.

11.7.

Headings.  The section headings contained in this Related Purchase Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Related Purchase Agreement.

11.8.

Notices.  All notices, requests, demands, claims and other communications hereunder will be in writing.  Any notice, request, demand, claim or other communication hereunder shall be deemed duly given (i) upon confirmation of facsimile, (ii) one Business Day following the date sent when sent by overnight delivery and (iii) five Business Days following the date mailed when mailed by registered or certified mail return receipt requested and postage prepaid at the following address:

If to Sellers:

Northeast Generation Services Company

c/o Northeast Utilities Service Company

107 Selden Street

Berlin, CT  06307

Attn: NUSCO Manager of Corporate Planning

Northeast Utilities Service Company

107 Selden Street

Berlin, CT 06307

Attn:  NUSCO Manager of Corporate Planning

And

Select Energy, Inc.

c/o Northeast Utilities Service Company

107 Selden Street

Berlin, CT 06307

Attn:  NUSCO Manager of Corporate Planning

Copy to:

Senior Vice President and General Counsel

Northeast Utilities Service Company

107 Selden Street

Berlin, CT  06307

If to Buyer:

NE Energy, Inc.

Attn: General Counsel

51 John F. Kennedy Parkway, Suite 200

Short Hills, NJ 07078

NE Energy, Inc.

Attn: Andrew Singer

11943 El Camino Real #220

San Diego, CA 92130

Copy to:

Latham & Watkins LLP

885 Third Avenue

New York, NY 10022

Attn: Edward Sonnenschein and David Kurzweil

Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. For purposes of this Related Purchase Agreement, messages delivered by electronic mail shall be deemed to constitute “writings.” Any Party may change the address to which notices, requests, demands,

claims and other communications hereunder are to be delivered by giving the other Party notice in the manner herein set forth.

11.9.

Governing Law.  This Related Purchase Agreement shall be governed by and construed in accordance with the domestic laws of the State of Connecticut without giving effect to any choice or conflict of law provision or rule (whether of the State of Connecticut or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Connecticut.

11.10.

Recourse.  Except as expressly provided in the Acceptable Guaranty and in the Seller Guaranty, neither Party shall have recourse whatsoever under this Related Purchase Agreement against any of the trustees, general or limited partners, members, shareholders, directors, officers, employees or representatives of the other Party (including for such purposes, the trustees, general or limited partners, members, shareholders, directors, officers,  employees or representatives of any Affiliate of a Party).  Without limiting the generality of the foregoing, except as expressly provided in the Acceptable Guaranty and the Seller Guaranty, Buyer, on behalf of itself, its Affiliates and Buyer Indemnified Parties, and Seller, on behalf of itself, its Affiliates and Seller Indemnified Parties, each hereby fully and irrevocably waives any right, claim or entitlement whatsoever against such trustees , general or limited partners, members, shareholders, directors, officers, employees or representatives relating to any and all Losses suffered or incurred by any of them arising from, based upon, related to, or associated with this Related Purchase Agreement or any Ancillary Agreement or the transactions contemplated hereby and thereby (including any breach, termination or failure to consummate such transactions) in each case whether based on contract, tort or strict liability, other laws or otherwise and whether by piercing of the corporate veil, by claim on behalf of or by a Party hereto or other Person or otherwise.

11.11.

Consent to Jurisdiction.  Each of Sellers and Buyer consent to the nonexclusive jurisdiction of any state or federal court located within the City of Hartford, Connecticut, for adjudication of any suit, claim, action or other proceeding at law or in equity relating to this Related Purchase Agreement, or to any transaction contemplated hereby.  Sellers and Buyer each accept, generally and unconditionally, the nonexclusive jurisdiction of the aforesaid courts and waive any objection as to venue, and any defense of forum non conveniens.

11.12.

Amendments and WaiversNo amendment of any provision of this Related Purchase Agreement shall be valid unless the same shall be in writing and signed by Buyer and Sellers.  No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

11.13.

Severability.  Any term or provision of this Related Purchase Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

11.14.

Expenses.  Each of Buyer and Sellers will bear their own costs and expenses incurred in connection with this Related Purchase Agreement and the transactions contemplated hereby (including legal and accounting fees and expenses, except as otherwise provided in Section 9 above), except that Buyer shall bear the entire cost (other than legal fees of the Sellers) of all filings by both Sellers and Buyer under the Hart-Scott-Rodino Act.

11.15.

Construction.  Ambiguities or uncertainties in the wording of this Related Purchase Agreement will not be construed for or against any Party, but will be construed in the manner that most accurately reflects the Parties’ intent as of the Effective Date.  The Parties acknowledge that they have been represented by counsel in connection with the review and execution of this Related Purchase Agreement, and, accordingly, there shall be no presumption that this Related Purchase Agreement or any provision hereof be construed against the Party that drafted this Related Purchase Agreement.

11.16.

Incorporation of Exhibits and Schedules.  The Exhibits and Schedules identified in this Related Purchase Agreement are incorporated herein by reference and made a part hereof.

11.17.

Specific Performance.  Each of the Parties acknowledges and agrees that the other Party would be damaged irreparably in the event any of the provisions of this Related Purchase Agreement are not performed in accordance with their specific terms or otherwise are breached.  Accordingly, each of the Parties agrees that the other Party shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Related Purchase Agreement and to enforce specifically this Related Purchase Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter in addition to any other remedy to which it may be entitled, at law or in equity.

11.18.

Bulk Transfer Laws.  The Parties hereby waive compliance with the bulk sales act or comparable statutory provisions of each applicable jurisdiction.

11.19.

Good Faith Covenant.  The Parties agree that their actions and dealings with each other shall be subject to an express covenant of good faith and fair dealing.

11.20.

Dispute Resolution.  

(a)

Negotiation between Executives:  The Parties shall attempt in good faith to resolve any dispute arising out of or relating to this Related Purchase Agreement, promptly by negotiation between executives who have authority to settle the controversy.  Any Party may give the other Party written notice of any dispute not resolved in the normal course of business.  Such notice shall include: (a) a statement of that Party’s position and a summary of arguments supporting that position; and (b) the name and title of the executive who will be representing that Party and of any other person who will accompany the executive.  Within fifteen (15) days after delivery of the notice, the receiving Party shall respond with:  (a) a statement of that Party’s position and a summary of arguments supporting that position; and (b) the name and title of the executive who will repres ent that Party and of any other person who will accompany the executive.  Within thirty (30) days after delivery of the initial notice, the executives of

both Parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute.  All reasonable requests for information made by one Party to the other will be honored.  All negotiations pursuant to this clause are confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence.

(b)

Mediation:  If the dispute has not been resolved by negotiation within forty-five (45) days of the disputing Party’s notice, or if the Parties failed to meet within thirty (30) days, the Parties shall endeavor to settle the dispute by mediation under the then current International Institute for Conflict Prevention and Resolution (“CPR”) Mediation Procedure; provided that if one Party fails to participate as provided herein, the other Party can initiate mediation prior to the expiration of the forty-five (45) days.  Unless otherwise agreed, the Parties will select a mediator from the CPR Panels of Distinguished Neutrals.

(c)

Arbitration:  Any dispute arising out of or relating to this Related Purchase Agreement, including the breach, termination or validity thereof, that has not been resolved by a non-binding procedure as provided herein within ninety (90) days of the initiation of such procedure, shall be finally resolved by arbitration in accordance with the then current CPR Rules for Non-Administered Arbitration by a sole arbitrator, for disputes involving amounts in the aggregate under three million dollars ($3,000,000), or three arbitrators, for disputes involving amounts in the aggregate equal to or greater than three million dollars ($3,000,000), of whom each Party shall designate one in accordance with the “screened” appointment procedure provided in Rule 5.4; provided that if any Party will not participate in a non-binding procedure, the other may initiate arbitration before e xpiration of the above period.  The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1-16, and judgment upon the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof.  The place of arbitration shall be Hartford, Connecticut.

(d)

The arbitrator(s) are not empowered to award damages in violation of any limitations on damages provided for in this Related Purchase Agreement and each Party expressly waives and foregoes any right to punitive, exemplary or similar damages unless a statute requires that compensatory damages be increased in a specified manner.

[SIGNATURE PAGE FOLLOWS]

[Signature page for Related Purchase Agreement]

IN WITNESS WHEREOF, the Parties have duly executed and delivered this Related Purchase Agreement as of the date first written above.

NORTHEAST GENERATION SERVICES COMPANY

By: /s  David R. McHale

Name: David R. McHale

Title:   Senior Vice President and Chief Financial Officer at Northeast Utilities Service Company, as agent for Northeast Generation Company

NORTHEAST UTILITIES SERVICE COMPANY

By: /s/ David R. McHale

Name: David R. McHale

Title:   Senior Vice President and Chief Financial Officer at Northeast Utilities Service Company

SELECT ENERGY, INC.

By: /s/ David R. McHale

Name: David R. McHale

Title:   Senior Vice President and Chief Financial Officer at Northeast Utilities Service Company, as agent for Select Energy, Inc.

[Signature page for Related Purchase Agreement]

IN WITNESS WHEREOF, the Parties have duly executed and delivered this Related Purchase Agreement as of the date first written above.

NE ENERGY, INC.

By:/s  Sarah Wright

Name:  Sarah Wright

Title:    Executive Vice President

EX-10.35.1

Exhibit 10.35.1

7/24/06

EXHIBIT C TO RELATED PURCHASE AGREEMENT

FORM OF ACCEPTABLE GUARANTY

GUARANTY

This unconditional guaranty of payment and performance (“Guaranty”) dated July 24, 2006, of ENERGY CAPITAL PARTNERS I, LP, a limited partnership organized under the laws of the State of Delaware (“Guarantor”), is for the benefit of and delivered to Northeast Generation Services Company, a Connecticut corporation, Select Energy, Inc., a Connecticut corporation, and Northeast Utilities Service Company, a Connecticut corporation (collectively, “Counterparty”).

Guarantor does hereby irrevocably guarantee the full and prompt payment and performance by its subsidiary, NE Energy, Inc., a Delaware corporation (“Subsidiary”), of all of its obligations, including, without limitation, all payment and indemnification obligations (“Guaranteed Obligations”), under the Purchase and Sale Agreement between the Counterparty and Subsidiary, dated July 24, 2006 (as the same may be amended from time to time, the “Agreement”), at the times and in the manner provided therein; provided that the maximum aggregate amount payable by the Guarantor hereunder, under the Acceptable Guaranty as defined in the NGC SPA (as defined in the Agreement) and under the Acceptable Guaranty as defined in the Mt. Tom Purchase Agreement (as defined in the Agreement) shall not exceed $53,600,000 (the “Cap”).  The parties agree that this Guaranty may not b e enforced without giving effect to the Cap.  In addition, Guarantor hereby agrees to pay any and all costs and expenses (including reasonable fees and disbursements of counsel) incurred by Counterparty in enforcing and/or attempting to enforce any rights under this Guaranty.

This Guaranty may only be amended or modified by a writing signed by the parties hereto and is subject to, and its terms are governed by and must be interpreted under the laws of the State of Connecticut except for its choice of laws rules.

The Counterparty acknowledges and agrees that

(a)

this Guaranty shall be the sole and exclusive remedy of Counterparty for,

(b)

Guarantor, and any past, present or future directors, officers, employees, incorporators, members, partners, stockholders, Affiliates, agents, trustees, attorneys or representatives of Guarantor or any of their respective Affiliates, shall otherwise have no liability or obligation for, and

(c)

Counterparty shall not otherwise make any claim for,

in each case, any matter under, relating to or arising out of, the transactions contemplated pursuant to the Agreement or any Ancillary Agreement (including the breach, termination or failure to consummate such transactions, and whether by piercing of the corporate veil, by a claim by or on behalf of Subsidiary, or otherwise), whether based on contract, tort, strict liability, other laws or otherwise, or any action, suit, arbitration, claim, litigation, investigation or proceeding based on, in respect of, or by reason of any of the foregoing, provided that nothing in this Guaranty shall limit the rights, remedies or claims of the Counterparty (a) under the Agreement against Subsidiary, (b) under any Ancillary Agreement (as defined in the Agreement), other than this Guaranty, against Subsidiary or any other party to such Ancillary Agreement or (c) under the Acceptable Letter of Credit (as defined in the Agreement).

Guarantor’s obligation pursuant to this Guaranty (subject to the Cap) is an unconditional guaranty of payment and performance and not of collectibility.  This Guaranty shall remain in full force and effect until, and shall otherwise terminate at, the earliest of:

(i)

completion of the Closing;

(ii)

such time as each and all of the Guaranteed Obligations (subject to the Cap) shall have been fully paid and performed in accordance with the terms and provisions of the Agreement; and

(iii)

the date that is six (6) months following the termination of the Agreement, unless prior to such date the Counterparty shall have commenced proceedings to enforce this Guaranty, in which case this Guaranty shall terminate upon and in accordance with the final completion of such proceedings and payment of the Guaranteed Obligations (subject to the Cap).

Counterparty shall have no obligation to assert any claim or demand or to enforce any remedy under the Agreement or to proceed first against Subsidiary or any other person or entity, or resort to any security or make any effort to obtain payment and/or performance by Subsidiary or any other person or entity.  No delay or omission by Counterparty to exercise any right under this Guaranty shall impair any right, nor shall it be construed to be a waiver thereof.  No waiver of any single breach or default under this Guaranty shall be deemed a waiver of any other breach or default.

The liability of Guarantor under this Guaranty (subject to the Cap) shall be absolute, unconditional and irrevocable, irrespective of, except as expressly set forth herein: (a) any change in time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other amendment to, modification of (including, without limitation, change orders), waiver of, or any consent to departure from, the Agreement, (b) any change in ownership of Guarantor or Subsidiary; (c) any bankruptcy, insolvency, or reorganization of, or other similar proceedings involving

Subsidiary; or (d) any other circumstances that might otherwise constitute a legal or equitable discharge of a surety or guarantor.

If a claim is made upon Counterparty at any time for repayment or recovery of any amounts received by Counterparty from any source on account of any of the Guaranteed Obligations, and the Counterparty, pursuant to a court order or applicable law, repays or returns any amounts so received, then Guarantor shall remain liable for the amounts so repaid (such amounts being deemed part of the Guaranteed Obligations) to the same extent as if such amounts had never been received by Counterparty, notwithstanding any termination hereof or the cancellation of any instrument or agreement evidencing any of the Guaranteed Obligations.

Guarantor hereby irrevocably, unconditionally and expressly waives, to the fullest extent permitted by applicable law, promptness, diligence, presentment, notice of acceptance and other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that Counterparty protect, secure or perfect any security interest or exhaust any right or first proceed against Subsidiary or any other person or entity.

The Counterparty may, without affecting any of its rights hereunder, receive and hold collateral or security from Subsidiary or from Guarantor or any other party to secure the payment and performance of the obligations of Subsidiary or Guarantor and may release such collateral or security or any part thereof, at any time, in its discretion, with or without the substitution of any other collateral or security, and likewise in its sole discretion Counterparty may, without notice to Guarantor and without affecting in any way its rights hereunder:

(a)

modify or otherwise change any terms of all or any part of the Agreement (so long as any such modification or other change is in a writing signed by Subsidiary) or grant any extension(s) or renewal(s) for any period or periods of time for payment and/or performance or grant any other indulgence(s) with respect thereto and effect any release, compromise or settlement with respect thereto;

(b)

enter into any agreement of forbearance with respect to all or any part of any payment and/or performance due under the Agreement, or with respect to all or any part of the collateral securing the payment and/or performance by Subsidiary or Guarantor of its obligations, and change the terms of any such agreement;

(c)

call for or forbear from calling for additional collateral or security from Subsidiary to secure its obligations;

(d)

enter into any agreement or agreements with Subsidiary concerning then existing or additional obligations; and/or

(e)

release or effect any settlement or compromise with respect to the payment and/or performance of the Agreement by Subsidiary or any other party primarily or secondarily liable for the payment and/or performance of the Agreement.

Without limiting Guarantor’s own defenses and rights hereunder, Guarantor hereby reserves to itself all rights, setoffs, counterclaims and other defenses to which Subsidiary is or may be entitled arising from or out of the Agreement, except for defenses arising out of bankruptcy, insolvency, dissolution or liquidation of Subsidiary.

Guarantor represents and warrants to the Counterparty that:

(a)

Guarantor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has full power and legal right to execute and deliver this Guaranty and to perform the provisions of this Guaranty on its part to perform;

(b)

The execution, delivery and performance of this Guaranty by Guarantor have been and remain duly authorized by all necessary action, corporate or otherwise, and do not contravene any provision of its organizational documents or any law, regulation or contractual restriction binding on it or its assets;

(c)

No notice to or filing with, any governmental authority having jurisdiction is required for the execution, delivery and performance of this Guaranty; and

(d)

This Guaranty constitutes the legal, valid and binding obligation of Guarantor enforceable against it in accordance with its terms, except as enforcement hereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights or by general equity principles.

This Guaranty shall be binding upon Guarantor and its successors and permitted assigns and inure to the benefit of and be enforceable by Counterparty and its successors and permitted assigns.  Guarantor may not assign this Guaranty without the prior written consent of Counterparty, which consent may be withheld for any reason, and any assignment by Guarantor in violation of the foregoing shall be null and void.  The Counterparty may assign this Agreement, without the consent of Guarantor, to any assignee of the Counterparty’s rights under the Agreement.

Until payment in full of all Guaranteed Obligations, Guarantor hereby waives, releases, and relinquishes any claim, right, or remedy that Guarantor may now have or hereafter acquire against Subsidiary, or any of its assets or property that arises hereunder or from the performance by Guarantor hereunder, including, without limitation, any claim, right, or remedy of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim, right, or remedy that Guarantor may have against Subsidiary or any collateral for the Guaranteed Obligations that Guarantor now

has or hereafter acquires, whether or not such claim, right or remedy arises in equity, under contract, by statute, under common law, or otherwise.

All notices or communications to Guarantor shall be in writing and shall be directed by registered or certified mail or overnight delivery service to Guarantor’s principle office located at:

Energy Capital Partners I, LP

c/o Energy Capital Partners, LLC

51 John F. Kennedy Parkway, Suite 200

Short Hills, NJ 07078

Attn: General Counsel

Copy to:

Energy Capital Partners, LLC

11943 El Camino Real #220

San Diego, CA 92130

Attn: Andrew Singer

Copy to:

Latham & Watkins LLP

885 Third Avenue

New York, NY 10022

Attn: Ted Sonnenschein and David Kurzweil

or such other address as Guarantor shall from time to time specify in writing to Counterparty.

GUARANTOR HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF CONNECTICUT FOR ENFORCEMENT OF ALL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY AND THE TRANSACTIONS CONTEMPLATED HEREBY.  GUARANTOR HEREBY IRREVOCABLY WAIVES AND RELEASES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (a) ANY OBJECTION TO THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT; AND (b) ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

IF GUARANTOR DOES NOT MAINTAIN A REGISTERED AGENT IN CONNECTICUT, COUNTERPARTY MAY SERVE GUARANTOR BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE CORPORATE SECRETARY OF GUARANTOR AT THE

ADDRESS SET FORTH ABOVE, WHICH SERVICE SHALL BE ACCEPTED BY GUARANTOR.

GUARANTOR HEREBY WAIVES AND RELEASES ITS RIGHT TO CLAIM A TRIAL BY JURY WITH RESPECT TO ANY ACTION ARISING HEREUNDER.

Guarantor hereby (a) consents to being joined as a party and/or a witness in any dispute resolution proceeding under the Agreement and/or related thereto; and (b) waives and releases, to the fullest extent permitted by applicable law, any objection, right or other claim that Guarantor cannot be compelled or otherwise has no obligation to participate in any such proceeding, as a party, witness or otherwise.

[Signature Page to follow]

IN WITNESS WHEREOF, this Guaranty has been executed by a duly authorized officer of Guarantor as of the date first written above.

ENERGY CAPITAL PARTNERS I, LP, Guarantor

By: /s/ Scott Helm

Name:  Energy Capital Partners GP I, LLC

Its:       General Partner

By: /s/ Scott Helm

Name:  Energy Capital Partners, LLC

Its:       Managing Member

Accepted and acknowledged:

NORTHEAST GENERATION SERVICES COMPANY

By: /s/ David R. McHale

Name: David R. McHale

Title:  Senior Vice President and Chief Financial Officer

           at Northeast Utilities Service Company, as agent for

           Northeast Generation Company

SELECT ENERGY, INC.

By:  /s/ David R. McHale

Name: David R. McHale

Title:   Senior Vice President and Chief Financial Officer

            at Northeast Utilities Service Company, as agent for Select Energy, Inc.

NORTHEAST UTILITIES SERVICE COMPANY

By: /s/ David R. McHale

Name: David R. McHale

Title:   Senior Vice President and Chief Financial Officer

            at Northeast Utilities Service Company

EX-10.35.2

Exhibit 10.35.2

7/24/06

EXHIBIT E TO RELATED PURCHASE AGREEMENT

FORM OF SELLER GUARANTY

GUARANTY

This unconditional guaranty of payment and performance (“Guaranty”) dated July 24, 2006, of NORTHEAST UTILITIES, a Massachusetts business trust (“Guarantor”), is for the benefit of and delivered to NE ENERGY, INC., a Delaware corporation (“Counterparty”).

Guarantor does hereby irrevocably guarantee the full and prompt payment and performance by its subsidiaries, Northeast Generation Services Company, a Connecticut corporation, Select Energy, Inc., a Connecticut corporation, and Northeast Utilities Service Company, a Connecticut corporation (each, a “Subsidiary”), of all of their respective obligations, including, without limitation, all payment and indemnification obligations (“Guaranteed Obligations”), under the Purchase and Sale Agreement between the Counterparty and the Subsidiaries, dated as of July 24, 2006 (as the same may be amended from time to time, the “Agreement”), at the times and in the manner provided therein.  In addition, Guarantor hereby agrees to pay any and all costs and expenses (including reasonable fees and disbursements of counsel) incurred by Counterparty in enforcing and/or attempting to enforce any rights under this Guaranty.

This Guaranty may only be amended or modified by a writing signed by the parties hereto and is subject to, and its terms are governed by and must be interpreted under the laws of the State of Connecticut except for its choice of laws rules.

No shareholder or trustee of Guarantor shall be held to any liability whatever for any obligation under this Guaranty, and such Guaranty shall not be enforceable against any such trustee in their or his or her individual capacities or capacity.  This Guaranty shall be enforceable against the trustees of Guarantor only as such, and every person, firm, association, trust or corporation having any claim or demand arising under this Guaranty and relating to Guarantor, its shareholders or trustees shall look solely to the trust estate of Guarantor for the payment or satisfaction thereof.

Guarantor’s obligation pursuant to this Guaranty is an unconditional guaranty of payment and performance and not of collectibility.  This Guaranty shall remain in full force and effect until, and shall otherwise terminate at, the earliest of:

(i)

such time as each and all of the Guaranteed Obligations shall have been fully paid and performed in accordance with the terms and provisions of the Agreement;

(ii)

the date that is six (6) months following the termination of the Agreement, unless prior to such date the Counterparty shall have commenced

proceedings to enforce this Guaranty, in which case this Guaranty shall terminate upon and in accordance with the final completion of such proceedings and payment of the Guaranteed Obligations;

(iii)

with respect to all Guaranteed Obligations other than Special Guaranteed Obligations (as defined in clause (iv) below), the date that is twelve (12) months following the Closing Date (as defined in the Agreement), except to the extent that prior to such date the Counterparty shall have commenced proceedings to enforce this Guaranty with respect to any Guaranteed Obligations covered by this clause (iii), in which case this Guaranty shall with respect to such Guaranteed Obligations terminate upon and in accordance with the final completion of such proceedings and payment of such Guaranteed Obligations; and

(iv)

solely with respect to Guaranteed Obligations in respect of each Subsidiary’s Authority Representations (as defined in the Agreement), Excluded Liabilities (as defined in the Agreement) and the representations and warranties contained in Section 3.7 of the Agreement and any claims for indemnification in respect of the foregoing pursuant to Section 9.3(a) or 9.3(b) of the Agreement (collectively, “Special Guaranteed Obligations”), the date that is thirty-six (36) months following the Closing Date (as defined in the Agreement), except to the extent that prior to such date the Counterparty shall have commenced proceedings to enforce this Guaranty with respect to any Special Guaranteed Obligations, in which case this Guaranty shall with respect to such Special Guaranteed Obligations terminate upon and in accordance with the final completion of such proceedings and payment of such Special Guaranteed Obligations.

Counterparty shall have no obligation to assert any claim or demand or to enforce any remedy under the Agreement or to proceed first against any Subsidiary or any other person or entity, or resort to any security or make any effort to obtain payment and/or performance by any Subsidiary or any other person or entity.  No delay or omission by Counterparty to exercise any right under this Guaranty shall impair any right, nor shall it be construed to be a waiver thereof.  No waiver of any single breach or default under this Guaranty shall be deemed a waiver of any other breach or default.

The liability of Guarantor under this Guaranty shall be absolute, unconditional and irrevocable, irrespective of, except as expressly set forth herein: (a) any change in time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other amendment to, modification of (including, without limitation, change orders), waiver of, or any consent to departure from, the Agreement, (b) any change in ownership of Guarantor or any Subsidiary; (c) any bankruptcy, insolvency, or reorganization of, or other similar proceedings involving any Subsidiary; or (d) any other circumstances that might otherwise constitute a legal or equitable discharge of a surety or guarantor.

If a claim is made upon Counterparty at any time for repayment or recovery of any amounts received by Counterparty from any source on account of any of the Guaranteed Obligations, and the Counterparty, pursuant to a court order or applicable law, repays or returns any amounts so received, then Guarantor shall remain liable for the amounts so repaid (such amounts being deemed part of the Guaranteed Obligations) to the same extent as if such amounts had never been received by Counterparty, notwithstanding any termination hereof or the cancellation of any instrument or agreement evidencing any of the Guaranteed Obligations.

Guarantor hereby irrevocably, unconditionally and expressly waives, to the fullest extent permitted by applicable law, promptness, diligence, presentment, notice of acceptance and other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that Counterparty protect, secure or perfect any security interest or exhaust any right or first proceed against any Subsidiary or any other person or entity.

The Counterparty may, without affecting any of its rights hereunder, receive and hold collateral or security from any Subsidiary or from Guarantor or any other party to secure the payment and performance of the obligations of any Subsidiary or Guarantor and may release such collateral or security or any part thereof, at any time, in its discretion, with or without the substitution of any other collateral or security, and likewise in its sole discretion Counterparty may, without notice to Guarantor and without affecting in any way its rights hereunder:

(a)

modify or otherwise change any terms of all or any part of the Agreement (so long as any such modification or other change is in a writing signed by the Subsidiaries) or grant any extension(s) or renewal(s) for any period or periods of time for payment and/or performance or grant any other indulgence(s) with respect thereto and effect any release, compromise or settlement with respect thereto;

(b)

enter into any agreement of forbearance with respect to all or any part of any payment and/or performance due under the Agreement, or with respect to all or any part of the collateral securing the payment and/or performance by any Subsidiary or Guarantor of its obligations, and change the terms of any such agreement;

(c)

call for or forbear from calling for additional collateral or security from any Subsidiary to secure its obligations;

(d)

enter into any agreement or agreements with any Subsidiary concerning then existing or additional obligations; and/or

(e)

release or effect any settlement or compromise with respect to the payment and/or performance of the Agreement by any Subsidiary or any other

party primarily or secondarily liable for the payment and/or performance of the Agreement.

Without limiting Guarantor’s own defenses and rights hereunder, Guarantor hereby reserves to itself all rights, setoffs, counterclaims and other defenses to which any Subsidiary is or may be entitled arising from or out of the Agreement, except for defenses arising out of bankruptcy, insolvency, dissolution or liquidation of such Subsidiary.

Guarantor represents and warrants to the Counterparty that:

(a)

Guarantor is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has full power and legal right to execute and deliver this Guaranty and to perform the provisions of this Guaranty on its part to perform;

(b)

The execution, delivery and performance of this Guaranty by Guarantor have been and remain duly authorized by all necessary action, corporate or otherwise, and do not contravene any provision of its organizational documents or any law, regulation or contractual restriction binding on it or its assets;

(c)

No notice to or filing with, any governmental authority having jurisdiction is required for the execution, delivery and performance of this Guaranty; and

(d)

This Guaranty constitutes the legal, valid and binding obligation of Guarantor enforceable against it in accordance with its terms, except as enforcement hereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights or by general equity principles.

This Guaranty shall be binding upon Guarantor and its successors and permitted assigns and inure to the benefit of and be enforceable by Counterparty and its successors and permitted assigns.  Guarantor may not assign this Guaranty without the prior written consent of Counterparty, which consent may be withheld for any reason, and any assignment by Guarantor in violation of the foregoing shall be null and void.  The Counterparty may assign this Agreement, without the consent of Guarantor, to any assignee of the Counterparty’s rights under the Agreement.

Until payment in full of all Guaranteed Obligations, Guarantor hereby waives, releases, and relinquishes any claim, right, or remedy that Guarantor may now have or hereafter acquire against each Subsidiary, or any of its assets or property that arises hereunder or from the performance by Guarantor hereunder, including, without limitation, any claim, right, or remedy of subrogation, reimbursement, exoneration, contribution, indemnification, or participation in any claim, right, or remedy that Guarantor may have against such Subsidiary or any collateral for the Guaranteed Obligations that Guarantor now has or hereafter acquires, whether or not such claim,

right or remedy arises in equity, under contract, by statute, under common law, or otherwise.

All notices or communications to Guarantor shall be in writing and shall be directed by registered or certified mail or overnight delivery service to Guarantor’s principle office located at:

Northeast Utilities

107 Selden Street

Berlin, CT 06037-1616

Attention: Ms. Patricia C. Cosgel, Assistant Treasurer – Finance

or such other address as Guarantor shall from time to time specify in writing to Counterparty.

GUARANTOR HEREBY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF CONNECTICUT FOR ENFORCEMENT OF ALL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY AND THE TRANSACTIONS CONTEMPLATED HEREBY.  GUARANTOR HEREBY IRREVOCABLY WAIVES AND RELEASES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (a) ANY OBJECTION TO THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT; AND (b) ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

IF GUARANTOR DOES NOT MAINTAIN A REGISTERED AGENT IN CONNECTICUT, COUNTERPARTY MAY SERVE GUARANTOR BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE CORPORATE SECRETARY OF GUARANTOR AT THE ADDRESS SET FORTH ABOVE, WHICH SERVICE SHALL BE ACCEPTED BY GUARANTOR.

GUARANTOR HEREBY WAIVES AND RELEASES ITS RIGHT TO CLAIM A TRIAL BY JURY WITH RESPECT TO ANY ACTION ARISING HEREUNDER.

