AN

INTERCONNECTION AGREEMENT

BETWEEN

NIAGARA MOHAWK POWER CORPORATION

AND

EMPIRE GENERATING CO, LLC

INTERCONNECTION AGREEMENT (the “Agreement”) is made as of January 15, 2004, between Niagara Mohawk Power Corporation, a National Grid company (“Niagara Mohawk”), a New York Corporation, and Empire Generating Co, LLC, a New York limited liability company (the “Producer”). (Collectively, Producer and Niagara Mohawk may be referred to as the “Parties”, or individually, as a “Party.”)

WHEREAS, the Producer is developing a power production facility to be located in the City of Rensselaer, County of Rensselaer, New York (the “Production Facility”);

WHEREAS, the Producer and Niagara Mohawk desire to provide for the interconnection of the Production Facility to Niagara Mohawk’s Transmission System under the terms and
conditions set forth herein; and,

WHEREAS, certain Upgrades to Niagara Mohawk’s system will be needed solely for Producer’s benefit and will not support any other transmission user.

NOW THEREFORE, in consideration of the mutual representations, covenants and agreements set forth herein, the Parties to this Agreement agree as follows:

ARTICLE I

DEFINITIONS

The following terms, when used herein with initial capitalization, shall have the meanings specified in this section.

1.1  “Agreement” shall mean this Interconnection Agreement between Niagara Mohawk and

the Producer, including all exhibits hereto, as the same may be amended, supplemented, revised, altered, changed, or restated in accordance with its terms.

1.2  “Bulletin No. 756” or “ESB 756” shall mean that certain internal Niagara Mohawk

document dated 2001, 2” printing June, entitled “Supplement to Specifications for

Electrical Installations; Parallel Generation Requirements” and designated Electric

System Bulletin No. 756 and its Appendix C, as amended or superseded, as available on Niagara Mohawk’s website.

1.3  “Commercial Operation Date” shall follow the Initial Synchronization Date and shall

mean the date after all pre-operational testing of the Interconnection Facility has been
completed to Niagara Mohawk’s satisfaction, the Interconnection Facility has been
energized, and the Producer has commenced selling energy or capacity into the
wholesale power market administered by the NYISO pursuant to the NYISO OATT.
Producer shall provide Niagara Mohawk written notice at least sixty (60) days in
advance of the Commercial Operation Date and will reaffirm this date, or provide notice
of a revised date, no less than twenty (20) days prior to the previously notified date.

1.4  “Commercially Reasonable Efforts” shall mean efforts which are designed to enable a

Party, directly or indirectly, to satisfy expeditiously a condition to, or otherwise assist in

1

the consummation of, the actions contemplated by this Agreement and which do not

require the performing Party to expend any finds or assume liabilities other than

expenditures and liabilities which are customary and reasonable in nature and amount in the context of the actions contemplated by this Agreement.

1.5  “Confidential Information” shall mean any plan, specification, pattern, procedure,

design, device, list, concept, policy or compilation relating to the present or planned

business of a Party which has not been released publicly by its authorized representatives
and which has been designated as “Confidential” by the Party asserting a claim of
confidentiality, whether such Confidential Information is conveyed orally, electronically,
in writing, through inspection, or otherwise. Confidential Information as used herein also
includes Confidential Information supplied by any Party to another Party prior to the
execution of this Agreement, and such Confidential Information shall be considered in
the same trimmer and be subject to the same treatment as the Confidential Information
made available after the execution of this Agreement. Confidential Information shall also
include Confidential Information observed by any Party while visiting the premises of
another Party.

1.6  “Delivery Point” shall mean the point at which the Interconnection Facility is connected

to the Transmission System as indicated on Exhibit A. This point shall be at the jaw side
of the disconnect switch (SW #599) connecting the Interconnection Facility, new breaker
and switches to the existing bus work at the Niagara Mohawk Reynolds Road Substation

1.7 “Electricity” shall mean electric capacity as measured in MW or kW, energy as measured

in MWh or kWh, and/or ancillary services.

1.8  “Emergency Condition” shall mean a condition or situation which is deemed imminently

likely to (i) endanger life, property, or public health; or (ii) adversely affect or impair the
Transmission System, the Production Facility, or the electrical or transmission systems
of others to which Niagara Mohawk’s electrical systems are directly or indirectly
connected.

1.9  “Facilities Study” shall mean the necessary studies performed by Producer, or its third

party designee, approved by Niagara Mohawk as set forth in Article IV, Section 4.1. The Facilities Study is attached hereto as Exhibit B.

1.10 “FERC” shall mean the United States of America’s Federal Energy Regulatory

Commission or any successor organization.

1.11  “Good Utility Practice” shall mean any of the practices, methods and acts engaged in or

approved by a significant portion of the electric utility industry during the relevant time
period, or any of the practices, methods and acts which, 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 Utility Practice is not intended
to be limited to the optimum practice, method, or act, to the exclusion of all others, but

2

rather to be acceptable practices, methods, or acts generally accepted in the region in
which the Production Facility is located. Good Utility Practice shall include, but not be
limited to, NERC (defined below) criteria, rules, guidelines and standards, NPCC
(defined below) criteria, rules, guidelines and standards, New York State Reliability
Council (defined below) criteria, rules, guidelines and standards, and NYISO (defined
below) criteria, rules, guidelines and standards, where applicable, as they may be
amended from time to time including the rules, guidelines and criteria of any successor
organization to the foregoing entities. When applied to the Producer, the term Good
Utility Practice shall also include standards applicable to a utility generator connecting to
the distribution or transmission facilities or system of another utility.

1.12  “Greenbush #16 Line” shall mean the existing 115 kV circuit consisting of poles, wires,

insulators, conductors and other miscellaneous hardware between Rensselaer Cogen Facility and the existing Niagara Mohawk Greenbush Substation.

1.13  “Hazardous Substance(s)” shall mean those substances, materials, products or wastes

which are classified as hazardous or toxic under any applicable federal, state or local law,
or any regulations promulgated thereunder, effective as of the date of execution of this
Agreement, and the presence of which requires remediation, removal or cleanup under
this Agreement.

1.14  “Initial Energization Date” shall mean the date upon which construction of the

Interconnection Facility and Upgrades have been completed and have been determined by Niagara Mohawk to be completed in accordance with Power Control Order 6-1
(“PCO 6-1”) and the circuit breakers have been closed, thereby, permitting electricity to flow from Niagara Mohawk’s transmission system to the Production Facility.

1.15  “Initial Synchronization Date” shall mean a date that follows the Initial Energization

Date, and which date shall occur during the pre-operational testing of the Production
Facility and is the first date that Electricity flows from the Production Facility through
the Interconnection Facility to the Delivery Point without the need for any further major
repairs or testing as determined by Niagara Mohawk and in accordance with PCO 6-1

1.16  “Interconnection Facility” shall include all those facilities located between the

Interconnection Point and the Delivery Point necessary to effect the transfer of

Electricity produced at the Production Facility to the Transmission System, as such

facilities are described in more particularity in Article II and in Exhibit A to this

Agreement, and shall include any Modifications, replacements or upgrades made to the Interconnection Facility, and any communications and/or protection equipment installed for the operation of the Interconnection Facility.

1.17  “Interconnection Point” shall mean the point at which the Production Facility is

connected to the Interconnection Facility, as indicated on Exhibit A. This point will be at the jaw side of the disconnect switch used to connect the Production Facility to the
Interconnection Facility.

3

1.18 “Metering Point” shall mean that point at which the Electricity produced by the

Production Facility will be metered by Niagara Mohawk for purposes of billing and metering for NYISO transactions, as depicted in Exhibit A.

1.19  “Modification” shall mean any new construction, new facilities, additions,

reinforcements, alterations, improvements, appurtenances, replacements or upgrades

made to the Interconnection Facility, Upgrades, Transmission System, or the Production
Facility as required by the NYISO or revised reliability standards, after the Commercial
Operation Date. “Modification” as it applies to the Interconnection Facility, Upgrades or
Transmission System shall also include Modifications which are required to support the
operations of the Producer including those required by: (i) changes in the operations of
the Production Facility after the Effective Date as hereinafter defined, or (ii) changes in
the technology employed at the Production Facility after the Effective Date.

1.20 “NERC” shall mean the North American Electric Reliability Council or any successor

organization.

1.21 “New York Control Area” shall have the same meaning as in the Independent System

Operator Agreement establishing the New York ISO (as defined below).

1.22 “New York ISO” or “NYISO” shall mean the New York Independent System Operator,

Inc. or any successor thereto.

1.23 “Niagara Mohawk” shall mean Niagara Mohawk Power Corporation and its successors

and permitted assigns.

1.24  “Niagara Mohawk Properties” shall mean those parcels of and/or interest in real property

that Niagara Mohawk uses for its transmission facilities upon which portions of the Interconnection Facility will be constructed.

1.25  “NPCC” shall mean the Northeast Power Coordinating Council (a reliability council

under Section 202 of the Federal Power Act) or any successor organization.

1.26  “NYISO OATT” shall mean the FERC-approved Open Access Transmission Tariff for

the NYISO and/or the FERC-approved Service Tariff for the NYISO, as applicable, and as it may be amended from time to time.

1.27 “NYPSC” shall mean the New York Public Service Commission or any successor

thereto.

1.28 “NYSRC” shall mean the New York State Reliability Council or any successor

organization.

1.29  “Original Greenbush #16 Line” shall mean that portion of the Greenbush #16 Line to be

removed between the Rensselaer Cogen Facility generating facility and the existing Niagara Mohawk structure number 29.

4

1.30 “Permanent Greenbush #16 Line” shall mean that new portion of the Greenbush # 16

Line to be constructed and attached to the same structures supporting the Interconnection

Facility between the Rensselaer Cogen Facility generating facility and the existing

Niagara Mohawk structure number 29.

1.31 “Producer” shall mean Empire Generating Co, LLC, and its successors and permitted

assigns.

1.32  “Production Facility” shall mean Producer’s Electricity Production facility with a

maximum net Winter rating of 672 MW and with a maximum net Summer rating of 603 MW located in the City of Rensselaer, County of Rensselaer New York, to be owned, operated and maintained by Producer.

1.33  “Property” and “Properties” shall mean that aggregate real property interest necessary for

construction, operation and maintenance of the Interconnection Facility, which real

property interest may be acquired in fee ownership, via easement or option, or other

means of acquisition of property rights acceptable to Niagara Mohawk, or such real

property interest held by Niagara Mohawk to which Producer will be allowed access for the removal of the Original Greenbush #16 Line, construction and removal of the
Temporary Greenbush #16 Line, construction of the Permanent Greenbush #16 Line, and for other necessary modifications to the Greenbush #16 Line.

1.34  “Rensselaer Cogen Facility” shall mean the 79 MW Rensselaer Cogeneration Facility,

located at 39 Riverside Avenue, Rensselaer, New York 12144, currently owned and
operated by El Paso Merchant Energy, North America, or its successors or assigns.

1.35  “Retail Tariff” shall means Niagara Mohawk’s Retail Tariff, New York Public Service

Commission (“NYPSC”) No. 207 - Electricity as approved by the NYPSC and all subsequent revisions, as it may be amended from time to time.

1.36  “System Reliability Impact Study” or “SRIS” shall mean that study entitled

“Interconnection Study for the Empire State Newsprint Project,” authored by the

Washington Group and approved by the NYISO Operating Committee on November 14,
2001.

1.37  “Temporary Greenbush #16 Line” shall mean that new temporary portion of the

Greenbush #16 Line to be constructed between the Rensselaer Cogen Facility generating facility and the existing Niagara Mohawk structure number 29.

1.38  “Transmission System” shall mean the properties, structures, facilities, equipment,

devices, and apparatus wholly or partly owned or leased by, or under contract to, or under the control of Niagara Mohawk or its Affiliates, other than the Interconnection Facility, which are necessary to interconnect the Production Facility to the New York Control Area, or are necessary for purposes of providing transmission and Retail Tariff services, including services under the NYISO Tariff.

5

1.39 “Upgrades” shall mean the modifications, reinforcements and additions to Niagara

Mohawk’s Transmission System and distribution facilities required or recommended to
be constructed and installed prior to the Commercial Operation Date in order for Niagara
Mohawk to interconnect the Production Facility to the Transmission System in
accordance with NYISO Tariff rules and regulations, as identified in the Facilities Study
(Exhibit B to this Agreement), and pursuant to this Agreement, and that will be needed
solely for Producer’s benefit and will not support any other transmission user.

Interpretation. The following rules shall govern the interpretation of this Agreement, including its definitions. The terms “includes” or “including” shall not be limiting, whether or not
followed by the words “without limitation.” References to an article or section shall mean an
article or section of this Agreement unless the context requires otherwise. References to a given agreement or instrument shall be a reference to that agreement or instrument as modified,
amended, supplemented and restated.

ARTICLE II

AGREEMENT TO INTERCONNECT

DESCRIPTION OF INTERCONNECTION FACILITY

2.1 The Parties agree to interconnect the Production Facility to the Transmission System in

accordance with the terms of this Agreement.

2.2  Term: This Agreement shall become effective as of the date first above written (the

“EFFECTIVE DATE”), subject to its approval or acceptance for filing by the FERC, and
shall continue in effect for thirty (30) years thereafter and shall be automatically renewed
for each successive one-year period thereafter.  This Agreement may be terminated by
the Producer after giving Niagara Mohawk ninety (90) Calendar Days advance written
notice, or by Niagara Mohawk notifying FERC after the Production Facility is retired..

2.3  The Interconnection Facility shall consist generally of those facilities, including but not

limited to a new 345 kV high voltage transmission line and all associated equipment and upon which said facilities are located, necessary to effect the transfer of electricity
produced at the Production Facility into the Transmission System. The Interconnection Facility shall connect with the Production Facility at the Interconnection Point and the Interconnection Facility shall connect with the Transmission System at the Delivery Point, as indicated on the one-line diagram in Exhibit A.

2.4  The Production Facility shall include all facilities and equipment up to and including the

Production Facility’s high side generator breaker, line-side disconnect switch jaws, as
indicated on Exhibit A. Producer agrees that the installation of the electrical equipment
and the operation of the Production Facility must meet or exceed the standards of Good
Utility Practice, all requirements of Bulletin No. 756 and the NYISO; provided, however,
that in the event of a conflict between the requirements, rules and regulations of the

6

NYISO and the requirements of Bulletin No. 756, the requirements, rules and regulations of the NYISO shall govern.

2.5  Producer recognizes that nothing in this Agreement or in the Producer’s financial support

of the Interconnection Facility confers upon the Producer any right to transmit electricity over the Transmission System. However, the interconnection of the Production Facility to the Transmission System contemplated herein will allow Producer to access the New York Control Area for purposes of Producer’s stated intent to participate in the wholesale market administered by the NYISO pursuant to the NYISO OATT.

2.6  Niagara Mohawk shall use Good Utility Practice to own, operate and maintain the

Interconnection Facility, Upgrades and Transmission System. Niagara Mohawk does not, however, guarantee or warrant uninterrupted availability of the Interconnection Facility, Upgrades or the Transmission System. Any curtailment of deliveries over the
Interconnection Facility, Upgrades or the Transmission System shall be governed by Good Utility Practice, the terms and conditions of the NYISO OATT, ESB 756 and any other tariffs, approved by a regulatory body having jurisdiction.

2.7  Niagara Mohawk, in accordance with the rates, terms and conditions of the Retail Tariff,

shall provide Producer with station service power, if so requested or authorized. Producer
agrees to complete all necessary applications and forms as required by the Retail Tariff.

2.8  Without limiting its rights hereunder, Niagara Mohawk reserves the right to operate the

primary means of disconnect on the Producer’s side of the Interconnection Point.

