Consolidated Edison, Inc.

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Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

/x/	Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
For The Quarterly Period Ended September 30, 2001
or
/ /	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number	Exact name of registrant as specified in its charter and principal office address and telephone number	State of Incorporation	I.R.S. Employer ID. Number

1-14514	Consolidated Edison, Inc. 4 Irving Place, New York, New York 10003 (212) 460-4600	New York	13-3965100
1-1217	Consolidated Edison Company of New York, Inc. 4 Irving Place, New York, New York 10003 (212) 460-4600	New York	13-5009340
1-4315	Orange and Rockland Utilities, Inc. One Blue Hill Plaza, Pearl River, New York 10965 (914) 352-6000	New York	13-1727729

Indicate by check mark whether each Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / /

As of the close of business on October 31, 2001, Consolidated Edison, Inc. (Con Edison) had outstanding 212,236,944 Common Shares ($.10 par value). Con Edison owns all of the outstanding common equity of Consolidated Edison Company of New York, Inc. (Con Edison of New York) and Orange and Rockland Utilities, Inc. (O&R).

O&R meets the conditions specified in general instruction H (1) (a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format.

TABLE OF CONTENTS



Filing Format
Forward-Looking Statements
Part I.	Financial Information
Item 1.	Financial Statements
	Con Edison	Consolidated Balance Sheet
		Consolidated Income Statements
		Consolidated Statement of Retained Earnings
		Consolidated Statement of Comprehensive Income
		Consolidated Statement of Cash Flows
		Notes to Financial Statements
	Con Edison of New York	Consolidated Balance Sheet
		Consolidated Income Statements
		Consolidated Statement of Retained Earnings
		Consolidated Statement of Comprehensive Income
		Consolidated Statement of Cash Flows
		Notes to Financial Statements
	O&R	Consolidated Balance Sheet
		Consolidated Income Statements
		Consolidated Statement of Retained Earnings
		Consolidated Statement of Comprehensive Income
		Consolidated Statement of Cash Flows
		Notes to Financial Statements
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations
	Con Edison
	Con Edison of New York
	O&R
	O&R Management's Narrative Analysis of the Results of Operations
Item 3	Quantitative and Qualitative Disclosures About Market Risk
	Con Edison
	Con Edison of New York
	O&R
Part II.	Other Information
Item 1.	Legal Proceedings
Item 6.	Exhibits and Reports on Form 8-K

* O&R is omitting this information pursuant to General Instruction H of Form 10-Q.

Filing Format

This Quarterly Report on Form 10-Q is a combined report being filed separately by three different registrants: Consolidated Edison, Inc. (Con Edison), Consolidated Edison Company of New York, Inc. (Con Edison of New York) and Orange and Rockland Utilities, Inc. (O&R). Neither Con Edison of New York nor O&R makes any representation as to the information contained in this report relating to Con Edison or the subsidiaries of Con Edison other than itself.

O&R, a wholly-owned subsidiary of Con Edison, meets the conditions specified in General Instruction H of Form 10-Q and is permitted to use the reduced disclosure format for wholly-owned subsidiaries of companies, such as Con Edison, that are reporting companies under the Securities Exchange Act of 1934. Accordingly, O&R has omitted from this report the information called for by Part I, Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations and has included in this report its Management's Narrative Analysis of the Results of Operations. In accordance with general instruction H, O&R has also omitted from this report the information, if any, called for by Part I, Item 3, Quantitative and Qualitative Disclosure About Market Risk; Part II, Item 2, Changes in Securities and Use of Proceeds; Part II, Item 3, Defaults Upon Senior Securities; and Part II, Item 4, Submission of Matters to a Vote of Security Holders.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements, which are statements of future expectation and not facts. Words such as "estimates," "expects," "anticipates," "intends," "plans" and similar expressions identify forward-looking statements. Actual results or developments might differ materially from those included in the forward-looking statements because of factors such as competition and industry restructuring, developments relating to the company's nuclear generating unit (which it sold in September 2001—see Note C to the Con Edison financial statements in Part I, Item 1 of this report), developments relating to Northeast Utilities (see Note D to the Con Edison financial statements in Part I, Item 1 of this report), developments relating to the World Trade Center attack (See "World Trade Center Attack" in Part I, Item 2 of this report), developments in wholesale energy markets, technological developments, changes in economic conditions, changes in historical weather patterns, changes in laws, regulations or regulatory policies, developments in legal or public policy doctrines, and other presently unknown or unforeseen factors.

Consolidated Edison, Inc.