Guarantor hereby (a) consents to being joined as a party and/or a witness in any dispute resolution proceeding under the Agreement and/or related thereto; and (b) waives and releases, to the fullest extent permitted by applicable law, any objection, right or other claim that Guarantor cannot be compelled or otherwise has no obligation to participate in any such proceeding, as a party, witness or otherwise.

[Signature page follows]

IN WITNESS WHEREOF, this Guaranty has been executed by a duly authorized officer of Guarantor as of the date first written above.

NORTHEAST UTILITIES, Guarantor

By: /s/ David R. McHale

Name: David R. McHale

Title:

Senior Vice President and Chief Financial Officer

Accepted and acknowledged:

NE ENERGY, INC.

By:  /s/ Sarah Wright

Name:  Sarah Wright

Title:  Executive Vice President

EX-10.36

Exhibit 10.36

STOCK PURCHASE AGREEMENT

by and among

AMERESCO, INC.,

NU ENTERPRISES, INC.

and

NORTHEAST UTILITIES

Exhibits and Schedules:

Exhibit A

UConn Agreement (Reimbursement and Indemnity Agreement)

Schedule 1

Company Contracts

Schedule 2

Seller's Knowledge List

Schedule 2.03(a)

(i) Company Balance Sheet, (ii) Summary and (iii) Methodology

Schedule 2.03(d)

Aged Receivables Report

Schedule 3

Disclosure Schedule

Section 3.02

Qualification to do Business

Section 3.04

(b) Non-Contravention and (c) Consents

Section 3.05

Subsidiaries and Investments

Section 3.08

(a) Real Property Leases, (b) Personal Property Leases, and (c)(i) Assets and (ii) Licenses and Permits

Section 3.09

Undisclosed Liabilities

Section 3.10

Taxes

Section 3.12

(a) Benefit Plans, (b) Benefit Plans/Legal Compliance and (c) Benefit Plans/Post-Employment Benefits

Section 3.13

Legal Requirements

Section 3.14

Legal Proceedings

Section 3.15

Material Change

Section 3.16

(a) Company Contracts/Status, (b) Material Compliance, (c) Guarantees and Surety Bonds, (f) Warranty Obligations, (g) Customer Satisfaction and (h) Project Percentage Completion

Section 3.17

Insurance Policies

Section 3.18

(a) Retention Agreements and (b) Company’s Employees

Section 3.19

Broker’s Fees

Section 3.20(c)

Environmental Claims

Section 3.21

Affiliate Transactions

Section 3.22

Intellectual Property

Section 3.23

Business Relationship

Section 3.24

Encumbrances

Section 3.25

Indebtedness

Section 3.26

Full Disclosure

Section 4.02(c)

Buyer Consent

Section 5.01

(a) Operation of Business and (d) Affiliate Contracts

Schedule 7.01(a)

Retained Employees

Schedule 7.01(b)

Continued Plans

Schedule 7.12(l)

Rejected Equipment Leases

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and dated as of February 1, 2006, by and among NU Enterprises, Inc., a Connecticut corporation (the "Seller"), Northeast Utilities, a Massachusetts business trust ("Parent") and Ameresco, Inc .., a Delaware corporation (the "Buyer").  The Seller and the Buyer may each be referred to herein individually as a "Party" and collectively as the "Parties."

RECITALS:

WHEREAS, Seller is the sole shareholder of Select Energy Services, Inc., a Massachusetts corporation (the "Company"), and the Company is engaged in the business of providing energy-related engineering, performance contracting, design-build, and operations and maintenance services to governmental, institutional, and commercial customers (the "Business"); and

WHEREAS, the Seller desires to sell, and the Buyer desires to purchase, all of the issued and outstanding shares of capital stock of the Company ( collectively, the "Shares") on the terms and conditions set forth in this Agreement.

NOW THEREFORE, in consideration of the covenants, representations, warranties, and mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

I.

DEFINITIONS

For purposes of this Agreement, the following terms have the meanings specified or referred to in this Article I:

“Adjusted Shareholder’s Equity” has the meaning assigned to such term in Section 2.03(a).

“Adjustment Amount” has the meaning assigned to such term in Section 2.03(a).

“AEI Matter” means the matter styled Select Energy Services, Inc., Plaintiff, vs. Alternate Energy, Inc., Peter J. Nelson and “John Doe”, Defendants, filed in the Supreme Court of the State of New York, County of New York, Index No. 05113987.

"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934, as amended.

"Arbitrator" has the meaning assigned to such term in Section 2.03(b).

"Assets" has the meaning assigned to such term in Section 3.08(c).

“BARC Contract” means the work, equipment and services to be provided under Beltsville Agriculture Research Center Project Order No. 43-3K06-3-0030 under Contract No. DE-AM01-99EE73682 dated as of September 24, 2003, by and between the United States of America and the Company, as the same may be amended and/or otherwise modified from time to time.

"Bostonia” means Bostonia Partners, LLC and/or its affiliates and special purpose entities, including BFL Funding IV, LLC, used to facilitate the financing of the Company's projects set forth on Schedule 1.

“Bradley Construction Contract” means the Engineering, Procurement and Construction Agreement for the Bradley International Airport Energy Center dated as of May 30, 2001, by and between the State of Connecticut and the Company, as the same may be amended and/or otherwise modified from time to time.

“Bradley O&M Contract” means the Operation and Maintenance Agreement for the Bradley International Airport Energy Center dated as of May 30, 2001, by and between the State of Connecticut and the Company, as the same may be amended and/or otherwise modified from time to time.

"Business" has the meaning assigned to such term in the first recital of this Agreement.

"Business Day" means any day other than a Saturday, Sunday or other day on which banks in Boston, Massachusetts are permitted or required to close by law or regulation.

"Buyer" has the meaning assigned to such term in the first paragraph of this Agreement.

"Buyer Consent" has the meaning assigned to such term in Section 4.02(c).

"Buyer Indemnified Parties" has the meaning assigned to such term in Section 11.02.

“CBS Summary” has the meaning assigned to such term in Section 2.03(a).

“CJTS Construction Contract” means the Engineering, Procurement and Construction Agreement for the Connecticut Juvenile Training School Energy Center dated as of July 21, 2000, by and between the State of Connecticut and the Company, as the same may be amended and/or otherwise modified from time to time.

“CJTS O&M Contract” means the Operation and Maintenance Agreement for the Connecticut Juvenile Training School Energy Center dated as of February 15, 2001, by and between the State of Connecticut and the Company, as the same may be amended and/or otherwise modified from time to time.

“Claim” has the meaning assigned to such term in Section 11.02(b)(ii).

"Cleanup" means all actions required to: (1) clean up , remove, treat or remediate Hazardous Materials in the indoor or outdoor environment; (2) prevent the Release of Hazardous Materials so that they do not migrate, endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (3) perform pre-remedial studies and investigations and post-remedial monitoring and care; or (4) respond to any government requests for information or documents in any way relating to cleanup, removal, treatment or remediation or potential cleanup, removal, treatment or remediation of Hazardous Materials in the indoor or outdoor environment.

"Closing" has the meaning assigned to such term in Section 2.02.

“Closing Balance Sheet” has the meaning assigned to such term in Section 2.03(a).

"Closing Date" has the meaning assigned to such term in Section 2.02.

"Closing Purchase Price" has the meaning assigned to such term in Section 2.01(b).

"Common Stock" has the meaning assigned to such term in Section 3.03.

"Company" has the meaning assigned to such term in the first recital of this Agreement.

"Company Balance Sheet" has the meaning assigned to such term in Section 3.06(a).

"Company Contract" has the meaning assigned to such term in Section 3.16(a).

"Company Financial Statements" has the meaning assigned to such term in Section 3.06(a).

"Company Plans" means all Plans (a) maintained by or contributed to (or required to be contributed to) by the Company; (b) maintained by or contributed to (or required to be contributed to) by the Seller or any of its Affiliates for the benefit of any employees or former employees of the Company; (c) which cover any employees or former employees of the Company; or (d) any other Plan as to which the Company has or could have any liability.

"Company's Employees" has the meaning assigned to such term in Section 3.18(b).

"Confidentiality Agreement" means the agreement between the Buyer and the Company dated June 21, 2005 ..

“Consent” has the meaning assigned to such term in Section 8.06.

"Construction Contract" means each Company Contract pursuant to which the Company or any of its subsidiaries has an obligation to provide, and the counterparty has an obligation to purchase, construction goods and services.

"Contract" means any agreement, contract, lease, consensual obligation, promise or undertaking (whether written or oral and whether express or implied), whether or not legally binding, including without limitation employment and consulting or other contracts with current or former officers, directors, employees, consultants, agents, shareholders or other representatives, labor and other collective bargaining agreements, employment agreements, employee benefit plans and programs and policies, patent, trademark and other intellectual property contracts, agreements for the preferential rights to purchase any prospects or businesses, partnership or joint venture agreements, agreements relating to the acquisition of any business, and contracts for the payments of fees or other consideration to any officers or directors , in each case as amended, modified, supplemented, renewed or extended from time to time in accordance therewith, together with all exhibits, schedules, annexes and other attachments thereto ..

"Contract Payment" means monies due or to become due under each Task Order, including, without limitation, (i) interest owed by an Ordering Agency under the Prompt Payment Act, as amended, 31 U.S.C. ꞧ3901-3906, (ii) payments owed by an Ordering Agency upon the termination for any reason, in whole or in part, of the Task Order, (iii) the buydown or prepayment in part of amounts owing under the Task Order, (iv) the buyout or prepayment in whole of amounts owing under the Task Order, and (v) any amounts payable as a result of any claims relating to the foregoing under the Contracts Disputes Act, 41 U.S.C. Ꜷ11.

"Consent" has the meaning assigned to such term in Section 8.06.

“Costs” has the meaning assigned to such term in Section 7.12(f).

"Cumulative Financial Statements" has the meaning assigned to such term in Section 3.06(a).

"Damages" has the meaning assigned to such term in Section 11.02.

"Deductible Amount" has the meaning assigned to such term in Section 11.05.

“DEP” has the meaning assigned to such term in Section 7.12(k).

“Difference” has the meaning assigned to such term in Section  2.03(d).

"Disclosure Schedule" means the Schedule 3 attached to this Agreement as a schedule entitled "Disclosure Schedule."

"Disclosure Update" has the meaning assigned to such term in Section 5.04.

"Dispute" has the meaning assigned to such term in Section 11.04(c).

"Dispute Notice" has the meaning assigned to such term in Section 11.04(c).

"Due Amount" has the meaning assigned to such term in Section 7.12(c).

“East Hartford Lease” means the Lease Agreement dated as of February 8, 2001, by and between Fremont Meadow Street, LLC, as landlord, Select Energy Contracting, Inc. and the Company for the premises at 22 Meadow Street, East Hartford, Connecticut, as the same may be amended and/or modified from time to time.

"ECMs" has the meaning assigned to such term in the definition of ESPC.

"Encumbrance" means any charge, claim, lien, option, pledge, security interest or right of first refusal or other restriction on use, voting or transfer.

“End Date” has the meaning assigned to such term in Section 7.12(c).

"Environmental Claim" means any claim, action, cause of action, investigation or notice (written or oral) by any person or entity alleging potential liability (including, without limitation, potential liability for investigatory costs, Cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries , or penalties) arising out of, based on or resulting from (a) the presence, Release or threatened Release of any Hazardous Materials at any location, whether or not owned or operated by the Company, or (b) circumstances forming the basis of any violation, or alleged violation, of any Environmental Law.

"Environmental Laws" means all federal, state, county, local and foreign laws and regulations relating to pollution or protection of human health or the environment, including without limitation, laws relating to Releases or threatened Releases of Hazardous Materials or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, Release, transport or handling of Hazardous Materials, all laws and regulations with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials, and all laws relating to endangered or threatened species of fish, wildlife and plants and the management or use of natural resources.

"ERISA" means the Employee Retirement Income Security Act of 1974 or any successor law, and regulations and rules issued pursuant to that Act or any successor law.

"ESPC" means an energy savings performance Company Contract pursuant to which the Company has agreed, among other things, to (a) provide to the Ordering Agency more particularly described in such Contract the resources, services and expertise necessary to implement energy conservation measures ("ECMs") in order to reduce energy consumption at certain facilities, including, without limitation, preliminary energy audits, feasibility analysis, engineering and design services, installations, operation, maintenance, repair, training and emergency response services for energy related equipment, and (b) provide the necessary labor, materials, tools, services, transportation, supplies and all other items required to implement such ECMs.

“Exempt Items” has the meaning assigned to such term in Section 11.02(b)(vi)(N).

"Exhibits" means the exhibits attached to this Agreement.

“Ft. Huachuca Contract” means the means the work, equipment and services to be provided under Order for Supplies or Services under Contract No. DACA87-97-D-0001, Task Order 0002, dated Sept 15, 1998, as the same may be amended and/or otherwise modified from time to time.

"GAAP" means generally accepted accounting principles within the United States as applied to a company the size and character of the Company.

“Goldbelt” means Goldbelt Eagle, LLC.

“Goods” means materials, plant, equipment, consumables and all other items of tangible or personal property required to be supplied under any applicable Contract.

"Governmental Authorization" means any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement.

"Governmental Body" means any federal, state, county, local or foreign government or any court, administrative or regulatory agency or commission or other governmental authority or agency , whether executive, legislative or judicial in nature ..

"Governing Documents" means (a) the articles or certificate of incorporation and the bylaws of a corporation, (b) any similar documents adopted or filed in connection with the creation, formation, or organization of a Person that is not a corporation, and (c) any amendment or supplement to any of the foregoing.

"Guaranteed Receivable" means each interest and principal payment receivable and each billed account receivable of the Company reflected on the Closing Balance Sheet which has been outstanding for ninety (90) days or more, without taking into account whether any reserve has been established therefor.

“Guarantees” has the meaning assigned to such term in the definition of Refinancing.

“Hannon Armstrong” means Hannon Armstrong and/or its affiliates and special purpose entities, including Hannie Mae, LLC, used to facilitate the financing of the Company's projects set forth on Schedule 1.

"Hazardous Materials" means all substances defined as Hazardous Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. ꜠300.5, toxic mold, or defined as such by, or regulated as such under, any Environmental Law.

"Hold Harmless" shall mean indemnify , and, at the Buyer's written request, defend, pursuant to Article XI and the other provisions of this Agreement applicable to indemnification , but with no deduction of any sort, i.e., with liability for all Damages.

“H2O” means H2O Applied Technologies Limited Partnership.

“IBS Summary” has the meaning assigned to such term in Section 2.03(a).

"Indebtedness" has the meaning assigned to such term in Section 3.25.

"Indemnified Party" has the meaning assigned to such term in Section 11.07(a).

"Indemnifying Party" has the meaning assigned to such term in Section 11.07(a).

“Initial Balance Sheet” has the meaning assigned to such term in Section 2.03(a).

"IP Asset" has the meaning assigned to such term in Section 3.22.

"IRC" means the Internal Revenue Code of 1986 as amended from time to time or any successor law, and regulations issued by the IRS pursuant to the Internal Revenue Code as amended from time to time or any successor law.

"IRS" means the United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury.

"Legal Requirement" means any constitution, law, statute, ordinance, code, rule, regulation or other requirement, determination, finding, judgment, writ, order, ruling, injunction, decree or award of any Governmental Body.

"Material Adverse Effect" means (i) a material adverse effect on the assets, properties, prospects, business, condition (financial or otherwise), or results of operations of the affected party (other than material adverse effects that result from economic factors affecting the economy as a whole), (ii) any effect which prevents or materially impairs the affected party's performance of its material obligations under, or the consummation of, this Agreement and the transactions contemplated hereby, or (iii) each adverse effect, which, when taken together with every other adverse effect that would give rise to an indemnification obligation of Seller were it a Material Adverse Effect pursuant to this Agreement, has an aggregate adverse economic impact upon the Company or the Business in excess of Fifty Thousand Dollars ($50,000).  As used in this definition, "affected party" means, except where otherwise specifically set forth in this Agreement, any of the Buyer, the Company, any of its subsidiaries or the Business.

“Methodology” has the meaning assigned to such term in Section 2.03(a).

“MJD Matter” means the matter styled M.J.D. Combustion Sales, Inc. and Rahamin Bazini, Petitioners, against Power Authority of the State of New York, Nassau County Department of Public Works, Easco Boiler Corp., Major Systems, Inc. and Select Energy Services, Inc., Respondents, filed in the Supreme Court of the State of New York, County of Nassau, Index No. 020136/05.

“Natick Lease” means the Lease Agreement dated as of June 11, 1991, by and between LMF Cochituate Corp., as landlord, and the Company for the premises at 24 Prime Park Way, Natick, Massachusetts, as the same may be amended and/or modified from time to time.

"Order" means any order, writ, judgment, ruling, injunction, decree, stipulation, determination or award entered by or with any Governmental Body or any arbitral tribunal.

"Ordering Agency" means any agency of the United States of America that has entered into an ESPC ..

“Parent” has the meaning assigned to such term in the first paragraph of this Agreement.

"Party" and "Parties" have the meanings assigned to such terms in the first paragraph of this Agreement.

"Person" means any individual, corporation, partnership, limited liability company, trust, association, organization, or other entity or Governmental Body.

"Plan" means any bonus, deferred compensation, incentive compensation, stock purchase, restricted stock, stock option, severance, hospitalization or other medical, life or other insurance, employee welfare, supplemental unemployment benefit, profit-sharing, pension or retirement plan, program, agreement or arrangement or any other employee benefit plan, program, agreement or arrangement, including without limitation any "employee pension benefit plan" and any "employee welfare benefit plan" as those terms are defined in section 3 of ERISA.

"Pre-Closing Tax Liabilities" means all Taxes for which the Company is obligated, to the extent that such Taxes are attributable to or were realized or assessed during or became due and payable during a taxable period or portion thereof ending on or prior to the Closing Date (based on a closing of the books as of the Closing Date), and any other Taxes for which the Company may be held liable by virtue of such entity (or a predecessor of such entity) being a member of any affiliated, combined or other Tax group at any time on or prior to the Closing Date.

"Prime Rate" has the meaning assigned to such term in Section 2.03(c).

"Proceeding" means any action, arbitration, investigation, litigation, or suit , in equity or at law, commenced, brought, conducted, or heard by or before, or otherwise involving, any Person or Governmental Body.

"Purchase Price" has the meaning assigned to such term in Section 2.01(b).

“Rand Whitney Project” means the work, equipment and services to be provided under (i) the Master Development and Construction Agreement dated as of October 28, 2003, by and between Rand-Whitney Containerboard Limited Partnership and Northern Generation Services Company, (ii) the Engineering Procurement & Construction Contract dated as of October 28, 2003 by and between Rand-Whitney Realty, LLC and Northern Generation Services Company, and (iii) the Settlement Agreement and Release dated as of April 12, 2005, by and among Rand-

Whitney Containerboard Limited Partnership, Rand-Whitney Realty, LLC , the Company and Northern Generation Services Company, as each such agreement may be amended and/or otherwise modified from time to time.

“Refinancing” means the refinancing of certain Contract payments currently financed by either Bostonia or Hannon Armstrong and guaranteed by the Parent, as set forth on Section 3.16(c) of the Disclosure Schedule (the “Guarantees”) where such refinancing is mutually acceptable to the Parties and: (i) allows the Parent to notify Hannon Armstrong and Bostonia of the non-renewal of the Guarantees or causes the Guarantees to be released by Hannon Armstrong and Bostonia; (ii) allows the Guarantees to expire no later than at completion of their current term; (iii) provides security reasonably acceptable to the Seller to guarantee repayment to Hannon Armstrong or Bostonia should any payments be required to be made due to energy savings shortfalls relating to the projects financed by Hannon Armstrong and/or Bostonia; (iv) will not cause the Seller or the Parent to have any liability on their respective balance sheets related to the Guarantees or the savings guarantees such Guarantees relate to after the Closing Date; and (v) if the Guarantees are not released at the Closing, an escrow account reasonably acceptable to the Seller is established that: (x) contains sufficient funds to make all repayment obligations required under the Hannon Armstrong and Bostonia financing agreement as they come due, (y) is accessible by the Parent should a claim be made by Hannon Armstrong or Bostonia against the Parent for repayment pursuant to the terms of the Guarantees, and (z) appropriately hedges against interest rate shifts until the expiration of the Guarantees; provided however, that the effecting of the Closing under this Agreement shall be deemed to reflect satisfaction or waiver of the foregoing conditions.

"Release" means any release, spill, emission, discharge, leaking, pumping, injection, deposit, disposal, dispersal, leaching or migration into the indoor or outdoor environment (including, without limitation, ambient air, surface water, groundwater and surface or subsurface strata) or into or out of any property, including the movement of Hazardous Materials through or in the air, soil, surface water, groundwater or property.

“Report Date” has the meaning assigned to such term in Section 2.03(d).

"Required Consent" means each Buyer Consent and each Seller Consent ..

"Scheduled Employee" means each of the Company's Employees who is not a Selected Employee.

"Schedules" means the schedules attached to this Agreement or to be delivered by a Party on or prior to the Closing.

"Section" or "Sections" has the meaning assigned to such terms in Section 12.11.

"Section 338 Election" shall have the meaning assigned to such term in Section 7.08(a).

"Security" has the meaning assigned to such term in Section 3.16 ( c ).

“Selected Employees” has the meaning assigned to such term in Section 7.01(a).

"Seller" has the meaning set forth in the first paragraph of this Agreement.

"Seller Consent" has the meaning assigned to such term in Section 3.04(c).

"Seller Indemnified Parties" has the meaning assigned to such term in Section 11.03.

"Seller's Knowledge" means (i) the actual knowledge of those individuals listed on Schedule 2 hereto, or (ii) what any such individual should have known after reasonable inquiry or had such person exercised due diligence in the performance of such person's duties.

"Shares" has the meaning assigned to such term in the second recital of this Agreement.

“Sigonella Contract” means the work, equipment and services to be provided under Delivery Order Under N47408-00-D-8131, Euromed Energy Savings Performance Contract for NAS Sigonella Delivery Order 0002, dated September 30, 2003, as the same may be amended and/or otherwise modified from time to time.

"Stock Acquisition Right" means any option, warrant, right (preemptive or otherwise), call, commitment, conversion right, right of exchange, stock appreciation rights, plan or other agreement or Contract of any character providing for the purchase, issuance or sale of any securities.

“Supplemental Employee” has the meaning assigned to such term in Section 7.12(d)(i).

"Tangible Property" has the meaning assigned to such term in Section 3.08(c).

"Task Order" means an authorization, a task order or other similar contract (as amended, modified, supplemented, renewed or extended from time to time in accordance therewith, together with all exhibits, schedules, annexes and other attachments thereto) issued by an Ordering Agency to commence an ECM pursuant to an ESPC ..

"Tax" or "Taxes" means any federal, state, local and foreign income, profits, franchise, gross receipts, payroll, employment, sales, use, property, withholding, alternative minimum, estimated, ad valorem, value added, excise and other tax, duty, fee, levy, custom, tariff, impost or assessment of any nature whatsoever, together with all interest, penalties and additions imposed with respect thereto.  The term "taxable" shall have a correlative meaning.

"Tax Audit" has the meaning assigned to such term in Section 7.03(f).

"Tax Returns" shall mean any report, return, information statement or return, payee statement, notice, form, claim for refund or other document or information provided to or required to be provided to any Governmental Body, with respect to Taxes, including any attachment, amendment and supplement thereto and any return of an affiliated, combined or unitary group.

“Termination Costs” has the meaning assigned to such term in Section 7.01(a).

"Third Party" means any Person or entity other than the Seller, the Buyer , the Company and their respective Affiliates.

"Third Party Claim" has the meaning assigned to such term in Section 11.07(a).

"Transaction Documents" means, collectively, this Agreement and all agreements, instruments, certificates, waivers and other documents executed or delivered in accordance with the terms of this Agreement.

"Transfer Taxes" has the meaning assigned to such term in Section 7.03(j).

"Transition Services Agreement" has the meaning assigned to such term in Section 8.03(i).

"UConn Cogeneration Project" means the 24.9MW cogeneration electrical and steam generation plant project at the Storrs campus of the University of Connecticut designed and constructed by the Company under the UConn Contract.

“UConn Agreement” has the meaning assigned to such term in Section 8.03(h).

“UConn Contract” means the Standard Form of Agreement between Owner and Design/Builder Project No. BI-900886 dated as of December 10, 2003, by and between the University of Connecticut and the Company, as the same may be amended and/or otherwise modified from time to time.

"WARN Act" has the meaning assigned to such term in Section 3.18(c).

“West Haven Contract” means the Fixed Price Construction Subcontract dated as of October 26, 2004, by and between Goldbelt Eagle, LLC and the Company, as the same may be amended and/or otherwise modified from time to time.

“West Haven Project” means the work, equipment and services to be provided under VA Connecticut Healthcare System Prime Contract Number V689C-1008 dated on or about October 12, 2004, by and between the VA Connecticut Healthcare System and Goldbelt Eagle, LLC, as the same may be amended and/or otherwise modified from time to time.

“WNRC Project” means the work, equipment and services to be provided under Washington National Records Center Project Order No. WPJ-04-0156 under Contract No. DE-AM36-99EE73682 dated as of September 30, 2003, by and between the United States of America and the Company, as the same may be amended and/or otherwise modified from time to time.

“York County Contract” means the Energy Equipment, Services and Supply Agreement dated as of November 21, 2001, by and among the County of York, Maine, Select Energy, Inc. and the Company, as the same may be amended and/or otherwise modified from time to time.

“York Indemnity Agreement” has the meaning assigned to such term in Section 8.03(j).

II.

PURCHASE AND SALE OF SHARES

2.01

Purchase and Sale of Shares

(a)

In exchange for the consideration described in subsection 2.01(b), below, the Seller shall sell, assign, transfer and deliver the Shares to the Buyer, and the Buyer shall accept the Shares from the Seller, free and clear of all Encumbrances.  The certificate(s) representing the Shares shall be duly endorsed in blank or accompanied by stock powers duly executed in blank by the Seller.

(b)

In consideration for the transfer described in subsection (a) above and the other rights and privileges provided to Buyer hereunder , the Seller shall pay to the Buyer, and the Buyer shall accept from the Seller, payment of One Million Six Hundred Eighty Four Thousand U.S. Dollars ($1,684,000)  (the "Closing Purchase Price"), payable in immediately available funds at the Closing by wire transfer as instructed by the Buyer prior to the Closing.  The Closing Purchase Price shall be subject to adjustment as set forth in Section 2.03 (as so adjusted, the "Purchase Price").

2.02

Closing

The purchase and sale (the "Closing") provided for in this Agreement will take place at the offices of the Company, at 10:00 a.m. (local time) on or about the date upon which the Refinancing has closed and a net gain amount of at least Two Hundred Fifty Thousand Dollars, after expenses, has been disbursed to the Buyer from the proceeds of such Refinancing , or, if later, two (2) Business Days following the satisfaction or waiver of all conditions under Articles VIII and IX (other than conditions with respect to actions the respective Parties will take at the Closing itself), or at such other time and place as the Parties may agree (such specified or other time and date, the "Closing Date") and shall be effective immediately prior to 11:59 pm on the Closing Date.  Subject to the provisions of Article X, failure to consummate the purchase and sale provided for in this Agreement on the date and time and at the place determined pursuant to this Section 2.02 will not result in the termination of this Agreement and will not relieve any Party of any obligation under this Agreement.

2.03

Post-Closing Purchase Price Adjustments

(a)

Schedule 2.03(a) hereto constitutes (i) the Company Balance Sheet marked to reflect those items which shall not be taken into account in calculating any post-Closing adjustment to the Purchase Price (such Company Balance Sheet, after excluding such items not to be so taken into account, the “Initial Balance Sheet”), (ii) a summary of the Initial Balance Sheet (the “IBS Summary”) showing the calculation of the “Adjusted Shareholder’s Equity” as of December 31, 2005, which is equal to negative Seven Hundred Eighty Four Thousand Dollars ($784,000), and (iii) a description of the methodology to be used in calculating the Adjusted Shareholder’s Equity (the “Methodology”).  Within one hundred twenty (120) days after the Closing Date, the Buyer shall cause to be prepared and delivered to the Seller (x) the Company’s balance sheet prepared in accordance with GAAP for the period ending as of 11:59 pm on the Closing Date (the “Closing Balance Sheet”) and in the form of, and showing any changes in each line item of, the Initial Balance Sheet and (y) a summary of the Closing Balance Sheet in the form of, and showing any changes in each line item of, the IBS Summary, showing the calculation in accordance with the Methodology of the “Adjusted Shareholder’s Equity” as of the Closing Date (the “CBS Summary”).  The absolute value of the difference between negative Seven Hundred Eighty Four Thousand Dollars ($784,000) minus the Adjusted Shareholder’s Equity calculated in accordance with the Methodology and shown on the CBS Summary is defined as the “Adjustment Amount”.  Each of the Parties, and, if applicable, its Affiliates, will provide the other Party, its Affiliates and its independent auditors access for such purpose at all reasonable times to the relevant personnel, properties, books and records with respect to the Company.

(b)

The Seller shall have a period of sixty ( 60 ) days following receipt of the Closing Balance Sheet and the CBS Summary to review such statements and to object thereto in writing (" Seller 's Dispute Notice").  If no Seller 's Dispute Notice is delivered to the Buyer with respect to the Closing Balance Sheet or the CBS Summary within such sixty (60) day period, such statements shall be final and binding upon both the Buyer and the Seller.  If the Seller timely delivers a Seller 's Dispute Notice, the Buyer and the Seller shall have a period of sixty (60) days to attempt to amicably resolve in good faith any disputes with respect thereto; if the Buyer and the Seller are unable to resolve all matters in dispute within such sixty ( 60 ) day period, then those matters not in dispute shall be promptly paid by the relevant Party in the same manner as if such amounts had been finally determined to be payable under Section 2.03(c), below, and any remaining matters in dispute shall be submitted by either Party for resolution to Ernst & Young (the "Arbitrator").  The Arbitrator shall resolve such disputes by the application of GAAP and the determination of the Arbitrator with respect to those matters in dispute, together with the determination of the Seller and the Buyer with respect to those matters not in dispute, shall become the Closing Balance Sheet , which shall be final and binding on the Parties.  The fees of the Arbitrator shall be borne equally by the Seller and the Buyer.