Niagara Mohawk shall exercise such right of disconnect (a) in accordance with Bulletin No. 756, (b) in the event of an Emergency Condition, (c) after giving Producer
reasonable notice under the circumstances, (d) in a non-discriminatory manner, and (e) in accordance with Good Utility Practice.

2.9  If the Producer relies on Niagara Mohawk’s system protection equipment and practices

for protection of the Production Facility or if the Producer relies on any other of Niagara Mohawk’s equipment for support of its operations, the Producer agrees to release,
indemnify, defend, and save harmless Niagara Mohawk, its agents and employees,
officers, directors, parent(s) and affiliates, against any and all claims, judgments, cost,
liability, damage, injury, penalties, fines (civil or criminal), or other costs arising from
any damage or loss to the Production Facility, as a result of such reliance, whether the
loss, damage or injury result to or be sustained by Producer or any other persons, firms or corporations. To the extent the Producer relies on any other of Niagara Mohawk’s
equipment for support of Producer’s operations, Producer shall agree to indemnify
Niagara Mohawk in accordance with this Section 2.9 except in the event of Niagara
Mohawk’s gross negligence or willful misconduct.

7

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF PARTIES

3.1  Producer is a Corporation duly organized and validly existing under the laws of the State

of New York. Producer is qualified to do business under the laws of the State of New York, is in good standing under the laws of the State of New York, has the power and authority to own its properties, to carry on its business as now being conducted, and to enter into this Agreement and the transactions contemplated herein and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement, and is duly authorized to execute and deliver this Agreement and
consummate the transactions contemplated herein.

3.2  Niagara Mohawk is a corporation duly organized, validly existing and qualified to do

business under the laws of the State of New York, is in good standing under its

certificate of incorporation and the laws of the State of New York, has the corporate authority to own its properties, to carry on its business as now being conducted, and to enter into this Agreement and the transactions contemplated herein and perform and carry out all covenants and obligations on its part to be performed under and pursuant to this Agreement, and is duly authorized to execute and deliver this Agreement and
consummate the transactions contemplated herein.

3.3  The Producer and Niagara Mohawk each represents that: (a) upon receipt of all

governmental permits, licenses and approvals required to construct and operate the

Production Facility, Producer is not prohibited from entering into this Agreement and
discharging and performing all covenants and obligations on its part to be performed
under and pursuant to this Agreement; (b) upon the acceptance of the terms of this
Agreement by FERC, the execution and delivery of this Agreement, the consummation
of the transactions contemplated herein including the fulfillment of and compliance with
the provisions of this Agreement will not conflict with or constitute a breach of or a
default under any of the terms, conditions or provisions of any law, rule or regulation,
any order, judgment, writ, injunction, decree, determination, award or other instrument
or legal requirement of any court or other agency of government, or any contractual
limitation, corporate restriction or outstanding trust indenture, deed of trust, mortgage,
loan agreement, lease, other evidence of indebtedness or any other agreement or
instrument to which it is a party or by which it or any of its property is bound and will
not result in a breach of or a default under any of the foregoing; and (c) unless this
Agreement is materially modified by any court or appropriate regulatory authority having
jurisdiction and subsequently terminated, this Agreement shall be a legal, valid and
binding obligation enforceable in accordance with its terms, except as limited by any
subsequent order of any court or appropriate regulatory authority having jurisdiction, or
by any applicable reorganization, insolvency, liquidation, readjustment of debt,
moratorium, or other similar laws affecting the enforcement of rights of creditors
generally as such laws may be applied in the event of a reorganization, insolvency,
liquidation, readjustment of debt or other similar proceeding of or moratorium applicable
to the Party and by general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law.)

8

ARTICLE IV

FACILITIES STUDY

4.1  A Facilities Study attached hereto as Exhibit B shall be performed by Producer, or a third

party selected by the Producer subject to Niagara Mohawk’s approval. The Facilities
Study shall estimate the cost of the equipment, engineering, procurement and
construction and a preliminary schedule for the work needed to implement the
recommendations of the System Reliability Impact Study and, in accordance with Good
Utility Practice, to physically and electrically connect the Production Facility to the
Transmission System. The Facilities Study shall include those studies that, in the
judgment of Niagara Mohawk, are necessary to determine (a) an appropriate
Interconnection Point and Delivery Point, (b) equipment and the facilities necessary and
desirable for the construction and operation of any new or additional or modified
transmission and distribution facilities, including but not limited to the Interconnection
Facility and Upgrades, the electrical switching configuration of the connection
equipment, the transformer(s), switchgear, meters, and other station equipment, (c) the
interconnection voltage and operational constraints, (d) the estimated costs of facilities
and/or the costs for Niagara Mohawk’s and Producer’s design, review, assistance and
inspection of facilities to be designed and constructed by Producer and/or Niagara
Mohawk, (e) the estimated costs of any Upgrades, (f) the removal of the Original
Greenbush #16 Line and Temporary Greenbush #16 Line, and the design, engineering,
and construction of the Temporary Greenbush #16 Line, Permanent Greenbush #16 Line,
and other necessary modifications to the Greenbush #16 Line (g) the estimated time
required to complete construction, removal, and installation of such facilities, and (h) a
mutually agreed upon schedule and estimated budget for the activities contemplated
under this Agreement, including but not limited to, the design, engineering, procurement
activities and construction of the Interconnection Facility, Temporary Greenbush #16
Line, Permanent Greenbush #16 Line, other necessary modifications to the Greenbush
#16 Line and Upgrades, and the removal of the Original Greenbush #16 Line and
Temporary Greenbush #16 Line.

4.2  Niagara Mohawk shall review the Facilities Study as contracted and paid for by the

Producer. Niagara Mohawk retains the right to require modifications of any aspect of the
proposal for the Interconnection Point, Interconnection Facility, Delivery Point, and any
new or additional or modified transmission and distribution facilities, including, but not
limited to the Greenbush #16 Line, Original Greenbush #16 Line, Temporary Greenbush
#16 Line and Permanent Greenbush #16 Line, and Upgrades as presented in the Facilities
Study, prior to Niagara Mohawk’s approval of the Facilities Study. Construction of the
Interconnection Facility, Temporary Greenbush #16 Line, Permanent Greenbush #16

Line, other necessary modifications to the Greenbush #16 Line, and Upgrades, and

removal of the Original Greenbush #16 Line and Temporary Greenbush #16 Line, shall
proceed only following: (a) Niagara Mohawk’s approval of the Facilities Study, (b)
Producer’s satisfaction, as determined by Niagara Mohawk, of the pre-conditions set
forth in Article VII, (c) execution of this Agreement, (d) the receipt by Niagara Mohawk

9

of a written notice from Producer to proceed with such activities and, (e) receipt by Niagara Mohawk of a money deposit per Article XV of this Agreement.

4.3  The Parties recognize that as of the Effective Date of this Agreement the Interconnection

Facility has not been authorized by the NYPSC, and, therefore, is subject to a certificate
to be issued by the NYPSC pursuant to Article VII of the New York Public Service Law.

ARTICLE V

REAL PROPERTY

5.1 OBTAINING REAL PROPERTY INTERESTS, AND NECESSARY LICENSES,

PERMITS, AND APPROVALS

5.1.1  Producer will acquire all interests in real property that are necessary, in the

opinion of Niagara Mohawk, for the Producer and/or Niagara Mohawk, as

applicable, to construct, reconstruct, relocate, operate, repair, maintain, and

remove the Interconnection Facility, Greenbush #16 Line, Temporary Greenbush
#16 Line, and Permanent Greenbush #16 Line in accordance with the terms and
provisions of this Agreement. Such real property interests may be acquired by
Producer in the form of an option acceptable to both parties. Sueh options which
shall name Niagara Mohawk as the optionee and grantee of the real property
interests and shall be exercised by the Producer in favor of Niagara Mohawk to
provide permanent easements or fee title necessary for the construction,
reconstruction, relocation, operation, repair, maintenance and removal of the
Interconnection Facility, Greenbush #16 Line, Temporary Greenbush #16 Line,
and Permanent Greenbush #16 Line.

5.1.2  Niagara Mohawk shall authorize Producer to place applicable portions of the

Interconnection Facility on existing Niagara Mohawk real property interests. The
acreage and width of Niagara Mohawk’s fee-owned real property necessary for
the Interconnection Facility shall be subject to Niagara Mohawk’s approval.

5.1.3  Producer shall be responsible for preparing applications for and obtaining all

government permits, authorizations, licenses, certificates and approvals necessary
to construct, relocate, operate, repair, maintain, and remove the Interconnection
Facility, Temporary Greenbush #16 Line, Permanent Greenbush #16 Line, other
necessary modifications to the Greenbush #16 Line, and Upgrades on terms and
conditions acceptable to Niagara Mohawk. Said applications shall be prepared by
Producer for submittal by Niagara Mohawk and/or Producer, where appropriate.
Niagara Mohawk, at Producer’s expense, shall be responsible for maintaining in
full force and effect all permits, authorizations, licenses, certificates, and

approvals necessary to operate and maintain the Interconnection Facility and

Upgrades. Producer, at Producer’s expense, shall be responsible for maintaining
in full force and effect all permits, authorizations, licenses, certificates, and
approvals necessary to operate and maintain the Production Facility. Producer
and Niagara Mohawk agree to comply in all material respects with all federal,

10

state and local environmental and other laws, ordinances, rules, regulations,
permits, licenses, approvals, certificates and requirements thereunder as may
apply to each Party in connection with the activities each performs pursuant to
this Agreement.

5.1.4  Producer agrees that, prior to the transfer by Producer of any real property

interest to Niagara Mohawk under the terms of this Agreement, Producer shall
conduct, or cause to be conducted, and be responsible for all costs of sampling,
soil testing, and any other methods of investigation which would disclose the
presence of any Hazardous Substance which has been released on the Property or
which is present upon the Property by migration from an external source, and
which existed on the Property prior to the transfer, and shall notify Niagara
Mohawk in writing as soon as reasonably practicable after learning of the
presence of Hazardous Substance upon said Property interest. Producer agrees to
indemnify, defend, and save Niagara Mohawk, its agents and employees, officers,
directors, parents and affiliates, harmless from and against any loss, damage,
liability (civil or criminal), cost, suit, charge (including reasonable attorneys’
fees), expense, or cause of action, for the removal or management of any
Hazardous Substance and relating to any damages to any person or property
resulting from presence of such Hazardous Substance.

5.1.5  Prior to transfer of control of the Interconnection Facility from Producer to

Niagara Mohawk, Niagara Mohawk shall be given the opportunity to inspect,

perform final testing and approve the Interconnection Facility and review all

appropriate approvals, certificates, permits, and authorizations. Prior to transfer of
control of the Interconnection Facility from Producer to Niagara Mohawk,
Producer shall be responsible for correcting within thirty (30) days of discovery
any situations that are contrary, in Niagara Mohawk’s sole judgment, to Good
Utility Practice, Bulletin No. 756, Niagara Mohawk’s standards, procedures,
practices and functional specification requirements, standard Niagara Mohawk
environmental, construction, forestry, and right-of-way management practices
and procedures, Niagara Mohawk’s Standard Environmental Management and
Construction Plan Protection Measures and Niagara Mohawk’s Transmission
Right-of-Way Management Plans or any applicable NYISO, NYPSC, NYSRC,
NPCC, NERC, or FERC standards and criteria requirements, which such
requirements shall govern in the event of a conflict between NYISO, NYPSC,
NYSRC, NPCC, NERC or FERC and the requirements of Bulletin No. 756,
which, in Niagara Mohawk’s sole judgment, materially and adversely affect the
operability of the Interconnection Facility or are contrary to applicable laws or
permits, and for correcting any material deficiencies which could impede the
transfer of control of the Interconnection Facility to Niagara Mohawk pursuant to
this Agreement. Producer shall be responsible for the costs associated with
making such corrections.

5.2 ACCESS RIGHTS

11

5.2.1   Niagara Mohawk hereby grants to Producer access and licenses, as necessary for
 Producer to construct the Interconnection Facility, Temporary Greenbush #16
 Line, Permanent Greenbush #16 Line, other necessary modifications to the
 Greenbush #16 Line, and to remove both the Temporary Greenbush #16 Line and
 the Original Greenbush #16 Line.

5.2.2   Producer hereby grants to Niagara Mohawk all necessary access, and licenses,
 including adequate and continuing rights of access to Producer’s property, as
 necessary for Niagara Mohawk to construct, operate, maintain, replace, or
 remove the Interconnection Facility and to read meters in accordance with the
 terms of this Agreement and to exercise any other of its obligations under this
 Agreement. Producer hereby agrees to execute such grants, deeds, licenses,
 instruments or other documents as Niagara Mohawk may require to enable it to
 record such rights of way, easements, and licenses.

5.3 RIGHT OF WAY ACQUISITION AND EXPENSE

5.3.1 Producer shall pay and be solely liable for all expenditures and paying for all

activities incurred or engaged in by Producer and Niagara Mohawk in acquiring
necessary real property interests and associated permits and authorizations
required for Producer and Niagara Mohawk, as appropriate, to construct,
reconstruct, relocate, operate, repair, maintain, as applicable, the Interconnection
Facility, Temporary Greenbush #16 Line, Permanent Greenbush #16 Lines, other
necessary modifications to the Greenbush #16 Line, and Upgrades, and to remove
the Original Greenbush #16 Line, and Temporary Greenbush #16 Line, as
required pursuant or related to this Agreement. Producer shall pay fair market
value for the real property interests acquired as determined by an appraiser
retained by Producer at Producer’s expense (a copy of the appraisal shall be
provided to Niagara Mohawk free of charge) or such other value as the Parties
may agree upon in writing. Producer shall pay and be solely liable for all costs
associated with the transfer of real property rights to Niagara Mohawk, including,
but not limited to, closing costs, subdivision costs, transfer taxes and recording
fees. Producer shall reimburse Niagara Mohawk for all costs Niagara Mohawk
incurs in connection with transfers of property and any associated permits and
authorizations and in carrying out Niagara Mohawk’s responsibilities as provided
in this Agreement, including but not limited to Article IX, except as to costs
related to encroachments on existing Niagara Mohawk property, if any, that
impede the siting or construction of facilities necessary to implement the
interconnection under this Agreement.

5.3.2  Producer shall be responsible for defending and shall indemnify and hold

harmless Niagara Mohawk, its directors, officers, employees, agents and

affiliates, from and against all liabilities, expense (including litigation costs and
attorney’s fees) damages, losses, penalties, claims, demands, actions and
proceedings of any nature whatsoever for construction delays, construction or
operations cessations, claims of trespass, or other events of any nature
 12

whatsoever that arise from or are related to an issue as to the sufficiency of the
real property interests acquired or utilized by the Producer (including, but not
limited to, those real property interests from Niagara Mohawk) for the
construction, reconstruction, relocation, operation, repair, and maintenance of the
Interconnection Facility, Temporary Greenbush #16 Line, Permanent Greenbush
#16 Line, other necessary modifications to the Greenbush #16 Line, and the
removal of the Original Greenbush #16 Line and Temporary Greenbush #16
Line. In no event, shall Niagara Mohawk be held liable to Producer or third
parties for consequential, incidental or punitive damages arising from or any way
relating to an issue as to the sufficiency of the real property interests acquired or
utilized by the Producer (including, but not limited to, those real property
interests from Niagara Mohawk) for the construction, reconstruction, relocation,
operation, repair, and maintenance of the Interconnection Facility, Temporary
Greenbush #16 Lines, Permanent Greenbush #16 Line, other necessary
modifications to the Greenbush #16 Line, and removal of the Original Greenbush
#16 Line and Temporary Greenbush #16 Line.