(c)

Not later than fifteen (15) Business Days after the final determination of the Closing Balance Sheet, (x) if the Adjusted Shareholder’s Equity shown on the CBS Summary is greater than negative Seven Hundred Eighty Four Thousand Dollars ($784,000), then the Buyer shall pay the Seller the Adjustment Amount, or (y) if the Adjusted Shareholder’s Equity shown on the CBS Summary is less than negative Seven Hundred Eighty Four Thousand Dollars ($784,000), then the Seller shall pay the Buyer the Adjustment Amount.  Until made, such payments shall bear daily interest from the Closing Date at an annual rate equal to the prime rate

as published in the Wall Street Journal (the “Prime Rate”) plus two percent (2%), and shall be made by wire transfer of immediately available funds to such account as shall be directed by the receiving party.

(d)

On the Closing Date, the Seller shall deliver to the Buyer a report of each interest and principal payment receivable and each billed account receivable of the Company which has been outstanding for ninety (90) days or more as of such date, without taking into account whether any reserve has been established therefor, and such report shall be attached hereto as Schedule 2.03(d) ..  From the Closing Date until the earlier of (i) the delivery of the Guaranteed Receivables report referred to below and (ii) November 30 , 2006, the Buyer shall use reasonable diligence to cause the Company and each of its subsidiaries to pursue collection of each Guaranteed Receivable.  Within sixty (60) days after September 30 , 2006, the Buyer shall cause the Company to prepare and deliver to the Seller a written report disclosing the total amount of the Guaranteed Receivables collected between the Closing Date and the date of preparation of such report (the “Report Date”) and listing the amount outstanding on each Guaranteed Receivable that the Company has not fully collected as of the Report Date.  During the period from the Closing Date until the Report Date, the Company shall apply all payments with respect to the Guaranteed Receivables to the satisfaction of such Guaranteed Receivables. To the extent that (iii) the total amount so collected is less than (iv) the difference between (x) the total amount of Guaranteed Receivables reflected on the Closing Balance Sheet minus (y) the receivable reserve, if any, for TOB0135140 for TYAD HVAC/Maint. Svc. Contract Yr 4 aged over ninety (90) days (which, as of December 31, 2005, equaled $429,141.12) (the amount referred to in clause (iv) minus the amount referred to in clause (iii), the “Difference”), then the Buyer shall have the option, exercisable at the time of the delivery of the foregoing report, of requiring the Seller to pay to the Company an amount equal to the Difference, and the Seller shall do so within fifteen (15) days after receipt of written notice of the Buyer's exercise of such option.  If the Buyer elects to require the Seller to pay for the Difference, then, upon such payment in full, the Buyer shall cause the Company and its subsidiaries to assign to the Seller, or any Person specified by it, free and clear of all liens and effective as of the Report Date, the uncollected Guaranteed Receivables inclusive of all rights to collect the same and the Buyer will thereafter use its commercially reasonable efforts to assist the Seller in the collection of such assigned accounts.  If at any time following the effective date of the assignment to the Seller of uncollected Guaranteed Receivables, the Buyer, any Affiliate of the Buyer, the Company or any of its subsidiaries receives payment in respect of such account, the amount received shall be promptly remitted to the Seller.  Notwithstanding anything herein to the contrary, the rights of the Buyer provided for in this Section 2.03(d) shall be the Buyer's sole and exclusive remedy for any misrepresentations or breach of any warranties in Section 3.06(b) regarding the Guaranteed Receivables.

III.

REPRESENTATIONS AND WARRANTIES OF THE SELLER

The Seller represents and warrants to the Buyer that each of the statements set forth below is true and correct in all respects as of the date hereof and will be true and correct as of the Closing Date; provided that, an exception or qualification set forth in Schedule 3 to this Agreement (the "Disclosure Schedule") with respect to a particular representation and warranty

shall be deemed to be an exception or qualification with respect to all other applicable representations and warranties to the extent the description of the facts regarding the event, item or matter disclosed is adequate so as to make reasonably clear or otherwise make the Buyer reasonably aware that such exception or qualification is applicable to such other representations and warranties whether or not such exception or qualification is so numbered.   The Seller agrees that, except where a subsidiary of the Company is specifically referred to, each representation and warranty with respect to the Company shall be deemed to apply as well to each subsidiary of the Company as if all assets, liabilities, rights and obligations of, and facts relating to, such subsidiary were assets, liabilities, rights, obligations of, and facts relating to, the Company.   Parent represents and warrants that each of the statements made in Section 3.04(a) below which refer to Seller is true and correct in all respects as of the date hereof as if Seller meant Parent, and will be true and correct as of the Closing Date as if Seller meant Parent.

3.01

Ownership of Shares

The Seller is the record and beneficial owner of all of the Shares, free and clear of all Encumbrances.

3.02

Incorporation and Legal Existence

(a)

The Company is a corporation duly organized, legally existing and in good standing under the laws of the Commonwealth of Massachusetts, with full corporate power and authority to conduct its business as it is now being conducted and to own or use the properties and assets that it owns or uses.  The Company is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, except where the absence of qualification could not reasonably be expected to have a Material Adverse Effect.   Section 3.02 of the Disclosure Schedule contains a complete and accurate list of the states in which the Company is qualified to do business as a foreign corporation.

(b)

The Seller is a corporation duly organized, legally existing and in good standing under the laws of the State of Connecticut.

3.03

Capital Stock

The Company's authorized capital stock consists of One Hundred (100) shares of common stock, with a par value of One Dollar ( $1.00) per share ("Common Stock").  The Shares consist of One Hundred (100) shares of Common Stock of the Company, constituting all of the issued and outstanding shares of Common Stock.  No other shares of capital stock are issued or outstanding, and there are no outstanding Stock Acquisition Rights for any capital stock or other securities of the Company other than the rights of the Buyer as contemplated by this Agreement.  All of the Shares have been duly authorized and validly issued and are fully paid, non-assessable

and free of pre-emptive rights.  None of the Shares have been issued in violation of federal or state law.

3.04

Power and Authority

(a)

The Seller has full power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party and to perform its obligations under this Agreement and under such other Transaction Documents.  All corporate, shareholder and other action on the part of the Seller, its officers and directors necessary for the authorization, execution and delivery of this Agreement and the other Transaction Documents, and for the performance of all obligations of the Seller hereunder and thereunder, has been taken.  Each of this Agreement and each of the Transaction Documents to which the Seller is a party has been or will be duly executed and delivered by the Seller and, assuming due execution and delivery by each of the other parties thereto, constitutes the valid and legally binding obligation of the Seller, enforceable in accordance with its terms and conditions, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and to general principles of equity (regardless of whether such enforcement is sought in a Proceeding in equity or at law).

(b)

Except as set forth in Section 3.04(b) of the Disclosure Schedule, none of the execution and delivery of this Agreement or any other Transaction Document, the consummation or performance of any of the transactions contemplated hereby and thereby, or the compliance by the Seller with the provisions hereof and thereof, will, directly or indirectly (with or without notice or lapse of time): (i) violate or conflict with any provision of the Governing Documents of Seller or the Company; (ii) violate or conflict with any Legal Requirement or Order applicable to the Seller , the Company or the Business; (iii) violate, breach or constitute a default under the provisions of any material agreement, contract, option, license, instrument, mortgage, obligation , undertaking or other Company Contract that is legally binding; or (iv) result in the imposition or creation of any Encumbrance upon or with respect to any of the assets of the Company, except where the imposition or creation of an Encumbrance would not have a Material Adverse Effect.

(c)

Except as set forth in Section 3.04(c) of the Disclosure Schedule, no notice need be given to, any filing or registration made with, or any authorization, permit, license, waiver, exception, franchise, order, consent, or approval obtained from any Governmental Body or other Person by the Seller or the Company in order for the Parties to consummate the transactions contemplated by this Agreement and for the Buyer and the Company to carry on the Business pursuant to the Contracts and good industry practice (each such item, a "Seller Consent") ..

3.05

Subsidiaries and Investments

Except as set forth in Section 3.05 of the Disclosure Schedule, the Company has no subsidiaries, and does not own, directly or indirectly, any capital stock or other equity or ownership or proprietary interest in, and is not a party to any Contract or interest that would allow it to acquire, any other corporation, partnership, association, trust, joint venture or other entity.  The Company is not, directly or indirectly, subject to any obligation or requirement to provide funds to, or invest in, any Person.

3.06

Financial Statements

(a)

The Company has delivered to the Buyer (i) an unaudited balance sheet of the Company as of December 31 , 2005 (the "Company Balance Sheet"), and related unaudited statements of income and cash flows of the Company for the twelve ( 12 ) months ended December 31, 2005 (with the Company Balance Sheet, the "Company Financial Statements"), (ii) an unaudited balance sheet of the Company as of Sept ember 30 , 2005, and related unaudited statements of income and cash flows of the Company for the nine ( 9 ) months ended September 30, 2005, and (iii) an unaudited balance sheet of the Company as of December 31 , 2004 (reflecting, as to subsidiaries of the Company, only those subsidiaries listed on Section 3.05 of the Disclosure Schedule), and related unaudited statements of income of the Company for the twelve ( 12 ) months ended December 31, 2004 (collectively, the “Cumulative Financial Statements”).  Each of the Cumulative Financial Statements fairly presents the financial condition and the results of operations of the Company as at the date of and for the period referred to therein, and is in accordance with GAAP, subject, in the case of (ii), to normal recurring year-end adjustments (the effect of which, with respect to the Company Financial Statements, will not, individually or in the aggregate, have a Material Adverse Effect ), and the absence of notes.  No financial statements of any Person other than the Company are required by GAAP to be included in the financial statements of the Company.

(b)

All accounts receivable and unbilled receivables reflected on the Company Balance Sheet represent, and the accounts receivable and unbilled receivables that will be reflected on the Closing Balance Sheet represent, or will represent, valid obligations of the Company's customers arising from sales actually made or services actually performed in the ordinary course of business of the Company.  There are no rights of set-off or counter-claims against such accounts receivable and unbilled receivables, and the Company Financial Statements reflect the current portion of long term receivables in accordance with GAAP ..

3.07

Books and Records

Copies of the Articles of Organization and By-Laws and any other charter documents of the Company and each of its subsidiaries , as amended to date, have heretofore been delivered to Buyer, and such copies, as so amended, are true, complete and accurate.   Each of the minute books of the Company and each of its subsidiaries , as previously made available to the Buyer and its representatives, contains accurate records of all meetings and consents in lieu of meetings of the board of directors (and committees thereof) and shareholders of the Company.  The books of account and other financial records of the Company, which have been made available to the Buyer, are complete and correct and represent actual, bona fide transactions.  The stock record books of the Company are true, complete and accurate.

3.08

Title to Properties; Encumbrances; Adequacy of Assets

(a)

Except as set forth on Section 3.08(a) of the Disclosure Schedule, (i) the Company does not own any real property, and is not party to any Contract relating to the purchase or sale of real property or any interest in real property , including any lease or sublease,

and (ii) no consent of any counterparty to any such lease or sublease is required with respect to the transactions contemplated hereby.  The Company has delivered to Buyer correct and complete copies of each lease or sublease listed in Section 3.08(a) of the Disclosure Schedule , and with respect to each such lease and sublease , ( w ) each such lease or sublease is legal, valid, binding, enforceable, and in full force and effect against the Company and each other party thereto in all material respects , ( x ) all rent and other amounts payable to date thereunder have been paid and the Company is not in material breach or default, and no event has occurred which, with notice or lapse of time, would constitute a material breach or default or permit termination, modification, or acceleration thereunder , ( y ) to Seller's Knowledge there are no material disputes, oral agreements, or forbearance programs in effect as to any such lease or sublease, and the Company has not received any notice of default thereunder , and ( z ) the Company has not assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in any leasehold or subleasehold and such leaseholds and subleaseholds are subject to no other Encumbrance affecting the Company's rights thereunder ..

(b)

Section 3.08(b) of the Disclosure Schedule lists and briefly describes all     material personal property leased to the Company.  Except as set forth on Section 3.08(b) of the Disclosure Schedule, no consent of any counterparty to such leases and subleases is required with respect to the transactions contemplated hereby.   The Seller has delivered to the Buyer correct and complete copies of the leases listed in Section 3.08(b) of the Disclosure Schedule.

(c)

Each item of tangible personal property, including inventory, owned or leased by the Company that is (i) worth in excess of Five Thousand Dollars ($5,000) or (ii) reasonably necessary or material to the conduct of the Business (the "Tangible Property") is set forth in Section 3.08(c)(i) of the Disclosure Schedule, together with a complete and accurate depreciation schedule relating thereto, and all such owned Tangible Property is reflected on the Company Balance Sheet.  Except as described in Section 3.08(c)(i) of the Disclosure Schedule, the Company owns, free of Encumbrances, all the properties and assets (whether real, personal, or mixed, whether tangible or intangible) that it purports to own or that are used in the operation of the Business including, without limitation, all of the properties and assets reflected in the Company Balance Sheet or purchased or acquired since the date of the Company Balance Sheet (colle ctively, the "Assets").  Except as described in Section 3.08(c)(i) of the Disclosure Schedule, (x) the material plant, equipment and materials installed by the Company or which is currently being used in the operations of the Company was properly designed and is in good working order, and (y) the Assets are sufficient and all of the assets necessary for the continued conduct of the Company's Business after the Closing Date in the same manner as conducted prior to the Closing Date.  Each Governmental Authorization which the Company has an obligation to maintain is set forth in Section 3.08(c)( ii ) of the Disclosure Schedule.

3.09

No Undisclosed Liabilities

Except as set forth in Section 3.09 of the Disclosure Schedule, to Seller's Knowledge, the Company has no liabilities or obligations of any nature (whether absolute, accrued, contingent or otherwise, including without limitation liabilities as a guarantor or otherwise with respect to obligations of others, obligations for taxes due or then accrued or to become due, or obligations that would be reflected in the footnotes of an audited balance sheet, except for (a) liabilities or

obligations reflected or reserved against in the Company Balance Sheet (in an amount no greater than the dollar amount set forth thereon), and (b) current liabilities incurred in the ordinary course of business since December 31, 2005 which could not reasonably be expected to have a Material Adverse Effect.

3.10

Taxes

The Company has filed or caused to be filed, within the times and manners prescribed by Legal Requirements (taking into account all properly granted extensions), all Tax Returns required to be filed by, or with respect to, it.  All such Tax Returns are true, correct and complete in all material respects.  All Taxes payable by or due from or reserved for by the Company have been fully paid or adequately disclosed and fully provided for in the books and financial statements of the Company ..  To Seller's Knowledge, except as set forth in Section 3.10 of the Disclosure Schedule, no examination of any Tax Return of the Company is currently in progress or proposed.  There are no outstanding agreements, consents, or waivers extending the statutory period of limitations applicable to any Tax Return of the Company.  Except as set forth in Section 3.10 of the Disclosure Schedule, there are no tax sharing agreements or Contracts to which the Company is a party.  There is no suit, audit, claim or assessment pending or proposed in writing with respect to Taxes of the Company.  There are no written assessments of Taxes from any taxing authority against the Company. The Company has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, member or other third party.

3.11

No Material Adverse Change

There has not been since November 30, 2005, any change in the business, financial condition or results of operations of the Company, taken as a whole, which constitutes a Material Adverse Effect and neither the Seller nor the Company has knowledge of any such change which is threatened or grounds for any such change; provided however, that the effects of changes in the federal government's energy service performance contracting program authorized in the Energy Policy Act of 2005 shall be excluded from any determination of changes that result in a Material Adverse Effect for the purposes of this Section 3.11.

3.12

Employee Benefits

(a)

Section 3.12(a) of the Disclosure Schedule sets forth all the Company Plans.  Copies of all the Company Plans have been made available to the Buyer.

(b)

Except as set forth in Section 3.12(b) of the Disclosure Schedule, each of the Company Plans has been adopted and operated in substantial compliance with its terms and all applicable Legal Requirements (including, where applicable, ERISA and the IRC).  None of the Company Plans or any trusts relating thereto have engaged in any transaction in connection with which the Company or any fiduciaries of the Company Plans or related trusts is or could be subject either to a civil penalty or other liability under ERISA § §502(i), 406 or 409 or a tax imposed by IRC §4975, and except as set forth in Section 3.12(b) of the Disclosure Schedule no event has occurred and no condition exists with respect to the Company Plans that could subject

the Company to any other Tax or penalty under the IRC or civil penalty or other liability under ERISA or other Legal Requirements that could reasonably be expected to have a Material Adverse Effect.  Each Company Plan intended to be "qualified" under §401(a) of the IRC, and the trust (if any) forming a part thereof, has received a favorable determination letter from the IRS as to its qualification under the IRC and to the effect that each such trust is exempt from taxation under §501(a) of the IRC or generally eligible to rely on a favorable opinion or advisory letter for a nonstandardized Master and Prototype plan.  To Seller's Knowledge, except as set forth in Section 3.12(b) of the Disclosure Schedule there are no investigations in respect of any Company Plan being conducted or threatened by written or electronic communication, or, to Seller's Knowledge, by oral communication, by any Governmental Body.  There are no pending or, to Seller's Knowledge, threatened claims by or on behalf of any of the Company Plans, by any participant or otherwise involving any such Company Plan or the assets of any Company Plan (other than routine claims for benefits).

(c)

Except as set forth in Section 3.12(c) of the Disclosure Schedule or to the extent that the Seller will remain liable therefor, no person is entitled to post-employment benefits of any kind under any Company Plan or by reason of employment by the Company, including, without limitation, death or medical benefits (whether or not insured) other than coverage mandated by §4980B of the IRC.  Except as set forth in Section 3.12(c) of the Disclosure Schedule, the consummation of the transactions contemplated by this Agreement will not (i) entitle any current or former employee, officer, director or independent contractor of the Company to severance pay, unemployment compensation or any other similar payments under the Company Plans or any other arrangements; (ii) accelerate the time of payment or vesting, or increase the amount of payments or compensation due any such person; or (iii) result in any prohibit ed transaction described in ERISA §406 or IRC §4975 for which an exemption is not available.  Except as set forth in Section 3.12(c) of the Disclosure Schedule, each Company Plan can be terminated at the election of the Company without payment of additional contributions or amounts by the Company and without the vesting or acceleration of any benefits.

(d)

No liability under Title IV of ERISA has been incurred by the Seller or the Company, and no condition exists, that presents a risk to the Seller or the Company of incurring a liability of the Company or relating to any Company’s Employee under Title IV of ERISA.  The Pension Benefit Guaranty Corporation has not instituted proceedings under Section 4042 of ERISA to terminate any Plan maintained by the Seller, the Company or any of their respective Affiliates, and no condition exists that presents a material risk that such proceedings will be instituted.  Neither the Seller nor the Company maintains or contributes to or ever maintained or was required to contribute to (i) any plan or arrangement that is or was subject to Title IV of ERISA or §302 of ERISA or §412 of the IRC, or (ii) any plan or arrangement that is or was a multiemployer plan within the meaning of §3(40) or 4001(a)(3) of ERISA.  No "leased employees," as that term is defined in Section 414(n) of the IRC, perform services for the Company.  The Company has not used the services of workers provided by third party contract labor suppliers, temporary employees, such "leased employees," or individuals who have provided services as independent contractors to an extent that would reasonably be expected to result in the disqualification of any Company Plan or the imposition of penalties or excise taxes with respect to any Company Plan by the IRS, the Department of Labor, or any other Governmental Body.

3.13

Compliance With Legal Requirements; Governmental Authorizations

Except as set forth in Section 3.13 of the Disclosure Schedule, (i) the Company is, and to Seller's Knowledge at all times has been, in material compliance with all applicable Legal Requirements, and neither the Seller nor the Company has received any notice of potential violation of any Legal Requirements related to the Company; and (ii) the Company has all Governmental Authorizations necessary for the conduct of its business as now being conducted unless the failure to possess such Governmental Authorizations could not reasonably be expected to have a Material Adverse Effect and the Company is, and to Seller's Knowledge at all times has been, in material compliance with all of the terms and requirements of each Governmental Authorization and neither the Seller nor the Company has received any notice of a potential violation of any Governmental Authorization related to the Company.

3.14

Legal Proceedings; Orders

(a)

Except as set forth in Section 3.14 of the Disclosure Schedule, (i) there is no pending Proceeding that has been commenced ( A ) by or against the Company or any asset owned, used or held by the Company, or any Security , ( B ) relating to the Business, or ( C ) that challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated hereby, and no such Proceeding has been threatened by written or electronic or, to Seller's Knowledge, oral notification, (ii) to Seller's Knowledge, there are no investigations (whether or not the defense thereof or liabilities in respect thereof are covered by insurance) pending, or, to Seller's Knowledge, threatened against or involving the Company or any of its securities, assets or properties , (iii) to Seller's Knowledge, there is no fact, event or circumstance that could reasonable be expected to give rise to any suit, action, claim, investigation or Proceeding, and (iv) there is no Order to which the Company, or any asset owned, used or held for use by the Company, or any Security , is subject and the Company is, and all times has been, in compliance with all of the terms and requirements of each Order to which it, or any of the assets owned, used or held for use by it, or any Security , is or has been subject and neither the Seller nor the Company has received any notice of a potential violation of any such Order.

(b)

Except as set forth in Section 3.14 of the Disclosure Schedule, there is no (i) litigation, suit, action, proceeding, or claim pending or, to Seller 's Knowledge , threatened against the Company or any of its subsidiaries, that (x) affects any such party, or the Assets, or (y) seeks restraint, prohibition, or other injunctive relief in connection with this Agreement or the consummation of the transactions contemplated hereby, nor, to Seller 's Knowledge , are there any events or occurrences currently existing that form a reasonable basis for such litigation, suits, actions, proceedings or claims, and (ii) there is no judgment, decree, injunction, order, determination, award, finding, or letter of deficiency of any Governmental Body or arbitrator outstanding against the Company, any of its subsidiaries, or, to Seller 's Knowledge , any of the Assets, that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

3.15

Absence of Certain Changes and Events

Except as set forth in Section 3.15 of the Disclosure Schedule, since November 30, 2005, the Company has conducted its business in the ordinary course of business and consistent with its past practices and there has not been any:

(a)

payment or increase of any bonuses, salaries, or other direct or indirect compensation to any of the Company's directors, officers or employees (other than payment in the ordinary course of business of salaries) or entry into any employment, severance, or similar agreement with any employee, director, consultant, agent or other representative;

(b)

adoption of, or increase in the payments to or benefits under, any Company Plan;

(c)

damage to or destruction or loss of any assets of the Company, which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect    whether or not covered by insurance;

(d)

other than pursuant to the terms of a Construction Contract, sale, lease, or other disposition of any asset or property of the Company or mortgage, pledge, or imposition of any Encumbrance on any asset or property of the Company, which constitutes a Material Adverse Effect;

(e)

termination of, or receipt of notice of termination of, any Contract or agreement relating to the Business other than in the ordinary course of business;

(f)

indebtedness incurred for borrowed money by the Company;

(g)

change in the accounting methods or practices, credit practices or collection policies, depreciation or amortization policies or rates used by the Company;

(h)

change in the Company's authorized or issued capital stock, grant of any stock option or right to purchase shares of capital stock of the  Company or issuance of any security convertible into such capital stock, or any subscriptions, rights (including pre-emptive rights), stock appreciation rights, calls or commitments of any character whatsoever relating to its capital stock;

(i)

amendment to the Governing Documents of the Company;

(j)

entry by the Company into any Contract, or the amendment of any Contract to which the Company is a party, or by which it or its assets are bound or subject;

(k)

institution of, becoming a party to, settlement or agreement to settle, any Legal Proceeding;

(l)

payments or agreement to make payments to any Affiliate of the Company or the Seller outside the ordinary course of business;

(m)

declaration or payment by the Company of any dividends or declaration or making of any other distribution of any kind by the Company to its shareholders, or any direct or indirect redemption, purchase or other acquisition of any shares of its capital stock by the Company;

(n)

making by the Company of any loan or advance to any of its shareholders, officers, directors, employees, consultants, agents or other representatives (other than travel advances made in the ordinary course of business), or the making by the Company of any other loan or advance other than in the ordinary course of business;

(o)

except for inventory or equipment acquired in the ordinary course of business, any acquisition of all or any part of the assets, properties, capital stock or business of any other Person;

(p)

incurrence by the Company of any contingent liability as a guarantor with respect to the obligations of others or the cancellation of any material debt or claim owing to it, or waiver by the Company of any of its material rights;

(q)

adoption of a plan of liquidation or resolutions providing for the liquidation, dissolution, merger, consolidation or other reorganization of the Company;

(r)

revaluation of any portion of its assets, properties or business including, without limitation, any write-down of the value of inventory or other assets or any write-off of notes or accounts receivable other than in the ordinary course of business;

(s)

material change in any of the Company's business policies;

(t)

other than in connection with customer Contracts, capital expenditure in excess of $10,000; or

(u)

agreement by the Company to do any of the foregoing.

3.16

Contracts

(a)

Each Contract to which the Company or any of its subsidiaries is a party or by which any of them is bound or to which any of them or any of their properties or assets is subject, including each Contract with a customer , each Construction Contract, each material master Contract with a supplier and each Contract pursuant to which the Company or any of its subsidiaries will have any future obligations or liability (each such Contract, a "Company Contract") is set forth on Schedule 1 hereto, and the Buyer has been provided access to a complete and correct copy of each such Company Contract.  All work performed for or on behalf of the Company by any Affiliate of the Company was performed pursuant to a Company Contract.   Except as set forth in Section 3.16(a) of the Disclosure Schedule, (i) each Company Contract is in full force and effect and is valid and enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization, or other similar laws affecting the enforcement of creditors' rights generally and

as to limitations on the enforcement of the remedy of specific enforcement or other equitable remedies, and (ii) (x) the entry of the Company into the Agreement and the consummation of the transactions contemplated hereby will not constitute a breach of, or a default under, any Company Contract, and (y) no work with respect to which the Company has any obligations or potential liability has been performed by any Person which was an Affiliate of the Company at the time such work was performed which was not performed pursuant to a written agreement between such Affiliate and the Company which is set forth on Schedule 1 ..  The Company Contracts contain all warranties, guarantees, indemnities and other similar undertakings made by the Company or any Affiliate thereof that are currently in effect with respect to the Company or the Business, and the Company Balance Sheet will contain reserves and accruals for such undertakings which are at least equal to a reasonable estimate of the Company's prospective liability for such undertakings.  Each of the Company Contracts will continue to be legal, valid, binding and enforceable and in full force and effect immediately following the Closing Date.  No event has occurred, is pending or is threatened, which, after the giving of notice, with lapse of time, or otherwise, would constitute a breach or default by the Seller, the Company or any of its subsidiaries or any other party under any Company Contract.

(b)

Except as set forth in Section 3.16(b) of the Disclosure Schedule, (i) the Company  is and at all times in the past twelve (12) months has been in material compliance with all applicable terms and requirements of each Company Contract, (ii) to Seller's Knowledge, each other Person that has any obligation under any Company Contract is in material compliance with all applicable terms and requirements of such Company Contract, (iii) the Company has not given to or received from any other Person any written notice or other written communication regarding any actual or alleged violation or breach of, or default under, or lapse or termination of any Company Contract and no party has repudiated in writing any material provision of any Company Contract.   E xcept as set forth in Section 3.16(c) of the Disclosure Schedule, neither the Seller nor any Affiliate of the Seller is directly or indirectly subject to or otherwise liable for any liability or obligation with respect to the Company.

(c)

Section 3.16(c) of the Disclosure Schedule sets forth (i) a list of all surety , payment, performance or efficiency bonds or guaranties or similar security directly or indirectly posted, provided or maintained by or on behalf of the Seller , any Affiliate of the Seller or any other Person in connection with the Company 's or any of its subsidiaries' obligations under any Company Contract (each, a "Security"), and identifies each counterparty thereto and beneficiary thereof, together with the term of each such Security, and (ii) each Construction Contract or Security with respect to which the Company has any obligation or liability, substantial completion was achieved within the last twelve (12) months, and the Company has received written confirmation of the customer's acceptance of all work, and final payment.  Except as specifically noted in Section 3.16(c) of the Disclosure Schedule, (i) there are no projects, work or Company Contracts outstanding on which any Security remains in effect, and (ii) for each Construction Contract under which construction was substantially completed prior to December 31, 2005 and to which a Security applies, the customer's savings thereunder exceeded the guaranteed savings thereunder for each reporting period in 2005 since such construction was completed.

(d)

The Company (A ) except to the extent reserved for or otherwise reflected on the Company Balance Sheet, has performed and otherwise complied in all material respects with the covenants, agreements, duties, obligations, terms and conditions applicable to it under each ESPC that is a Company Contract, each Task Order issued pursuant to any such ESPC, and each Company Contract with any department, agency, bureau or other subdivision of the Ordering Agency, and ( B ) has not received any notice of any dispute, default, opportunity to cure, show cause, termination, intent to terminate or other notice that could affect the obligation of the Ordering Agency to make Contract Payments in full when due.  None of the Company, the Seller, or, to Seller's Knowledge , any other Person, has received any notice that any Ordering Agency will terminate (in whole or in part), fail to renew or otherwise discontinue any Task Order prior to the end of the expected aggregate term of such Task Order.

( e )

There are no outstanding powers of attorney issued by the Company or any of its subsidiaries.

( f )

Section 3.16( f ) of the Disclosure Schedule sets forth each outstanding warranty obligation of the Company or any of its subsidiaries in respect of any Company Contract, the start date of each warranty period thereunder and the annual historical warranty expenditures performed thereunder expressed in dollars for the years 2002-2005 ..

( g)

Except as set forth on Section 3.16(g) of the Disclosure Schedule , over the last three (3) years, (i) none of the Company or any of its subsidiaries has received any written notice (A) stating that any savings guarantee pursuant to any Company Contract or Security has not been realized , (B) stating that any payment due to the Company under any Company Contract or Security is subject to any contest, claim or setoff , or ( C ) expressing dissatisfaction with, nor to Seller's Knowledge, has any customer been dissatisfied with, the Company's performance of its obligations or the operation of any project under any Company Contract; and (ii) except to the extent reserved for or otherwise reflected on the Company Balance Sheet, the Company has substantially performed and received payment in full of all obligations or amounts required or owed to be performed by it to date under all Company Contracts, and , to Seller 's Knowledge , no other party is in default (or would be in default on the giving of notice or the lapse of time or both) under any Company Contract ..

( h )

Section 3.16(h ) of the Disclosure Schedule sets forth , with respect to each Construction Contract as of January 31, 2006, the total dollar value thereunder and the actual percentage of work completed thereunder ..

3.17

Insurance

The Company maintains insurance of the types and in the amounts that the Company reasonably believes are (i) adequate for its business against such risks customarily insured against by similarly situated companies, (ii) in conformity with the requirements of all Contracts to which the Company is a party, and, (iii) to Seller's Knowledge, valid and enforceable in accordance with their terms.  Section 3.17 of the Disclosure Schedule sets forth each policy and binder of such insurance of the Company at the Closing, and for each such policy or binder, sets forth each pending claim thereunder and the aggregate awards paid thereunder for the five (5)

years prior to the date hereof.  The Company has paid all premiums due, and has otherwise performed all of its obligations, under each such policy and binder, and each such policy and binder is in full force and effect.  No material misstatement has been made in applying for each such policy.

3.18

Employees ..

(a)

Except as disclosed in Section 3.18(a) of the Disclosure Schedule:

(i)

the Company is not a party to, or bound by, any collective bargaining agreement with any labor organization applicable to employees of the Company , and no such agreement is currently being negotiated;

(ii)

no representation election petition or application for certification has been filed by any employees of the Company , nor is such a petition or application pending with the National Labor Relations Board or any other Governmental Body, and no labor union is currently engaged in or, to Seller's Knowledge, threatening, organizational efforts with respect to any employees of the Company ;

(iii)

there is no unfair labor practice charge pending, or to Seller's Knowledge, threatened against the Company before the National Labor Relations Board or any other Governmental Body;

(iv)

there is no labor dispute, strike, work stoppage, lockout or other collective labor action involving employees of the Company pending, or to Seller's Knowledge, threatened against or affecting the Company , and the Company has not been the subject of any such collective labor action within the past three years;

(v)

there are no material actions, suits, claims, labor disputes, grievances or controversies pending, or to Seller's Knowledge, threatened , involving the Company or any of its current or former directors, officers or employees arising out of any law governing labor, employment, employment practices or employment discrimination, including, without limitation, any claim for wrongful termination, breach of express or implied contract of employment or for violation of equal employment opportunity laws by the Company or any of its Affiliates; and

(vi)

there currently exists no contract, agreement, understanding or arrangement with the Company pursuant to which any current or former employee of the Company has or, upon termination of employment by the Seller , the Company or , in the case of any of the Company's Employees, the Buyer, would have any right to severance, termination or other similar payments.

(b)

A true and complete list of the names of all employees of the Company as of the date of this Agreement is set forth in Section 3.18 (b) of the Disclosure Schedule (the "Company's Employees").

( c )

The Seller is in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment, occupational safety and health, and wages and hours.  The Seller shall not, at any time within ninety (90) days before the Closing Date, without complying fully with the notice and other requirements of  the Worker Adjustment and Retraining Notification Act of 1988, as amended (the "WARN Act"), effectuate (i) a "plant closing" (as defined in the WARN Act), affecting any site of employment or one or more facilities or operating units within any site of employment or facility of the Seller, or (ii) a "mass layoff" (as defined in the WARN Act) affecting any site of employment or facility of the Seller; or any similar action under applicable state or foreign law requiring notice to employees in the event of a plant closing or layoff.   The Seller shall Hold Harmless the Buyer from and against any and all claims, losses, damages, expenses, obligations and liabilities (including costs of collection, attorney's fees and other costs of defense) which the Buyer may incur in connection with any suit or claim of violation brought against the Buyer or the Company under the WARN Act or any similar state or foreign law, which relates to actions taken by the Seller or the Company with regard to any site of employment or one or more facilities or operating units within any site of employment of the Business affected by this Agreement.

3.19

Brokers or Finders

Other than as set forth in Section 3.19 of the Disclosure Schedule, which lists fees and expenses which are to be paid by the Seller, no broker, finder, agent or similar intermediary has acted for or on behalf of the Company or the Seller in connection with this Agreement or the transactions contemplated hereby, and no broker, finder, agent or similar intermediary is entitled to any broker's, finder's or similar fee or other commission in connection herewith based on any Contract or other agreement with the Company or the Seller or any action taken by them.

3.20

Compliance with Environmental Laws

(a)

The Company is in material compliance with all applicable Environmental Laws (which compliance includes, but is not limited to, the possession by the Company of all Governmental Authorizations required under applicable Environmental Laws, and compliance with the terms and conditions thereof).  The Company has not received any communication (written or oral), whether from a Governmental Body, citizens group, employee or otherwise, alleging that the Company is not in such compliance, and there are no past or present (or to Seller's Knowledge, future) actions, activities, circumstances conditions, events or incidents that may prevent or interfere in the future with such compliance with Environmental Laws in effect as of the Closing Date.

(b)

There is no Environmental Claim pending or , to Seller's Knowledge, threatened against the Company or, to Seller's Knowledge, against any person or entity whose liability for any Environmental Claim the Company has or may have retained or assumed either contractually or by operation of law.

(c)

Except as set forth in Section 3.20(c) of the Disclosure Schedule, there are no present or, to Seller's Knowledge, past actions, activities, circumstances, conditions, events or

incidents, including, without limitation, the Release, threatened Release or presence of any Hazardous Material which could form the basis of any Environmental Claim against the Company, or to Seller's Knowledge, against any person or entity whose liability for any Environmental Claim the Company has or may have retained or assumed either contractually or by operation of law.

(d)

The Company has not, and to Seller's Knowledge, no other person has, placed, stored, deposited, discharged, buried, dumped or disposed of Hazardous Materials or any other wastes produced by, or resulting from, any business, commercial or industrial activities, operations or processes, on, beneath or adjacent to any property currently or formerly owned, operated or leased by the Company, except for inventories of such substances to be used, and wastes generated therefrom, in the ordinary course of business of the Company (which inventories and wastes, if any, were and are stored or disposed of in accordance with applicable Environmental Laws and in a manner such that there has been no Release or threatened Release of any such substances).

(e)

The Seller has delivered or otherwise made available for inspection to the Buyer true, complete and correct copies of any reports, studies, analyses, tests or monitoring possessed or initiated by the Seller or the Company pertaining to Hazardous Materials in, on, beneath or adjacent to any property currently or formerly owned, operated or leased by the Company, or regarding the Company's compliance with applicable Environmental Laws.

3.21

Relationships with Related Persons

Except as set forth in Section 3.21 of the Disclosure Schedule, neither the Seller, nor any Affiliate of the Seller, provides any goods or services to the Company and the Company does not use or require goods or services of the Seller or any Affiliate of the Seller to operate the Business.

3.22

Intellectual Property

To Seller's Knowledge, the Company has not interfered with, infringed upon, misappropriated, or violated any intellectual property right of any Person.  To Seller's Knowledge, no Person has interfered with, infringed upon, misappropriated, or violated any intellectual property right of the Company.  No patent or registration has been issued and there are no pending patent applications or applications for registration with respect to any of the intellectual property of the Company.  Section 3.22 of the Disclosure Schedule describes all trademarks, service names, trade names (other than its  legal corporate name as of the date hereof), copyrights, software not owned by the Company, franchises, internet domain names, all applications for any of the foregoing, and all licenses, royalty agreements and similar contracts running to or from the Company relating to the foregoing, in each case that is used in connection with the Business (each, an "IP Asset"), and indicates each such item that will not remain with the Company after the Closing, or as to which the use thereof by the Company may be subject to less advantageous terms following the Closing,  The Company has the right to use each IP Asset as it has been used by the Company, and is in compliance with each Contract relating thereto.

3.23

Business Relationship

Except as indicated on Section 3.23 of the Disclosure Schedule, no customer or subcontractor has terminated or, to Seller's Knowledge, threatened to terminate, any agreements with the Company in the past year, other than terminations for convenience.

3.24

No Encumbrances.

Except as set forth in Section 3.24 of the Disclosure Schedule, the Company has good and marketable title to all of its assets, properties and business, including, without limitation, all of the assets, properties and business reflected on the Company Balance Sheet, in each case, free and clear of any Encumbrance.

3.25

Balance Sheet Indebtedness.

Except as set forth in Section 3.25 of the Disclosure Schedule, all Indebtedness (as such term is defined in this Section 3.25) of the Company as of December 31, 2005 is set forth on the Company Balance Sheet. All Indebtedness so reflected or which has arisen after such date has arisen in the ordinary course of business and represents valid Indebtedness of the Company.  As used herein, the term "Indebtedness" means all items which, in accordance with GAAP , would be included in determining total liabilities as shown on the liability side of a balance sheet as at the date such indebtedness is determined.

3.26

Full Disclosure.

All documents and other papers delivered by or on behalf of the Company or the Seller in connection with this Agreement and the transactions contemplated hereby are true, complete and authentic copies of such documents and papers.  To the extent there is any conflict between any documentation provided to the Buyer in connection with this Agreement and any documents attached to this Agreement, the documents attached hereto shall control and such conflict shall not be deemed a breach of this Section 3.26.  No representation or warranty of the Company or the Seller contained in this Agreement and, to Seller's Knowledge, no document or other paper furnished by or on behalf of the Company or the Seller to the Buyer (or any of its agents) pursuant to this Agreement or in connection with the transactions contemplated hereby, taken as a whole, contains an untrue statement of material fact or omits to state a material fact required to be stated therein or necessary to make the statements made, in the context in which made, not false or misleading.  There is no fact known to the Company or the Seller that has not been disclosed to the Buyer in this Agreement or the Schedules hereto that has a Material Adverse Effect, or (in the reasonable business judgment of the Company or the Seller based on Seller's Knowledge) is likely to have a Material Adverse Effect.

3.27

Disclaimer of Other Representations and Warranties

Without in any way limiting the representations and warranties of the Seller herein, neither the Seller, the Company nor their respective officers, directors, employees, stockholders, Affiliates or representatives have made or make any representation or warranty to the Buyer with

respect to any financial projection or forecast relating to the Company, or any ability to refinance on- or off-balance sheet debt.  Without in any way limiting the other representations and warranties of the Seller herein, with respect to any such projection or forecast delivered by or on behalf of the Seller or the Company to the Buyer, the Buyer acknowledges and agrees by its execution hereof that (i) there are uncertainties inherent in attempting to make such projections and forecasts and to achieve refinancings; (ii) it is familiar with such uncertainties; (iii) the Buyer is taking full responsibility for making its own evaluation of all such projections and forecasts and possible refinancings so furnished to it; and (iv) the Buyer shall have no claim against the Seller, the Company or their respective officers, directors, employees, stockholders, Affiliates or representatives with respect to such projections or forec asts and possible refinancings.

IV.

REPRESENTATIONS AND WARRANTIES OF BUYER

The Buyer represents and warrants to the Seller as follows:

4.01

Incorporation and Legal Existence

The Buyer is duly organized, validly existing, and in good standing under the laws of the State of Delaware.

4.02

Authority; No Conflict

(a)

The Buyer has full power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party and to perform its obligations under this Agreement and such other Transaction Documents.  This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable in accordance with its terms and conditions, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and to general principles of equity (regardless of whether such enforcement is sought in a proceeding in equity or at law).

(b)

Neither the execution and delivery of this Agreement nor the consummation or performance of any of the transactions contemplated hereby will (i) violate any provision of the Buyer's Governing Documents; (ii) violate any Legal Requirement applicable to the Buyer or the transactions contemplated hereby; or (iii) result in the breach or violation of, or constitute a default under, any material agreement to which the Buyer is a party or by which the Buyer may be bound, except, in the case of clauses (ii) and (iii), for such violation, breach, or default which would not, individually or in the aggregate, reasonably be expected to prevent, delay or otherwise interfere with the consummation or performance of any of the transactions contemplated hereby.

(c)

Except as set forth in Section 4.02(c) of the Disclosure Schedule, the Buyer is not or will not be required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the transactions contemplated hereby (each such item, a "Buyer Consent") ..

4.03

Certain Proceedings

There is no pending Proceeding that has been commenced against the Buyer and that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated hereby.  To the knowledge of the Buyer, no such Proceeding has been threatened.

4.04

Brokers or Finders

The Buyer and its officers and agents have incurred no obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement or the transactions contemplated hereby.

4.05

[RESERVED]

4.06

Purchase for Investment

The Buyer acknowledges that the Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act") or under any state securities laws.  The Buyer is not an "underwriter" (as such term is defined in the Securities Act), and is purchasing the Shares solely for investment with no present intention to distribute any of the Shares to any Person, and the Buyer will not sell or otherwise dispose of any of the Shares, except in compliance with the registration requirements or exemption provisions under the Securities Act and the rules and regulations thereunder and any applicable state securities laws.  The Buyer is an "accredited investor" as defined under Regulation D promulgated under the Securities Act.

V.

REPRESENTATIONS AND WARRANTIES OF BUYER

5.01

Operation of the Company's Business

Between the date of this Agreement and the Closing Date, the Seller will, or will cause the Company to:

(a)

conduct the affairs of the Company in the ordinary course of business, consistent with past practice; provided, however, that, except as indicated on Section 5.01(a) of the Disclosure Schedule, neither shall the Seller, nor shall the Seller permit the Company to, without the prior written consent of the Buyer, (i) take any action described in Sections 3.15 (a) through (u), (ii) except with respect to requests for proposals to suppliers for projects which are under construction, issue any proposal or request for proposal to any potential customer or supplier other than the USPS Shared Energy Savings (SES) Solicitation No. 1A UTIL-06-A-0001, or (iii) release the Detailed Energy Study for Marine Corps Base, Quantico, or any draft thereof;

(b)

except as otherwise explicitly provided for in this Agreement: preserve the Company’s business organizations intact; use commercially reasonable efforts to keep available

the services of the Company’s present officers, employees, consultants and agents; maintain the Company’s present suppliers, customers, licensors, licensees, contractors and others with which the Company has advantageous business relationships and use commercially reasonable efforts to preserve the Company’s goodwill; and conduct the Company’s business in such a manner that the representations and warranties contained in Article III hereof shall continue to be true, complete and accurate in all material respects on and as of the Closing Date with the same force and effect as if made on and as of the Closing Date except for changes contemplated or permitted by this Agreement and except to the extent that any representation and warranty is made as of a specified date, in which case, such representation and warranty shall be true, complete and accurate in all material respects as of such date;

(c)

give prompt written notice to the Buyer of: (i) the occurrence, or failure to occur, of any event which occurrence or failure would be likely to cause any representation or warranty of the Seller contained in this Agreement, if made on or as of the date of such event or as of the Closing Date, to be untrue or inaccurate in any material respect, except for changes contemplated or permitted by this Agreement and except to the extent that any representation and warranty is made as of a specified date, in which case, such representation and warranty shall be true, complete and accurate in all material respects as of such date; (ii) any material failure of the Company or of any officer, director, employee, consultant or agent of the Company, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it or them under this Agreement; (iii) any event of which it has knowledge which will result, or would reasonably be expected to result, in the failure to satisfy the conditions specified in Article VIII hereof; (iv) any notice of, or other communication relating to, a default received by the Company subsequent to the date hereof and prior to the Closing Date, und er any Contract; (v) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated hereby other than the Seller’s Consents described in Section 3.04(c) of the Disclosure Schedule; (vi) any notice or other communication received by the Seller or the Company from any Governmental Body in connection with the transactions contemplated hereby other than the Seller’s Consents described in Section 3.04(c) of the Disclosure Schedule; (vii) the occurrence of any event which has, or so far as reasonably can be foreseen at the time of its occurrence, could reasonably be expected to result in , a Material Adverse Effect ; and (viii) any matter hereafter arising which, if existing, occurring or known at the date hereof, would have been required to be disclosed to Buyer under the provisions of this Agreement; provided, however, that no such notification shall affect the representations or warranties of the Seller or the conditions to the obligations of the Seller hereunder; and

(d)

except as set forth in Section 5.01(d) to the Disclosure Schedule, but only to the extent that all obligations of the Company thereunder are properly billed or accrued, and reflected on the Closing Balance Sheet, settle, terminate and extinguish all accounts, debts, payables, receivables , Company Contracts and other obligations between (i) the Company and its subsidiaries, on one hand, and (ii) the Seller and its Affiliates (other than those described in clause (i)), on the other hand, such that, except as set forth in Section 5.01(d) of the Disclosure Schedule or as explicitly provided for in the Transaction Documents, none of the Company and its subsidiaries shall have any obligation of any nature whatsoever to the Seller or any such Affiliates.

5.02

Efforts to Close

Between the date of this Agreement and the Closing Date, the Seller will use its reasonable best efforts to cause the conditions to the Closing to be satisfied such that the Closing Date may occur in accordance with Section 2.02.

5.03

Required Approvals

As promptly as practicable after the date of this Agreement, the Seller will, and will cause the Company to, make all filings required by Legal Requirements, if any, to be made by it prior to the Closing in order to consummate the transactions contemplated by this Agreement.

VI.

COVENANTS OF THE BUYER PRIOR TO CLOSING DATE

6.01

Efforts to Close

Between the date of this Agreement and the Closing Date, the Buyer will use its reasonable best efforts to cause the conditions to the Closing to be satisfied such that the Closing Date may occur in accordance with Section 2.02.

6.02

Required Approvals

As promptly as practicable after the date of this Agreement, the Buyer will make all filings required by Legal Requirements, if any, to be made by it prior to the Closing in order to consummate the transactions contemplated by this Agreement.

6.03

Changes in Representations/Warranties

The Buyer shall give the Seller prompt written notice of any change in any fact respecting which a representation or warranty has been made by it in this Agreement.

VII.

ADDITIONAL AGREEMENTS OF THE PARTIES

7.01

Employment and Plans

(a)

No later than seven (7) days prior to the Closing, the Buyer shall notify the Company of at least fifty (50) of the Company's Employees who shall have the opportunity to remain employed by the Company or to be employed by the Buyer or one of its Affiliates after the Closing on an at-will basis (the “Selected Employees”).  Subject to the confirmation in writing at least one (1) day prior to the Closing Date by such Selected Employee of his or her intention to be so employed, each Selected Employee shall be retained by the Buyer or the

Company on an at-will basis.  On or before the Closing Date, the Seller shall cause the Company to terminate the employment of each Company’s Employee who is not a Selected Employee who has delivered such confirmation, and the Seller shall be liable for all notice, severance, unused vacation, earned but unpaid incentive payments and other benefits arising from or payable upon the termination of employment (the “Termination Costs”) in each such case.   The Buyer agrees that Selected Employees (i) shall receive the same base pay that they received as employees of the Company as of November 30, 2005, (ii) shall be entitled to the same number of days of annual paid vacation that they were entitled to as employees of the Company as of November 30, 2005; provided however, that such paid vacation entitlement may not exceed the maximum paid vacation entitlement offered under the Buyer’s existing vacation plan, (iii) shall be eligible, following the Closing Date, for the benefit plans offered by the Buyer under the terms of such plans, and (iv) following the Closing Date until June 30, 2006, shall be eligible for sales and project incentive payments under the terms of the applicable Company plans as of the Closing Date, and, thereafter, under the terms of such plans maintained by the Buyer.  The Company may, at its discretion, within ninety (90) days following the Closing Date, provide to the Seller a list of not more than ten (10) Selected Employees whose employment is subject to termination by the Company, and the Seller shall be liable for all Termination Costs of each such Selected Employee, including paying directly to each such Selected Employee all Termination Costs that may be paid directly, and reimbursing the Buyer for all additional Termination Costs; provided however, that the Seller shall not be obligated to pay to any Selected Employee described in the foregoing clause any Termination Costs more beneficial than the severance such claimant would have been entitled to as a Scheduled Employee or any vacation pay or sales or incentive compensation earned after the Closing Date.

(b)

The Buyer shall cause the Company to maintain the Company Plans identified on Schedule 7.01(b) (or other benefit plans that provide substantially similar benefits in the aggregate) from the Closing Date through February 28, 2006.

(c)

For purposes of participation and vesting, but not benefit accrual, (i) in the Buyer's defined contribution "401(k)" program and defined benefit retirement program (if any), or (ii) for other differential benefits based on length of service under any arrangements maintained or otherwise provided to Selected Employees by the Buyer after the Closing Date, the Buyer shall credit Selected Employees for prior service with the Company, based upon their date of hire by the Company.

(d)

The Seller shall bear all costs of any retention agreement executed prior to the Closing Date with any Company’s Employee.  The Seller shall pay each Company’s Employee full credit for and use of all vacation time, sick leave or other paid leave, if any, accrued (but unused) up to the Closing Date in accordance with Company policies in effect immediately prior to the Closing Date.

(e)

The Buyer shall take any and all necessary action to cause the trustee of a defined contribution plan of the Buyer, if requested to do so by a Selected Employee, to accept a direct rollover of all or a portion of such Selected Employee's distribution from a Seller employee benefit plan that constitutes an eligible rollover distribution pursuant to Section 402(c)(4) of the IRC ..

(f)

Except as provided in the last sentence of Section 7.01(a) or otherwise explicitly stated in this Agreement or any Transaction Document, from and after the Closing Date, the Buyer shall be solely responsible for all claims, costs, Taxes (all types), charges, liabilities, and termination and severance benefits (if any), of any nature incurred after the Closing Date with respect to the employment or termination of employment of Selected Employees in respect of the period after the Closing Date.  In the event that the Buyer employs, within 180 days of the termination of employment by the Seller or the Company thereof, any Company’s Employee who has received Termination Costs from the Seller pursuant to this agreement, the Buyer shall reimburse the Seller for such Termination Costs.

(g)

No Company's Employee, Selected Employee or Scheduled Employee shall be a third party beneficiary of this Agreement.

7.02

Access

(a)

From the date of this Agreement until the Closing Date, the Seller shall cause the Company to afford the Buyer and its representatives access upon reasonable advance notice, to the Company and its employees as the Buyer may reasonably request in order to consummate the transactions contemplated by this Agreement, and the Seller shall cause the Company to cooperate fully therewith.

(b)

From and after the Closing Date, each Party agrees to cooperate with and to grant to the other Party and its respective officers, employees, attorneys, accountants, representatives and agents, during normal business hours, reasonable access to the such Party's management personnel and such other information and records relating to the Business in their possession after the Closing Date and to permit copying or, where reasonably necessary, to furnish original documents relating to the Business for the purposes of (i) any financial reporting or Tax matters (including without limitation any financial and Tax audits, Tax contests, Tax examination, preparation for any Tax Returns or financial records); (ii) any investigation being conducted by any Governmental Body involving either Party or the Business; (iii) any claims or litigation involving either Party or the Business; or (iv) any similar or related matter.  Each Party shall use i ts commercially reasonable efforts to ensure that its access to and requests for records and documents pursuant to this Section 7.02(b) are conducted so as not to interfere with the normal and ordinary operation of the other Party's business.  Each Party acknowledges that the records and documents made available to such Party pursuant to this Section 7.02(b) constitute confidential information of the disclosing Party.

7.03

Liability for Taxes

(a)

The Seller shall be responsible for and pay all Pre-Closing Tax Liabilities.

(b)

Except to the extent otherwise provided in Section 7.03(a) above, the Buyer shall be responsible for and pay all Taxes that are payable for a period that ends after the Closing Date and all Taxes arising or resulting from the ownership of the Company after the Closing Date.

(c)

The Buyer shall pay to the Seller the amounts of any refund, abatement or credit of Taxes received (i) for which the Seller has previously indemnified the Buyer and (ii) for Taxes that are attributable to the ownership of the Company on or prior to the Closing Date.

(d)

The Seller shall pay to the Buyer the amounts of any refund, abatement or credit of Taxes received (i) for which the Buyer has previously indemnified the Seller and (ii) for Taxes that are attributable to the ownership of the Company after the Closing Date.

(e)

The Seller shall prepare and timely file or shall cause to be prepared and timely filed and shall remit or cause to be remitted any Taxes due in respect of the following Tax Returns with respect to the Company or in respect of their businesses, assets or operations ; : (i) all Tax Returns for any taxable period ending on or before the Closing Date; and (ii) all other Tax Returns required to be filed (taking into account extensions) prior to the Closing Date.  The Buyer shall prepare and timely file or shall cause to be prepared and timely filed all Tax Returns that are required to be filed by or with respect to the Company or in respect of their businesses, assets or operations for taxable years or periods beginning and ending after the Closing Date.  The Buyer shall remit or cause to be remitted any Taxes due in respect of such Tax Returns.  If the Buyer is required to file any Tax Return for a taxable period beginning before and ending after the Closing Date, the Buyer shall cause such Tax Return to be filed and shall be responsible for the payment of any Tax for such period.  However, the Seller shall pay to the Buyer, as an adjustment to the Purchase Price, the amount by which the Tax attributable to the period through the Closing Date exceeds the amount of such Tax paid (including payments of estimated Tax) on or before the Closing Date.  The Tax attributable to the period through the Closing Date shall be determined using the Tax accounting methods and Tax elections used by the Company before the Closing Date.  The Buyer shall compute the amount of the Tax attributable to the period through the Closing Date and shall notify the Seller of such amount in writing no later than forty-five (45) days prior to filing the Tax Return.  Within twenty (20) days after the date of such notification, the Seller shall pay to the Buyer or the Buyer shall pay to the Seller, as appropriate, the difference between (i) the amount of Tax determined by the Buyer as attributable to the portion of the period through the Closing Date, and (ii) the amount of the Tax for the taxable period paid (including payments of estimated Tax) on or before the Closing Date by the Seller, unless within fifteen (15) days after such date, the Seller notifies the Buyer in writing that the Seller disagrees with the computation of any such amount.  In that case, the Seller and the Buyer shall proceed in good faith to determine the correct amount, and the Seller's payment to the Buyer, or the Buyer's payment to the Seller, shall be due the later of (i) the time specified in the immediately preceding sentence and (ii) ten (10) days after the Seller and the Buyer agree to the amount payable.  The parties agree that if the Company is permitted but not required under applicable state or local Tax laws to treat the Closing Date as the last day of a taxable period, the parties shall treat such day as the last day of a taxable period. Where it is necessary for purposes of this Section 7.03 to apportion between the Seller and the Buyer the Taxes of the Company for a taxable period beginning on or before the Closing Date and ending after the Closing Date (which is not treated under the immediately preceding sentence as closing on the Closing Date), such liability shall be apportioned between the period deemed to end at the close of the Closing Date, and the period deemed to begin at the beginning of the day following the Closing Date on the basis of an interim closing of the books, except that Taxes (such as real or personal property Taxes) imposed on a periodic basis shall be allocated on a daily basis. The parties agree that they

will treat the Company as if it ceased to be part of the affiliated group of corporations of which the Seller is a member within the meaning of §1504 of the IRC, and any comparable or similar provision of state, local or foreign laws or regulations, as of the close of business on the Closing Date.

(f)

The Buyer and the Seller agree to cooperate and share all required information on a timely basis in order to timely file all Tax Returns, reports, returns, schedules and any other documents required to be filed with respect to Taxes and all claims for refunds of Taxes and for the preparation of any audit, and for the prosecution or defense of any claim or Proceeding relating to any proposed adjustment.  The Buyer and the Seller agree to retain or cause to be retained all Tax Returns, and books and records pertinent to the Business until the applicable period for assessment under applicable law (giving effect to any and all extensions or waivers) has expired, and to abide by or cause the abidance with all record retention agreements entered into with any Governmental Body.  After the Closing Date, the Buyer and the Seller will give each other reasonable notice prior to transferring, discarding or destroying any such Tax Returns, and books and records relating to Tax matters, and the Buyer and the Seller will allow each other upon request to take possession of such Tax Returns, and books and records at the requesting Party's expense.  The Buyer and the Seller shall cooperate with each other in the conduct of any audit or other proceedings involving the Business for any Tax purpose.  In the case of a taxable period ending on or before the Closing Date, the Buyer shall be entitled to participate at its expense in any audit or examination by any Governmental Body ("Tax Audit"), but the Seller shall control the Tax Audit.  In the case of a period that begins before and ends after the Closing Date, the Seller shall be entitled to participate at its expense in any Tax Audit relating in any part to Taxes attributable to the portion of such period deemed to end on or before the Closing Date, but the Buyer shall control the Tax Audit. Neither Party nor any of their Affiliates may settle or otherwise dispose of any Tax Audit for which the other Party may have a liability under this Agreement, or which may result in an increase in such other Party's liability under this Agreement, without the prior written consent of such other Party, which conse nt may not be unreasonably withheld, conditioned or delayed.

(g)

Any payment by a Party hereto to the other Party hereto under this Agreement will be deemed an adjustment to, without giving rise to any additional obligation regarding, the Purchase Price to the maximum extent permitted by law, except that, unless otherwise required by law, on their Tax Returns the Seller and the Buyer will (and will cause their Affiliates to) treat any such payment as an adjustment to the Purchase Price.

(h)

Notwithstanding any other provision of this Agreement, the covenants and obligations set forth in this Section 7.03 shall not be subject to any restrictions or limitations other than those expressly set forth in this Section 7.03 and shall survive until, and any claim for indemnification with respect thereto must be made prior to, ninety (90) days after the expiration of the applicable statute of limitations with respect to the underlying Tax claim (including any valid extensions).

(i)

All Tax sharing agreements or similar arrangements with respect to or involving the Company shall be amended to exclude the Company prior to the Closing Date and, after the Closing Date, the Company shall not be bound thereby or have any liability thereunder.

(j)

All excise, sales, use, transfer (including real property transfer or gains), stamp, documentary, filing, recordation and other similar taxes, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties (the "Transfer Taxes"), resulting from the transfer of the Shares pursuant to this Agreement shall be borne by the Seller.

(k)

The Buyer agrees to make the election described in Reg. Section 1.1502-21T(b)(3)(ii)(B) to relinquish, with respect to all consolidated net operating losses attributable to the Company, the portion of the carryback period for which the Company was a member of the consolidated group which included the Seller.

7.04

Consents

The Company, the Seller and the Buyer will cooperate prior to the Closing to obtain any Required Consents from any Person in connection with the execution and delivery of this Agreement, or the consummation or performance of any other transactions contemplated hereby.  After Closing, the Seller and the Buyer shall continue to cooperate in good faith to obtain any Required Consents that were not obtained by the Closing Date.

7.05

Seller Cooperation

The Seller will cause its personnel, and those of its Affiliates, to assist the Company in promptly notifying any customers and suppliers of the Company of the transactions completed pursuant to this Agreement.   The Buyer shall have reasonable right of approval over the content and timing of such notifications.

7.06

Section 338 Election

(a)

At the Buyer's request within 250 days following the Closing Date, the Seller will join with the Buyer in making an election under §338(h)(10) of the IRC (and any corresponding election under state or local Tax law) with respect to the purchase and sale of the stock of the Company hereunder (a "Section 338 Election").  The Seller will include any income, gain, loss deduction, or other Tax item with respect to the deemed sale of assets resulting from the Section 338 Election on its Tax Returns to the extent permitted by applicable law.

(b)

Upon and following the Section 338 Election, if any, the Purchase Price shall be allocated among the assets by the Buyer in a manner that is reasonably acceptable to the Seller.  Such allocation shall be reported on Form 8883 and filed in the manner required by the IRS.  Such allocation is intended to comply with the allocation method required by the Treasury regulations under § 338(h)(10) of the IRC and the parties shall cooperate to comply with all procedural requirements thereunder ..  The Buyer and the Seller agree that they will not take nor will they permit any affiliated Person to take any tax position inconsistent with such allocation; provided, however, that (i) the Buyer's cost for the assets may differ from the total amount allocated thereunder to reflect the Buyer's capitalized transaction costs not included in the amount allocated, and (ii) the Seller's amount realized on the sale of the assets may differ from

the total amount so allocated to reflect the Seller's transaction costs that reduce the amount realized.