5.4 CONVEYANCE OF PROPERTY RIGHTS AND FACILITIES CONSTRUCTED

5.4.1 The real property interests necessary for the construction, reconstruction,

relocation, operation, repair, and maintenance of the Interconnection Facility,
Permanent Greenbush #16 Line, Temporary Greenbush #16 Lines, other
necessary modifications to the Greenbush #16 Line, and Upgrades, and removal
of the Original Greenbush #16 Line and Temporary Greenbush #16 Line, that are
not already owned or controlled by Niagara Mohawk, shall be conveyed to
Niagara Mohawk in fee simple or by an easement approved by Niagara Mohawk,
with good and marketable title free and clear of all liens, encumbrances, and
exceptions to title for a sum of $1.00 at least thirty (30) days prior to the date
scheduled for the commencement of construction or removal, as applicable, of
any of the facilities described in Article VIII, Section 8.1 of this Agreement. With
respect to any approved conveyance of easements, Producer shall subordinate
pertinent mortgages to easement rights. Producer shall indemnify, defend, and
hold harmless Niagara Mohawk, its agents and employees, officers, directors,
parent(s) and affiliates, and successors in interest, from all liens and
encumbrances against the property conveyed. Producer further agrees to provide
to Niagara Mohawk a complete field survey with iron pin markers showing the
centerline of the entire Interconnection Facility right-of-way, and a 40-year
abstract of title, and a 10-year tax search for real property interests acquired by
the Producer from third parties. Prior to the execution of an option, Producer shall
be required to provide Niagara Mohawk a title insurance commitment with a
complete title report issued by a reputable and independent title insurance
company for any property rights, in fee or easement in the segment of the
Interconnection Facility from the Production Facility to Niagara Mohawk’s
existing fee-owned right-of-way, that are to be transferred to Niagara Mohawk.
At the time of the execution of an option by Producer, Producer shall provide a

13

title insurance policy naming Niagara Mohawk as the insured covering the real
property interest to be acquired for any property rights, in fee or easement in the
segment of the Interconnection Facility from the Production Facility to Niagara
Mohawk’s existing fee-owned right-of-way, that are to be transferred to Niagara
Mohawk.

5.4.2   Producer shall provide to Niagara Mohawk conformed copies of all necessary

real property interests, environmental, engineering, and other permits,

authorizations, licenses, certificates, permits, approvals and as-built drawings not otherwise prepared by or directly for, or issued to Niagara Mohawk.

5.4.3   Upon completion of removal of the Original Greenbush #16 Line and Temporary
 Greenbush #16 Line and the construction and testing of the Interconnection
 Facility, Permanent Greenbush #16 Line, other necessary modifications to the
 Greenbush #16 Line, and 60 days prior to Initial Synchronization Date of the
 Interconnection Facility, in accordance with the Schedule provided in the
 Facilities Study, Producer shall convey and transfer the Interconnection Facility,
 Permanent Greenbush #16 Line, and, as required, other necessary modifications
 to the Greenbush #16 Line, to Niagara Mohawk for a sum of $1.00.

ARTICLE VI

PILOT PROGRAM

6.1  Subject to the terms and conditions of this Agreement, Niagara Mohawk shall be the

owner and sole operator of the Interconnection Facility contemplated in this Agreement.
The Production Facility may be subject to a Payment in Lieu of Taxes (“PILOT”)
program with the Rensselaer County Industrial Development Agency (“RCIDA”). Any
proposed RCIDA PILOT program by and between the RCIDA and the Parties shall
provide that Niagara Mohawk be the owner and sole operator of the Interconnection
Facility under this Agreement. Furthermore, such RCIDA PILOT program must be
acceptable to Niagara Mohawk and Producer must obtain Niagara Mohawk’s prior
written consent for a proposed RCIDA PILOT with respect to the Interconnection
Facility.

6.2  PILOT Expenses: All costs and expenses (including attorneys’ fees) incurred by

Producer and Niagara Mohawk in connection with obtaining the RCIDA PILOT shall be
paid by Producer. In the event that the PILOT is not acceptable to Niagara Mohawk, or
in the event that the PILOT is in effect and acceptable to Niagara Mohawk but the
PILOT terminates, Producer shall pay all applicable taxes under Section 15.2.3 of this
Agreement.

14

ARTICLE VII

PRE-CONDITIONS OF DESIGN, ENGINEERING, PROCUREMENT AND
 CONSTRUCTION ACTIVITIES

7.1 PRE-CONDITIONS OF DESIGN, ENGINEERING, PROCUREMENT AND

CONSTRUCTION ACTIVITIES

Producer agrees to complete to Niagara Mohawk’s satisfaction and prior to Niagara

Mohawk’s or Producer’s, as the case may be, respective commencement of any design, engineering, procurement, or construction activities, including preparation for
construction, contemplated under this Agreement (a) all activities required in Articles IV (Facilities Study), V (Real Property), VI (PILOT Program), VIII (Section 8.1,
Construction Financing; Section 8.2.1.1, Agreement with owner of Rennselaer Cogen
Facility); (b) Niagara Mohawk and Producer have executed this Agreement; (c) Niagara Mohawk and Producer have established the Schedule, as required in Section 8.2.3; (d)
Niagara Mohawk has received a written notice from Producer to proceed with the
activities described in Article VIII, Section 8.2; and (e) Niagara Mohawk has received a money deposit per Article XV of this Agreement.

7.2  EFFECT OF FAILURE TO COMPLETE ALL PRE-CONDITIONS

In the event that Producer fails to timely and satisfactorily complete each of the pre-

conditions in this Article VII, Niagara Mohawk may terminate this agreement upon thirty

(30) days prior written notice to Producer subject to applicable NYISO and FERC requirements and Article XVII.

ARTICLE VIII

CONSTRUCTION

8.1 CONSTRUCTION FINANCING

Producer shall be responsible for arranging and securing all necessary construction

financing to support the construction activities contemplated under this Agreement.

Niagara Mohawk shall commence performance under this Agreement no earlier than the date of Producer’s closing on its construction loan financing in connection with activities related to or to be performed under this Agreement.

8.2  DESIGN, ENGINEERING AND CONSTRUCTION ACTIVITIES

8.2.1   At Producer’s expense, Producer shall design, engineer, and construct the

apparatuses, equipment and facilities located between the Production Facility and
the final 345 kV structure outside of the Reynolds Road Substation, as Depicted
in Exhibit A, and the Temporary Greenbush #16 Line, Permanent Greenbush #16
Line, other necessary modifications to the Greenbush #16 Line, and removal of
the Original Greenbush #16 Line and Temporary Greenbush #16 Line, and
procure all equipment, construction materials and other materials necessary for

15

the activities described above, all in accordance with, as applicable, (a) the

Facilities Study, (b) Good Utility Practice, (c) Niagara Mohawk’s standards, and

(d) agreement reached between Producer and the owner of the Rensselaer Cogen
Facility.

8.2.1.1 Producer, at Producer’s expense, shall negotiate and enter into an

agreement to secure the consent of the owner of the Rensselaer

Cogen Facility for Prouder to remove the Original Greenbush #16
Line and Temporary Greenbush #16 Line, construct the
Temporary Greenbush #16 Line, Permanent Greenbush #16 Line,
other necessary modifications to the Greenbush #16 Line, which
lines all are necessary for Niagara Mohawk to maintain the
interconnection between the Rensselaer Cogen Facility and the
Transmission System and for the payment by Producer to owner of
the Rensselaer Cogen Facility for any outage related costs for
which Niagara Mohawk would otherwise be responsible, if
applicable. Such new lines shall be satisfactory to the owner of the
Rensselaer Cogen Facility and shall, at a minimum, provide the
Rensselaer Cogen Facility with at least as much output capacity as
with the current interconnection facility. Producer shall provide
Niagara Mohawk a conformed, written executed copy of the
agreement Producer reaches with the owner of the Rensselaer
Cogen Facility no less than thirty (30) days prior to the
commencement of any removal or construction activities
involving the Greenbush #16 Line, Original Greenbush #16 Line,
Temporary Greenbush #16 Line or Permanent Greenbush #16
Line.

8.2.2  At Producer’s expense, Niagara Mohawk shall design, engineer, and construct the

apparatuses, equipment and facilities located between the final 345 kV structure
located outside of the Reynolds Road substation and the Delivery Point, as
depicted in Exhibit A, and all Upgrades necessary to facilitate the interconnection
of Producer’s Production Facility, and procure all equipment, construction
materials and other materials necessary for the activities described above, all in
accordance with (a) the Facilities Study, (b) Good Utility Practice and (c) Niagara
Mohawk’s standards.

8.2.3  Within forty-five (45) days of the Parties’ execution of this Agreement, the

Parties shall use Commercially Reasonable Efforts to determine a mutual

Schedule (hereinafter the “Schedule”) for their respective design, engineering and
construction responsibilities as set forth in the Facilities Study attached hereto as
Exhibit B. However, the Parties shall adjust the Schedule, as necessary, to
comply with the certificate issued by the NYPSC pursuant to Article VII of the
New York Public Service Law. Said Schedule may only be revised by mutual
written consent of both Parties. Completion of construction by either Party shall
be subject to the Force Majeure events as provided in Article XVII, Section 18.1.
 16

All design, engineering, procurement, and construction activities for which
Producer or a third party selected by Producer, upon approval of Niagara
Mohawk, is responsible shall be performed in accordance with the Schedule
mutually agreed to by the Parties in advance of the commencement of such
activities as set forth in the Facilities Study attached hereto as Exhibit B.
Producer shall inform Niagara Mohawk, at the Producer’s expense, on the first
business day of each month of the status of all such design, engineering,
procurement, and construction activities, including, but not limited to, the
following information: progress to date; a description of upcoming scheduled
activities and events; the delivery status of all ordered equipment; and the
identification of any event which Producer reasonably expects may delay
construction of the Interconnection Facility Permanent Greenbush #16 Line,
Temporary Greenbush #16 Line, other necessary modifications to the Greenbush
#16 Line, and Upgrades, or removal of the Original Greenbush #16 Line, or the
Temporary Greenbush #16 Line.

8.2.4  Niagara Mohawk shall inform Producer on the first business day of each month

of the status of all such design, engineering, procurement, and construction

activities, including, but not limited to, the following information: progress to

date; a description of upcoming scheduled activities and events; the delivery

status of all ordered equipment; and the identification of any event which Niagara
Mohawk reasonably expects may delay Producer’s construction of the
Interconnection Facility, Permanent Greenbush #16 Line, Temporary Greenbush
#16 Line, other necessary modifications to the Greenbush #16 Line, or removal
of the Original Greenbush #16 Line, or the Temporary Greenbush #16 Line.

8.2.5  If, for an excused reason, Niagara Mohawk completes its design, engineering and

construction responsibilities after the completion dates shown in the Schedule, as
may be amended upon mutual written consent of the Parties, the Commercial
Operation Date shall be automatically extended by the same length of time by
which the scheduled completion dates of Niagara Mohawk’s responsibilities are
delayed with no penalty or additional cost owing the Producer from Niagara
Mohawk, and no penalty, additional cost owing Niagara Mohawk from Producer.

8.2.6  If Producer completes its design, engineering and construction responsibilities

after the completion dates shown in the Schedule, as may be amended upon

mutual written consent of the Parties, or if Niagara Mohawk’s completion dates cannot be met due to any revised or adjusted Schedule of the Producer’s design, engineering and construction responsibilities, Producer acknowledges and agrees to reimburse, in accordance with Article XV of this Agreement, Niagara Mohawk for all costs incurred by Niagara Mohawk, that cannot be avoided, due to
Producer’s delaying said work.

8.2.7  Producer shall, at Producer’s expense, (a) with Niagara Mohawk representatives

present, test the Interconnection Facility, Temporary Greenbush #16 Line,
Permanent Greenbush #16 Line, and other necessary modifications to the
 17

Greenbush #16 Line, to ensure their safe and reliable operation in accordance

with Good Utility Practice and (b) correct, within thirty (30) days of testing, any situations contrary to Good Utility Practice.

8.2.8   Niagara Mohawk shall, at Producer’s expense, test the apparatuses, equipment
 and facilities located between the final 345 kV structure located outside of the
 Reynolds Road Substation and the Delivery Point as depicted in Exhibit A and
 the Upgrades to ensure their safe and reliable operation in accordance with Good
 Utility Practice and (b) correct, within thirty (30) days of testing, any situations
 contrary to Good Utility Practice.

8.3 RISK OF LOSS

Producer shall bear all risk of loss with respect to the Interconnection Facility removal of
the Original Greenbush #16 Line and the Temporary Greenbush #16 Line, the
Temporary Greenbush #16 Line, Permanent Greenbush #16 Line, other necessary
modifications to the Greenbush #16 Line until completion of construction of the
Interconnection Facility and the Permanent Greenbush #16 Line, and other necessary
modifications to the Greenbush #16 Line and all title and interest in the Interconnection
Facility, Permanent Greenbush #16 Line, and other necessary modifications to the
Greenbush #16 Line have been transferred to Niagara Mohawk in accordance with the
terms and conditions of this Agreement and, until such transfer, Producer waives all
rights of recovery against Niagara Mohawk regarding such risk.

ARTICLE IX

OPERATION AND MAINTENANCE

9.1 OPERATION AND MAINTENANCE OF INTERCONNECTION AND OTHER

FACILITIES

9.1.1   At Producer’s expense, Niagara Mohawk shall own, operate, maintain (maintain
 includes right-of-way vegetation management activities apportioned to the
 Interconnection Facility) and repair (repair includes, but is not limited to,
 replacement of existing equipment when required due to failure) the
 Interconnection Facility in accordance with Good Utility Practice.

9.1.2   At Niagara Mohawk’s expense, Niagara Mohawk shall own, operate, maintain
 and repair the Upgrades in accordance with Good Utility Practice.

9.1.3   The Producer, at its own expense, shall own, and be responsible for operating,
 maintaining and repairing (repairing includes, but is not limited to, replacement
 of existing equipment when required due to failure) the Production Facility and
 other apparatuses, equipment and facilities located between the Production
 Facility and the Interconnection Point as Depicted in Exhibit A in accordance
 with Good Utility Practice. The Producer will notify in writing no later than
 December 1 of each year Niagara Mohawk of the schedule for scheduled outages

18

of the Production Facility for the next calendar year in accordance with Bulletin
No. 756, Good Utility Practice, the Retail Tariff, NYISO practices and Niagara
Mohawk standard practices and, upon making any changes to such schedules
thereafter, shall promptly notify Niagara Mohawk of any such changes.

9.1.4  In furtherance of the Parties’ mutual objective to preserve and maintain the

reliability of the Transmission System, the Producer agrees, at the expense of the Producer, to coordinate with Niagara Mohawk, the planning and scheduling of any outages and any changes thereto in a manner that will preserve and maintain the reliability of, and minimize the effect on, the Transmission System, consistent with Good Utility Practice, Bulletin No. 756, the Retail Tariff, NYISO practices and Niagara Mohawk standard practices.

9.1.5  In furtherance of the Parties’ mutual objective to preserve and maintain the

reliability of the Transmission System, the Parties agree, at the expense of the

Producer, to coordinate the planning and scheduling of preventative and

corrective maintenance in a manner that will preserve and maintain the reliability
of the Transmission System. The Parties shall conduct, at the expense of the
Producer, preventative maintenance and corrective maintenance activities for the
Interconnection Facility and the Production Facility, as scheduled and planned, or
as they become necessary, consistent with Good Utility Practice. Niagara
Mohawk shall conduct, at Niagara Mohawk’s expense, preventative maintenance
and corrective maintenance activities for the Upgrades as scheduled and planned,
or as they become necessary, consistent with Good Utility Practice.