7.07

Non-Compete

For a period of four (4) years following the Closing Date, (a) except for similar activities that are ancillary to, but reasonably necessary for, the provision of substantially unrelated services, none of the Seller or any of its Affiliates shall engage within the United States, other than through its regulated utilities or regulated Affiliates, as directed or allowed by its respective commissions, in any business activity similar to the Business, including without limitation the financing, development, acting as the general contractor for construction of, or the ownership of, cogeneration, renewable, energy conservation, energy efficiency, or guaranteed energy, water or O&M savings projects, and (b) no unregulated Affiliate of the Parent may voluntarily acquire in any manner any Third Party, 20% or more of the revenues of which, on a consolidated basis with the acquired entities of such Third Party included in such transaction, de rive from activities competitive with the Business; provided however, that neither of such prohibitions shall prevent the Parent or any regulated Affiliate from merging with or acquiring or being acquired by a company whose business includes a competitive business.

7.08

Use of Name

The Buyer and its Affiliates (including the Company following the Closing Date) are prohibited from using the name "Select Energy Services" for any purpose from and after ninety (90) days following the Closing Date; provided, however, that (i) the Buyer may continue to use such name with respect to each customer who has the right to approve any change of name until such customer has approved the change of name proposed by the Company, and (ii) the Buyer shall be able to use such name on the Buyer's website and in the Buyer's marketing materials to describe the history of the Company and the Buyer.  The Buyer and the Company shall use commercially reasonable efforts to obtain such consent. The Buyer shall file an amendment to the Company’s Articles of Organization changing the name of the Company within the time period set forth in Section 9.03(e).  The Buyer shall change the Company’s website address, www.selectenergysi.com , as soon as practicable after the Closing Date.

7.09

Brokers' Fees.

The Seller shall pay all fees and related expenses for each item listed in Section 3.19 of the Disclosure Schedule.

7.10

Security ..

The Seller shall maintain, at its sole cost and expense, all Security in accordance with its current terms and the current terms of each applicable Company Contract, and, in the event that any extension of any Security is required due to the action or inaction of the Seller or the Company prior to the Closing Date, the Seller shall obtain such extension; provided that, the Buyer shall indemnify the Seller for any losses, costs or damages of the Seller due to a call on such Security that is caused by the action or inaction of the Buyer or the Company following the

Closing Date and is not caused by the action or inaction of the Seller or the Company on or prior to the Closing Date ; and provided further that the Buyer shall cooperate reasonably with the Seller in the Seller's efforts to persuade Travelers Casualty and Surety Company (“Travelers”) to accept a Buyer guaranty on the basis of the Buyer’s balance sheet credit and to release the Seller and its Affiliates from any liability on Efficiency Guaranty Bond No. 001S103553162 dated August 13, 2001, executed by the Company as Principal and by Travelers as Surety, and relating to the Energy Services Agreement dated August 13, 1998 between the Company and the Commonwealth of Massachusetts.

7.11

[RESERVED]

7.12

Other Covenants and Agreements.

(a)

For a period of three (3) years following the Closing Date , neither the Seller nor any Affiliate thereof will (i) solicit the hire of any employee of the Buyer or the Company, or any Selected Employee not described in the last sentence of Section 7.01(a); provided that, the response of any such employee to a widely circulated notice of job opportunities shall not constitute a breach of such covenant, or (ii) following notification by the Buyer or the Company thereof, hire any Selected Employee in contravention of a non-compete agreement between (x) such Selected Employee and (y) the Buyer or the Company.

(b)

With respect to the West Haven Contract, the Buyer shall cause the Company to bill Goldbelt in accordance with the West Haven Contract for work done under the West Haven Contract, and shall simultaneously send a copy of such bill to the Seller together with a calculation of (i) the total Costs incurred by the Buyer in performing work under the West Haven Contract which were billed to Goldbelt (including the work on the current bill to Goldbelt), with a twenty percent (20%) margin thereon, (ii) the total Costs incurred by the Buyer in performing work under the West Haven Contract which were not billable to Goldbelt, with a twenty percent (20%) margin thereon, which have not been paid to the Company by the Seller, (iii) each amount theretofor billed to Goldbelt which remains past due to the Company, and the number of days that each such payment is overdue, (iv) without duplication of any amount reflected in clause (iii), each amount theretofor billed to Goldbelt which was paid late, and the number of days that each such payment was overdue, and (v) the amount of accrued interest, at the Prime Rate plus two percent (2%), on items (ii), (iii) and (iv) (the sum from time to time of items (ii), (iii) and (v), the “Due Amounts”). When the sum of (i), (ii) and (v) exceeds the remaining amount to be billed to Goldbelt under the West Haven Contract as of the Closing Date , the Seller shall pay the Company the then Due Amounts, and the Seller shall thereafter pay to the Company monthly the sum of all then Due Amounts.  The Buyer shall cause the Company to retain all payments received from Goldbelt; provided however, that the Buyer shall cause the Company to remit to the Seller any payment received from Goldbelt for which the Company has theretofor been paid by the Seller hereunder.

(c)

The Company shall remain responsible for all costs under the Natick Lease for the longer of thirty (30) days following the Closing Date or the date on which the Company vacates the Natick office space (such later date, the “End Date”).  The Company shall be obligated to vacate the space upon fourteen (14) days prior notification by the Seller; provided that the date to

vacate provided in such notification may not be prior to the date which is thirty (30) days following the Closing Date.  From and after the End Date, (i) the Seller shall Hold Harmless the Buyer for all Costs relating to the Natick Lease, and (ii) the Seller shall, at its sole cost, take all reasonable actions to assign, assume or terminate such lease and to obtain a written release of the Company from liability thereunder.  Except as otherwise notified by the Buyer to the Seller within fifteen (15) days after Closing, the Seller shall be responsible for the disposal of all Natick office furniture and fittings to be disposed of upon the termination of the Natick Lease.

(d)(i)  At least seven (7) days prior to the Closing Date , the Buyer shall notify the Seller of those Company’s Employees at the Company’s East Hartford office who will be Selected Employees.  In the event that the Seller determines that additional Company’s Employees must be retained in order to satisfactorily service the UConn Cogeneration Project, including the completion of construction, the achievement of final acceptance relating thereto, and staffing for anticipated maintenance and warranty work thereon, the Seller shall notify the Buyer of such Company’s Employees, and the Buyer shall retain each such Company’s Employee (the “Supplemental Employees”).  The Seller shall notify the Buyer when any Supplemental Employee is not needed in order to so satisfactorily service such project.  The Seller shall bear all Costs of (x) the continued employment of each Supplemental Employee by the Company relating to the UConn Cogeneration Project, in each case with a twenty percent (20%) margin, and (y) in the event of the termination of employment of a Supplemental Employee who was substantially dedicated to the UConn Cogeneration Project, all Termination Costs relating thereto, to be paid by the Seller directly to each such Supplemental Employee to the extent feasible; provided however, that the Seller shall not be obligated to pay to any Supplemental Employee described in the foregoing clause any severance more beneficial than such claimant would have been entitled to as a Scheduled Employee.

(ii)  From and after the Closing Date , the Seller will pay directly and Hold Harmless the Buyer for all Costs of the Company under the East Hartford Lease.  Upon achievement of final completion under the UConn Contract, the Seller shall, at its sole expense, remove all furnishings and equipment remaining after the Company has vacated the premises, and take all reasonable actions to assign, assume or terminate such lease and to obtain a written release of the Company from liability thereunder.

(e)

From and after the Closing Date , the Seller shall use its commercially reasonable efforts to obtain the lessor’s approval for a sublease to the Company of space requested by the Company in the Syracuse office of Select Energy New York, Inc. (“SENY”), and shall cause SENY to sublease such space to the Company as a tenant at will who may vacate upon thirty (30) days prior notice, and otherwise under the same terms and conditions and at the same cost per square foot of subleased space as SENY pays under its lease.

(f)

Each reference to the costs of the Buyer or the Company after the Closing shall mean, except as otherwise specifically provided for herein, the sum of (i) internal labor provided by the Buyer or the Company, charged at such provider's fully burdened standard rates in effect from time to time, and (ii) any required third party provided labor, services, goods or materials (including all out of pocket expenses), charged at the cost to the Buyer or the Company (cumulatively sometimes referred to herein as the "Costs").

(g)

From and after the Closing Date , (i) the Company will not retain insurance coverages provided by any Affiliate of the Seller, and (ii) at the Buyer’s option, the Company may retain at its sole cost all insurance coverages held in the Company’s name.

(h)

The Seller shall timely pay (i) all amounts to be paid at any time pursuant to each retention agreement with any Seller’s Employee or otherwise relating to the Company or the Business, and (ii) all earned and due sales commissions relating to the Company or the Business, and shall deliver to the Buyer on or before the Closing Date Schedule 7.12(h), setting forth each Selected Employee who has earned any sale commissions as of such date, and any such amounts remaining to be paid after such date.

(i)

The Seller shall be responsible for, and shall bear all of the costs and expenses of prosecuting and defending, as the case may be, each matter set forth in Section 3.14 to the Disclosure Schedule, including the AEI Matter and the MJD Matter , including the retention of counsel with respect thereto.  The Seller shall retain or pay, as the case may be, all money judgments awarded or settlement amounts agreed relating to such matters.  The Buyer shall cause the Company to, at the Seller’s expense, cooperate as the Seller may reasonably request in providing any documentation relating to such matters, or as necessary to evidence the Seller’s right and authority to act on such matters.  The Seller shall provide the Company with (i) timely copies of all notices, submissions, filings, findings and agreements in such matters, (ii) such details of the status of such matters as the Company may reasonable request from time to time, and (iii) timely opportunity to review and reasonably approve any offer or proposed settlement in such matters that may adversely reflect upon the Company.  To the extent that the Buyer receives any notices and filings in the AEI Matter or the MJD Matter from anyone other than the Seller, the Buyer shall provide a copy of the same to the Seller.

(j)

The Seller shall cooperate in restructuring the obligations of Select Energy, Inc. under the York County Contract such that the Company’s obligations under the York County Contract may be restated in an agreement between the County of York, Maine and the Company such that the Company shall have no obligations or liability with respect to any commodity supply arrangements, including for payments, imbalance charges or failures to deliver ..

(k)

The Buyer shall cause the Company to use commercially reasonable efforts after the Closing Date to:

(i) obtain modifications to (x) air permit number 213-0097 issued by the Connecticut Department of Environmental Protection (the “DEP”) relating to boiler number 1 and (y) air permit number 213-0098 issued by the DEP relating to boiler number 2 at the Bradley International Airport installed under the Bradley Construction Contract that will permit the consumption of up to 19,520,000 cubic feet of natural gas and 62,768 gallons of #2 fuel oil in the two boilers on a rolling 12-month basis;

(ii) effect a resolution, while using reasonable efforts to mitigate the cost thereof, to (w) any breach of Section 3.13 of the Bradley Construction Contract, (x) any breach of

Section 2.9 of the Bradley O&M Contract, (y) any breach of Section 3.13 of the CJTS Construction Contract, and (x) any breach of Section 2.9 of the CJTS O&M Contract;

(iii) recover from the State of Connecticut any charges or penalties (x) from any energy commodity supplier to the Connecticut Juvenile Training School Energy Center project and any other charges relating to the obtaining or provision of natural gas, oil or any other  commodity under the terms and conditions of the CJTS O&M Contract, and (y) from any energy commodity supplier to the Bradley International Airport project and any other charges relating to the obtaining or provision of natural gas, oil or any other commodity under the terms and conditions of the Bradley O&M Contract, and (z) mitigate such charges or penalties by coordinating with the customer as to customer responsibility for commodity supply nominations or liability for such charges or penalties ; and

(iv) recover from the County of York, Maine any Claim relating to any liability of the Company for the procurement, supply or delivery of electricity, oil or any other commodity under the York County Contract until the Company’s obligations under the York County Contract have been restated in an agreement between the County of York, Maine and the Company such that the Company has no exposure to any such claims.

(l)

As of and after the date set forth therefor on Schedule 7.12(l), (i) each of the Buyer and the Company hereby disclaims, and grants by quitclaim to the Seller, any and all rights or interests in, under or relating to, and (ii) the Seller shall retain liability, and Hold Harmless each of the Buyer and the Company, for all costs relating to, the applicable leases and subject equipment described on such Schedule.

VIII.

CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE;

CLOSING DELIVERIES

The Buyer's obligation to purchase the Shares and to take the other actions required to be taken by the Buyer at the Closing is subject to the satisfaction, at or prior to the Closing Date, of each of the following conditions (any of which may be waived by the Buyer, in whole or in part):

8.01

Accuracy of Representations

The representations and warranties of the Seller contained in this Agreement (as may be modified by the Disclosure Updates) shall be true, complete and correct in all material respects    on and as of the Closing Date, with the same force and effect as if made on and as of the Closing Date, except (i) to the extent that such representations and warranties are qualified by terms such as "material" or "Material Adverse Effect," in which case such warranties and representations shall be true and correct in all respects as so qualified on and as of the Closing Date, with the same force and effect as if made on and as of the Closing Date; and (ii) for those representations and warranties which address matters only as of a particular date (which shall be true, complete and correct as of such date).

8.02

The Seller's Performance

All of the covenants and agreements that the Seller or the Company is required to perform or to comply with pursuant to this Agreement at or prior to the Closing Date must have been duly performed and complied with in all material respects.

8.03

The Seller's Closing Deliveries

The Seller shall deliver stock certificates representing the Shares to the Buyer in accordance with Section 2.01(a), duly endorsed in blank or with duly executed stock powers attached, in proper form for transfer (i) in form and substance satisfactory to the Buyer and its counsel and (ii) sufficient to vest effectively in Buyer good and marketable title to the Shares free and clear of all Encumbrances.  The Seller shall make the cash payment of the Closing Purchase Price required to be made by the Seller pursuant to Section 2.01(b).  The Seller shall also deliver each of the following documents, duly executed by the Seller where applicable, to the Buyer:

(a)

copies of the Company's Articles of Organization together with any amendments thereto, certified by the appropriate official of The Commonwealth of Massachusetts; (ii) a certificate from the appropriate official of The Commonwealth of Massachusetts to the effect that the Company is in good standing and subsisting in such jurisdiction; and (iii) a certificate from the appropriate official in each jurisdiction in which the Company or any of its subsidiaries is required to be qualified to do business to the effect that such entity is in good standing in such jurisdiction, each of the foregoing dated as of a date less than ten (10) days prior to the Closing Date;

(b)

a certificate of existence for the Seller from the State of Connecticut, dated as of a  date less than ten (10) days prior to the Closing Date;

(c)

a certificate, dated as of the Closing Date, signed by a duly authorized officer of the Seller, certifying that the conditions specified in Sections 8.01 and 8.02 have been fulfilled , together with a certified copy of the Company's By-Laws, together with any amendments thereto ;

(d)

resignations of the officers and directors of the Company, effective as of the Closing Date;

(e)

copies of the requisite resolutions or actions of the Seller's board of directors approving the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, certified by the Secretary of the Seller as being duly adopted and in full force and effect;

(f)

an opinion of the Seller's counsel, Day, Berry & Howard LLP , and the Parent, dated the Closing Date, and in form and substance satisfactory to the Buyer;

(g)

a certificate of non-foreign status of the Seller pursuant to Section 1445(b)(2) of the IRC, in form and substance reasonably satisfactory to the Buyer;

(h)

the Reimbursement and Indemnity Agreement substantially in the form set forth on Exhibit A hereto dated as of the Closing Date and executed by the Parent, the Seller, the Company and the Buyer (the “UConn Agreement”);

(i)

the Transition Services Agreement dated as of the Closing Date and executed by the Seller, the Company and the Buyer (the “Transition Services Agreement”);

(j)

the York Indemnity Agreement dated as of the Closing Date, executed by Select Energy, Inc. and the Company, and in form and substance reasonably satisfactory to the Buyer (the “York Indemnity Agreement”);

(k)

indicia of ownership , good standing and qualifications to do business reasonably satisfactory to Buyer of each of the subsidiaries of the Company, together with all minute books and corporate and financial and other records relating thereto;

(l)

evidence reasonably satisfactory to the Buyer of the termination of any tax sharing agreement between the Company with the Parent or any Affiliate thereof; and

(m)

 such other documents as Buyer may reasonably request.

8.04

No Proceedings

Since the date of this Agreement, there must not have been commenced or threatened against the Buyer, the Seller or the Company any Proceeding (a) involving any challenge to, or seeking damages or other relief in connection with, any of the transactions contemplated hereby, including without limitation with respect to beneficial ownership of, any asset or any voting, equity, or ownership interest in, the Company, or any portion of the Purchase Price, (b) that may have the effect of preventing, delaying, or making illegal any of the transactions contemplated hereby, (c) that might affect the right of the Buyer to own, operate or control, after the Closing Date, any of the assets, properties or Business of the Company, or (d) that has, or reasonably could be expected to have, a Material Adverse Effect; provided that any such Material Adverse Effect shall be subject to the terms of Section 8.08.

8.05

No Injunction

There must not be in effect any Legal Requirement or Order issued by any Governmental Body that prohibits consummation of any of the transactions contemplated hereby.

8.06

Consents and Approvals

Each Governmental Authorization and each notice, consent, waiver, condition, permission, approval or action ("Consent") by any Governmental Body or any other Person, including any party to any Contract with the Company (including any amendments and

modifications thereto) or any Security relating thereto, (i) necessary for the consummation of the transactions contemplated hereby, including any consents to assignments or transfers or change of control, (ii) required in order for the Company to carry on its Business in accordance with customary industry practice, (iii) required to be obtained by Legal Requirements, or (iv) required in connection with the performance by the Seller of its obligations under such Contracts or any Security or this Agreement, or to assure that such Contracts and Security continue in full force and effect after the consummation of the transactions contemplated hereby without any breach by the Company and without giving any contracting party the right to terminate or modify any such Contract or Security, including in each case those set forth on Sections 3.04(c) of the Disclosure Schedule, shall have been obtained, taken or given, as the case may be, by the Seller and shall be in full force and effect upon and following the Closing Date,  None of the Governmental Authorizations shall contain any terms, limitations or conditions which the Buyer determines in good faith to be materially burdensome to the Buyer or to the Company taken as a whole, or which restrict the Buyer's rights as the sole shareholder of the Company (including, without limitation, its right to participate actively in the management of the Company), or which would prevent the Buyer, its subsidiaries or Affiliates or the Company from conducting their respective businesses in substantially the same manner as conducted on the date hereof.  In the event of a waiver by the Buyer of this condition to Closing with respect to any such Seller Consent , the Seller shall be obligated to obtain such Consent after the Closing Date, and shall Hold Harmless the Buyer from and after the Closing Date for all Damages arising from the Seller's failure to obtain such Seller Consent.

8.07

Project Refinancing.

Closing and disbursement shall have occurred on the Refinancing, the Refinancing shall have been concluded on terms reasonably satisfactory to the Buyer, and the Buyer shall have realized thereon, and received payment of therefrom, a net gain, after all expenses, of at least Two Hundred Fifty Thousand Dollars ( $ 250,000).

8.08

No Material Adverse Effect.

Since the date of this Agreement, there shall have been no Material Adverse Effect , nor shall any event have occurred which so far as can reasonably be foreseen on the Closing Date appears reasonably likely to have a Material Adverse Affect; provided however, for purposes of this Section 8.08, such condition to Closing shall be deemed satisfied if (i) the impact of such Material Adverse Effect is less than Two Hundred Fifty Thousand Dollars ($250,000), and (ii) the Seller shall indemnify the Buyer for such amount ; provided that, to the extent that the subject of such indemnification is otherwise specifically covered in this Agreement, such indemnification shall be effected as so provided for.  For the avoidance of doubt, (a) if such indemnification is addressed as a general indemnification matter, applicable procedures, deductions and caps shall apply, (b) if such indemnification is addressed as a Hold Harmless matter, applicable procedures, deductions and caps shall apply, and (c) if such indemnification is not otherwise provided for under the Agreement, the procedures applicable to a general indemnification shall apply.

IX.

CONDITIONS PRECEDENT TO THE SELLER'S OBLIGATION TO CLOSE;

CLOSING DELIVERIES

The Seller's obligation to transfer the Shares and the obligations of the Seller to take, and to cause the Company to take, the other actions required to be taken by the Company or the Seller, respectively, at the Closing are subject to the satisfaction, at or prior to the Closing Date, of each of the following conditions (any of which may be waived by the Seller, in whole or in part):

9.01

Accuracy of Representations

The representations and warranties of the Buyer contained in this Agreement shall be true and correct in all material respects on and as of the Closing Date, with the same force and effect as if made on and as of the Closing Date; except to the extent that such representations and warranties are qualified by terms such as "material" or "Material Adverse Effect " in which case such warranties and representations shall be true and correct in all respects as so qualified on and as of the Closing Date, with the same force and effect as if made on and as of the Closing Date.

9.02

The Buyer's Performance

All of the covenants and obligations that the Buyer is required to perform or to comply with pursuant to this Agreement at or prior to the Closing Date must have been performed and complied with in all material respects.

9.03

The Buyer's Closing Deliveries

The Buyer shall receive the cash payment of the Closing Purchase Price required to be received by the Buyer pursuant to Section 2.01(b) and shall deliver the following documents, duly executed by the Buyer where applicable :

(a)

a certificate of good standing for the Buyer from the State of Delaware, dated as of a date less than ten (10) days prior to the Closing Date;

(b)

a certificate, dated as of the Closing Date, signed by a duly authorized officer of the Buyer, certifying that the conditions specified in Sections 9.01 and 9.02 have been fulfilled;

(c)

copies of the requisite resolutions or actions of the Buyer's board of directors approving the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, certified by the Secretary of the Buyer as being duly adopted and in full force and effect;

(d)

an opinion of Buyer's counsel, Skadden, Arps, Slate, Meagher & Flom LLP, dated the Closing Date, and in form and substance satisfactory to the Seller;

(e)

Articles of Amendment of the Company's Articles of Organization providing for a change to the Company's name, to be filed within a reasonable period of time following Closing;

(f)

written evidence that the Buyer has obtained satisfactory insurance to replace required insurance which is terminated or withdrawn by the Seller or not assumed by the Buyer;

(g)

the UConn Agreement duly executed by the Buyer;

(h)

the Transition Services Agreement duly executed by the Buyer;

(i)

the York Indemnity Agreement duly executed by the Buyer;

(j)

reasonably satisfactory evidence that the Refinancing has closed; and

(k)

such other documents as the Seller may reasonably request.

9.04

[RESERVED]

9.05

No Proceedings

Since the date of this Agreement, there must not have been commenced or threatened against the Seller or the Company any Proceeding (a) involving any challenge to, or seeking damages or other relief in connection with, any of the transactions contemplated hereby, or (b) that may have the effect of preventing, delaying, or making illegal any of the transactions contemplated hereby.

9.06

No Injunction

There must not be in effect any Legal Requirement or any injunction or other order issued by any Governmental Body that prohibits consummation of any of the transactions contemplated hereby.

9.07

Consents and Approvals

All notices, consents, approvals or actions by any Governmental Body or any other Person which are necessary to consummate the transactions contemplated hereby or which are required to be obtained prior to the Closing Date by Legal Requirements must have been obtained and must be in full force and effect.

X.

TERMINATION

10.01

Termination Events

This Agreement may, by notice given prior to or at the Closing, be terminated:

(a)

by the Buyer if (i) the Buyer is not in material breach of its obligations under this Agreement, (ii) there has been a material breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of the Seller, and (iii) such breach has not been cured within thirty (30) Business Days after written notice thereof to the Seller;

(b)

by the Seller if (i) the Seller is not in material breach of its obligations under this Agreement, (ii) there has been a material breach of any representation, warranty, covenant or agreement contained in this Agreement on the part of the Buyer, and (iii) such breach has not been cured within thirty (30) Business Days after written notice thereof to the Buyer;

(c)

by mutual written consent of the Parties; or

(d)

by any Party if the Closing has not occurred (other than through the breach of material terms or agreements by the Party seeking to terminate this Agreement) on or before (i) the date thirty (30) days following the date of this Agreement (the "Final Closing Date"), (ii) such later date as the Parties may agree upon in writing or (iii) such earlier date as the parties providing the Refinancing may agree that the Refinancing cannot close, or on which the failure to have secured sufficient firm bids would preclude the Refinancing from closing, by the Final Closing Date.   The inability of the Buyer to satisfy the condition precedent to Closing described in Section 8.07 shall be deemed to constitute a basis for termination by the Buyer pursuant to this clause (d), shall not constitute a breach of or a failure to comply with the Buyer's obligations under this Agreement, and shall not give rise to the exercise of any legal remedy or to any claim for Damages against the Buyer.

10.02

Effect of Termination

Each Party's right of termination under Section 10.01 is in addition to any other rights it may have under this Agreement, and the exercise of a right of termination pursuant to Sections 10.01 (a) or (b) will not be an election of remedies.  If this Agreement is terminated pursuant to Sections 10.01 (c) or (d), all further obligations of the Parties under this Agreement will terminate, except that the obligations in Sections 12.01, 12.02, 12.03, 12.08 and 12.13 will survive.  If this Agreement is terminated by a Party pursuant to Sections 10.01(a) or (b) because of a breach of the Agreement by the other Party or because one or more conditions to the terminating Party's obligations under this Agreement is not satisfied as a result of the other Party's failure to comply with its obligations under this Agreement, the terminating Party's right to pursue all legal remedies will survive such termination unimpaired.

10.03

Disclosure Update

From time to time prior to the Closing Date, the Seller shall supplement or amend and deliver updates to the Disclosure Schedule (each a "Disclosure Update") which are necessary to complete or correct any information in the Disclosure Schedule or in any representation or warranty of the Seller which has been rendered inaccurate since the date of execution and delivery of this Agreement.   The Buyer shall waive any right not to close on the basis of such Disclosure Updates, unless (a) the Disclosure Updates constitute all or a portion of any Material Adverse Effect as described in Section 8.08 of this Agreement, or (b) the Buyer notifies the Seller in writing within ten (10) Business Days after receipt of the Disclosure Update, that it will

refuse to close as a result of such Disclosure Update, and setting forth the basis for such refusal; provided, however, that the Seller shall have the ability, within thirty (30) Business Days after written notice to the Buyer, to cure any deficiency or breach identified in the notice provided to the Seller.  Any Disclosure Update delivered pursuant to this Section 10.03 shall not constitute a breach by the Seller of any of its representations or warranties hereunder.

10.04

Survival of Representations, Warranties, Covenants and Agreements.

Notwithstanding any right of the Buyer fully to investigate the affairs of the Company and notwithstanding any knowledge of facts determined or determinable by the Buyer pursuant to such investigation or right of investigation, the Buyer has the right to rely fully upon the representations, warranties, covenants and Contracts of the Seller contained in this Agreement or in any Schedule, certificate, financial statement or other writing delivered on behalf of the Seller or the Company.

XI.

INDEMNIFICATION; REMEDIES

11.01

Survival

All representations, warranties, covenants, and agreements in this Agreement or any Transaction Document will survive the Closing, subject to Section 11.04.  

11.02

Indemnification by the Seller

(a)

Subject to Section 11.05 below, the Seller will indemnify , defend and hold harmless the Buyer, its Affiliates and their respective officers, directors, employees, consultants, assigns, agents and shareholders (collectively, the "Buyer Indemnified Parties") for all Costs, losses, liabilities, claims, damages or expenses (including reasonable attorneys' fees and expenses) (collectively, "Damages"), arising out of any breach of any representation or warranty or any breach or non-fulfillment of any covenant or agreement of the Seller or, prior to the Closing Date, the Company in this Agreement or any other Transaction Document delivered in connection with this Agreement by a Seller Indemnified Party, but specifically excluding, for purposes of a breach of any representation or warranty, any matter disclosed in a Disclosure Update, as provided in Section 10.03.

(b)

Subject to Section 11.05 below, the Seller will Hold Harmless the Buyer Indemnified Parties for all Damages arising out of:

(i)  the claims of any broker or finder engaged or alleged to have been engaged by the Seller, the Company or the Parent ;

(ii)  to the extent not otherwise indemnified hereunder, any claim (including warranty and product liability claims), suit, action, arbitration, proceeding, investigation or other similar matter (collectively, "Claims") which relates to ( A ) products manufactured, leased, sold or delivered or services provided by the Company or any of its

subsidiaries prior to the Closing Date , or ( B ) the business or operations of the Company or any of its subsidiaries prior to the Closing Date ;

(iii) any Claim relating to Company, customer or supplier warranty claims arising with respect to warranty periods which began prior to the Closing Date, to the extent that the Damages in the aggregate exceed by Seventy-Five Thousand Dollars ($75,000) the sum of all warranty accruals reflected on the Closing Balance Sheet , in which event the Buyer shall be entitled to all Damages in excess of such total, together with a twenty percent (20%) margin on such Damages;

(iv) any Claim arising from the employment or termination of employment of (A) any Scheduled Employee, (B) any Selected Employee described in the last sentence of Section 7.01(a), or (C) any Supplemental Employee; provided however, that the Buyer shall indemnify the Seller to the extent of any Damages arising from a final and unappealable determination by a court of competent jurisdiction in which the Buyer has been provided adequate opportunity to defend such claim that the termination of employment of such complaining Scheduled, Selected or Supplemental Employee was caused by an act of the Buyer in violation of federal or state employment law; provided further, that the Seller shall not be obligated to pay to any employee described in the foregoing clauses (B) or (C) any severance more beneficial than such claimant would have been entitled to as a Scheduled Employee whose employment was terminated on or prior to the Closing Date;

( v) any Claim relating to the activities of any Affiliate, and any division or past subsidiary thereof, of the Company, including Northeast Generation Services, Co., Select Energy Contracting, Inc., Reed's Ferry, Alert Air, Yankee Energy Services, Denron, HEC International, HEC Energy Consulting Canada, and Southwest HEC Energy Services LLC;

(vi) (A) (I) upon the incurrence of over Five Thousand Dollars ($5,000) in Costs of efforts to obtain modifications to any of (x) air permit number 213-0097 issued by the DEP relating to boiler number 1 and (y) air permit number 213-0098 issued by the DEP relating to boiler number 2 at the Bradley International Airport installed under the Bradley Construction Contract that will permit the consumption of up to an aggregate amount of 19,520,000 cubic feet of natural gas and 62,768 gallons of #2 fuel oil in the two boilers on a rolling 12-month basis (such permits, as so modified, the "Modified Permits"), all Costs, from first dollar, incurred in such efforts, (II) operating any such boiler at any time prior to the Closing Date in violation of the applicable existing air permit, (III) upon or after the Closing Date and prior to the effectiveness of the Modified Permits, operating any such boiler in violation of the applicable air permit in order to supply energy services pursuant to the Bradley O&M Contract, or (IV) upon or after the Closing Date and prior to the effectiveness of the Modified Permits, breaching the Company’s energy services obligations pursuant to the Bradley O&M Contract in order not to operate any such boiler in violation of the applicable existing air permit, in each case together with a twenty percent (20%) margin thereon; provided however, that such

margin shall not be applicable to the amount of any penalty assessed and paid in connection with any such violation;

(B) (I) any breach of Section 3.13 of the Bradley Construction Contract, (II) any breach of Section 2.9 of the Bradley O&M Contract, (III) any breach of Section 3.13 of the CJTS Construction Contract, (IV) any breach of Section 2.9 of the CJTS O&M Contract, and (V) commercially reasonable efforts to effect a resolution to any such breaches, together with a twenty percent (20%) margin thereon; provided however, that such margin shall not be applicable to the amount of any penalty assessed and paid in connection with any such violation;

(C) any Claim relating to (I) any charges or penalties from any energy commodity supplier (x) to the Bradley International Airport Project under the terms and conditions of the Bradley O&M Contract or (y) to the CJTS Project under the terms and conditions of the CJTS O&M Contract, in each case including commodity supply imbalance charges, that can not be recovered from the State of Connecticut after commercially reasonable efforts to recover such charges and (II) any Costs of attempting to mitigate such charges or penalties by coordinating with such customer as to customer responsibility for commodity supply nominations or liability for such charges or penalties;

( D) other than as provided for under Section 7.12(b), any Claim relating to or arising from the West Haven Contract;

(E) any Claim relating to or arising out of flood or water damage at the WNRC Project in excess of amounts reserved for such work on the Closing Balance Sheet ;

(F)  any Costs under any Construction Contract of completing the work thereunder to actually achieve the percentage complete amount stated therefor in Section 3.16(h) of the Disclosure Schedule where such percentage complete amount is overstated by more than the lesser of (x) five percent (5%) and (y) Fifty Thousand Dollars ($50,000), with a twenty percent (20%) margin on such Costs for subcontractor costs, subcontractor furnished Goods and in-house labor, and with a ten percent (10%) margin on Company furnished Goods;

(G) an amount not in excess of Two Hundred Thirty-Eight Thousand Dollars ($238,000) to the extent (x) asserted by the Company against H2O for damages owing to the Company pursuant to the Sigonella Contract and (y) to which the Company is unable to reduce by Two Hundred Thirty-Eight Thousand Dollars amounts otherwise owed by the Company to H2O pursuant to the Sigonella Contract; provided however, that such shortfall is not the result of a negotiated settlement with H2O by the Company;

(H) any Claim relating to annual chiller savings shortfalls before or after the Closing Date not in excess of Twelve Thousand Six Hundred Eighty-Six Dollars ($12,686) per annum pursuant to the Ft. Huachuca Contract;

(I) any Claim relating to any amounts in excess of Two Hundred Thousand Dollars ($200,000) (to the extent reserved for on the Closing Balance Sheet) for which the Company is found to be legally obligated to H2O for any damages arising out of the BARC Contract relating to the August 17, 2005 letter from H2O to the Company;

(J) any Claim relating to any failure to deliver any maintenance, measurement or verification report in accordance with any applicable Company Contract which report was to be delivered on or prior to the Closing Date , in excess of any amount reserved therefor, together with a twenty percent (20%) margin thereon (except on assessments of penalties under any such Company Contract);

(K) any Claim relating to the Rand Whitney Project, together with a twenty percent (20%) margin thereon (except on assessments of penalties or judgments under any such Company Contract);

(L) any Claim for which the Seller may be liable pursuant to the UConn Agreement;

(M) any Claim for which Select Energy, Inc. may be liable pursuant to the York Indemnity Agreement for which the Company has not received payment; and

(N) any Claim relating to Seller’s undertakings or liabilities relating to Sections 3.01, 3.03, 3.10, 3.12(c), 3.14, 3.18(a)(v) and (vi), 3.18(b), 3.19, 3.20, 3.24, 7.01(d), 7.03, 7.09, 7.10, 7.12 and 11.02(b)(i), (iii), (iv), (v) and (vi) (the “Exempt Items”).

(c)

Except for the representations and warranties made in Sections 3.16(b)(ii), (d) and (g), 3.18(a)(ii)-(v), 3.20(a), 3.23 and 3.26, any qualification as to Seller's Knowledge contained in this Agreement shall be disregarded for purposes of evaluating whether a representation or warranty has been breached and for establishing liability for the resulting Damages.

11.03

Indemnification by the Buyer

Subject to Section 11.06 below, the Buyer will indemnify , defend and hold harmless the Seller, its Affiliates and their respective officers, directors and shareholders (collectively, the "Seller Indemnified Parties") for all Damages arising out of (i) any breach of any representation or warranty of the Buyer set forth in Article IV of this Agreement, (ii) any breach or non-fulfillment of any covenant or agreement of the Buyer in this Agreement or any other Transaction Document, (iii) the Business, assets, Selected Employees, operations and activities of the Company following the Closing Date, except for Damages for which Seller has expressly agreed to retain liability, or to indemnify any Buyer Indemnified Party in this Agreement or any other Transaction Document, (iv) the claims of any broker or finder engaged or alleged to have been engaged by the Buyer, (v) a claim by a Company’s Employee that the termination of employment of such Company’s Employee was caused by an act of the Buyer in violation of federal or state employment law, with respect to which the Buyer has been found liable pursuant to a final and unappealable determination by a court of competent jurisdiction in which the Buyer has been provided adequate opportunity to defend against such claim, and (vi) any Claim

for which the Company may be liable pursuant to the York Indemnity Agreement for which Select Energy, Inc. has not received payment ..

11.04

Time Limitations

(a)

(i) Subject to the following clause (ii), the Seller will have no liability (for indemnification or otherwise) with respect to any representation, warranty, covenant or agreement under this Agreement, unless, on or before the date eighteen (18) months after the Closing Date, the Buyer notifies the Seller of a claim specifying the factual basis of that claim in reasonable detail to the extent then known by the Buyer; provided however, that Buyer may assert after such period any claim based upon substantially the same facts upon which a claim was asserted by the Buyer during such period.  (ii) With respect to (A) issues relating to the legal ownership of the Shares, (B) Claims relating to Security, and (C) the Exempt Items, the Seller shall retain indemnification liability pursuant to Article XI until the expiration of all relevant statutes of limitation and applicable tolling periods.

(b)

The Buyer will have no liability (for indemnification or otherwise) with respect to any representation, warranty, covenant or agreement under this Agreement unless, on or before the date eighteen (18) months after the Closing Date, the Seller notifies the Buyer of a claim specifying the factual basis of that claim in reasonable detail to the extent then known by the Seller; provided however, that Seller may assert after such period any claim based upon substantially the same facts upon which a claim was asserted by the Seller during such period.

(c)

If a controversy, claim or dispute arises out of, or relating to, any indemnification claim under Section 11.02 or 11.03 (the "Dispute"), then, within thirty (30) days after its receipt of the indemnification claim, the indemnifying party shall notify the indemnified party in writing of the Dispute, such notice containing sufficient detail to provide the indemnified party with sufficient notice as to the Dispute (the "Dispute Notice").  The parties agree to use their reasonable efforts to resolve the Dispute in accordance with the provisions of, and procedure described in, Section 12.08.  In the event of any such Dispute, the non-Prevailing Party shall pay to the Prevailing Party the reasonable attorney's fees of the Prevailing Party.  "Prevailing Party" shall mean that Party that, following the final and binding determination of the Dispute, if seeking Damages, is awarded any Damages, or, i f defending against a claim for Damages, is not required to pay any Damages.  If both Parties are awarded Damages, neither shall be entitled to such fees.

11.05

Limitations on Amount — the Seller

(a)

Except as otherwise explicitly set forth herein, the Seller will have no liability (for indemnification or otherwise) with respect to the matters described in Section 11.02 that involve Damages unless and until the aggregate amount of all such Damages exceeds Fifty Thousand Dollars ($ 50,000 ) (the "Deductible Amount"), in which case the Seller shall be liable for the aggregate amount of all such Damages in excess of the Deductible Amount.

(b)

Except as set forth in the following clause (c), notwithstanding the foregoing clause (a), the Seller' s aggregate liability (for indemnification or otherwise) with respect to the matters described in Section 11.02 shall not exceed Five Million Dollars ($ 5,000,000).

(c)

With respect to (i) issues relating to the legal ownership of the Shares, and (ii) the Exempt Items, there shall be no limit on the indemnification liability of the Seller pursuant to Article XI or otherwise.

11.06

Limitations on Amount — the Buyer

The Buyer will have no liability (for indemnification or otherwise) with respect to the matters described in Section 11.03 that involve Damages unless and until the aggregate amount of all the Buyer Indemnified Claims exceeds the Deductible Amount, in which case the Buyer shall be liable for the aggregate amount of all such Damages in excess of the Deductible Amount; provided however, that the Buyer's aggregate liability (for indemnification or otherwise) with respect to the matters described in Section 11.03 shall not exceed Five Million Dollars ($5,000,000) ; provided further however, that with respect to amounts payable by the Buyer with respect to the Natick Lease, the Security and the Retained Employees, there shall be no limit on the indemnification liability of the Buyer pursuant to Article XI or otherwise.

11.07

Indemnification Matters Involving Third Parties

(a)

If any third party shall notify any Party (the "Indemnified Party") with respect to any matter (a "Third Party Claim") which may give rise to a claim for indemnification against any other Party (the "Indemnifying Party") under Section 11.02 or Section 11.03, then the Indemnified Party shall promptly notify each Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation under this Agreement unless (and then solely to the extent) the Indemnifying Party is prejudiced thereby.

(b)

Any Indemnifying Party will have the right to assume the defense of the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party at any time within twenty (20) days after the Indemnified Party has given notice of the Third Party Claim; provided, however, that: (i) the Indemnifying Party must conduct the defense of the Third Party Claim actively and diligently thereafter in order to preserve its rights in this regard; (ii) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim; (iii) if the named parties to any such Third Party Claim (including any impleaded parties) include an Indemnified Party and the Indemnifying Party or one or more other Indemnified Parties, and such Indemnified Party shall have been advised by its counsel in writing that there is a conflict of interest between such Indemnified Party and the Indemnifying Party or any such other Indemnified Party in the conduct of the defense thereof, then in any such case the reasonable fees and expenses of such separate counsel shall be borne by the Indemnifying Party.  In the event that the Indemnifying Party fails to assume the defense of a Third Party Claim in the manner provided above in this Subsection 11.07(b), or fails to conduct the defense of a Third Party Claim actively and diligently after such assumption, the

Indemnified Party shall have the right to select counsel of its choice (and at its sole discretion), and the reasonable fees and expenses of such counsel shall be paid by the Indemnifying Party.

(c)

So long as the Indemnifying Party has assumed and is conducting the defense of the Third Party Claim in accordance with subsection 11.07(b) of this Agreement: (i) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be unreasonably withheld, conditioned or delayed) unless the judgment or proposed settlement involves only the payment of money damages by one or more of the Indemnifying Parties and does not impose an injunction or other equitable relief upon the Indemnified Party; and (ii) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be unreasonably withheld, conditioned or delayed).

11.08

Certain Other Limitations

(a)

The amount of any Damages for which indemnification is provided under this Article XI shall be net of any actual cash insurance recoveries or recoveries of indemnities from any Third Parties (and no right of subrogation shall accrue to any insurer hereunder).  If a Party obtains such a recovery, such Party's indemnity claim shall not be offset to the extent of the Party's expenses in obtaining such recovery.

(b)

Each Person entitled to indemnification hereunder or otherwise to Damages in connection with the transactions contemplated in this Agreement shall take all commercially reasonable steps to mitigate all Damages after becoming aware of any event or circumstance that could reasonably be expected to give rise to any Damages that are indemnifiable or recoverable hereunder or in connection herewith.  In the event that two or more indemnifications apply to the same Claim, the Indemnifying Party shall pay the maximum amount payable under any such indemnification without duplication.

11.09

Indemnification Exclusive Remedy

The Buyer and the Seller acknowledge and agree that, except for fraud and for the enforcement of rights and obligations with respect to any covenants or agreements which are to be performed following the Closing Date pursuant to this Agreement, their sole and exclusive remedy with respect to any and all Damages relating to the subject matter of this Agreement shall be pursuant to the indemnification provisions set forth in this Article XI and any other explicit reference to indemnification, liability, responsibility, the bearing of costs or similar allocation of financial obligation set forth in this Agreement or any other Transaction Document.  In furtherance of the foregoing, the Buyer hereby waives, to the fullest extent permitted under applicable law, any and all rights, claims and causes of action it may have against the Seller or the Company in law or equity, except such rights, claims and causes of action based upon this Ag reement or any other Transaction Document and the Seller hereby waives, to the fullest extent permitted under applicable law, any and all rights, claims and causes of action it may have against the Buyer in law or equity except such rights, claims and causes of action based upon this Agreement, or any other Transaction Document.

11.10

Limitations on Damages

NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, THE LIABILITY OF ANY PARTY UNDER THIS AGREEMENT (WHETHER AS AN INDEMNIFYING PARTY OR OTHERWISE) SHALL NOT EXCEED THE ACTUAL DAMAGES OF THE OTHER PARTY (OR THE PARTY ENTITLED TO INDEMNIFICATION) AND SHALL NOT OTHERWISE INCLUDE INCIDENTAL, CONSEQUENTIAL, INDIRECT, SPECIAL, PUNITIVE, EXEMPLARY OR OTHER SIMILAR DAMAGES, OTHER THAN COMPENSATORY DAMAGES.

XII.

GENERAL PROVISIONS

12.01

Expenses; Late Payments

Except as otherwise expressly provided in this Agreement, each Party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the transactions contemplated hereby, including all fees and expenses of agents, representatives, counsel, and accountants.  In the event of termination of this Agreement, the obligation of each Party to pay its own expenses will be subject to any rights of such Party arising from a breach of this Agreement by another Party. Except as otherwise expressly provided in this Agreement, each payment required to be made to a Party hereto under this Agreement shall bear daily interest at the lower of (i) a monthly rate of one and one half  percent (1.5%) or (ii) the highest allowable annual interest rate under applicable law.

12.02

Public Announcements

Any public announcement or similar publicity with respect to this Agreement or the transactions contemplated hereby will be issued, if at all, at such time and in such manner as the Buyer and the Seller jointly shall determine.  Unless consented to in advance by the Buyer or the Seller, as the case may be, or required by Legal Requirements, prior to the Closing Date, the Buyer and the Seller shall keep this Agreement strictly confidential and may not make any disclosure of this Agreement to any Person.  The Buyer and the Seller will consult with each other concerning the means by which the Company's employees, customers, and suppliers and others having dealings with the Company will be informed of the transactions.

12.03

Confidentiality

Between the date of this Agreement and the Closing Date, each Party will maintain in confidence, and will cause the directors, officers, employees, agents, and advisors of such Party to maintain in confidence, and not to use to the detriment of another Party any written, oral, or other information obtained in confidence from another Party in connection with this Agreement or the transactions contemplated hereby, unless (a) such information is already known to such Party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such Party, (b) the use of such information is necessary or appropriate in making any filing or obtaining any consent or approval required for the

consummation of the transactions contemplated hereby, or (c) the furnishing or use of such information is required by or necessary or appropriate in connection with an applicable Legal Requirement or any Proceeding.  If the transactions contemplated hereby are not consummated, each Party will return or destroy as much of such written information as the other Party may reasonably request.  Prior to and after the Closing Date, the Buyer and the Seller shall be bound by the terms and conditions of any written agreement to which the Buyer or the Seller is a party concerning the confidential treatment of any information or materials of either party, including, but not limited to, the Confidentiality Agreement ..

12.04

Notices

All notices and other communications provided for hereunder shall be in writing, shall be addressed to the receiving Party's address set forth below or to such other address as a Party may designate by notice hereunder, and shall be deemed to have been sufficiently given for all purposes (a) three (3) Business Days after being mailed by first class certified or registered mail, postage prepaid, (b) the next Business Day after being sent by nationally recognized overnight courier for next Business Day delivery, (c) when personally delivered, or (d) upon confirmed receipt when made by facsimile transmission, in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may hereafter designate by similar notice to the other parties):

If to the Seller:

John J. Roman

Director--Accounting

NU Enterprises, Inc.

107 Selden Street

Berlin, CT 06070

Facsimile: (860) 665-2807

With a copy to:

Gerald Garfield, Esq.

Day, Berry & Howard LLP

CityPlace I

Hartford, CT  06103-3499

Facsimile: (860) 275-0343

If to the Buyer:

Ameresco, Inc.

111 Speen Street

Framingham, MA 01701

Attn: General Counsel

Facsimile: (508) 661-2201

12.05

Further Assurances

Each Party shall (a) furnish upon request to the other such further information, (b) execute and deliver to the other such other documents, and (c) do such other acts and things, all as the other Party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.

12.06

Waiver

The rights and remedies of the Parties to this Agreement are cumulative and not alternative.  Neither the failure nor any delay by any Party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege.  To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one Party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other Party; (b) no waiver that may be given by a Party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one Party will be deemed to be a waiver of any obligation of such Party or of the right of the Party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.

12.07

Entire Agreement and Modification

Except for the Confidentiality Agreement, which remains in full force and effect, this Agreement supersedes all prior agreements between the Parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the Parties with respect to its subject matter.  This Agreement may not be amended or modified except by a written agreement duly executed by each of the Parties hereto.

12.08

Dispute Resolution

Except as may otherwise be specifically provided herein:

(a)

The Parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement promptly by negotiation between executives who have authority to settle the controversy.  Any Party may give the other Party written notice of any dispute not resolved in the normal course of business.  Such notice shall include: (a) a statement of that Party's position and a summary of arguments supporting that position; and (b) the name and title of the executive who will be representing that Party and of any other Person who will accompany the executive.  Within fifteen (15) days after delivery of the notice, the receiving Party shall respond with: (i) a statement of that Party's position and a summary of arguments supporting that position; and (ii) the name and title of the executive who will represent that Party and of any other Person who will accompany the executive.  Within thirty (30) days after deliv ery of the initial notice, the executives of both Parties shall meet at a mutually acceptable time and place,

and thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute.  All reasonable requests for information made by one Party to the other will be honored.  All negotiations pursuant to this Section 12.08 are confidential and shall be treated as compromise and settlement negotiations for purposes of applicable law and rules of evidence.

(b)

If the dispute has not been resolved by negotiation within forty-five (45) days after the disputing Party's notice, or if the Parties fail to meet within thirty (30) days, each as contemplated herein, the Parties shall endeavor to settle the dispute by mediation under the then current CPR Mediation Procedure; provided, however, that if one Party fails to participate as provided herein, the other Party can initiate mediation prior to the expiration of the forty-five (45) days.  Unless otherwise agreed, the Parties will select a mediator from the CPR Panels of Distinguished Neutrals.

12.09

Assignments, Successors and No Third Party Rights

No Party may assign this Agreement or any of its rights or obligations under this Agreement without the prior consent of the other Party, and any purported assignment without a consent shall be void ; provided, however that Seller may, after notice to, but without such prior consent of, the Buyer, assign this Agreement to the Parent; and provided further that the Buyer may collaterally assign this Agreement to any Persons providing financing to the Buyer, in which event the Seller agrees, upon the request of any such Person, to provide to such Person such consent to such assignment and such customary documentation thereof as such Person may reasonably request ..  Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the Parties.  Nothing expressed or referred to in this Agreement will be construed to give any Person other than the Parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement.  This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the Parties to this Agreement and their successors and permitted assigns.

12.10

Severability

If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect.  Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

12.11

Section Headings; Construction; Conflicts

The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation.  All bare references to "Section" or "Sections" refer to the corresponding Section or Sections of this Agreement.  All words used in this Agreement will be construed to be of such gender or number as the circumstances require.  Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms.  In the event of any conflict between the provisions of this Agreement and the provisions of any other Transaction Document, the provisions of this Agreement shall prevail.

12.12

Time of Essence

With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence.

12.13

Governing Law

This Agreement will be governed by the laws of the Commonwealth of Massachusetts, without regard to conflicts of laws principles. Subject to Section 12.08, any litigation arising out of this Agreement or any of the Transaction Documents shall be resolved exclusively by the state or federal courts sitting in Suffolk Country, Massachusetts, and each Party hereby irrevocably submits to the jurisdiction of any such court.

12.14

Execution of Agreement; Counterparts

This Agreement and any amendment hereto may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument.  The exchange of copies of this Agreement or amendments thereto and of executed signature pages by facsimile transmission or by email transmission in portable document format shall constitute effective execution and delivery of such instrument(s) as to the Parties and may be used in lieu of the original Agreement or amendment for all purposes.  Signatures of the Parties transmitted by facsimile or by email in portable document format shall be deemed to be their original signatures for all purposes.

12.15

Co-Signer.

Northeast Utilities, as co-signer of this Agreement, does so solely for the purpose of (a) making the representations it makes in Article III and (b) accepting joint and several liability with the Seller for any and all obligations arising under, growing out of, or connected with this Agreement, and for no other reason, and execution hereof by Northeast Utilities shall not constitute a guaranty.  No shareholder or trustee of Northeast Utilities shall be held to any liability whatsoever for any obligation under this Agreement, and this Agreement shall not be enforceable against any such shareholder or trustee in their or his or her individual capacities or capacity.  This Agreement shall be enforceable against the trustees of Northeast Utilities only as such, and every person, firm, association, trust or corporation having any claim or demand arising under this Agreement and relating to Northeast Utilities, its shareholders or trustees shall look solely to the trust estate of Northeast Utilities for the payment or satisfaction thereof.

IN WITNESS WHEREOF, each of the Parties and Northeast Utilities has duly executed and delivered this Agreement as of the date first written above.

BUYER

AMERESCO, INC.

By:  /s/  George P. Sakellaris

        Name: George P. Sakellaris

        Title: President & CEO

SELLER

NU ENTERPRISES, INC.

By: /s/ John J. Roman

       Name: John J. Roman

       Title:  Director--Accounting, NUEI

CO-SIGNER

NORTHEAST UTILITIES

By: /s/ David R. McHale

       Name: David R. McHale

       Title: Senior Vice President and

                 Chief Financial Officer

EX-10.36.1

Exhibit 10.36.1

NU LOGO

Northest Utilities Service Company

107 Selden Street, Berlin, CT 06037

P. O. Box 270

Hartford, CT 06141-0270

Tel: (860) 665-2440

Fax: (860) 665-2330

John Roman

March 1, 2006

Andrew Spence

Ameresco, Inc.

111 Speen Street

Suite 410

Frarningham, MA 01701

Re:

Stock Purchase Agreement, dated February 1, 2006, between Select Energy Services, Inc. and Ameresco, Inc. (SPA)

Dear Andrew:

Section 10.01(d)(i) of the SPA provides the right for either party to the agreement to terminate if the Closing has not occurred by March 3, 2006 (30 days). Based upon the current direction of our refinancing efforts, we believe it makes sense for the right to terminate under this section to be extended for an additional 30 days. In other words, neither party would have the right to terminate under Section 10.01(d)(i) of the SPA until 60 days has lapsed from the date of the agreement. If you agree, please have. an appropriate representative from your organization execute the letter. If you have any questions, please don't: hesitate to contact me.

Sincerely yours,

/s/ John Roman

John Roman

Director of Accounting, NUEI

Agreed and accepted by:

/s/ Andrew B. Spence

Name:  Andrew B. Spence

Title:  VP/CFO

cc:

Tim Huckaby, FMI

Peter Brown, NU

Lane Watson, DBH

EX-10.36.2

Exhibit 10.36.2

NU LOGO

Northest Utilities Service Company

107 Selden Street, Berlin, CT 06037

P. O. Box 270

Hartford, CT 06141-0270

Tel: (860) 665-2440

Fax: (860) 665-2330

John Roman

March 31, 2006

Andrew Spence

Ameresco, Inc.

111 Speen Street

Suite 410

Frarningham, MA 01701

Re:

Stock Purchase Agreement, dated February 1, 2006, between Select Energy Services, Inc. and Ameresco, Inc. (SPA)

Dear Andrew:

Section 10.01(d)(i) of the SPA provides the right for either party to the agreement to terminate if the Closing has not occurred by March 3, 2006 (30 days). By prior letter agreement, the right to terminate under this section was extended for an additional 30 days. Now that the Offering Memorandum has been issued with respect to the refinancing of SESI's debt and we have a more well established timetable, it makes sense to extend this deadline an additional 30 days to encompass the expected closing of our transaction. In other words, neither party would have the right to terminate under Section 10.01(d)(i) of the SPA until 90 days has lapsed from the date of the agreement. If you agree, please have an appropriate representative from your organization execute the letter. If you have any questions, please don't hesitate to contact me.

Sincerely yours,

/s/ John Roman

John Roman

Director of Accounting, NUEI

Agreed and accepted by:

/s/ Andrew B. Spence

Name:  Andrew B. Spence

Title:  VP/CFO

cc:

Tim Huckaby, FMI

Peter Brown, NU

Lane Watson, DBH

EX-10.36.3

Exhibit 10.36.3

STOCK PURCHASE AGREEMENT AMENDMENT AND WAIVER

THIS STOCK PURCHASE AGREEMENT AMENDMENT AND WAIVER (this "Amendment") to that certain Stock Purchase Agreement by and among NU Enterprises, Inc., a Connecticut corporation (the "Seller"), Northeast Utilities, a Massachusetts business trust ("Parent") and Ameresco, Inc., a Delaware corporation (the "Buyer") dated as of February 1, 2006, as modified by that certain letter agreement dated as of March 1, 2006 and by that certain letter agreement dated as of March 31, 2006 (as so modified, the “Agreement”), is dated as of May 5, 2006.  The Seller and the Buyer may each be referred to herein individually as a "Party" and collectively as the "Parties."

RECITALS:

WHEREAS, Seller, Parent and Buyer entered into the Agreement for the purposes of the sale by Seller and the purchase by Buyer of the Shares on the terms and conditions set forth in the Agreement;

WHEREAS, certain conditions to the obligations of the Parties to effect Closing have not yet been satisfied; and

WHEREAS, Seller, Parent and Buyer desire to amend the Agreement and to waive certain conditions thereunder as further set forth below;

NOW THEREFORE, in consideration of the covenants, representations, warranties, and mutual agreements herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

1.

Article 1 of the Agreement is hereby amended by inserting therein in alphabetical order the following definitions:

“Allocated Payoff Reserve Amount” means, for each New Phase I Investment, the Payoff Reserve Amount times the percentage of the Investment Shortfall for that New Phase I Investment (excluding the Allocated Payoff Reserve Amount for such New Phase I Investment) to the total Investment Shortfall for all New Phase I Investments (excluding the Payoff Reserve Amount).

“Bridgewater Bond” has the meaning assigned to such term in Section 7.12(m).

“Bridgewater Guarantee” has the meaning assigned to such term in Section 7.12(m).

“CETO” means a Phase I CETO or a Phase II CETO.

“Closing Proceeds” has the meaning assigned to such term in Section 7.13(a).

“Commitment Letter” means that certain Agreement to Purchase Contract Payments, dated as of May 5, 2006, and executed and delivered by the Buyer and General Electric Capital Corporation.

“Demand” means a demand by a New Phase I Investor for the repayment of all or a portion of the applicable CETO due to the occurrence of an Early Termination, which Demand shall set forth with specificity the applicable (i) CETO description, Payoff Amount, and Termination Contract Payment, and (ii) Investment Shortfall, payee (with such wire instructions or other destination information as may be relevant), and timing of the payment.

“Early Termination” means (a) the buydown or prepayment in part of amounts owing under a CETO or (b) the buyout or prepayment in whole of amounts owing under a CETO prior to the expiration thereof, that is (a) a termination for convenience or cancellation as provided for in such a CETO or through federal law, or (b) not caused by a breach by the Company of such a CETO.

“Investment Shortfall” means the difference between the Termination Contract Payment and the Payoff Amount for a CETO, to the extent that such obligations have not been increased by the disbursement to the Company or the Buyer of unencumbered proceeds from the refinancing of the Phase I Guarantees in the aggregate.

“Investment Shortfall Indemnification” means that certain Northeastern Utilities Indemnification, dated as of May 5, 2006, in favor of, inter alia, each of the Buyer, the Company and each New Phase I Investor, and executed and delivered by the Parent.

“Make-Whole Payments” has the meaning assigned to such term in Section 7.13(a).

“MPA” has the meaning assigned to such term in Section 3.30.

“New Phase I Investment” means, for each Phase I CETO providing for Contract Payments, the investment relating to the purchase of such Contract Payments.

“New Phase I Investor” means each owner obligee of a New Phase I Investment.

“New Phase II Investment” means, for each Phase II CETO, the investment relating to the purchase of such Contract Payments.

“New Phase II Investor” means each owner obligee of a New Phase II Investment.

“Payoff Amount” means the payoff amount required to discharge all amounts owing to the New Phase I Investor upon an Early Termination with respect to a CETO.

“Payoff Reserve Amount” means $2,576,279.

“Pending Payments” means the aggregate amount, from time to time, of all Contract Payments by the customer under any Phase I Subject Order which have been received by or on behalf of the Company and have not at such time been applied to the paydown of the respective New Phase I Investment.

“Phase I CETO” means each Contract, ESPC and related Task Order that provides for Contract Payments which are to be sold to a New Phase I Investor in connection with the Phase I Closing, and listed as a Phase I Task Order on Attachment A hereto.

“Phase II CETO” means each Contract, ESPC and related Task Order that provides for Contract Payments which are to be sold to a New Phase II Investor in connection with the Phase II Closing, and listed as a Phase II Task Order on Attachment A hereto.

“Phase I Closing” means the closing of the Refinancing.

“Phase II Closing” has the meaning assigned to such term in Section 7.13(a).

“Phase II Guarantees” means each of those guaranties or bonds set forth on Schedule 7.13.

“Termination Contract Payment” means, with respect to any CETO, the amount the Ordering Agency thereunder is required to pay upon the occurrence of a cancellation, termination for convenience or buyout of such CETO.

“Tobyhanna Action” has the meaning assigned to such term in Section 11.02(b)(vi)(N)(y).

“Tobyhanna Issue” has the meaning assigned to such term in Section 11.02(b)(vi)(N)(x).

2.