9.1.6  If the Producer requests that Niagara Mohawk perform maintenance during a time

period other than as scheduled by Niagara Mohawk, Niagara Mohawk will use
Commercially Reasonable Efforts to meet the Producer’s request as long as
meeting the request would not reasonably be expected, as determined by Niagara
Mohawk, to have an adverse impact upon Niagara Mohawk’s operations or the
operations of Niagara Mohawk’s customers. Notwithstanding the foregoing,
should the Producer request Niagara Mohawk to perform maintenance that
Niagara Mohawk in good faith determines may have an adverse impact on
Niagara Mohawk’s operations or the operations of Niagara Mohawk’s customers,
and if such maintenance may be delayed until after such period, Niagara Mohawk
may reject the Producer’s scheduling request. The Producer shall reimburse
Niagara Mohawk for all costs incurred by Niagara Mohawk in satisfying the
Producer’s request.

ARTICLE X

MODIFICATION OR RETIREMENT

10.1 MODIFICATION OF THE INTERCONNECTION FACILITY, UPGRADES OR

TRANSMISSION SYSTEM

19

10.1.1  Niagara Mohawk shall retain the discretion to determine whether, when, and in

what manner Modifications are required by Good Utility Practice and, as soon as reasonably practicable, shall advise Producer when it makes such a determination and whether performing the Modification, or the Modification itself, is expected to interrupt the flow of power over the Interconnection Facility. Niagara Mohawk shall provide Producer a written explanation of the need for Modifications,
together with a cost estimate.

10.1.2  If Modification is required to support the operations of the Producer, Niagara

Mohawk shall construct, operate, maintain and repair, at the Producer’s expense,
any such Modification, and the Producer shall reimburse Niagara Mohawk for all
actual costs and expenses of constructing operating and maintaining the
Modification.

10.1.3  Except in case of an Emergency Condition, the Producer shall give Niagara

Mohawk three months advance written notice of any planned Modifications to

the Production Facility that could reasonably be expected to affect the operations of the Transmission System or Interconnection Facility.

10.1.3.1  Such notice shall include plans, specifications, information and

operating instructions relating to the impact of planned

Modifications on the Transmission System, Interconnection
Facility, and Upgrades or on Niagara Mohawk’s electric
operations.

10.1.3.2  If Niagara Mohawk determines that such Modification would have

a material adverse effect upon Niagara Mohawk’s operations or
the operations of Niagara Mohawk’s customers, then Niagara
Mohawk shall so notify the Producer. In the event that the
Producer elects to continue with such Modification, Niagara
Mohawk shall be entitled to designate the earliest date upon which
the Producer may begin operation of the Modification, provided
however, that Niagara Mohawk shall not designate a beginning
date that is later than eighteen (18) months after receipt of the
notice mandated by subsection 10.1.3. The Producer shall be
responsible for all costs associated with such Modification,
including any costs incurred by Niagara Mohawk associated with
ensuring that the Transmission System, Upgrades and
Interconnection Facility would be compatible with such
Modification.

10.1.3.3  Notwithstanding the foregoing, should the Producer propose a

schedule for performing a Modification that Niagara Mohawk in
good faith determines may adversely affect Niagara Mohawk’s
operations or the operations of Niagara Mohawk’s customers,
Niagara Mohawk may reject such schedule; however, Niagara

20

Mohawk is amenable to working with Producer on developing a workable schedule.

10.1.4 All Modifications to the Production Facility, Interconnection Facility, Upgrades,
 and Transmission System and any resulting effects on the Transmission System
 shall meet the rules and requirements of NERC, NPCC, NYSRC, and the NYISO
 or their respective successors, the standards of Good Utility Practice, the Retail
 Tariff and the requirements of Bulletin No. 756; provided, however, that in the
 event of a conflict between the rules and requirements of the NYISO and the
 requirements of Bulletin No. 756, the rules and requirements of the NYISO shall
 govern.

10.2  RELOCATION, REARRANGEMENT, ABANDONMENT OR RETIREMENT

10.2.1  If, during the term of this Agreement, Niagara Mohawk determines that it is

required by Good Utility Practice to relocate, rearrange, abandon, or retire the
Transmission System and such relocation, rearrangement, abandonment, or
retirement requires a change to the Interconnection Facility, Niagara Mohawk
shall use good faith efforts to give the Producer no less than one (1) year advance
written notice and shall, to the extent consistent with Good Utility Practice, defer
such action, to the extent reasonably practicable, so that the Producer’s operation
of the Production Facility may continue with minimal interruption.

10.2.2  If Niagara Mohawk is required or ordered by governmental authority or the

NYISO to relocate, rearrange, abandon, or retire the Transmission System and such relocation, rearrangement, abandonment, or retirement requires a change to the Interconnection Facility, Niagara Mohawk shall promptly give the Producer written notice of such requirement or order.

10.2.3  If relocation, rearrangement, abandonment, or retirement is required pursuant to

Paragraph 10.2.1 or .10.2.2 Niagara Mohawk shall perform or have performed, at
the Producer’s expense, the studies necessary to identify any Modifications to the
Interconnection Facility, or Upgrades necessary for the continued operation of the
Production Facility and shall inform the Producer of the estimated costs. The
Producer shall at its option either: (a) reimburse Niagara Mohawk for all actual
costs and expenses of such Modification, studies and estimates in accordance
with Section 10.1.2 of this Agreement; (b) construct, at its own expense, a new
Interconnection Facility subject to the terms of this Agreement; provided,
however, that design, engineering, and construction activities relating to the
existing Transmission System, Interconnection Facility, and Upgrades shall be
performed by Niagara Mohawk, or by a third party selected by Niagara Mohawk,
at the Producer’s expense; or (c) terminate this Agreement, upon no less than
sixty (60) days advance written notice to Niagara Mohawk.

21

ARTICLE XI

POWER DELIVERIES

11.1 METERING

11.1.1  Niagara Mohawk shall, at Producer’s expense, provide, own, and maintain

compatible revenue quality metering equipment at the Reynolds Road substation. Such metering equipment shall record the delivery of energy, including reactive power, in such a manner so as to measure total facility power output and
consumption. Niagara Mohawk shall provide suitable space within its facilities for installation of such metering equipment.

11.1.2  Niagara Mohawk shall provide, at Producer’s expense, all necessary

communication equipment and transmission mediums such as telephone lines and
any necessary protection for such communication equipment and related
equipment. Producer shall be responsible for, at Producer’s expense, all
communications required by Niagara Mohawk, the NYPSC or the NYISO. At
Producer’s own expense, Producer shall purchase, own and maintain all
telemetering equipment located at the Producer’s facilities required by Producer,
Niagara Mohawk, the NYPSC or the NYISO. Producer shall provide, install and
own Niagara Mohawk approved or specified test switches in the transducer
circuits that have been approved or specified by Niagara Mohawk. Producer shall
be responsible for any and all costs involved in the relocation of communication
circuits and transmission mediums that may be required from time to time by
Niagara Mohawk, the NYPSC, or the NYISO.

11.1.3  All metering equipment installed pursuant to this Agreement and associated with

the Production Facility may be routinely tested by Niagara Mohawk in

accordance with Good Utility Practice and applicable Niagara Mohawk, NYPSC
and NYISO criteria, rules and standards. Each Party shall have the right at all
reasonable times, upon giving not less than ten (10) days written notice to the
other Party for the purpose of permitting the other Party to be present at the
inspection, to inspect and test said meters and, if said meters or equipment are
found to be defective, Niagara Mohawk shall adjust, repair or replace the same at
the expense of the Producer, or if within one year of installation, at the expense of
Niagara Mohawk. Any test or inspection requested by a Party shall be at the
expense of that Party.

11.1.4  Electricity delivered to the Delivery Point by Producer hereunder shall be

measured by electric watt hour meters of a type approved by Niagara Mohawk
and the NYPSC. These metering facilities will be installed, owned, and
maintained by Niagara Mohawk and shall be sealed by Niagara Mohawk, with
the seal broken only upon occasions when the meters are to be inspected, tested
or adjusted and representatives of both Niagara Mohawk and Producer are
present. Producer shall pay all metering, testing and installation costs. The meters

22

shall be maintained in accordance with the rules set forth in 16 NYCRR Part 92, as amended from time to time, and with Good Utility Practice.

11.1.5  Niagara Mohawk will guarantee the installation of any meter and its accuracy for

a period of one (1) year from the date that meter is installed; provided, however,
that this guarantee does not cover any incidental or consequential damages that
the Producer may suffer as a result of the failure of a meter to which this
guarantee applies. Any repair or replacement, except for any repair or
replacement occasioned by the negligence or willful misconduct of Producer,
required during the initial year will be at the expense of Niagara Mohawk. In the
event that any meter is found to be inaccurate after the initial year, Niagara
Mohawk will repair or replace the same within a commercially reasonable time
period at the expense of Producer.

11.1.6  Producer may elect to install at Producer’s expense its own metering equipment

in addition to Niagara Mohawk metering equipment. Such metering equipment

shall meet the requirements of 16 NYCRR Part 92, as may be amended from time to time. Should any metering equipment installed by Niagara Mohawk fail to
register during the term of this Agreement, the Parties shall use Producer’s
metering equipment, if installed. On any day or days on which neither Party’s
metering equipment is in service, the quantity of energy delivered shall be
determined in such manner as the Parties agree. Niagara Mohawk’s meter(s) shall be read on a schedule compatible with Niagara Mohawk’s normal meter reading schedule consistent with NYISO requirements.

11.1.7  In the event the Producer desires access to Niagara Mohawk meter information

related to the Production Facility and Interconnection Facility, the Producer, at its own expense, shall be responsible for purchasing and installing software,
hardware and/or other technology that may be required to access such meter
information. The software, hardware and/or other technology installed for this purpose shall be in compliance with any applicable NYPSC and Niagara
Mohawk rules, requirements, or standards.

11.1.8  The Producer grants to the employees and agents of Niagara Mohawk the right of

access to Producer’s premises during regular business hours for purposes of the reading of Producer’s meters.

11.2 LOSSES

No loss calculations shall be necessary if the Metering Point is located in close proximity
to the Delivery Point, as depicted in Exhibit A. However, if the Metering Point(s) are
changed and the metering equipment and the Delivery Point are not at the same location,
the metering equipment shall record delivery of Electricity in a manner that accounts for
losses occurring between the Metering Point(s) and the Delivery Point(s), which shall be
calculated by Niagara Mohawk in accordance with mutually acceptable loss calculations.

23

In addition, Producer will be responsible for all costs associated with the change in Metering Point(s).

11.3  REACTIVE POWER SUPPORT

The Producer agrees to provide, at no cost to Niagara Mohawk, reactive capability to

regulate and maintain system voltage at the Delivery Points in conformance with Bulletin
No. 756 or any applicable NYISO tariff or agreement as they may be amended from time
to time.

11.4 ISLANDING

Niagara Mohawk reserves the right to require, allow or prevent, with reference to

Bulletin No. 756, the islanding of the Production Facility during an Emergency. This Agreement is not intended to impair or supersede any rights of the NYISO to allow or prevent the islanding of the Production Facility.

11.5  NYISO OR REGULATORY PENALTIES AND CHARGES

The Producer shall be solely responsible and liable for any penalties or charges imposed by the NYISO or by other regulatory bodies and payment thereof, for any products
derived or failures to provide such products from the Production Facility to the NYISO, or for any failures by the Producer to comply with the regulations, rules, or procedures of the NYISO or other regulatory bodies.

ARTICLE XII

INSURANCE PROVISIONS

12.1  By the date on which construction of the Interconnection Facility begins, each Party

agrees to maintain at its own expense insurance policies issued by reputable insurance companies reasonably acceptable to the other Party which provide insurance coverage which meets or exceeds the following requirements:

12.1.1 Workers Compensation and Employers Liability Insurance. Each Party shall
 provide workers compensation and employers liability insurance coverages as
 required by the State of New York. If required, such insurance coverage shall
 include but not be limited to the levels of coverage required by the U.S.
 Longshoremen’s Act, the Harbor Workers Compensation Act and the Jones Act.

12.1.2 Comprehensive Public Liability (Including Contractual Liability). Each Party
 shall provide comprehensive public liability insurance, including contractual
 liability insurance, covering all activities and operations to be performed by it
 under this Agreement, with following minimum limits:

(A)   Bodily Injury - $1,000,000/$1,000,000

Property Damage - $1,000,000/$1,000,000
OR

24

(B)   Combined Single Limit - $1,000,000
 OR

(C)   Bodily Injury and Property Damage per Occurrence - $1,000,000
 General Aggregate & Product Aggregate - $2,000,000 each

12.1.3 Umbrella or Excess Liability. Each Party shall provide umbrella or excess
 liability insurance coverage with a minimum limit of $ 4,000,000.

12.2  Each Party may elect to self-insure any and/or all of the above insurance requirements. In

addition, each Party shall name the other Party as an additional insured for all coverages except Workers Compensation and Employers Liability Insurance in order to provide the other Party protection from liability arising out of activities of the insured Party relating to the Interconnection Facility, the Party’s side of the Interconnection Point, and/or the Upgrades, as the case may be.

12.3  In the event that a Party uses subcontractors in connection with this Agreement, that

Party shall require all subcontractors to provide the same insurance coverages set forth in paragraphs 12.1.1, 12.1.2 and 12.13.

12.4  Upon request by either Party, the other Party shall promptly provide the requesting Party

with either evidence of insurance or certificates of insurance evidencing the insurance coverage required under sections 12.1.1, 12.1.2, 12.1.3 and 12.2. If so requested,
Producer shall provide such certificates or evidence of insurance to Niagara Mohawk at the following address:

To:    Niagara Mohawk Power Corporation

Attention: Risk Management, Bldg. A-1 300 Erie Boulevard West

Syracuse, NY 13202

If so requested, Niagara Mohawk shall provide such certificates or evidence of insurance to Producer at the following address:

To:    Empire Generating Co, LLC
 Attention: President

1151 Flatbush Road
Kingston, NY 12401

Such certificates, and any renewals or extensions thereof, shall provide that at least thirty

(30) days prior written notice shall be given to the other Party in the event of any

cancellation or diminution of coverage and shall outline the amount of deductibles or self-insured retentions which shall be for the account of the insured Party.

12.5  If Producer fails to secure or maintain any insurance coverage, or any insurance coverage

is cancelled before the completion of all services provided under this Agreement, and

25

Producer fails immediately to procure such insurance as specified herein (the “uninsured Party”), then Niagara Mohawk has the right to procure such insurance and, at its option, either bill the cost thereof to the Producer or deduct the cost thereof from any sum due the Producer under this Agreement.

12.6  To the extent reasonably requested, Producer shall furnish to Niagara Mohawk copies of

any accidents report(s) sent to the Producer’s insurance carriers covering accidents or incidents occurring in connection with or as a result of the performance of the work under this Agreement.

12.7 Each Party shall comply with any governmental and/or site specific insurance

requirements even if not stated herein.

12.8  By the date that such coverage is required, Producer represents that it will have full

policy limits available and shall notify Niagara Mohawk in writing when coverages
required herein have been reduced as a result of claim payments, expenses, or both.

12.9  Nothing contained in these insurance requirements is to be construed as (a) limiting the

extent, if any, to which either Party is responsible for payment of damages, or (b)

limiting, diminishing, or waiving the obligation of either Party to indemnify, defend and save harmless the other Party in accordance with this Agreement.

ARTICLE XIII

COMPLIANCE WITH LAWS AND REGULATIONS

13.1  Niagara Mohawk and Producer each agree to comply in all material respects with all

applicable federal, state and local laws, ordinances, rules, regulations, permits, licenses,
approvals, certificates, and requirements thereunder in connection with all its activities
performed pursuant to this Agreement, including, but not limited to all design,
environmental, regulatory, engineering, construction, and property acquisition activities.

13.2  If either Party observes that any requirement specified in this Agreement is at variance

with any governing laws, ordinances, rules, regulations, permits, licenses, approvals, certificates and requirements thereunder, such Party shall promptly notify the other in writing before incurring any further liability, expense or obligation. Niagara Mohawk and Producer shall in good faith attempt to reform this Agreement to comply with the aforementioned laws, ordinances, rules, regulations, permits, approvals, or certificates. If Niagara Mohawk and Producer are unable to do so, either Party may terminate this
agreement, subject to NYISO and FERC requirements.

13.3  Environmental Releases by Producer. The Producer shall notify Niagara Mohawk first

orally and then in writing, of the Release of Hazardous Substances by Producer or its
agents, that could reasonably be expected to enter upon Niagara Mohawk property, as
soon as possible but not later than twenty-four (24) hours after the incident, and shall
promptly furnish to Niagara Mohawk copies of any reports filed with any governmental
agencies addressing such events. If Hazardous Substances are released or reasonably

26

believed to have been released onto Niagara Mohawk property, the Producer, at its own
expense, shall conduct, or cause to be conducted, sampling, soil testing, and any other
methods of investigation which would disclose the presence and extent of contamination
by any Hazardous Substance which has been released onto Niagara Mohawk property
and shall notify Niagara Mohawk in writing as soon as reasonably practicable after
learning of the presence of any Hazardous Substance upon Niagara Mohawk property.
The Producer shall notify Niagara Mohawk immediately of any type of remediation
activities it plans to undertake. The Producer shall provide Niagara Mohawk thirty (30)
days written notice prior to conducting any asbestos or lead abatement activities on
Niagara Mohawk property, and shall promptly furnish to Niagara Mohawk (i) copies of
any reports filed with any governmental or regulatory agencies pertaining to such
abatement activities, (ii) copies of applications for permits to conduct abatement
activities, and (iii) copies of all permits authorizing abatement activities. Except for
Hazardous Substances released by Niagara Mohawk or its agents, the Producer agrees to
indemnify, defend, and save harmless Niagara Mohawk, its agents and employees, from
and against any loss, damage, liability (civil or criminal), cost, suit, charge (including
reasonable attorneys’ fees), expense, or cause of action, for the removal or management
of any Hazardous Substance and/or relating to any damages to any person or property
resulting from presence of such Hazardous Substance.

13.4  The Producer shall promptly provide to Niagara Mohawk, all relevant information,

documents, or data regarding the Production Facility which may reasonably be expected to pertain to the safety, security or reliability of the Transmission System. As may be necessary, the Parties agree to enter into a confidentiality agreement governing the
provision and use of such information, documents or data.

13.5  Niagara Mohawk shall file this Agreement with the appropriate regulatory authorities. If

any such regulatory body materially modifies the terms and conditions of this Agreement
and such modification(s) materially affect the benefits flowing to one or both of the
Parties, the Parties agree to attempt in good faith to negotiate an amendment or
amendments to this Agreement or take other appropriate action(s) so as to put each Party
in effectively the same position in which the Parties would have been had such
modification not been made. In the event that, within sixty (60) days or some other time
period mutually agreed upon by the Parties after such modification has been made, the
Parties are unable to reach agreement as to what, if any, amendments are necessary and
fail to take other appropriate action to put each Party in effectively the same position in
which the Parties would have been had such modification not been made, then either
Party shall have the right to unilaterally terminate this Agreement, subject to applicable
NYISO and FERC requirements.

13.6  In the event that it is determined that this Agreement is to be filed with the Federal

Energy Regulatory Commission or its successor, the Parties agree to support such filing
and that, absent the agreement of all parties to any proposed change to this Agreement,
the standard of review for changes to this Agreement proposed by a Party, a non-party or
the Federal Energy Regulatory Commission acting sua sponte shall be the “public
interest” standard of review set forth in United Gas Pipe Line Co. v. Mobile Gas Service
 27

Corp., 350 U.S. 332 (1956) and Federal Power Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956) (the “Mobile-Sierra” doctrine).

ARTICLE XIV

CREDITWORTHINESS

14.1  Producer shall supply to Niagara Mohawk evidence of Producer’s compliance with the

“Creditworthiness Requirements for Customers” established by the NYISO in

Attachment K of NYISO’s FERC Electric Tariff, Original Volume No. 2, and with the

“Creditworthiness Requirements for Transmission Customers” established by the NYISO in Attachment W of NYISO’s FERC Electric Tariff, Original Volume No. 1, as such
requirements may be amended from time to time. The currently effective NYISO tariffs, including the aforementioned Attachment K and Attachment W, are available on the
NYISO Internet website.

14.2  Provision of Security. At least thirty (30) calendar days prior to the commencement of

the design, engineering, procurement, and construction of any of the facilities under this
Agreement, including but not limited to the Interconnection Facility, Upgrades,
Temporary Greenbush #16 Line, Permanent Greenbush #16 Line, other necessary
modifications to the Greenbush #16 Line and for the removal of the Original Greenbush
#16 Line and Temporary Greenbush #16 Line, Producer shall provide Niagara Mohawk,
satisfactory assurances of creditworthiness. Such assurances include, but are not limited
to, a minimum investment grade rating for senior securities issued by Producer of BBB-
by Standard & Poor’s Ratings Group or of Baa3 by Moody’s Investors Service, a
prepayment, a letter of credit in a form satisfactory to Niagara Mohawk, or a parent
guarantee from an entity deemed creditworthy by Niagara Mohawk, or any alternate
form of credit assurance, in an amount and form satisfactory to Niagara Mohawk.
Furthermore, if at any time during the period of construction up to the Commercial
Operation Date and for any Modifications made at the Producer’s expense after the
Commercial Operation Date, in addition to satisfactory assurances required hereunder, if
the Producer (i) makes an assignment or any general arrangement for the benefit of
creditors; (ii) default in the payment or performance of any obligation to the other party
under this Agreement; (iii) files a petition or otherwise commence, authorize, or
acquiesce in the commencement of a proceeding or cause under any bankruptcy or
similar law for the protection of creditors or have such petition filed or proceeding
commenced against it; (iv) otherwise become bankrupt or insolvent (however
evidenced); (v) is unable to pay its debts as they fall due or (vi) fail to give adequate
security for or assurance of its ability to perform its further obligations under this
Agreement within seventy-two (72) hours of a reasonable request by Niagara Mohawk,
Niagara Mohawk shall, upon written notice to Producer, have the right to either (i)
withhold or suspend performance under this Agreement upon three (3) days from the
date of such notice, or the beginning of the next month, whichever is earlier, or (ii)
terminate this Agreement, subject to NYISO and FERC requirements and the rights
provided under Section 22.1.1 of this Agreement in addition to any and all other
remedies available hereunder or pursuant to law or equity. Should the creditworthiness,
financial responsibility or ability to perform of Producer become unsatisfactory to
 28

Niagara Mohawk at any time during the period of construction up to the Commercial

Operation Date and for any Modifications made at the Producer’s expense after the

Commercial Operation Date, satisfactory assurances in the form of security or additional
security may be required as a condition to further performance under the Agreement.

ARTICLE XV

COST PAYMENTS

15.1  Niagara Mohawk shall invoice Producer at the start of each calendar month in an amount

equal to Niagara Mohawk’s actual costs and expenses for which Niagara Mohawk is to be reimbursed under this Agreement. However, if and as requested by Niagara Mohawk, the Producer shall reimburse Niagara Mohawk for costs and expenses in advance of Niagara Mohawk incurring the aforementioned costs or expenses. In such case, Niagara Mohawk shall send Producer a Statement of Project Costs (“Statement”) specifying the required deposit for such estimated costs and expenses.

15.2  The Producer shall pay Niagara Mohawk within thirty (30) calendar days of Niagara

Mohawk invoicing or sending a Statement for all costs incurred or for costs estimated in
advance by Niagara Mohawk under this Agreement, including, but not limited to, the
cost of constructing Upgrades and Modifications; and the costs of relocations,
rearrangements, abandonments, retirements or removals; operation, maintenance, repair
and spare parts; metering, telemetering and communication media; and miscellaneous
studies, testing, documentation and items relating to the Interconnection Facility,
Upgrades and Modifications performed by Niagara Mohawk at the request of Producer.

15.2.1  The Producer shall be responsible for all actual costs of Niagara Mohawk,

including, but not limited to, capital costs, labor (direct and distributable); labor
fringe benefits and payroll taxes; invoices for material, contractors, consultants,
etc.; employee expenses; storeroom material and handling; any and all costs and
expenses resulting from damage to Niagara Mohawk property not otherwise
covered by insurance; sales and/or use taxes on invoices and material;
transportation; Accumulated Funds Used During Construction (“AFUDC”);
Capital Associated Distributable Charges (“CAD”); administrative and general
expense (“A&G”) at Niagara Mohawk’s current rate at the time of invoicing
applied to the total of all costs; and, unless Producer is exempt from such taxes
and provides Niagara Mohawk with documentation supporting such exemption,
state, county, local sales and use taxes applied to the total of all costs and
expenses associated with, but not limited to, the acquisition, ownership,
operation, maintenance, repair, spare parts, A&G, inspection, design review,
engineering, surveying, project management and coordination, testing of
electrical equipment and installation of energy management system remote
terminal units and revenue meters, construction, construction monitoring,
financing, maintenance, environmental and regulatory permitting and licensing
of, taxes and transfer of title of the Interconnection Facility, Upgrades and
Modifications, and any other cost or expense arising out of the Project.

29

15.2.2  The Producer shall be responsible for any and all costs or expenses that arc

incurred by Niagara Mohawk pursuant to this Agreement for the operation, and the maintenance and repair of the Interconnection Facility.

15.2.2.1  The Producer shall reimburse Niagara Mohawk on a monthly basis

for operation, maintenance, and repair costs and expenses.

However, if and as requested by Niagara Mohawk, the Producer shall reimburse Niagara Mohawk for operation, maintenance, and repair costs and expenses in advance of Niagara Mohawk
incurring the aforementioned costs or expenses.

15.2.2.2  Operation, maintenance and repair costs and expenses shall

include, but not be limited to, all actual costs and expenses

associated with operation, maintenance (maintenance includes

right-of-way vegetation management activities apportioned to the
Interconnection Facility), repair, spare parts, inspection,
engineering and legal services, contract administration, right-of-
way acquisition, A&G, working capital (including material adders,
overhead charges, and transportation charges), and allowed
earnings and/or rates of return approved by a regulatory body
having jurisdiction, as related to the Interconnection Facility.

15.2.3  Except to the extent Producer is exempt from any one or more of the following

and provides Niagara Mohawk with documentation supporting such exemption,
the Producer shall be responsible for any and all federal, state, local, and foreign
taxes levied or assessed upon Niagara Mohawk for payments made to Niagara
Mohawk by Producer for services provided under this Agreement including, but
not limited to, the following: transfer tax, property tax, federal income tax, and
New York State taxes, including New York income or gross receipts, sales and
use taxes; provided, however, that Niagara Mohawk shall pay any applicable

interest or penalty incurred as a result of Niagara Mohawk’s delay in paying such
taxes or seeking reimbursement from the Producer. If any form of tax, other than
income or excess profits tax, under any present or future federal, state or other
law different from or in addition to the taxes for which participation in or
payment by Producer is provided herein or elsewhere in this Agreement, is
required to be paid, levied or assessed against or incurred by Niagara Mohawk
with respect to any property, property right, commodity, or service involved in,
resulting from or accruing from Niagara Mohawk’s performance under this
Agreement, which such different or additional tax would not be required to be
paid by Niagara Mohawk in the absence of this Agreement and, with respect to
such different or additional tax, no obligation of Producer to participate or pay
would have attached under the provisions of this Agreement elsewhere than in
this subsection, then in such event Producer shall fully reimburse Niagara
Mohawk for the full amount of such different or additional tax paid by Niagara
Mohawk.

30

15.2.3.1 If Niagara Mohawk receives a refund from the taxing authorities

of any amounts paid by Producer, Niagara Mohawk shall refund to
Producer such amount refunded Niagara Mohawk (net of expenses
related to obtaining the refund) within thirty (30) days of receiving
such refund.

15.2.3.2  Notwithstanding the foregoing, Producer, at its own expense, shall

have the right to require Niagara Mohawk to seek a Private Letter
Ruling from the Internal Revenue Service on whether any of the
sums paid to Niagara Mohawk by Producer under the terms of this
Agreement for the construction of the facilities contemplated
herein are subject to U.S. federal taxation. To the extent that the
Private Letter Ruling concludes that any such sums are taxable to
Niagara Mohawk, Producer shall reimburse Niagara Mohawk for
all such taxes consequently imposed upon Niagara Mohawk in
accordance with the terms of this Agreement. Producer shall
reimburse Niagara Mohawk for all costs, including but not limited
to legal fees, associated with seeking the Private Letter Ruling.

15.2.4  Increased income tax to Niagara Mohawk arising from Producer’s payment or

reimbursement of tax under the preceding provisions will be addressed in the

following manner. Any net actual U.S. federal income tax or New York State tax
(collectively, for this subsection 13.2.4, “Tax”), if any, arising out of any
payment or reimbursement of any tax by Producer under this Article shall be
reimbursed to Niagara Mohawk. The amount reimbursed to Niagara Mohawk
under this subsection shall consist of (1) the Tax arising under this subsection
(the “First Amount”); plus (2) the net actual Tax imposed on the First Amount
(the “Second Amount”); plus (3) the net actual Tax imposed on the Second
Amount (the “Third Amount”); and plus (4) the net actual Tax imposed on the
Third Amount and on each succeeding amount until the final amount is less than
one dollar.

15.3  Niagara Mohawk agrees to cooperate with the Producer in attempting to minimize

Niagara Mohawk’s costs under this Article, provided the Producer reimburses Niagara
Mohawk for all costs incurred by Niagara Mohawk in connection with such cooperation,
including reasonable attorneys’ fees and expenses, and provided further that the Producer
shall indemnify, defend, and save harmless Niagara Mohawk, its agents and employees,
officers, directors, parent(s) and affiliates, against any and all penalties, judgments, fines
(civil or criminal), or other costs that may be imposed by any governmental authority as
a result hereof, but only to the extent that such penalties, judgments, fines, or other costs
are not attributable to Niagara Mohawk’s gross negligence or intentional misconduct.

15.4  Niagara Mohawk shall include with each invoice documentation supporting the costs,

expenses, and/or taxes incurred by Niagara Mohawk in the previous quarter, or to be
incurred in the next quarter, as provided for in Section 15.2.2.1. Niagara Mohawk will
provide such documentation from its standard accounting methods. Within thirty (30)

31

days from date of the invoice, Producer shall pay the invoice and/or notify Niagara

Mohawk that Producer disputes, in whole or in part, any of the costs, expenses, and/or
taxes reflected in the invoice and shall specify with particularity the reasons for such
dispute. If Producer disputes any invoice or portion thereof, the Producer shall
immediately place into an independent escrow account an amount equal to the portion of
the invoice it disputes. Such amount shall remain in escrow until the dispute between the
Parties is resolved in accordance with Article XXVI of this Agreement. If any portion of
any invoice the Producer has not disputed remains unpaid thirty (30) days from the
invoice date, Niagara Mohawk shall apply to the unpaid balance, and Producer shall pay,
a finance charge at the rate of one and one-half percent (1.5%) per month, but in no event
more than the maximum allowed by law.

15.5  Producer acknowledges and agrees that Producer and/or Niagara Mohawk has

undertaken to construct the Interconnection Facility in a particular configuration solely at
the request of the Producer and in reliance on the Producer’s commitment to pay all of
the costs of constructing and of maintaining the Interconnection Facility. Accordingly,
Producer and Niagara Mohawk agree that the Interconnection Facility and all of its
components shall at all times be classified as generator leads that may be directly
charged to Producer and not as improvements to Niagara Mohawk’s Transmission
System, except to the extent that Niagara Mohawk hereafter voluntarily elects to
reclassify those facilities as improvements to its Transmission System. Producer hereby
waives its right to challenge any of the provisions of this Section 15.5 under Section 206
of the Federal Power Act (“FPA”), and Producer and Niagara Mohawk hereby stipulate
and agree that the provisions of this Section 15.5 may only be modified by the FERC
under the public interest standard of Section 206 of the FPA. Nothing contained in this
Section 15.5 shall be construed as limiting Producer’s rights under Section 206 of the
FPA with respect to the appropriate treatment of costs attributable to any portion of the
Interconnection Facility that Niagara Mohawk may hereafter voluntarily reclassify as
improvements to its Transmission System rather than as generator leads.