Each reference to “Hannon Armstrong” in the definition of “Refinancing” in Article 1 of the Agreement is hereby deemed to be without force or effect.

3.

Section 2.01(b) of the Agreement is hereby amended by deleting therefrom the words “One Million Six Hundred Eighty Four Thousand U.S. Dollars ($1,684,000)” and substituting therefore the words “Seven Million Six Hundred Eighty Four Thousand U.S. Dollars ($7,684,000)”.

4.

The Agreement is hereby amended by inserting at the end of Article III the following provisions:

Section 3.28

Investment Cash Collateral

The assets of the Company as of the Closing Date include the Payoff Reserve Amount in unencumbered cash or cash equivalents which do not include payments of any amounts due to the Company other than Contract Payments or buydowns under a Phase I Task Order.

Section 3.29

Tobyhanna Project Disclosure

The Seller has heretofore disclosed in writing to the Buyer all material information received or developed by the Seller or the Company or any Affiliate of either thereof relating to the Tobyhanna Issue or any Tobyhanna Action, including the delivery of all correspondence, notices, requests for information, personnel actions, and records relating thereto, including any documents of any Governmental Body as to the current status of the investigation, the status of the Seller and each of its Affiliates with respect thereto, and the status of any past and present employees thereof.  The Seller has provided the Buyer with the opportunity to participate in direct meetings with the government officials to assess the status of the investigation and the potential impact any resulting actions may have on the Buyer’s reputation and financial status.

Section 3.30

MPA Representations and Warranties

(a)  Each representation and warranty made by the Company in Article IV of that certain Master Purchase Agreement dated as of May 5, 2006 between the Company and General Electric Capital Corporation (the “MPA”) was, on the day first made, and remains, as of the date hereof, true and accurate in all respects, except for the representations made in Sections 4.4 and 4.11 of the MPA, and (b) each of the statements set forth below is true and accurate in all respects:

(i)  Assuming (x) the termination and release of all existing federal Assignment of Claims Act assignments affecting the Contract Payments under each (A) Phase I CETO, and (B) Phase I CETO, and (y) that the escrow between the Buyer, the Company and GECC related to the funding of the Phase I CETOs pursuant to the MPA were not in effect, the representation made in Section 4.4 of the MPA would be true and accurate as of the date hereof; and

(ii)  The representation made in Section 4.11 of the MPA would be true and accurate as of the date hereof if it referred to disclosures of materials disclosed by the Seller to the Buyer.

Section 3.31

Adequacy of Termination Contract Payments

In each case in which a Termination Contract Payment could be paid under a Contract, ESPC or Task Order subject to a Phase II Guarantee, the amount of the Termination Contract Payment provided for by such Contract, ESPC or Task Order will be adequate to pay off the Parent’s obligations with

respect to such Contract, ESPC or Task Order under the Phase II Guarantee relating to such Contract, ESPC or Task Order.

Section 3.32

Attachment A

Set forth on Attachment A hereto is a true, complete and accurate schedule identifying, for each Phase I Task Order and each Phase II Task Order, (a) by date, the amount of each Contract Payment to be made thereunder, and (b) by date, the amount of each Termination Contract Payment which would be due thereunder if there were an Early Termination.

Section 3.33

Officers and Directors

(a)

As of the time immediately prior to Closing, the following are all of the officers and directors of the Company:

Directors: Lawrence E. DeSimone , James B. Redden, John J. Roman

Officers: Lawrence E. DeSimone, Chairman and Chief Executive Officer; James B. Redden, President; John J. Roman, Vice President and Treasurer; Wade Hoefling, Secretary; Carol L. Carver, Assistant Secretary; Jennifer F. Powers, Assistant Secretary

(b)

As of the time immediately prior to Closing, the following are all of the officers and directors of the HEC/CJTS Energy Center, LLC:

Directors: Anthony Colonnese, James B. Redden, John J. Roman

Officers: James B. Redden, President; John J. Roman, Vice President and Treasurer; Wade Hoefling, Secretary; Jennifer F. Powers, Assistant Secretary

(c)

As of the time immediately prior to Closing, the following are all of the officers and directors of the HEC/Tobyhanna Energy Project, Inc.:

Directors: Lawrence E. DeSimone , James B. Redden, John J. Roman

Officers: Lawrence E. DeSimone, Chairman and Chief Executive Officer; James B. Redden, President; John J. Roman, Vice President and Treasurer; Wade Hoefling, Secretary and Clerk; Jennifer F. Powers, Assistant Secretary

(d)

As of the time immediately prior to Closing, the following are all of the officers and directors of the ERI/HEC EFA-MED, LLC:

Directors: James B. Redden

Officers: James B. Redden, Chairman; Barbara Casey, Secretary; John J. Roman, Vice President and Treasurer

5.

Section 7.01(d) of the Agreement is hereby amended by (a) deleting the second sentence thereof, and (b) substituting therefore the following sentence: “The Company shall retain liability for all vacation time, sick leave or other paid leave, if any, accrued (but unused) up to the Closing Date in accordance with Company policies in effect immediately prior to the Closing Date for each Selected Employee, and such liability shall be reflected on the Closing Balance Sheet.”.

6.

The Agreement is hereby amended by inserting at the end of Section 7.12(d) the following provision:

(iii)  Upon demand therefor, the Seller shall reimburse the Buyer or the Company, as the case may be, for the reasonable costs and expenses incurred by the Buyer or the Company pursuant to a consulting contract entered into between the Buyer or the Company and Eric Hodgdon, for services assisting the Buyer or the Company the Natick office for up to ten (10) days in the identification, transfer and integration of data and information technology and systems of the Company in such manner as the Buyer or the Company may reasonably request; provided that the Parties acknowledge that Eric Hodgdon is under no obligation to enter into any such contract.

7.

The Agreement is hereby amended by inserting at the end of Section 7.12 the following provision:

(m)

Upon Closing, the Buyer shall deliver to the Commonwealth of Massachusetts, acting through the Division of Capital Asset Management (the “DCAM”), with a copy to the Seller, a fully executed and effective (i) guarantee of the Buyer and (ii) payment/performance bond (the former, the “Bridgewater Guarantee” and the latter, the “Bridgewater Bond”) as required by the Energy Services Agreement, dated March 31, 2006, between the Commonwealth of Massachusetts and the Company for the Bridgewater State College project.

8.

The Agreement is hereby amended by inserting at the end of Article VII the following provisions:

Section 7.13

Post-Closing Investments

(a)  Beginning approximately thirty (30) days prior to the “Notification Date” set forth on Schedule 7.13 for each Phase II Guarantee, the Parent and the Buyer shall confer regarding the likelihood of (i) the put to the Parent of such Phase II Guarantee by the payment obligor under such Guarantee (the “Phase II Guarantee Obligor”), (ii) the satisfaction of the conditions for closing set forth in the Commitment Letter relating to such Phase II Guarantee (“Phase II Closing”), and (iii) whether such closing would be expected to result in the net disbursement of proceeds therefrom (“Closing Proceeds”), or require the delivery of make-whole payments with respect thereto (“Make-Whole Payments”).

(b)  The Parent shall deliver to the Phase II Investor, on or before the “Notification Date” set forth on Schedule 7.13 for such Phase II Guarantee, with a

copy to the Buyer, and pursuant to the terms of such Phase II Guarantee, a notification of non-renewal of such Phase II Guarantee. Upon (x) the delivery of each such notification of non-renewal of a Phase II Guarantee, and (y) the receipt from the Phase II Investor of a put notification with respect to such Phase II Guarantee prior to the expiration of the Commitment Letter relating to such Phase II Guarantee, the Parent and the Buyer shall cooperate to facilitate the Phase II Closing anticipated by such Commitment Letter; provided however that, in the event that such Phase II Closing is not achieved by the date upon which payments are due to the Phase II Investor pursuant to the Phase II Guarantee, the Parent shall pay such amounts at such time as may be necessary to discharge the obligations of the Parent under the Phase II Guarantee.  Notwithstanding any term of any agreement t o the contrary, the Parent hereby disclaims and waives any right of the Parent or any party claiming through the Parent, whether by assignment, succession, subrogation or otherwise, to assert any claim for, or to the recovery of, from the Company, the Buyer or any affiliate thereof, any such amounts paid by the Parent; provided, however that such disclaimer and waiver shall have no effect where: (i) the Parent’s obligation to make any such payment was the direct result of any breach or violation of an applicable Contract, ESPC or Task Order by the Company following the Closing; or (ii) the Phase II Closing fails to occur as a direct result of the Buyer’s failure, using reasonable commercial efforts, to cause the Conditions to Purchase to be satisfied as set forth in Section 3 of the Commitment Letter, except where such failure was due to a breach of this Agreement by the Seller, or of the Commitment Letter by the applicable New Phase II Investor.

(c)  Upon each Phase II Closing, (i) any Closing Proceeds shall be disbursed to the Buyer, and (ii) any Make-Whole Payments shall be made (x) fifty percent (50%) by the Seller and fifty percent (50%) by the Buyer until an aggregate of Make-Whole Payments not to exceed Five Hundred Thousand Dollars ($500,000) for all such Phase II Closings has been paid, and (y) by the Seller with respect to any Make-Whole Payments, for all such Phase II Closings, in excess of Five Hundred Thousand Dollars ($500,000).

Section 7.14

Termination Payments

(a)  Promptly following receipt of a Demand by a New Phase I Investor, the Parent shall pay to the New Phase I Investor the Investment Shortfall relating thereto.

(b)  Within ten days following receipt by the Company from the Parent of (i) notification of the receipt by the Parent of a Demand, (ii) notification of the receipt by the New Phase I Investor of the Termination Contract Payment relating thereto, including the amount thereof, (iii) notification of the Payoff Amount relating thereto, (iv) demand for payment of the Allocated Payoff Reserve Amount relating thereto, if any, and of the Pending Payment, if any, and (v) applicable wire transfer instructions for the payment thereof, the Company, or,

failing payment by the Company, the Buyer, shall pay to the Parent such Allocated Payoff Reserve Amount and such Pending Payment.

9.

Section 8.07 of the Agreement is hereby amended by (a) adding the word “and” before the words “the Refinancing shall” and (b) deleting therefrom all of the language following the words “to the Buyer”.

10.

The Agreement is hereby amended by inserting at the end of Article VIII the following provisions:

Section 8.09

Commitment Letters

Each of the Parent and the Buyer shall have received the Commitment Letter.

Section 8.10

Investment Shortfall Indemnification

The Buyer shall have received an Investment Shortfall Indemnification with respect to each of the New Phase I Investments.

Section 8.11

Refinancing Opinions

The Buyer and the New Phase I Investor shall have received one or more opinions reasonably satisfactory to the Buyer and the New Phase I Investor from counsel reasonably satisfactory to the Buyer and the New Phase I Investor with respect to the enforceability of certain Phase I Subject Order terms and the Investment Shortfall Indemnification, and related issues.

11.

Section 9.03 of the Agreement is hereby amended by deleting the word “and” following the word “closed;” in clause (j), inserting the following clause (k), and relettering the last clause “(l)”:

(k) the Bridgewater Guarantee and the Bridgewater Bond; and

12.

The Agreement is hereby amended by inserting at the end of Article IX the following provision:

Section 9.08 – Commitment Letters

Each of the Parent and the Buyer shall have received the Commitment Letter.

13.

Section 11.02(b)(v) of the Agreement is hereby amended by inserting (x) the words “Select Energy, Inc.,” following the words “Northeast Generation Services, Co.,” and (y) at the end thereof the word “and”.

14.

Section 11.02(b)(vi) of the Agreement is hereby amended by (x) deleting the word “and” at the end of clause (M), (y) relettering clause (N) as clause (P), and (z) inserting after clause (M) the following provisions:

(N)  any Claim relating to (x) any investigation by any Governmental Body of the Company or of any present or prior Affiliate thereof, or any present or prior employee of the Company or any such Affiliate, relating in any way to Delivery Orders 0001 or 0003 under IDIQ Contract # DACA87-97-D-0068 or Delivery Orders 0001, 0003, 0004, 0005 or 0006 under IDIQ Contract # DACA87-03-D-0031 or otherwise relating to the Tobyhanna project or any Tobyhanna contracts (the “Tobyhanna Issue”) or (y) any action brought or taken against the Company, the Buyer or any of its Affiliates relating to any civil, criminal or administrative charges arising from the Tobyhanna Issue (each, a “Tobyhanna Action”), including any related attorneys’ fees, costs of employee termination, implementation of ethics and compliance programs, and any other Costs or Damages provided for by any settlemen t entered into with any Governmental Body with respect thereto, all of which the Parent and the Seller agree shall not be characterized as consequential damages for the purposes of asserting any limitation on recovery with respect thereto; provided that neither the Parent nor the Seller shall have any liability for any Damages related to any debarment or suspension by any Governmental Body from governmental contracting of any type and for any period of time affecting the Buyer or its Affiliates (including the Company and its subsidiaries following the Closing) arising from or related to the Tobyhanna Issue or any Tobyhanna Action.

(O)  any Claim relating to (x) the representations in Sections 3.28, 3.29, 3.30, 3.31 and 3.32, or (y) the covenants set forth in Sections 7.13 and 7.14; and

15.

Section 12.15 of the Agreement is hereby amended by (x) inserting, after the words “Article III”, the following words and punctuation “, (b) undertaking the obligations set forth in the Investment Shortfall Indemnification,” and (y) changing “(b)” to “(c)”.

16.

(a)  Section 3.02 of the Disclosure Schedule is hereby amended by deleting “Massachusetts” from the list of jurisdictions in which HEC/CJTS Energy Center LLC must be qualified.

(b)  The Agreement is hereby amended by adding thereto Schedule 7.13 attached hereto.

17.

Solely for the purpose of effecting the Closing, the Buyer hereby waives the satisfaction of the conditions to Closing set forth in (i) Section 8.02, with respect to the requirement set forth in Section 7.01(a) that the retention of Selected Employees by the Buyer or the Company is subject to the written confirmation by such Selected Employees, on or before the Closing Date, of his or her intention to be so employed, (ii) 8.03(i), and (iii) Section 8.06, with respect to the consent required by the lease set forth in Section 3.04(b) of the Disclosure Schedule.  As to the condition waived in the foregoing

clause (i), the Seller shall remain liable for all Termination Costs of each Selected Employee who does not provide such written confirmation to the Buyer or the Company, which confirmation may be evidenced by the completion and submission to the Buyer or the Company by such Selected Employee of applicable benefits applications and forms, no later than eleven (11) days following the Closing Date.  As to the condition waived in the foregoing clause (ii), the Seller shall remain obligated to provide such consent within a reasonable period, the Buyer shall use reasonable efforts to facilitate obtaining such consent, and all rights and remedies of the Buyer with respect to such obligation of the Seller are hereby reserved.  The Seller shall remain obligated to satisfy the requirements of Section 7.12(j) within a reasonable period.

18.

The Seller hereby waives the satisfaction of the condition to Closing set forth in Section 9.03(h).

19.

To the extent that such terms are not explicitly inconsistent with the terms hereof, the provisions of Article XII of the Agreement shall be deemed incorporated into and applicable to this Amendment.  Except as amended, waived or modified as set forth above, each of the terms of the Agreement remains in full force and effect.

IN WITNESS WHEREOF, each of the Parties and Northeast Utilities has duly executed and delivered this Amendment as of the date first written above.

BUYER

AMERESCO, INC.

By:/s/ George P. Sakellaris

      Name: George P. Sakellaris

       Title: President & CEO

SELLER

NU ENTERPRISES, INC.

By: /s/ John J. Roman

       Name: John J. Roman

       Title: Director - Accounting

CO-SIGNER

NORTHEAST UTILITIES

By: /s/ David R. McHale

       Name:  David R. McHale

       Title:  Senior VP & CFO

EX-10.36.4

Exhibit 10.36.4

NORTHEAST UTILITIES INDEMNIFICATION

This INDEMNIFICATION AND UNDERTAKING (this "Indemnification"), dated as of May 5, 2006, in favor of each of General Electric Capital Corporation ("GECC") and each other Financing Party (as hereinafter defined) and each Acquisition Party (as hereinafter defined, and, together with each Financing Party, a "Beneficiary", and each Beneficiary, collectively with Northeast Utilities, a Massachusetts business trust (the "Parent"), a "Party" hereto), has been executed and delivered by the Parent, in connection with the Closing referred to in that certain Stock Purchase Agreement by and among NU Enterprises, Inc., a Connecticut corporation (the "Seller"), Ameresco, Inc., a Delaware corporation (the "Buyer") and the Parent, dated as of February 1, 2006, as modified and amended (as modified and amended, the "Agreement").

Section 1.

Defined Terms.

Unless specifically stated otherwise, each capitalized term used herein shall have the meaning provided in Attachment A hereto.

Section 2.

Representations and Warranties.

The Parent represents and warrants to each of the Beneficiaries that each of the statements set forth below is true and correct in all respects as of the date hereof.

(a)

Each Contract, ESPC and related Task Order that provides for Contract Payments which are to be sold to GECC or another Financing Party in connection with the refinancing of the Phase I Task Orders (the "Phase I Closing," and each such Contract, ESPC and related Task Order, a "Phase I CETO"), or to GECC or another Financing Party upon the satisfaction of the conditions for closing set forth in the Commitment Letter (the "Phase II Closing," and each such Contract, ESPC and related Task Order, a "Phase II CETO"), constitutes the valid and legally binding obligation of each of the parties thereto, enforceable in accordance with its terms and conditions, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and to general principles of equity (regardless of whether such enforcement is sought in a Proceeding in equity or at law).

(b)

(i) A true, complete, and accurate listing and description of each Phase I CETO, as modified through the date hereof, and each Phase II CETO, as modified through the date hereof, is set forth on Attachment B, and such documents reflect the entire agreement of the Company and the Ordering Agencies with respect to the subject matter thereof, and (ii) it has delivered or caused to be delivered to the Buyer true, correct, and complete copies of all such documents.

(c)

Set forth on Schedule 1 hereto is a true, complete and accurate schedule identifying, for each CETO, by date, (i) the amount of each Contract Payment to be made,

and (ii) the amount of each Termination Contract Payment which would be due if there were an Early Termination, and, if applicable (iii) the Investment Shortfall.

(d)

Each Acceptance under any CETO has been issued by the applicable Ordering Agency, and there are no outstanding disputes relating to any CETO.

(e)

In each case in which a Termination Contract Payment could be paid under a Contract, ESPC or Task Order subject to a Phase II Guarantee, the amount of the Termination Contract Payment provided for by such Contract, ESPC or Task Order will be adequate to pay off the Parent's obligations with respect to such Contract, ESPC or Task Order under the Phase II Guarantee relating to such Contract, ESPC or Task Order.

(f)

The assets of the Company as of the Closing Date include the Payoff Reserve Amount in unencumbered cash or cash equivalents which do not include payments of any amounts due to the Company other than Contract Payments or buydowns under a Phase I Task Order.

(g)

(i) Each representation and warranty made by the Company in Article IV of that certain Master Purchase Agreement dated as of May 5, 2006 between the Company and GECC (the "MPA") was, on the day first made, and remains, as of the date hereof, true and accurate in all respects, except for the representations made in Sections 4.4 and 4.11 of the MPA, and (ii) each of the statements set forth below is true and accurate in all respects:

(x) Assuming (I) the termination and release of all existing federal Assignment of Claims Act assignments affecting the Contract Payments under the (A) Phase I Task Orders at a Phase I Closing, and (B) Phase II Task Orders at the applicable Phase II Closing, and (II) that the escrow between the Buyer, the Company and GECC related to the funding of the Phase I Task Orders pursuant to the MPA were not in effect, the representation made in Section 4.4 of the MPA would be true and accurate as of the date hereof, and

(y) The representation made in Section 4.11 of the MPA would be true and accurate as of the date hereof if it referred to disclosures of materials disclosed by the Seller to the Buyer.

Section 3.

Post-Closing Actions.

(a) (i) Beginning approximately thirty (30) days prior to the Notification Date for each Phase II Guarantee, the Parent and the Buyer shall confer regarding the likelihood of (x) the put to the Parent of such Phase II Guarantee by the Phase II Investor under such Phase II Guarantee, (y) the Phase II Closing, and (z) whether such closing would be expected to result in the net disbursement of proceeds therefrom ("Closing Proceeds"), or

require the delivery of make-whole payments with respect thereto ("Make-Whole Payments").

(ii) The Parent shall deliver to the Phase II Investor, on or before the Notification Date for such Phase II Guarantee, with a copy to the Buyer, and pursuant to the terms of such Phase II Guarantee, a notification of non-renewal of such Phase II Guarantee. Upon (x) the delivery of each such notification of non-renewal of a Phase II Guarantee, and (y) the receipt from the Phase II Investor of a put notification with respect to such Phase II Guarantee prior to the expiration of the Commitment Letter relating to such Phase II Guarantee, the Parent and the Buyer shall cooperate to facilitate the Phase II Closing anticipated by such Commitment Letter; provided however that, in the event that such Phase II Closing is not achieved by the date upon which payments are due to the Phase II Investor pursuant to the Phase II Guarantee, the Parent shall pay such amounts at such time as may be necessary to discharge the obligations of the Parent und er the Phase II Guarantee. Notwithstanding any term of any agreement to the contrary, except to the extent that the Parent's obligation to make any such payment was the direct result of any breach or violation of an applicable Contract, ESPC or Task Order by the Company, the Parent hereby disclaims and waives any right of the Parent or any party claiming through the Parent, whether by assignment, succession, subrogation or otherwise, to assert any claim for, or to the recovery of, from the Company, the Buyer or any affiliate thereof, any such amounts paid by the Parent.

(iii)  Upon each Phase II Closing, (i) any Closing Proceeds shall be disbursed to the Buyer, and (ii) any Make-Whole Payments shall be made (x) fifty percent (50%) by the Seller and fifty percent (50%) by the Buyer until an aggregate of Make-Whole Payments not to exceed Five Hundred Thousand Dollars ($500,000) for all such Phase II Closings has been paid, and (y) by the Seller with respect to any Make-Whole Payments, for all such Phase II Closings, in excess of Five Hundred Thousand Dollars ($500,000).

(b)  Promptly following receipt of a Demand, the Parent shall pay the Investment Shortfall in accordance therewith.

Section 4.

Indemnification.

The Parent will indemnify, defend and hold harmless each of (x) each Acquisition Party, its Affiliates, and their respective officers, directors, employees, consultants, assigns, agents and shareholders, and (y) GECC and each other Financing Party, for all costs, losses, liabilities, claims, damages or expenses (including reasonable attorneys' fees and expenses) (collectively, "Damages"):

(a)

arising out of any breach of any representation or warranty or any breach or non-fulfillment of any covenant or agreement of the Parent in this Indemnification;

(b)

constituting Investment Shortfalls, as, when and to the extent incurred by any Person referred to in the preceding clauses (x) and (y), upon receipt from such Person of a reasonably detailed statement with respect to such Damages; or

(c)

against any claim by, through or on behalf of the Ordering Agency seeking recovery of excess proceeds as a result of the financing of any Contract Payments at a lower interest rate than was set forth in the applicable Task Order.

Section 5.

Interest on Payments.

  Except as otherwise expressly provided in this Indemnification, each payment required to be made under this Indemnification shall bear daily interest at the lower of (i) a monthly rate of one and one half percent (1.5%) or (ii) the highest allowable annual interest rate under applicable law.

Section 6.

Notices.

All notices and other communications provided for hereunder shall be in writing, shall be addressed to the recipient's address set forth below or to such other address as a Party may designate by notice hereunder, and shall be deemed to have been sufficiently given for all purposes (a) three (3) Business Days after being mailed by first class certified or registered mail, postage prepaid, (b) the next Business Day after being sent by nationally recognized overnight courier for next Business Day delivery, (c) when personally delivered, or (d) upon confirmed receipt when made by facsimile transmission, in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may hereafter designate by similar notice to the other parties):

If to the Parent:

John J. Roman

Northeast Utilities

107 Selden Street

Berlin, CT 06070

Facsimile: (860) 665-2807

With a copy to:

Gerald Garfield, Esq.

Day, Berry & Howard LLP

CityPlace I

Hartford, CT 06103-3499

Facsimile: (860) 275-0343

If to the Buyer or the Company:

Ameresco, Inc.

111 Speen Street, Suite 410

Framingham, MA 01701

Attn: General Counsel

Facsimile: (508) 661-2201

If to GECC

General Electric Capital Corporation

2000 Corporate Ridge, Suite 1095

McLean, VA 22102

Attn: Federal Finance Risk and Operations Manager

Facsimile: (703) 749-3527

Section 7.

Further Assurances.

Each Party shall (a) furnish upon request to the other such further information, (b) execute. and deliver to the other such other documents, and (c) do such other acts and things, all as the other Party may reasonably request for the purpose of carrying out the intent of this Indemnification and the documents referred to in this Indemnification.

Section 8.

Waiver.

The rights and remedies of the Parties to this Indemnification are cumulative and not alternative. Neither the failure nor any delay by any Party in exercising any right, power, or privilege under this Indemnification or the documents referred to in this Indemnification will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Indemnification or the documents referred to in this Indemnification can be discharged by one Party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other Party; (b) no waiver that may be given by a Party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one Party will be deemed to be a waiver of any obligation of such Party or of the right of the Party giving such notice or demand to take further action without notice or demand as provided in this Indemnification or the documents referred to in this Indemnification.

Section 9.

Modification.

This Indemnification may not be amended or modified except by a written agreement duly executed by each of the Parties to which the benefit of the amended provision runs; provided however that, in the event that an amended or modified provision runs to the benefit of one or more Acquisition Parties and one or more Financing Parties, any such Acquisition Party shall have the right to enter into such amendment or modification without the consent of any such Financing Party upon the provision by such Acquisition Party to such Financing Party of an indemnification acceptable to such Financing Party with respect to any Damages that may be suffered by such Financing Party arising from such amendment or modification.

Section 10.

Dispute Resolution.

Except as may otherwise be specifically provided herein, any dispute arising out of or relating to this Indemnification between the Parent and any Acquisition Party shall be resolved in the manner set forth in the Agreement for the resolution of disputes thereunder, and any dispute arising out of or relating to this Indemnification between the Parent and any Financing Party shall be resolved in the manner set forth in the MPA for the resolution of disputes thereunder as if the Parent were a party thereto and bound thereby.

Section 11.

Assignments, Successors and No Third Party Rights.

The provisions of this Indemnification shall be binding upon and inure to the benefit of the

Parties hereto, and their respective successors and permitted assigns as discussed in this Section; provided that the Parent may not assign or otherwise transfer any of its obligations under this Indemnification. This Indemnification may be assigned, in whole or in part, collaterally by the Buyer to any Person providing financing to or for the benefit of the Buyer or any of its Affiliates, in which event the Parent agrees, upon the request of any such Person, to provide to such Person', such consent to such assignment and such customary documentation thereof as such Person may reasonably request.

Nothing expressed or referred to in this Indemnification will be construed to give any Person other than the Parties to this Indemnification any legal or equitable right, remedy,, or claim under or with respect to this Indemnification or any provision of this Indemnification. This Indemnification and all of its provisions and conditions are for the sole and exclusive benefit of the Parties to this Indemnification and their successors and permitted assigns.

Section 12.

Severability.

If any provision of this Indemnification is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Indemnification will remain in full force and effect. Any provision of this Indemnification held invalid or unenforceable only in part or degree will remain iii full force and effect to the extent not held invalid or unenforceable.

Section 13.

Governing Law.

This Indemnification will be governed by the laws of New York, without regard to conflicts of laws principles.

Section 14.

Execution of Agreement.

Signatures of the Parties transmitted by facsimile or by email in portable document format shall be deemed to be their original signatures for all purposes.

Section 15.

Caveats

No shareholder or trustee of the Parent shall be held to any liability whatsoever for any obligation under this Indemnification, and this Indemnification shall not be enforceable against any such shareholder or trustee in their, or his or her individual capacities or capacity. This Indemnification shall be enforceable against the trustees of the Parent only as such., and every person, firm, association, trust or corporation having any claim or demand arising under this Indemnification and relating to the Parent, its shareholders or trustees shall look solely to the trust estate of the Parent for the payment or satisfaction thereof.

IN WITNESS WHEREOF, Northeast Utilities has duty executed and delivered this Indemnification and Undertaking as of the date first written above.

NORTHEAST UTILITIES

By: /s/ David R. McHale

Name:  David R. McHale

Title:  Senior VP & CFO

ATTACHMENT A

DEFINITIONS

For the purpose of this Indemnification and Undertaking, the following terms have the meanings specified or referred to in this Attachment:

"Acceptance" means that, with respect to each energy conservation measure installed or to be installed under a Task Order, the Ordering Agency responsible therefor has (i) issued a written certificate of acceptance, or (ii) delivered other written evidence indicating its acceptance of the energy conservation measure(s) installed under the Task Order that is reasonably satisfactory to the Buyer and any Financing Party, as their interests may appear.

"Acquisition Party" means each of the Buyer and the Company.

"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act of 1934, as amended.

"Agreement" has the meaning assigned to such term in the first paragraph.

"Beneficiary" has the meaning assigned to such term in the first paragraph.

"Buyer" has the meaning assigned to such term in the first paragraph.

"CETO" means a Phase I CETO or a Phase II CETO.

"Closing" means the purchase and sale provided for in that certain Stock Purchase Agreement by and among the Seller (as defined in the Indemnification) and the Buyer (as defined in the Indemnification) and the Parent (as defined in the Indemnification), dated February 1, 2006, as modified and amended.

"Closing Proceeds" has the meaning assigned to such term in Section 3.

"Commitment Letter" means that certain Agreement to Purchase Contract Payments dated as of May 5, 2006 by and between GECC, the Parent, and Ameresco Inc.

"Company" means Select Energy Services, Inc., a Massachusetts corporation.

"Contract" means (a) any agreement, contract, lease, consensual obligation, promise or undertaking (whether written or oral and whether express or implied), whether or not legally binding, including without limitation employment and consulting or other contracts with current or former officers, directors, employees, consultants, agents, shareholders or other representatives, labor and other collective bargaining agreements, employment agreements, employee benefit plans and programs and policies, patent, trademark and other intellectual property contracts, agreements for the preferential rights to purchase any

prospects or businesses, partnership or joint venture agreements, agreements relating to the acquisition of any business, and contracts for the payments of fees or other consideration to any officers or directors, (b) in each case as amended, modified, supplemented, renewed or extended from time to time in accordance therewith, together with all exhibits, schedules, annexes and other attachments thereto.