ARTICLE XVI

NOTICES

16.1  All notices required or permitted under this Agreement shall be in writing and shall be

personally delivered or sent by certified or registered first class mail (return receipt

requested, postage prepaid), facsimile transmission, or overnight express mail or courier service addressed as follows:

32

To Producer: To Niagara Mohawk:

EMPIRE GENERATING NIAGARA MOHAWK POWER

CO, LLC CORPORATION

Attn: Chet Szymanski Attn: Vice President, Transmission

Plant Manager Commercial Services

75 Riverside Avenue 300 Erie Boulevard West

P.O. Box 350 Syracuse, NY 13202

Rensselaer, NY 12144 Tel: (315) 428-3159

Tel: (518) 694-8205 ext. 302 Fax: (315) 428-5114

cheseter.szymanski@naes.com

16.1.1 All notices required for billing purposes under this Agreement shall be in writing

and shall be delivered to the following address:

To Producer:

EMPIRE GENERATING CO, LLC Attn: Chet Szymanski

Plant Manager

75 Riverside Avenue P.O. Box 350

Rensselaer, NY 12144
Tel: (518) 694-8205 ext. 302
cheseter.szymanski@naes.com

To Niagara Mohawk:

NIAGARA MOHAWK POWER CORPORATION

Attn: Vice President, Transmission Commercial Services

300 Erie Boulevard West Syracuse, NY 13202

Tel: (315) 428-3159
Fax: (315) 428-5114

16.1.2 If given by electronic transmission (including telex, facsimile or telecopy), notice
 shall be deemed given on the date received and shall be confirmed by a written
 copy sent by first class mail. If sent in writing by certified mail, notice shall be
 deemed given on the second business day following deposit in the United States
 mails, properly addressed, with postage prepaid. If sent by same-day or overnight
 delivery service, notice shall be deemed given on the day of delivery.

16.2 Either Party may change its address for notices by notice to the other in the manner

provided above.

16.3  Notwithstanding paragraph 16.1, any notice hereunder, with respect to an Emergency

Condition or other occurrence requiring prompt attention, shall be communicated in an expedited manner and may be made by telephone provided that such notice is confirmed in writing promptly thereafter.

16.4  The representatives noted in paragraph 16.1, or their designees, shall be authorized to act

on behalf of the Parties, and their instructions, requests, and decisions will be binding

upon the Parties as to all matters pertaining to this Agreement and the performance of the
Parties hereunder. Only these representatives shall have the authority to commit funds or
make binding obligations on behalf of the Parties. The Parties shall be permitted to

33

change their respective representatives by providing notice to the other Party of the change of representative.

ARTICLE XVII

DEFAULT AND TERMINATION

17.1  In the event either Party (the “Defaulting Party”) abandons its work or facilities under

this Agreement; becomes insolvent; or assigns or sublets this Agreement in a manner
inconsistent with this Agreement, or is violating any of the material conditions, terms,
obligations, or covenants of this Agreement, or is not performing this Agreement in good
faith, the Non-Defaulting Party may terminate this Agreement by providing written
notice. Before instituting proceedings before FERC to terminate the Agreement, Niagara
Mohawk must give Producer written notice of the reasons for termination. If, within a
period of ten (10) days of receiving such notice, Defaulting Party cures the default or
breach cited by the Non-Defaulting Party in such written notice, to the reasonable
satisfaction of the Non-Defaulting Party that provided such notice, and shall have
complied with the provisions of this Agreement, such notice shall become null and void
and of no effect. Otherwise, such notice shall remain in effect and, except to the extent
expressly provided for herein, the obligations of the Parties under this Agreement shall
terminate ten (10) days after such notice was provided, or in accordance with regulations
or rulings of FERC, whichever is later.

17.2  In the event of a billing dispute between Niagara Mohawk and the Producer, Niagara

Mohawk will not apply to remove the Interconnection Facility or any part of the

Transmission System from service or to terminate transmission service thereon as long as the Producer: (i) continues to make all undisputed payment amounts and (ii) adheres to the dispute resolution procedures set forth in Article XXVI of this Agreement and pays into an independent escrow account the portion of any invoice in dispute, pending
resolution of such dispute. If the Producer fails to meet these two requirements, then a default shall be deemed to exist, to which the procedures set forth in this Article XVII for the removal of the Interconnection Facility from service shall apply.

17.3  Termination of this Agreement shall not relieve Producer or Niagara Mohawk of any of

its liabilities and obligations arising hereunder prior to the date termination becomes

effective, and Producer or Niagara Mohawk may take whatever judicial or administrative
actions as appear necessary or desirable to enforce its rights hereunder. The rights
specified herein are not exclusive and shall be in addition to all other remedies available
to either Party, either at law or in equity, for default or breach of any provision of this
Agreement; provided, however, that in no event shall Niagara Mohawk or Producer be
liable for any incidental, special, indirect, exemplary or consequential costs, expenses, or
damages sustained by the other, as provided for in Article XXVII hereto.

17.4  If a Non-Defaulting Party provides to the Defaulting Party written notice of termination

pursuant to paragraph 17.1 and, in accordance therewith, such notice remains in effect
ten (10) days after such notice was provided, the Defaulting Party shall be liable to the
Non-Defaulting Party for all costs, expenses, liabilities and obligations, including

34

reasonable attorneys’ fees, incurred by the other Non-Defaulting Party resulting from or relating to the termination of this Agreement.

17.5  In the event of termination of this Agreement, Niagara Mohawk, at its sole option and at

the Producer’s expense, will physically disconnect the Production Facility from the

Transmission System, return the Transmission System to its original state prior to this
Agreement, and remove any or all of Niagara Mohawk’s Interconnection Facility
equipment.

ARTICLE XVIII
FORCE MAJEURE

18.1  Neither Party shall be considered to be in default or breach hereunder, and shall be

excused from performance hereunder, if and to the extent that it shall be delayed in or
prevented from performing or carrying out any provisions of this Agreement by reason
of flood, lightning strikes, earthquake, fire, epidemic, war, invasion, riot, civil
disturbance, sabotage, explosion, insurrection, military or usurped power, strikes,
stoppage of labor, labor dispute, failure of contractors or supplies of material, action of
any court or governmental authority, or any civil or military authority de facto or de jure,
change in law, act of God or the public enemy, or any other event or cause beyond such
Party’s control, including, without limitation, disconnection or limited operation of
Niagara Mohawk’s electric system, unscheduled repairs or maintenance, fuel or energy
shortages, or equipment breakdown resulting, in spite of Good Utility Practices, which
are beyond such Party’s reasonable control; provided, however, that neither Party may
claim force majeure for any delay or failure to perform or carry out any provision of this
Agreement to the extent that such Party has been negligent or engaged in intentional
misconduct and such negligence or intentional misconduct contributed to that Party’s
delay or failure to perform or carry out its duties and obligations under this Agreement.

18.2  The Party claiming force majeure shall give notice to the other Party of the occurrence of

force majeure no later than ten (10) business days after such occurrence and shall use due
diligence to resume performance or the provision of service hereunder as soon as
practicable.

ARTICLE XIX

INDEMNIFICATION

19.1  To the fullest extent allowed by law and to the extent not otherwise articulated in this

Agreement, each Party shall indemnify, defend, and save harmless the other Party, its
agents and employees, officers, directors, parent(s) and affiliates, from and against any
loss, damage, liability, cost, suit, charge, expense, or cause of action, whether
unconditionally certain or otherwise, as they exist on the effective date of this Agreement
or arise at anytime thereafter, (including but not limited to fees and disbursements of
counsel incurred by the indemnified Party in any action or proceeding between
indemnitor and the indemnified Party or between the indemnified Party and any third
party or otherwise) arising out of any damage or injury to its property or property of third

35

parties (including real property, personal property and environmental damages), persons,
(including injuries resulting in death), caused by or arising out of or in any way
connected with this Agreement, or the work performed hereunder, or any equipment,
property or facilities used by the other Party, its agents, employees, contractors, and
suppliers; provided however, each Party shall be liable for all claims of the Party’s own
employees arising out of any provision of the Workers’ Compensation Law.

19.2  Niagara Mohawk and Producer each agree to indemnify, defend, and save each other and

their agents and employees, officers, directors, parent(s) and affiliates, harmless from and
against any loss, damage, liability (civil or criminal), cost, suit, charge, expense
(including reasonable attorneys’ fees) or cause of action arising from violations by the
other Party of said laws, ordinances, rules, regulations, permits, licenses, approvals,
certificates and requirements thereunder. Niagara Mohawk and Producer each agree to
bear filly all civil and criminal penalties that may arise from its own activities or from its
own violations or from its own failure to comply with the aforementioned laws and
requirements, whether such penalties are assessed against Producer or Niagara Mohawk.
The provisions of this paragraph shall survive termination of this Agreement.

19.3  In the event that the claims, damages, losses, judgments, or settlements are the result of

the negligence of both Parties, each Party shall be liable to the extent or degree of their respective negligence, as determined by mutual agreement of both Parties, or in the absence thereof, as determined by the adjudication of comparative negligence.

19.4  The indemnifying Party shall initiate promptly action to defend and indemnify the other

Party against claims, actual or threatened, but in no event later than by the date the
indemnifying Party receives notice by the indemnified Party of the service on the
indemnified Party of notice, summons, complaint, petition to other service of process against the indemnified Party alleging damage, injury, liability, or expense attributed in any way to the Agreement, the work or acts, fault, negligence, equipment, materials,
properties, facilities, personnel, or property of the indemnifying Party, its agents,
employees, contractors or suppliers. The indemnifying Party shall defend any such claim or threatened claim, including as applicable, engagement of legal counsel, to respond to, defend, settle, or compromise any claim or threatened claim.

19.5  The indemnifying Party understands and agrees it is responsible for any and all costs and

expenses incurred by the indemnified Party to enforce this indemnification provision.

19.6  The obligations set forth in this Article shall survive the later of the completion of the

work, termination or expiration of the Agreement.

ARTICLE XX

RELATIONSHIP OF THE PARTIES

20.1  Nothing contained in this Agreement shall be construed or deemed to cause, create,

constitute, give effect to, or otherwise recognize Producer and Niagara Mohawk to be

36

partners, joint venturers, employer and employee, principal and agent, or any other business association, with respect to any matter.

20.2  Unless otherwise agreed to in writing signed by both Parties, neither Party shall have any

authority to create or assume in the other Party’s name or on its behalf any obligation, express or implied, or to act or purport to act as the other Party’s agent or legal
empowered representative for any purpose whatsoever.

20.3  Neither Party shall be liable to any third party in any way for any engagement,

obligation, commitment, contract, representation or for any negligent act or omission of the other Party, except as expressly provided for herein.

20.4 The rights and obligations of the Parties shall be limited to those expressly set forth

herein.

ARTICLE XXI

THIRD PARTY BENEFICIARY

21.1  No person or party shall have any rights or interests, direct or indirect, in this Agreement

or the services or facilities to be provided hereunder, or both, except the Parties, their successors, and authorized assigns.

21.2 The Parties specifically disclaim any intent to create any rights in any person or party as

a third-party beneficiary to this Agreement.

ARTICLE XXII
ASSIGNMENT

22.1  Except as provided for in paragraphs 22.1.1, 22.1.2 and 22.1.3, neither Party may assign

this Agreement or any of its rights, interests, or obligations hereunder without the prior
written consent of the other Party, which such consent shall not be unreasonably
withheld.

22.1.1 Producer may, upon prior written notice to Niagara Mohawk, assign, transfer,
 pledge, or otherwise dispose of its rights and interests under this Agreement to
 any lender or financial institution in connection with the financing or refinancing
 of the Interconnection Facility, Production Facility or property acquisition
 therefore. Niagara Mohawk hereby grants any such lender or financial institution
 assignee the following under this Agreement:

(i) the right to cure occurrence of any event of default for the account

of Producer;

(ii) the same time period to cure any events of default granted to

Producer;

37

(iii) the option to assume Producer’s rights and obligations under the

and the right to maintain the Agreement by providing full

monetary compensation for any breach of Producer, which such
assignee cannot cure other than paying monetary damages;

(iv)  the option to transfer the Interconnection Agreement to a new

owner of the Production Facility in a foreclosure proceeding, or
pursuant to a deed in lieu of foreclosure, which new owner shall
be recognized as a Part to the Interconnection Agreement in
replacement for Producer for all purposes under the
Interconnection Agreement provided that such owner and owner’s
creditworthiness is acceptable to Niagara Mohawk and new owner
assumes all obligations under the Interconnection Agreement.

22.1.2  Niagara Mohawk may, upon prior written notice to the Producer, assign, transfer,

pledge, or otherwise dispose of Niagara Mohawk’s rights and interests under this
Agreement to any lender or financial institution in connection with the financing
or refinancing of the Transmission System or property acquisition therefore.

22.1.3  Any company or entity which succeeds by purchase, merger or consolidation of

the properties and assets, substantially or entirely, of Niagara Mohawk shall be entitled to the rights and shall be subject to the obligations of Niagara Mohawk under this Agreement.

22.2  Each Party agrees to reimburse the other Party for any costs and expenses (including

reasonable attorneys’ fees) incurred in connection with the other Party’s review,

execution and delivery of instruments, agreements or documents necessary in connection
with the assigning Party’s assignment, transfer, sale or other disposition of this
Agreement or any interest in the Interconnection Facility or the Transmission System.

22.3  Any attempt to assign or assignment in violation of this Article XXII shall be considered

null and void from its inception and Niagara Mohawk reserves the right to terminate this
Agreement. Assignment contrary to the provisions of this Agreement shall make the
assigning Party the indemnitor of the other Party and its successors against any liabilities
and costs, including attorneys’ fees as to which the assigning Party’s transferee fails to
indemnify, defend, and hold harmless the other Party, its agents, employees and its
successors, from and against any loss, damage, liability, cost, suit, charge, expense
(including reasonable attorneys’ fees) or cause of action, incurred by the other Party as a
result of said assignment or as a result of any dispute between the assigning Party and its
transferees, or between any subsequent transferees, that arises from or relates to any
assignment by the assigning Party. The provisions of this paragraph shall survive
termination of this Agreement.

22.4  Any authorized assignment shall not relieve the assigning Party of the responsibility of

full compliance with the requirements of this Agreement, unless the other Party consents
and the assignee agrees in writing to be bound by all of the obligations and duties of the

38

assigning Party provided for in this Agreement and has provided written assurances to
the other Party of continued performance and protection against liability upon
assignment.

22.5 This Agreement shall bind and inure to the benefit of the Parties to this Agreement, their

successors and permitted assigns.

ARTICLE XXIII
 WAIVER

23.1  No provision of this Agreement may be waived except by mutual agreement of the

Parties as expressed in writing and signed by both Parties.

23.2 Any waiver that is not in writing and signed by both Parties shall be null and void from

its inception.

23.3 No express waiver in any specific instance as provided in a required writing shall be

construed as a waiver of figure instances unless specifically so provided in the required

writing.

23.4  No express waiver of any specific default shall be deemed a waiver of any other default

whether or not similar to the default waived, or a continuing waiver of any other right or default by a Party.

23.5  The failure of either Party to insist in any one or more instances upon the strict

performance of any of the provisions of this Agreement, or to exercise any right herein, shall not be construed as a waiver or relinquishment for the future of such strict
performance of such provision or the exercise of such right.

ARTICLE XXIV

AMENDMENT AND MODIFICATION

24.1  This Agreement may be amended or modified only if the amendment or modification is

in writing and executed by both Parties. Any amendment or modification that is not in writing and signed by both Parties shall be null and void from its inception.

24.2  No express amendment or modification in any specific instance as provided herein shall

be construed as an amendment or modification of future instances, unless specifically so provided in the required writing.

24.3  Except as provided for in paragraph 9.5, nothing in this Agreement shall be construed as

affecting in any way the right of Niagara Mohawk to unilaterally make application to
FERC (or any successor agency) for a change in rates, terms and conditions, charges,
classifications of service, rule or regulation under Section 205, of the Federal Power Act
(“FPA”) and pursuant to FERC’s rules and regulations promulgated thereunder, provided
that Niagara Mohawk provides Producer with copies at the time they are submitted to

39

FERC of such applications that if approved would affect Producer’s rights under this
Agreement, and provided that Producer may intervene to oppose the proposed changes.

ARTICLE XXV

GOVERNING LAW

25.1  This Agreement and the rights and obligations of the Parties to this Agreement shall be

governed by and construed in accordance with the laws of the State of New York, without giving effect to the conflict of laws principles thereof.

25.2  Producer and Niagara Mohawk agree to submit to the jurisdiction of the courts in the

State of New York for the purposes of interpretation and enforcement of this Agreement.

25.3  Producer and Niagara Mohawk waive personal service by manual delivery and agree that

service of process on Producer or Niagara Mohawk in any action concerning or arising out of this Agreement may be made by registered or certified mail, return receipt
requested, delivered to Producer or Niagara Mohawk at the addresses set forth in Article XIV of this Agreement.

ARTICLE XXVI

DISPUTE RESOLUTION

26.1  Should a claim or dispute among the Parties arise under this Agreement, the Parties shall

continue, in good faith, to perform their respective obligations hereunder. Notice of any claim or dispute that any Party may have against another Party, arising out of the
Agreement shall be submitted in writing to the other Parties in a manner that clearly identifies the nature of the claim or dispute and requests that the Parties engage in
negotiations to resolve the claim or dispute.

26.2  Upon receipt of the notice of claim or dispute under section 24.1, the Parties shall use

Commercially Reasonable Efforts to resolve any such dispute without resorting to

judicial resolution, through good faith negotiations between representatives with

authority to resolve or settle the claim or dispute. The Parties agree to keep confidential any documents or materials exchanged and/or confidential information revealed in
furtherance of resolving or settling the claim or dispute under this Article XXVI of this Agreement and that such documents, materials, or information shall be considered
confidential settlement information and that, pursuant to Rule 408 of the Federal Rules of Evidence and parallel doctrines of state law, shall not be admissible as evidence in any subsequent judicial or regulatory proceeding.

26.3  If the dispute remains unresolved for more than sixty (60) days after receipt of the notice

of claim or dispute under paragraph 26.1, any Party may seek resolution of its rights and remedies under this Agreement through any available forum in law or equity.

40

ARTICLE XXVII

LIMITATION OF LIABILITY

27.1  Notwithstanding any other provision of this Agreement, neither Party shall be

responsible to the other for incidental, indirect, exemplary, special or consequential
damages (including punitive damages or loss of profits) in connection with this
Agreement, except in cases of intentional misconduct, unless otherwise stated in this
Agreement.

27.2  Third-Party Claims. Notwithstanding the provisions of Article XII as they may apply

with respect to an indemnifying Party’s responsibility for claims asserted against an

indemnified Party by a third-party, under no circumstances shall Niagara Mohawk, or its
directors, officers, employees, agents and Affiliates, be liable to the Producer, its
directors, officers, employees, agents or Affiliates, for third-party claims, actions or
causes of action for direct, indirect, incidental, punitive, special, exemplary, indirect,
treble, multiple or consequential damages of any kind (including attorneys’ fees,
litigation costs, losses or damages caused by reason of the unavailability of the
Production Facility, plant shutdowns or service interruptions, losses of use, profits or
revenue, inventory or use charges, costs of purchased or replacement power, interest
charges or costs of capital) resulting from or related to curtailments or interruptions of
deliveries of Electricity over the Transmission System, including any such damages
which are based upon causes of action for breach of contract, tort (including negligence
and misrepresentation), breach of warranty or strict liability, that are alleged, filed or
otherwise brought against Producer.

27.3  Survival. The provisions of this Article shall apply regardless of fault and shall survive

termination, cancellation, suspension, completion or expiration of this Agreement.

ARTICLE XXVIII

SEVERABILITY

28.1  If any term of this Agreement, or the interpretation or application of any term or

provision to any prior circumstance, is held to be unenforceable, illegal, or invalid by any
governmental agency or court of competent jurisdiction, the remainder of this
Agreement, or the interpretation or application of all other terms or provisions to persons
or circumstances other than those that are unenforceable, illegal, or invalid, shall not be
affected thereby and each term and provision shall be valid and be enforced to the fullest
extent permitted by law.

ARTICLE XXIX
 HEADINGS

29.1  The headings in this Agreement are included herein for convenience of reference only

and shall not constitute a part of this Agreement for any other purpose, or limit or be used as an aid in construing the provisions of this Agreement.

41

ARTICLE XXX

INTEGRATION/MERGER/SURVIVABILITY

30.1  This Agreement sets forth the entire understanding and agreement of the Parties as to the

subject matter of this Agreement. This Agreement merges and supersedes all prior

agreements, commitments, representations, writings and discussions between the Parties
with respect to the Interconnection Facility except for those agreements, commitments,
representations, writings, or discussions which by their terms survive termination.

30.2  This Agreement shall not merge with or be terminated or superseded by any future

agreement between the Parties that does not specifically and in writing so provide.

ARTICLE XXXI

COMPLIANCE WITH GOOD UTILITY PRACTICE

31.1 The Parties shall comply with Good Utility Practice.

ARTICLE XXXII

COUNTERPARTS

32.1 This Agreement may be executed in two or more counterparts, each of which shall be

deemed an original but all of which together shall constitute one and the same

instrument.

42

IN WITNESS WHEREOF, the Parties hereto have caused this instrument to be executed as of the day and year first above written.

Empire Generating Co, LLC Niagara Mohawk Power Corporation

43

Exhibit A

[One-Line Diagram]

44

Exhibit B

[Facilities Study]

46

NIAGARA MOHAWK, A NATIONAL GRID COMPANY,

FACILITIES STUDY REPORT FOR

BESICORP - EMPIRE DEVELOPMENT COMPANY, LLC.

NM/NGRID UPGRADES ASSOCIATED WITH

THE 672 MW BESICORP - EMPIRE POWER COMPANY, LLC
 COGENERATION POWER PLANT

IN RENSSELAER, NEW YORK

January 13, 2004

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004

The Parties recognize that as of January 13, 2004, the Facilities Study has not been

finalized because the Interconnection Facility has not been authorized by the New York State Public Service Commission (“NYSPSC”) and, therefore, the scope of the Facility Study is subject to the certificate to be issued by the NYSPSC pursuant to Article VII of the New York Public Service Law and additional studies, as required.

This document was prepared by Niagara Mohawk Power Corporation.
 It is made available to others upon express understanding that neither
 NM/NGRID nor any of its affiliates, assumes any warranty or
representation with respect to the contents of this document or its accuracy

or completeness.

NIAGARA MOHAWK POWER CORPORATION
 300 Erie Boulevard West

Syracuse, New York 13202

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004

TABLE OF CONTENTS

1 SUMMARY..............................................1

2 POWER CO. PLANT........................................3

2.1   POWER CO. Plant Interconnection............................8

2.1.1   Special Protection Scheme.............................8

3 SUBSTATION FACILITIES...................................9

3.1 Reynolds Road Substation.................................9

3.1.1 345 kV Switchyard.................................9

3.1.2 115 kV switchyard.................................9

3.1.3 Foundations.......................................9

3.1.4   Grounding System..................................9

3.1.5   Station Service...................................10

3.1.6   Controls and Protection..............................10

3.1.7   EMS System.....................................10

3.1.8   Digital Fault Recorder System.........................10

3.1.9   Interfaces with Transmission..........................10

3.1.10 Review of Reynolds Road Distribution Feeds...............11

3.1.11 POWER CO. Power Plant Revenue Metering...............11

3.1.12 POWER CO. 345 kV Metering.........................11

3.2 Alps Substation........................................11

3.3 Greenbush Substation....................................11

3.4 Menands Substation.....................................11

3.5 Riverside Substation....................................11

3.6 Arsenal Substation......................................12

3.7 Wynantskill Substation...................................12

3.8 Rensselaer Waste Water Substation..........................12

3.9 North Troy Substation...................................12

3.10 Stephentown Substation..................................12

3.11 Feura Bush Substation...................................12

3.12 LG&E / El Paso Substation................................12

3.13 POWER CO. Substation..................................13

3.13.1 POWER CO. Special Protection Scheme..................13

3.13.2 Station Service Metering.............................13

4 Substation Cost Estimates and Construction Schedules..................14

4.1   Related Interface Work at POWER CO. Power Plant Station..........15

4.2   Related Interface Work at the Alps Station......................15

5 POWER CO. TRANSMISSION LINE............................16

5.1   ROW Segment Descriptions................................16

5.1.1   Segment 1.......................................16

5.1.2   Segment 2.......................................16

5.1.3   Segment 2A.....................................17

5.1.4   Segment 3.......................................17

5.2   General Description of the Proposed Transmission Line.............26

5.3   Monopole Structure Types.................................26

5.4   Power Conductor.......................................26

i

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004

5.5   Monopole Structure Locations..............................26

5.6   Right-of-Way Width.....................................26

5.7   Electric and Magnetic Fields...............................27

5.7.1   Evaluation Criteria.................................27

5.7.2   Methodology.....................................27

5.7.3   Results.........................................27

5.7.4   Conclusions.....................................27

5.8   Construct Segment One Temporary 115 kV Line..................41

5.9   Removal of Existing Greenbush #16 115 kV Circuit along Segment One..41

5.10 Construct Segment One 345 kV Line and 115 kV Line..............41

5.11 Construct Segment Two 345 kV Line..........................42

5.12 Construct Segment Three 345 kV Line.........................42

5.13 Other Infrastructure.....................................42

5.13.1 Existing Utilities..................................42

5.13.2 Industrial Facilities.................................43

6 Review of other transmission lines...............................44

6.1   Review Line #9 from Greenbush to Reynolds Road Stations...........44

6.2   Review Line #4 from Riverside to Reynolds Road Station............44

7 Transmission Line Cost Estimate and Construction Schedule.............45

8 APPROVALS AND PERMITS...................................46

8.1   Article X............................................46

8.2   Article VII...........................................46

8.3   NYISO.............................................46

8.4   ACOE..............................................46

APPENDIX 1 - REYNOLDS ROAD THERMAL RATING SHEETS..............48

APPENDIX 2 - REYNOLDS ROAD STATION WORK LIST..................69

APPENDIX 3 - NMPC POWER CO. STATION WORK LIST..................71

APPENDIX 4 - TRANSMISSION LINE WORK LIST.......................73

APPENDIX 5 - PROJECT SCHEDULES................................75

APPENDIX 6 - SYSTEM RELIABILITY IMPACT STUDY...................77

ii

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004

LIST OF FIGURES

Page

FIGURE 2-1 PROPOSED TRANSMISSION LINE LOCATION..................4

FIGURE 2-2 REYNOLDS ROAD STATION CONCEPTUAL LAYOUT............5

FIGURE 2-3 REYNOLDS ROAD STATION CONCEPTUAL PROFILE............6

FIGURE 2-4 2003 ANNUAL TRANSMISSION LOAD FLOW REVIEW...........7

FIGURE 2-5 CONCEPTUAL POWER CO. PLANT CONFIGURATION............8

FIGURE 5-1 TYPICAL TUBULAR MONOPOLE (SEGMENTS 2 & 3)............18

FIGURE 5-2 TYPICAL TUBULAR STEEL LARGE ANGLE MONOPOLE.........19

FIGURE 5-3 TYPICAL TUBULAR STEEL DOUBLE CIRCUIT MONOPOLE.......20

FIGURE 5-4 TYPICAL MONOPOLE FOUNDATIONS......................21

FIGURE 5-5 SEGMENT IA ROW CONFIGURATION.......................22

FIGURE 5-6 SEGMENT IB ROW CONFIGURATION.......................23

FIGURE 5-7 SEGMENT 2 ROW CONFIGURATION........................24

FIGURE 5-8 SEGMENT 3 ROW CONFIGURATION........................25

FIGURE 5-9 SEGMENT 1 ELECTRIC FIELD PROFILE.....................29

FIGURE 5-10 SEGMENT 1 MAGNETIC FIELD PROFILE....................30

FIGURE 5-11 SEGMENT 2 ELECTRIC FIELD PROFILE.....................31

FIGURE 5-12 SEGMENT 2 MAGNETIC FIELD PROFILE....................32

FIGURE 5-13 SEGMENT 3 ELECTRIC FIELD PROFILE.....................33

FIGURE 5-14 SEGMENT 3 MAGNETIC FIELD PROFILE....................34

FIGURE 5-15 SEGMENT 1 2002 PEAK LOAD ELECTRIC FIELD PROFILE.......35

FIGURE 5-16 SEGMENT 1 2002 PEAK LOAD MAGNETIC FIELD PROFILE......36

FIGURE 5-17 SEGMENT 2 2002 PEAK LOAD ELECTRIC FIELD PROFILE.......37

FIGURE 5-18 SEGMENT 2 2002 PEAK LOAD MAGNETIC FIELD PROFILE......38

FIGURE 5-19 SEGMENT 3 2002 PEAK LOAD ELECTRIC FIELD PROFILE.......39

FIGURE 5-20 SEGMENT 3 2002 PEAK LOAD MAGNETIC FIELD PROFILE......40

LIST OF TABLES

Page

TABLE 4-1 TOTAL NMPC ESTIMATED SUBSTATION COSTS...............14

TABLE 5-1 ROW PARALLELED BY OR INTERSECTING THE PROPOSED

TRANSMISSION LINE............................................17

TABLE 5-2 RESULTS OF ELECTRIC AND MAGNETIC STUDIES.............28

TABLE 7-1 TOTAL NMPC ESTIMATED TRANSMISSION LINE COSTS.........45

iii

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004

NIAGARA MOHAWK, A NATIONAL GRID COMPANY
 FACILITIES STUDY REPORT FOR

BESICORP - EMPIRE DEVELOPMENT COMPANY, LLC:
 NM/NGRID Upgrades Associated With The

672 MW POWER CO. Power Plant
 in Rensselaer, New York

1  SUMMARY

Besicorp - Empire Development Company, LLC (“BEDCO”) has proposed the development of a cogeneration power plant in the City of Rensselaer, Rensselaer County, New York. The project will consist of three main components:

(1)  The Besicorp - Empire Power Company, LLC (“POWER CO.”) cogeneration power
 plant (“Plant”)

(2)  The connection of the Plant into the New York transmission grid

(3)  The replacement of other system elements due to the presence of the proposed Plant

The proposed Plant will be located in the City of Rensselaer, New York. The Plant will have two
161 MW gas-fired combined-cycle-generating units and one 297 MW steam turbine generators,
for a total capability of 619 MW (603 MW after supplying the Plant’s auxiliary load), plus duct
firing for a total of 672 MW (winter rating). The proposed plant will be adjacent to LG&E’s
(“LG&E” or “El Paso”), Rensselaer Co-generation plant and approximately 8.1 miles from the
Niagara Mohawk Power Corporation’s (“NMPC”) Reynolds Road Substation which will be
used as the interconnection point. The POWER CO. Plant will operate mainly as a merchant
plant with approximately 33 MW of electric energy and 160,000 lbs. of steam being supplied to
the Empire State Newsprint Plant (“ESNP”) on an hourly basis, located adjacent to the plant site.
The balance of the energy, its capacity and other ancillary services will be sold to the market.
The proposed transmission facilities will be designed according to NMPC and Northeast Power
Coordinating Council standards.