"Contract Payment" means monies due or to become due under each Task Order, including, without limitation, (i) interest owed by an Ordering Agency under the Prompt Payment Act, as amended, 31 U.S.C. § 3901 3906, (ii) payments owed by an Ordering Agency upon the cancellation or termination for any reason, in whole or in part, of the Task Order, (iii) the buydown or prepayment in part of amounts owing under the Task Order, (iv) the buyout or prepayment in whole of amounts owing under the Task Order, and (v) any amounts payable as a result of any claims relating to the foregoing under the Contracts Disputes Act, 41 U.S.C. § 11.

"Contracts Disputes Act" means the Contracts Disputes Act, 41 U.S.C. § 11, as amended, and any successor statute thereto.

"Demand" means a demand by a New Phase I Investor for the repayment of all or a portion of the applicable CETO due to the occurrence of an Early Termination, which Demand shall set forth with specificity the applicable (i) CETO description, Payoff Amount, and Termination Contract Payment, and (ii) Investment Shortfall, payee (with such wire instructions or other destination information as may be relevant), and timing of the payment.

"Early Termination" means (a) the buydown or prepayment in part of amounts owing under a CETO or (b) the buyout or prepayment in whole of amounts owing under a CETO prior to the expiration thereof, that is (a) a termination for convenience or cancellation as provided for in such a CETO or through federal law, or (b) not caused by a breach by the Company of such a CETO.

"ECM" has the meaning assigned to such term in the definition of ESPC.

"ESPC" means (a) an energy savings performance Company Contract pursuant to which the Company has agreed, among other things, to (i) provide to the Ordering Agency more particularly described in such Contract the resources, services and expertise necessary to implement energy conservation measures ("ECMs") in order to reduce energy consumption at certain facilities, including, without limitation, preliminary energy audits, feasibility analysis, engineering and design services, installations, operation, maintenance, repair, training and emergency response services for energy related equipment, and (ii) provide the necessary labor, materials, tools, services, transportation, supplies and all other items required to implement such ECMs, (b) in each case as amended, modified, supplemented, renewed or extended from time to time in accordance therewith, together with all exhibits, schedules, annexes and other attachments thereto.

"Financing Party" means each of GECC, each New Phase II Investor, each subsequent purchaser of any Contract Payments purchased by any New Phase I Investor or any New Phase II Investor, and the successors and assigns of each of the foregoing.

"GECC" means General Electric Capital Corporation, its successors and assigns.

"Guarantee Obligor" has the meaning assigned to such term in Section 3.

"Investment" means a New Phase I Investment or a New Phase II Investment.

"Investment Shortfall" means the difference between the Termination Contract Payment and the Payoff Amount for a CETO as set forth in Schedule 1 hereto.

"Make-Whole Payments" has the meaning assigned to such term in Section 3.

"MPA" has the meaning assigned to such term in Section 2(g).

"New Phase I Investment" means, for each Phase I CETO providing for Contract Payments, the investment relating to the purchase of such Contract Payments.

"New Phase I Investor" means each owner obligee of a New Phase I Investment.

"New Phase II Investment" means, for each Phase II CETO providing for Contract Payments, the investment relating to the purchase of such Contract Payments.

"New Phase II Investor" means each owner obligee of a New Phase II Investment.

"Notification Date" means the date sixty (60) days prior to the anniversary date of each Phase II Guaranty.

"Ordering Agency" means (i) any agency or department of the United States of America that has entered into an ESPC or a Task Order, and (ii) any other governmental body that has entered into a Contract providing for Contract Payments which are purchased in a New Phase I Investment or a New Phase II Investment.

"Parent" has the meaning assigned to such term in the first paragraph.

"Party" and "Parties" have the meaning assigned to such term in the first paragraph.

"Payoff Amount" means the payoff amount required to discharge all amounts owing to GECC upon an Early Termination with respect to a CETO.

"Payoff Reserve Amount" means $2,576,279.

"Person" means any individual, corporation, partnership, limited liability company, trust, association, organization, or other entity or governmental body.

"Phase I Closing" has the meaning assigned to such term in Section 2(a).

"Phase I Task Orders" means those certain Task Orders set forth on Attachment B, Part I hereto executed pursuant to an ESPC.

"Phase II Closing" has the meaning assigned to such term in Section 2(a).

"Phase II Guarantee" means that certain Guaranty given by the Parent to the Phase II Investor pursuant to each applicable assignment schedule.

"Phase II Investor" means Hannie Mae, LLC together with its successors and assigns.

"Phase II Task Orders" means those certain Task Orders set forth on Attachment B, Part II hereto executed pursuant to an ESPC.

"Prompt Payment Act" means the Prompt Payment Act, 31 U.S.C. §§ 3901 - 3906, as amended, and any successor statute thereto.

"Task Order" means an authorization, a task order, delivery order or other similar contract (as amended, modified, supplemented, renewed or extended from time to time in accordance therewith, together with all exhibits, schedules, annexes and other attachments thereto) issued by an Ordering Agency to commence an ECM pursuant to an ESPC.

"Termination Contract Payment"-means, with respect to any CETO, the amount the Ordering Agency thereunder is required to pay upon the occurrence of a cancellation, termination for convenience or buyout of such CETO.

ATTACHMENT B

ESPC AND RELATED TASK ORDERS

PART I:

1.

ESPC No. DACA87-97-D-001 I dated January 23, 1997 with the U.S. Army Engineering & Support Center (last modified by P00010 on August 1, 2003).

(a)

Task Order No. 0001 dated August 10, 2001 issued by U.S. Army Engineering & Support Center on behalf of the U.S. Army, Ft. Eustis and Ft. Story, Virginia (last modified by MOD 12 on February 22, 2006).

(b)

Task Order No. 0002 dated August 10, 2001 issued by U.S. Army Engineering & Support Center on behalf of the U.S. Army, Ft. Monroe, Virginia (last modified by MOD 15 on March 3, 2006).

2.

ESPC No. DE-AM36-99EE73675 dated February 25, 1999 with the U.S. Department of Energy (last modified by MOD 04 on August 27, 2001).

(a)

Task Order No. V63 1 -01 -D242A dated September 5, 2001 issued by VA. Medical Center 631/001-A on behalf of the Northampton Veterans Administration Medical Center, Leeds, Massachusetts (last modified by Change Order #2 on March 8, 2004).

(b)

Task Order No. V689-01-D242A dated September 5, 2001 issued by VA. Medical Center 631/001-A on behalf of the Veterans Administration Medical Center, West Haven, Connecticut and the Veterans Administration Medical Center, Newington, Connecticut (last modified by Change Order #2 on December 29, 2003).

3.

ESPC No. DACA87-97-D-0068 dated August 11, 1997 with the U.S. Army Engineering & Support Center (last modified by P00011 on June 28, 2005).

(a)

Task Order No. 0002 dated August 30, 1999 issued by U.S. Army Engineering & Support Center and administered by Naval Facilities Engineering Command on behalf of the Portsmouth Naval Shipyard, Maine (last modified by MOD 30 on September 24, 2004).

4.

ESPC No. DACA87-97-D-0001 dated November 19, 1996 with the U.S. Army Engineering & Support Center (last modified by MOD 25 on March 31, 2005).

(a)

Task Order No. 3 dated April 14, 2000 issued by U.S. Army Engineering & Support Center and administered by Directorate of Contracting for U.S. Army, Ft. Huachuca, Arizona (last modified by MOD 22 on November 7, 2005).

PART II:

1.

ESPC No. DACA87-97-D-0068 dated August 11, 1997 with the U.S. Army Engineering & Support Center (last modified by P00011 on June 28, 2005 ).

(a)

Task Order No. 0005 dated September 30, 2002 issued by the U.S. Army Engineering & Support Center on behalf of the Army Research Laboratories, Aldephi, Maryland (last modified by Mod 13 on March 29, 2006).

2.

ESPC No. DE-AM36-99EE73682 dated February 25, 1999 with the U.S. Department of Energy (last modified by Mod 007 on October 24, 2005).

(a)

Task Order No. N47408-02-F-4965 dated September 30, 2002 issued by U.S. Naval Facilities Engineering Command on behalf of Quantico Marine Base, Quantico, Virginia (last modified by P00007 on September 8, 2005).

(b)

Task Order No. 43-3K06-3-0030 dated September 24, 2003 issued by U.S. Department of Agriculture on behalf of the Beltsville Agricultural Research Center, Beltsville, Maryland.

(c)

Task Order No. WPJ-04-0156 dated September 30, 2003 issued by General Services Administration on behalf of the Washington National Records Center, Suitland, Maryland (last modified by Mod 01 on September 13, 2005).

3.

ESPC No. N47408-00-D-8131 dated March 15, 2000 with US NAVFACENG COM Southwest Division Specialty Contracts (last modified by P0002 on September 2, 2005).

(a)

Task Order No. 0002 dated September 30, 2003 issued by US Naval Facilities Engineering Command on behalf of NAS Sigonella, Sigonella, Italy (last modified by Mod 03 on December 21, 2005).

EX-10.36.5

Exhibit 10.36.5

AGREEMENT TO PURCHASE CONTRACT PAYMENTS

THIS AGREEMENT TO PURCHASE CONTRACT PAYMENTS (this "Agreement'), dated as of May 5 2006 is executed and delivered by NORTHEAST UTILITIES, a Massachusetts business trust (the "Guarantor"), AMERESCO, INC., a Delaware corporation ("Ameresco"), and General Electric Capital Corporation, a Delaware corporation ("GECC"). Capitalized terms used in this Agreement shall have the same meaning assigned to them in the Guaranty (defined below) unless otherwise indicated. The Guarantor, Ameresco and GECC shall each be referred to as a "Party" and collectively as the "Parties".

RECITALS

WHEREAS, in accordance with the federal energy savings performance contracts (each, an "ESPC"), identified on Schedule 1 attached hereto, the United States of America through various agencies and departments (each, an "Ordering Agency"), issued to Select Energy Services, Inc. (the "Seller") certain task orders (as amended, modified, supplemented, renewed or extended from time to time in accordance therewith, together with all exhibits, schedules, annexes and other attachments thereto, collectively, the "Task Orders") identified on Schedule 1, which provide for, among other things, the Seller to implement energy conservation projects ("ECM Projects") at each Ordering Agency's site;

WHEREAS, each Ordering Agency is required under the relevant Task Order to make periodic installment payments in the amounts and on the dates set forth therein (collectively, together with interest owed by the relevant Ordering Agency under the Prompt Payment Act, as. amended, 31 U.S.C. §§ 3901-3907, and payments owed by the relevant Ordering Agency upon termination, buydown or buyout of the Task Order, the "Contract Payments");

WHEREAS, in conjunction with that certain Master Purchase Agreement (as amended, modified, supplemented, renewed or extended from time to time in accordance therewith, together with all exhibits, schedules, annexes and other attachments thereto), between Hannie Mae LLC (together with its successors and assigns, the "Buyer') and the Seller, the Seller executed and delivered certain assignment schedules pursuant to the Master Purchase Agreement assigning the Contract Payments to the Buyer (each such schedule, as amended, modified, supplemented, renewed or extended from time to time in accordance therewith, together with all exhibits, schedules, annexes and other attachments thereto, shall be referred to as an "Assignment Schedule ") attached hereto as Schedule 2, which sold, assigned, transferred and conveyed to the Buyer all of the Seller's right, title and interest in and to the Contract Payme nts;

WHEREAS, in support of each Assignment Schedule, the Guarantor executed a Guaranty in favor of the Buyer (each a "Guaranty") whereby the Guarantor agreed to guarantee the obligations of the Seller;

WHEREAS, each Guaranty provides that, should Guarantor elect not to renew or extend the Guaranty, the Buyer may require the Guarantor to purchase the remaining Contract Payments from the Buyer;

WHEREAS, Ameresco and NU Enterprises, Inc., a Connecticut corporation and wholly owned subsidiary of Guarantor, executed a Stock Purchase Agreement, dated February 3, 2006, whereby Ameresco agreed to purchase the capital stock of the Seller. Under the terms of the Stock Purchase Agreement, the financing of the Contract Payments must be refinanced so as to release the Guarantor from each Guaranty; and

WHEREAS, if Guarantor is required to purchase the Contract Payments from Buyer, the Guarantor desires to sell such Contract Payments to the Seller, GECC desires to purchase the Contract Payments from the Seller, and Ameresco desires to cause Seller to purchase from the Guarantor and to sell to GECC the Contract Payments.

NOW, THEREFORE, for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties agree as follows:

1.

Purchase of Contract Payments.  Subject to the terms hereof, GECC agrees to purchase the Contract Payments from the Seller. The purchase price for the remaining Contract Payments shall be determined as set forth in Section 2 below. GECC shall be obligated to purchase the applicable Contract Payments related to each Task Order on the dates set forth on Schedule 3 hereto (each a "Purchase Date").  The purchase shall be effected by wire transfer to an account to be provided by Seller prior to the Purchase Date. The contract documents effecting the transfer of the Contract Payments to GECC shall be in the form of the Master Purchase Agreement between the Seller and GECC dated on or about May , 2006 (the "MPA "). The Guarantor, Ameresco, the Seller and GECC shall work together in good faith to execute all other reasonable agreements necessary to effect the transf er of the Contract Payments (i.e., governmental consents, indemnifications, opinions of counsel, etc.).

2.

Purchase Price.  GECC agrees, as consideration for such purchase, to pay to the Seller an amount equal to the net present value of the Contract Payments discounted to the applicable Payment Date at an interest rate equal to the sum of 56 basis points (0.56%) plus the average life swap rate index (collectively, the "Discount Rate"), (as referenced in the Bloomberg Index) as of the close of business two (2) days prior to the Purchase Date (the "Purchase Price").

3.

Conditions to Purchase.  GECC's obligation to purchase the Contract Payments is subject to the satisfactory fulfillment of the following conditions and final approval of its investment committee:

(a)

The Seller shall not become insolvent, make an assignment for the benefit of its creditors or be subject to relief granted by the United States Bankruptcy Court or. commit or permit to occur or continue any act, condition or proceeding which constitutes an act of bankruptcy under any applicable federal or state law or have a material adverse

change in its financial or operating condition as determined by GECC in its reasonable discretion;

(b)

Seller shall not be in default of its obligations under any Task Order;

(c)

Receipt by GECC of each ESPC and Task Order and all other documents related to each Task Order, in form and substance satisfactory to GECC;

(d)

Completion of due diligence by GECC regarding the ESPCs and Task Orders, including, but not limited to:

i)

Evidence that the Contract Payments are being made promptly;

ii)

Evidence or representations and warranties that the Task Orders are valid, binding and enforceable against the Seller and the relevant Ordering Agency;

iii)

The performance of the ECM Projects is equal to or better than projected;

iv)

The Contract Payments under each Task Order are sufficient to cover GECC's investment (otherwise GECC must receive sufficient indemnification for any shortfall);

v)

None of the locations where the ECM's are installed is on the BRAC list; and

vi)

Maintenance and verification of the ECM Projects is being performed and is meeting or exceeding expectations; and

(e)

Receipt by GECC of all other documents required to be delivered to f GECC pursuant to the MPA, between the Seller and GECC, in form and substance satisfactory to GECC.

The Federal Finance unit of GECC agrees to submit and pursue final approval of its investment committee to purchase the applicable Contract Payments as set forth herein, so long as what has been represented to GECC by the Guarantor and Ameresco with respect to the ESPCs and Task Orders is satisfactorily confirmed by GECC as a result of its due diligence

4.

Representations.

(a)

The Guarantor represents and warrants that (a) the Guarantor is a Massachusetts business trust duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the power to enter into and perform its obligations under this Agreement, and (b) this Agreement has been duly authorized by the Guarantor, has been duly executed and delivered by the Guarantor and constitutes the legal, valid and binding obligation of the Guarantor enforceable against the Guarantor in accordance with its terms, except as such enforceability may be subject to the effect of general principles of equity or limited by or subject to any bankruptcy, insolvency,

reorganization, moratorium, or other similar laws affecting the enforcement of creditors' rights generally.

(b)

Ameresco represents and warrants that (a) Ameresco is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the power to enter into and perform its obligations under this Agreement, and (b) this Agreement has been duly authorized by , has been duly executed and delivered by the Ameresco and constitutes the legal, valid and binding obligation of the Ameresco enforceable against Ameresco in accordance with its terms, except as such enforceability may be subject to the effect of general principles of equity or limited by or subject to any bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting the enforcement of creditors' rights generally.

(c)

The Seller represents and warrants that (a) the Seller is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the power to enter into and perform its obligations under this Agreement, and (b) this Agreement has been duly authorized by the Seller, has been duly executed and delivered by the Seller and constitutes the legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, except as such enforceability may be subject to the effect of general principles of equity or limited by or subject to any bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting the enforcement of creditors' rights generally.

(d)

GECC represents and warrants that (a) GECC is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the power to enter into and perform its obligations under this Agreement, and (b) this Agreement has been duly authorized by GECC, has been duly executed and delivered by GECC and constitutes the legal, valid and binding obligation of GECC enforceable against GECC in accordance with its terms, except as such enforceability may be subject to the effect of general principles of equity or limited by or subject to any bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting the enforcement of creditors' rights generally.

5.

No Waivers,.

No failure or delay by any Party to this Agreement in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law or in any other document, instrument or agreement executed in connection with this Agreement.

6.

Severability.

 If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term thereof, such provision shall be fully severable, this Agreement shall be construed and enforced as if such illegal, invalid of unenforceable provision had never comprised a part thereof, and the remaining provisions thereof

shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance therefrom.

7.

Modification in Writing.

No modification, consent, amendment, or waiver of any provision of this Agreement, and no consent to any departure by the Parties therefrom, shall be effective unless the same shall be in writing and signed by an officer of the Buyer, and then shall be effective only in the specific instance and for the specific purpose for which given.

8.

Successors and Assigns.

All covenants and agreements contained in this Agreement shall be binding on the Parties and their successor and assigns and. shall inure to the benefit of the Buyer and its successors and assigns. Neither Party shall have the right to assign this Agreement without the express written consent of the other Party.

9.

Governing Law.

The laws of the State of New York applicable to contracts shall govern the validity, interpretation, and performance of this Agreement. Any action to enforce or interpret this Agreement shall be commenced or maintained only in, and each party consents to the jurisdiction of, a New York court of competent jurisdiction in New York, New York or a federal court of competent jurisdiction in New York, New York, and each party waives any venue, convenient forum, removal, jurisdiction or other rights to the contrary.

10.

Expenses.

Each Party agrees to pay, and save the other Party harmless against liability for the payment of all, all fees and expenses of the other Party, including, without limitation, attorneys' fees and disbursements, incurred in connection with enforcing any rights under this Agreement, including, without limitation, costs and expenses incurred in any bankruptcy case.

11.

Notices.

All notices, requests, demands and other communications to either Party shall be in writing 'and shall be given to such Party at its address or telecopier number set forth below or such other address or telecopier number as such Party may hereafter specify. Each such notice, request or other communication shall be effective (a) if given by registered or certified mail, postage prepaid, return receipt requested, as of the date of delivery shown on the return receipt, or (b) if given by any other means, including by hand, overnight courier or facsimile transmission, when delivered to the address or telecopier number specified below.

If to the Guarantor:

Northeast Utilities

107 Selden Street

Berlin, CT 06070

Telecopier: (860) 665-2807

Attn: John J. Roman

If to Ameresco:

Ameresco, Inc.

111 Speen Street, Suite 410

Framingham, MA 01701

Telecopier: (508) 661-2200

Attn: General Counsel

If to the Seller:

Select Energy Services, Inc.

111 Speen Street, Suite 410

Framingham, MA 01701

Telecopier: (508) 661-2200

Attn: General Counsel

If to GECC

General Electric Capital Corporation

2000 Corporate Ridge, Suite 1095

McLean, VA 22102

Telecopier: (703) 749-3527

Attn: Federal Finance Risk and Operations Manager

12.

Complete Agreement.

This Agreement constitutes the entire agreement between the Parties and supersedes and nullifies all prior negotiations, proposals or stipulations. There are no prior or contemporaneous agreements or presentations not included or provided for herein. No agent or representative of either party has authority to make, nor is either party relying upon, any representation not expressly contained herein.

13.

No Trustee Liability.

  No Trustee or shareholder of Guarantor shall be held to any liability whatsoever for any obligation under this Agreement, and such Agreement shall not be enforceable against any such Trustee in their or his or her individual capacities or capacity. This Agreement shall be enforceable against the Trustees of Guarantor only as such, and every person, firm, association, trust or corporation having any claim or demand arising under this Agreement and relating to Guarantor, its shareholders or Trustee shall look solely to the trust estate of Guarantor for the payment or satisfaction thereof.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF,-the undersigned have executed this Agreement as of the date first above written.

GENERAL ELECTRIC CAPITAL CORPORATION	AMERESCO, INC.
By: /s/ Robert Whartenby	By: /s/ Andrew B. Spence
Name:  Robert Whartenly	Name:  Andrew B. Spence
Title: Risk & Operations Manager	Title: VP/CFO

NORTHEAST UTILITIES

By:

/s/ David R. McHale

Name:

 David R. McHale

Title:

 Senior VP & CFO

EX-15

August 4, 2006

Northeast Utilities
107 Selden Street
Berlin, CT 06037

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim financial information of Northeast Utilities and subsidiaries (the “Company”) for the periods ended June 30, 2006 and 2005, as indicated in our report dated August 4, 2006 (which report includes an explanatory paragraph related to significant charges recorded in connection with the Company’s decision to exit certain business lines and the presentation of certain components of the Company’s generation business as discontinued operations); because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, is incorporated by reference in Registration Statement Nos. 33-34622, 33-40156, and 333-128811 on Forms S-3 and Registration Statement Nos. 33-63023, , 333-63144 and 333-121364 on Forms S-8 of Northeast Utilities.

We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

/s/	Deloitte & Touche LLP
	Deloitte & Touche LLP

Hartford, Connecticut

EX-31

Exhibit 31

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Charles W. Shivery, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Northeast Utilities (the registrant);

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

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

(d)

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 (the registrant's fourth fiscal quarter in the case of an annual report) 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 the 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:  August 4, 2006

/s/	Charles W. Shivery
	Charles W. Shivery
	Chairman, President and Chief Executive Officer
	(Principal Executive Officer)

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David R. McHale, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Northeast Utilities (the registrant);

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

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

(d)

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 (the registrant's fourth fiscal quarter in the case of an annual report) 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 the 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:  August 4, 2006

/s/	David R. McHale
	David R. McHale
	Senior Vice President and Chief Financial Officer
	(Principal Financial Officer)

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Northeast Utilities (the registrant) on Form 10-Q for the period ending June 30, 2006 as filed with the Securities and Exchange Commission (the Report), we, Charles W. Shivery, Chairman, President and Chief Executive Officer of the registrant and David R. McHale, Senior Vice President and Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 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 result of operations of the registrant.

/s/	Charles W. Shivery
	Charles W. Shivery
	Chairman, President and Chief Executive Officer

/s/	David R. McHale
	David R. McHale
	Senior Vice President and Chief Financial Officer

Date:  August 4, 2006

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.

EX-31

Exhibit 31

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Cheryl W. Grisé, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of The Connecticut Light and Power Company (the registrant);

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

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

(d)

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 (the registrant's fourth fiscal quarter in the case of an annual report) 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 the 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:  August 4, 2006

/s/	Cheryl W. Grisé
	Cheryl W. Grisé
	Chief Executive Officer
	(Principal Executive Officer)

EX-4.12.5

Exhibit 4.12.5

AMENDMENT NO. 6

TO AMENDED AND RESTATED RECEIVABLES PURCHASE AND SALE
AGREEMENT

AMENDMENT AGREEMENT, dated as of July 5, 2006, among CL&P RECEIVABLES CORPORATION, a Connecticut corporation (the "Seller"), THE CONNECTICUT LIGHT AND POWER COMPANY, a Connecticut corporation, ("CL&P") as Collection Agent and Originator, CAFCO, LLC, a Delaware limited liability company ("CAFCO"), CITIBANK, N.A. ("Citibank" ) and CITICORP NORTH AMERICA, INC., a Delaware corporation ("CNAI"), as agent ("Agent").

Preliminary Statements.  (1)

The Seller, CL&P, CAFCO, Citibank and CNAI, as Agent, are parties to an Amended and Restated Receivables Purchase and Sale Agreement dated as of September 30, 1997, as amended and restated as of March 30, 2001 and as further amended as of July 11, 2001, as of July 10, 2002, as of July 9, 2003, as of July 7, 2004 and as of July 6, 2005 (the "Agreement"; capitalized terms not otherwise defined herein shall have the meanings attributed to them in the Agreement), pursuant to which the Seller is prepared to sell undivided fractional ownership interests of its Receivables to the Conduit and the Banks; and

(2)

The Seller, CL&P, CAFCO, Citibank  and CNAI, as Agent, desire to amend the Agreement.

NOW, THEREFORE, the parties hereto hereby agree as follows:

SECTION 1.

Amendments to Agreement.  Subject to the conditions precedent set forth in Section 2 hereof, the definition of "Commitment Termination Date" in Section 1.01 of the Agreement is amended by deleting the date "July 5, 2006" in line one thereof and replacing it with the date "July 3, 2007."

SECTION 2.

Conditions Precedent.  The effectiveness of this Amendment Agreement and the obligations of the Conduit and the Banks to make any Purchase on or after July 5, 2006 is conditioned upon the receipt by the Agent of evidence satisfactory to it that (a) the DPUC and the Securities and Exchange Commission have granted such approvals as may be necessary in connection with the implementation of this Amendment Agreement, or (b) such approvals required in connection herewith as have heretofore been granted remain in full force and effect thus requiring no further approvals.

SECTION 3.

Confirmation of Agreement.  Except as herein expressly amended, the Agreement is ratified and confirmed in all respects and shall remain in full force and effect in accordance with its terms.  Each reference in the Agreement to "this Agreement," "hereof" or words of like import shall mean the Agreement as amended by this Amendment Agreement and as hereinafter amended or restated.

SECTION 4.

GOVERNING LAW.  THIS AMENDMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

SECTION 5.

Execution in Counterparts.  This Amendment Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Amendment Agreement.  Delivery of an executed counterpart of a signature page to this Amendment Agreement by facsimile shall be effective as delivery of a manually executed counterpart of this Amendment Agreement.

SECTION 6.

Seller’s Representations and Warranties.  The Seller represents and warrants that this Amendment Agreement has been duly authorized, executed and delivered by the Seller pursuant to its corporate powers and constitutes the legal, valid and binding obligation of the Seller.  The Seller also makes each of the representations and warranties contained in Section 4.01 of the Agreement (after giving effect to this Amendment Agreement) as of the date hereof.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the parties have caused this Amendment Agreement No. 6  to be executed by their respective officers thereunto duly authorized, as of the date first above written.

CL&P RECEIVABLES CORPORATION

By: /s/ Patricia C. Cosgel

       Name:  Patricia C. Cosgel

       Title:  Assistant Treasurer - Finance

THE CONNECTICUT LIGHT AND

POWER COMPANY

By: /s/ Patricia C. Cosgel

       Name:  Patricia C. Cosgel

       Title:  Assistant Treasurer - Finance

CAFCO, LLC

By: Citicorp North America, Inc.,

       as Attorney-in-Fact

      By: /s/ Derek L. Riddick

            Name:  Derek L. Riddick

            Title:  Vice President

CITIBANK, N.A.

By: /s/ Derek L. Riddick

      Name:  Derek L. Riddick

      Title:  Vice President

CITICORP NORTH AMERICA, INC., as Agent

By: /s/ Derek L. Riddick

      Name:  Derek L. Riddick

      Title:  Vice President

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David R. McHale, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of The Connecticut Light and Power Company (the registrant);

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

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

(d)

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 (the registrant's fourth fiscal quarter in the case of an annual report) 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 the 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:  August 4, 2006

/s/	David R. McHale
	David R. McHale
	Senior Vice President and Chief Financial Officer
	(Principal Financial Officer)

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of The Connecticut Light and Power Company (the registrant) on Form 10-Q for the period ending June 30, 2006 as filed with the Securities and Exchange Commission (the Report), we, Cheryl W. Grisé, Chief Executive Officer of the registrant and David R. McHale, Senior Vice President and Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 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 result of operations of the registrant.

/s/	Cheryl W. Grisé
	Cheryl W. Grisé
	Chief Executive Officer

/s/	David R. McHale
	David R. McHale
	Senior Vice President and Chief Financial Officer

Date:  August 4, 2006

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.

EX-31

Exhibit 31

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Cheryl W. Grisé, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Public Service Company of New Hampshire (the registrant);

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

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

(d)

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 (the registrant's fourth fiscal quarter in the case of an annual report) 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 the 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:  August 4, 2006

/s/	Cheryl W. Grisé
	Cheryl W. Grisé
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David R. McHale, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Public Service Company of New Hampshire (the registrant);

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

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

(d)

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 (the registrant's fourth fiscal quarter in the case of an annual report) 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 the 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:  August 4, 2006

/s/	David R. McHale
	David R. McHale
	Senior Vice President and Chief Financial Officer
	(Principal Financial Officer)

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Public Service Company of New Hampshire (the registrant) on Form 10-Q for the period ending June 30, 2006 as filed with the Securities and Exchange Commission (the Report), we, Cheryl W. Grisé, Chief Executive Officer of the registrant, and David R. McHale, Senior Vice President and Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 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 result of operations of the registrant.

/s/	Cheryl W. Grisé
	Cheryl W. Grisé
	Chief Executive Officer

/s/	David R. McHale
	David R. McHale
	Senior Vice President and Chief Financial Officer

Date:  August 4, 2006

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.

EX-31

Exhibit 31

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Cheryl W. Grisé, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Western Massachusetts Electric Company (the registrant);

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

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

(d)

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 (the registrant's fourth fiscal quarter in the case of an annual report) 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 the 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:  August 4, 2006

/s/	Cheryl W. Grisé
	Cheryl W. Grisé
	Chief Executive Officer
	(Principal Executive Officer)

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David R. McHale, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Western Massachusetts Electric Company (the registrant);

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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

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

(d)

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 (the registrant's fourth fiscal quarter in the case of an annual report) 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 the 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:  August 4, 2006

/s/	David R. McHale
	David R. McHale
	Senior Vice President and Chief Financial Officer
	(Principal Financial Officer)

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Western Massachusetts Electric Company (the registrant) on Form 10-Q for the period ending June 30, 2006 as filed with the Securities and Exchange Commission (the Report), we, Cheryl W. Grisé, Chief Executive Officer of the registrant, and David R. McHale, Senior Vice President and Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 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 result of operations of the registrant.

/s/	Cheryl W. Grisé
	Cheryl W. Grisé
	Chief Executive Officer

/s/	David R. McHale
	David R. McHale
	Senior Vice President and Chief Financial Officer

Date:  August 4, 2006

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the registrant and will be retained by the registrant and furnished to the Securities and Exchange Commission or its staff upon request.