A System Reliability Impact Study (“SRIS”) identifying impacts to the NMPC system was

completed in November 2001.1 This study was conducted by Washington Group International
(“WGI”) with coordinated input and review by NMPC, the New York Independent System
Operator (“NYISO”), as well as being reviewed by the ISO-New England due to the
interconnection at Reynolds Road, which is also directly connected to the transmission facilities
to New England. Additionally, the study also reviewed the impacts to the NMPC local
transmission system by the ESNP as purely a load on the NMPC transmission grid in the Capital
Zone of the NYISO. This Facility Study includes the scope of work for potential upgrades
associated with the surrounding NMPC transmission system and facilities resulting from the
addition of the POWER CO. Plant. Subsequent to the approval by the NYISO, POWER CO.

1 Report on the Empire State Newsprint Project for the Besicorp — Empire Development Company’s 505 MW Plant

in Rensselaer, New York, dated November RELIABILITY IMPACT STUDY.

POWER CO. Project
Exhibit B to the Interconnection Agreement

2001. This report is included as APPENDIX  6 — SYSTEM

1

Initial facilities Study
 January 15, 2004

also received confirmation from the Substation and Protection Engineering Group of New York
State Electric & Gas that the interconnection of the POWER CO. Plant would not over duty any
breakers or equipment on the NYSEG system with the interconnection at Reynolds Road.

This report documents preliminary engineering and conceptual design of modification and/or

additions to NMPC’s facilities to accommodate the interconnection of POWER CO.’s proposed
Plant based on a two-breaker 345 kV installation at the NMPC Reynolds Road Substation. The
following is a summary of the NMPC facilities requiring upgrade to incorporate the POWER
CO. Plant:

•  Mitigation of the short circuit impact on the Reynolds Road Substation by the

replacement of the 115 kV breaker R63 at Reynolds Road with a new 50 kA

breaker. The addition of the POWER CO. Plant increases the short circuit levels of the R-63 115 kV breaker at the Reynolds Road Substation beyond its 40-kA rating requiring its replacement.

•  Addition of one new 345 kV line breaker at the Reynolds Road Substation will be

required to accept the 345 kV generator leads from the POWER CO. substation switchyard to the Reynolds Road Substation.

•  Addition of one new 345 kV bus breaker at the Reynolds Road Substation is

required to provide clearing capability for the loss of the 345 kV Reynolds Road

- Alps #1 transmission line, enabling the POWER CO. generators to remain connected to the 345 kV bus at Reynolds Road.

•  Provide dual channel relaying at the Alps Substation. Extreme contingency

analysis results indicated that the POWER CO. Plant extends critical clearing

time of a three-phase fault at New Scotland on the New Scotland - Leeds circuit from 17 cycles to 19 cycles. This critical clearing time is considered acceptable because all 345 kV substations in the vicinity of the POWER CO. Plant, with the exception of Alps, have dual channel relaying, which provides backup clearing times comparable to primary clearing times.

•  Modifications of the existing system protection schemes at Reynolds Road and

Alps 345 kV substations to adjust for network changes, increased transmission loading and critical clearing time requirements.

2

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004

2  POWER CO. PLANT

The proposed site of the POWER CO. Plant is in the proximity of the LG&E/EI Paso Rensselaer
Generating Plant, in Rensselaer, NY. The plant is transmitting its output on the NMPC LG&E -
Greenbush #16 115 kV Circuit. The POWER CO. site is approximately 5 miles southwest of the
NMPC Reynolds Road Substation. The use of existing ROWs will require the construction of an

8.1 mile 345 kV transmission line to transmit the output power from the plant to the Reynolds
Road substation. The geographic area for location of the proposed POWER CO. Plant and the
Reynolds Road substation is shown in Figure 2-1. A conceptual drawing of the expanded
Reynolds Road substation is shown in Figure 2-2 and Figure 2-3. The summer 2003 annual
transmission review load flow study information sheet is also included as Figure 2-4.

3

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004

5

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004

6

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004

7

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004

2.1. POWER CO. Plant Interconnection

Figure 2-5 illustrates the preliminary configuration to interconnect the proposed POWER CO.
Plant to the 345 kV transmission system with a generator lead which extends from the POWER
CO. Plant to the NMPC Reynolds Road Substation, through a single 345 kV breaker at Reynolds
Road. The current configuration at Reynolds Road requires that a second 345 kV breaker also be
installed as an isolation device such that the POWER CO. Plant can remain connected to the bus
at Reynolds Road in the event of a line fault on the Reynolds Road - Alps #1 345 kV Circuit.
The new 345 kV transmission line will be installed using 2-1192.5 kcmil ACSR conductors per
phase for the entire length between the POWER CO. switchyard and the Reynolds Road

Substation. NMPC will have the responsibility to design, install and test all necessary equipment
at the Reynolds Road to accommodate this interconnection. POWER CO. will have the
responsibility for all transmission line construction between these same two points. NMPC will
be responsible for the approval of the transmission line design prior to the beginning of
construction.

2.1.1. Special Protection Scheme

An NPCC Type 111 Special Protection System (“SPS”) will be required to detect a fault, line trip or failure on the Reynolds Road - Alps #1 345 kV circuit and automatically runback the POWER CO. Plant generators.

9

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004

3  SUBSTATION FACILITIES

This section documents the necessary review and/or modifications required at the NMPC substations to accommodate the interconnection, including estimated costs and preliminary schedule for these modifications.

This listing of substations and the affected equipment within a given substation requires field verification of ratings and protection schemes. Therefore this section is considered preliminary, as is this document.

3.1. Reynolds Road Substation

The upgrades at the Reynolds Road Substation are associated with the interconnection of the
new 345 kV transmission facility, the installation of a second 345 kV isolation breaker, and the
upgrading of an existing 115 kV circuit breaker which has been determined through the SRIS to
be required to be replaced due to its current rating. The work at the Reynolds Road Substation
will include the following additions/modifications (Reference Plan View: Appendix!, Figure 1-

1).

3.1.1.  345 kV Switchyard

The 345 kV switchyard work mainly consists of creating a new 345 kV bay by the addition of a 345 kV circuit breaker, associated disconnects and bus work, along with the required
communications, controls and protection required for the interconnection. The following
equipment will be installed at the Reynolds Road 345 kV substation:

•    Two (2) dead tank breakers (CB) rated 50 kA, 3000 continuous amps will be
 installed;

•    Three (3) Disconnect switches, with Motor Operators will be installed;

•    One (1) Line 345 kV Grounding Switch will be installed;

•    One (I) Line 345 kV Line Trap and Tuning Equipment will be installed;

•    One (1) Set of metering CT / VT Units; and

•    One (1) Potential Transformer (PT) will be installed

3.1.2.  115 kV switchyard

The 115 kV switchyard work mainly consists of the replacement of an existing 115 kV circuit breaker (R63) which was determined to be beyond its normal rating through the SRIS analysis performed for the interconnection of the POWER CO. Plant.

•    One live tank breaker rated 40 kA will be replaced with a new 50 kA live tank
 breaker (R-63)

3.1.3.  Foundations

10

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004

It is proposed that new foundations will be poured for all new 345 kV equipment in the

Reynolds Road Substation. Such foundations will be required for the two (2) 345 kV circuit breakers, the 345 kV Grounding Switch, metering transformers and the one (1) Potential Transformer. The existing building foundation will need to be expanded to accommodate the additional required building space.

3.1.4.  Grounding System

The grounding system will consist of a ground conductor grid and driven ground rods. All ground conductors will be copperweld.

3.1.5.  Station Service

Station Service at the Reynolds Road Substation is not anticipated to need modifications or

replacement in order to serve the additional facilities. Additional analysis may be required

following specific specifications on the equipment are determined. The Station Service consists
of two battery sets (125 VDC) and charger systems with _____AH batteries and a _____A
chargers.

3.1.6.  Controls and Protection

Control and protection additions/replacements will include:

a)  Controls and indication for 345 kV breaker (#TBD-B1) and motor operated disconnect

(#TBD-D1) for the line interconnection of the POWER CO. Plant.

b) Controls and indication for 345 kV breaker (#TBD-B2) and motor operated disconnect

(#TBD-D2) for the isolation breaker on the Alps #1 345 kV connection at Reynolds

Road.

c) Synchronism check and reclosing relays for the new 345 kV breaker (#TBD-B1) and

(#TBD-B2)

d) Spare points on the existing annunciators will be used for the new alarms.

e) Protection packages (system 1 & 2) for the 345 kV POWER CO. line will be installed.

System 1 will be directional comparison carrier blocking (with on/off, and FSK power line carrier equipment) relaying system. System 1 cabinet will be located next to the
existing panel ____. The new cabinet will be designated as #____. System 2 will be
permissive over-reach transfer trip (with POTT communication equipment) relay
system. System 2 cabinet will be located next to the existing panel . The new cabinet
will be designated as # ____.

f) High speed and standard 345 kV breaker failure relaying for breaker (#TBD-BI) and for

345 kV breaker (#TBD-B2).

g) 345 kV bus differential relays for 345 kV bus #____ (system 1 and system 2). System 1

will be mounted on panel #____ and system 2 will be on panel #____.

h) Communication processor.

i) Digital fault recorder will be installed on panel #____.

j) Protective and controls associated with the replaced 115 kV circuit breaker R63 will be

revised accordingly, if required.

11

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004

3.1.7.  EMS System

Harris RTU exists at the station to monitor and control the 345 kV facilities from NMPC

Dispatch Center at ____. It is equipped for ____ status, ____ control pairs, and ____ analog

points. Spare points available in the RTU will be used to accommodate additional status, control, and sequence inputs associated with the new substation facilities.

3.1.8.  Digital Fault Recorder System

A new Digital Fault Recorder (“DFR”) system will need to be installed in the control building.

3.1.9.  Interfaces with Transmission

Transmission engineering will undertake the following interface with the substation equipment:

•  2 - 1192.5 kcmil ACSR conductors drops will be made from the 345 kV line to the

appropriate 345 kV breaker disconnect switches for the (#TBD-B1) breaker.

3.1.10. Review of Reynolds Road Distribution Feeds

A complete short circuit analysis will be reviewed/conducted to analyze the 13.2 kV distribution circuits. Those circuits, which will be analyzed through this study, are the 33451, 33452, 33453, and 33454 - 13.2 kV distribution circuits.

3.1.11. POWER CO. Plant Revenue Metering

NMPC will be responsible for providing all required metering equipment for the POWER CO.
Plant revenue metering which will be installed at the Reynolds Road Substation. Such metering
equipment will be in accordance with NMPC and NYISO revenue metering specifications.

3.1.12. POWER CO. 345 kV Metering

The meters provided for the Reynolds Road 345 kV interconnection will be capable of providing
required billing quantities via dial-up telephone to the NMPC / POWER CO. or POWER CO.
and the NYISO, using a UTS MV-90 in their standard format and protocol. With the location of
the meters at Reynolds Road, there will be no need to be capable of being electronically
compensated to reflect losses in the transmission line facilities. Any losses on transmission will
be solely borne by POWER CO. The specific meters must also be capable of measuring bi-
directional energy flow.

3.2. Alps Substation

The SRIS review of system condition indicated that modifications of the existing system

protection schemes at the Alps 345 kV substation is required to adjust for network changes

caused by increased transmission loading and critical clearing time requirements. It is also

necessary to coordinate breaker tripping and reclosing schemes to take into account the inclusion of the POWER CO. Plant input to the NMPC system.

12

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004

An NPCC Type III Special Protection System (“SPS”) will be required to detect and runback the Plant for a Reynolds Road - Alps #1 345 kV line failure or breaker trip.

3.3. Greenbush Substation

The SRIS review for the interconnection of the POWER CO. Plant to the NMPC Reynolds Road Substation concluded there were no impacts on the equipment at the Greenbush 115 kV
Substation. However, additional studies are required to look at the potential required
modifications to the protection scheme and station hardware.

3.4. Menands Substation

The SRIS review for the interconnection of the POWER CO. Plant to the NMPC Reynolds Road Substation concluded there were no impacts on the equipment at the Menands 115 kV
Substation. However, additional studies are required to look at the potential required
modifications to the protection scheme and station hardware.

3.5. Riverside Substation

The SRIS review for the interconnection of the POWER CO. Plant to the NMPC Reynolds Road Substation concluded there were no impacts on the equipment at the Riverside 115 kV
Substation. However, additional studies are required to look at the potential required
modifications to the protection scheme and station hardware.

3.6. Arsenal Substation

The SRIS review for the interconnection of the POWER CO. Plant to the NMPC Reynolds Road Substation concluded there were no impacts on the equipment at the Arsenal 115 kV Substation. However, additional studies are required to look at the potential required modifications to the protection scheme and station hardware.

3.7. Wynantskill Substation

The SRIS review for the interconnection of the POWER CO. Plant to the NMPC Reynolds Road Substation concluded there were no impacts on the equipment at the Wynantskill 115 kV
Substation. However, additional studies are required to look at the potential required
modifications to the protection scheme and station hardware.

3.8.  Rensselaer Waste Water Substation

The SRIS review for the interconnection of the POWER CO. Plant to the NMPC Reynolds Road Substation concluded there were no impacts on the equipment at the Rensselaer Water Tap.
However, additional studies are required to look at the potential required modifications to the protection scheme and station hardware.

3.9. North Troy Substation

13

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004

The SRIS review for the interconnection of the POWER CO. Plant to the NMPC Reynolds Road Substation concluded there were no impacts on the equipment at the North Troy 115 kV
Substation. However, additional studies are required to look at the potential required
modifications to the protection scheme and station hardware.

3.10.   Stephentown Substation

The SRIS review for the interconnection of the POWER CO. Plant to the NMPC Reynolds Road Substation concluded there were no impacts on the equipment at the Stephentown 115 kV
Substation. However, additional studies are required to look at the potential required
modifications to the protection scheme and station hardware.

3.11.   Feura Bush Substation

The SRIS review for the interconnection of the POWER CO. Plant to the NMPC Reynolds Road Substation concluded there were no impacts on the equipment at the Feura Bush 115 kV
Substation. However, additional studies are required to look at the potential required
modifications to the protection scheme and station hardware.

3.12.   LG&E/ El Paso Substation

The SRIS review for the interconnection of the POWER CO. Plant to the NMPC Reynolds Road
Substation concluded there were no impacts on the equipment at the LG&E / El Paso 115 kV
Substation for the LG&E / El Paso Cogeneration Plant. However, additional studies are required
to look at the potential required modifications to the protection scheme and station hardware.

3.13.   POWER CO. Substation

3.13.1. POWER CO. Special Protection Scheme

The SRIS review for the interconnection of the POWER CO. Plant has indicated that there will
be a need to install a NPCC Type 111 SPS equipment. This SPS equipment will automatically
runback the output of the generation units at the POWER CO. Plant to an approximate ____%
output, for the case of the loss of the Alps #1 345 kV Line between Reynolds Road and the Alps
Substation, or for the loss of its associated breaker (#TBDB2) at the Reynolds Road Substation.

•    Installation of an audio-tone transmitter at Alps, with a receiver at POWER CO.
 Plant.

•    It may be possible to share communications paths and equipment for different SPSs.

3.13.2. Station Service Metering

Dual Station Service supply will be provided for the POWER CO. 345 kV switchyard in

accordance with NPCC requirements, in accordance with NPCC Document A-5, Section 3.6.

The physical bus arrangement of the POWER CO. 345 kV switchyard enables the station service
for the POWER CO. Plant to be supplied through the 345/13.8 kV step-down transformer, for a

14

POWER CO. Project Initial facilities Study

Exhibit B to the Interconnection Agreement January 15, 2004