CONSOLIDATED BALANCE SHEET

(Unaudited)

			As at
			September 30, 2001		December 31, 2000
			(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
	Electric		$	11,023,319	$	11,808,102
	Gas			2,371,997		2,300,056
	Steam			754,984		740,189
	General			1,320,781		1,388,602

	TOTAL			15,471,081		16,236,949
	Less: Accumulated depreciation			4,309,963		5,186,058

	NET			11,161,118		11,050,891
	Construction work in progress			544,380		504,470
	Nuclear fuel assemblies and components, less accumulated amortization			-		107,641

NET UTILITY PLANT				11,705,498		11,663,002

NON-UTILITY PLANT
	Unregulated generating assets, less accumulated depreciation of $19,438 and $48,643			173,005		230,416
	Non-utility property, less accumulated depreciation of $7,828 and $5,516			90,376		41,752

NET PLANT				11,968,879		11,935,170

CURRENT ASSETS
	Cash and temporary cash investments			432,143		94,828
	Accounts receivable—customer, less allowance for uncollectible accounts of $30,640 and $33,714			863,637		910,344
	Other receivables			132,256		168,415
	Fuel, at average cost			19,850		29,148
	Gas in storage, at average cost			109,695		82,419
	Materials and supplies, at average cost			89,731		131,362
	Prepayments			836,232		524,377
	Other current assets			28,551		75,094

TOTAL CURRENT ASSETS				2,512,095		2,015,987

INVESTMENTS
	Nuclear decommissioning trust funds			-		328,969
	Other			215,144		197,120

TOTAL INVESTMENTS				215,144		526,089

DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS
	Goodwill and other intangible assets			529,622		488,702
	Regulatory assets
		Future federal income tax		576,810		676,527
		Recoverable energy costs		194,074		340,495
		Loss on Indian Point Sale		166,494		-
		Real estate sale costs — First Avenue properties		104,449		103,009
		Deferred special retirement program costs		83,726		88,633
		Divestiture — capacity replacement reconciliation		73,850		73,850
		Workers' compensation reserve		66,162		47,097
		Accrued unbilled revenues		64,022		72,619
		Deferred environmental remediation costs		60,649		49,056
		Deferred revenue taxes		42,615		43,879
		World Trade Center Incident		35,626		-
		Other		110,359		112,604

	TOTAL REGULATORY ASSETS			1,578,836		1,607,769
	Other deferred charges and noncurrent assets			232,724		193,528

TOTAL DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS				2,341,182		2,289,999

TOTAL			$	17,037,300	$	16,767,245

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

Consolidated Edison, Inc.

CONSOLIDATED BALANCE SHEET

(Unaudited)

			As at
			September 30, 2001			December 31, 2000
			(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
	Common stock, authorized 500,000,000 shares; outstanding 212,206,394 shares and 212,027,131 shares		$	1,482,341		$	1,482,341
	Retained earnings			5,242,821			5,040,931
	Treasury stock, at cost; 23,281,700 shares and 23,460,963 shares			(1,000,486	)		(1,012,919	)
	Capital stock expense			(35,614	)		(35,817	)
	Accumulated other comprehensive income			(26,919	)		(2,147	)

	TOTAL COMMON SHAREHOLDERS' EQUITY			5,662,143			5,472,389

	Preferred stock subject to mandatory redemption			37,050			37,050
	Other preferred stock			212,563			212,563
	Long-term debt			5,508,460			5,415,409

TOTAL CAPITALIZATION				11,420,216			11,137,411

NONCURRENT LIABILITIES
	Obligations under capital leases			41,708			31,504
	Accumulated provision for injuries and damages			177,049			160,671
	Pension and benefits reserve			213,163			181,346
	Other noncurrent liabilities			39,028			30,118

TOTAL NONCURRENT LIABILITIES				470,948			403,639

CURRENT LIABILITIES
	Long-term debt due within one year			460,270			309,590
	Notes payable			202,110			255,042
	Accounts payable			736,496			1,020,401
	Customer deposits			211,276			202,888
	Accrued taxes			135,909			64,345
	Accrued interest			97,092			85,276
	Accrued wages			78,510			70,951
	Other current liabilities			338,888			328,686

TOTAL CURRENT LIABILITIES				2,260,551			2,337,179

DEFERRED CREDITS AND REGULATORY LIABILITIES
	Accumulated deferred federal income tax			2,255,219			2,302,764
	Accumulated deferred investment tax credits			119,797			131,429
	Regulatory liabilities
		NYISO reconciliation		77,606			-
		Gain on divestiture		70,398			60,338
		Deposit from sale of First Avenue properties		50,000			50,000
		Accrued electric rate reduction		38,018			38,018
		DC service termination funding		25,995			18,169
		NYPA revenue increase		18,338			35,021
		Other		213,891			253,060

	TOTAL REGULATORY LIABILITIES			494,246			454,606
	Other deferred credits			16,323			217

TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES				2,885,585			2,889,016

TOTAL			$	17,037,300		$	16,767,245

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

Consolidated Edison, Inc.

CONSOLIDATED INCOME STATEMENT

For the Three Months Ended September 30, 2001 and 2000 (Unaudited)		2001			2000
		(Thousands of Dollars)
OPERATING REVENUES
	Electric	$	2,247,325		$	2,328,220
	Gas		166,601			177,891
	Steam		78,703			82,837
	Non-utility		200,241			231,831

TOTAL OPERATING REVENUES			2,692,870			2,820,779

OPERATING EXPENSES
	Purchased power		1,149,074			1,218,017
	Fuel		88,207			95,977
	Gas purchased for resale		86,868			131,921
	Other operations		258,485			263,463
	Maintenance		101,128			114,971
	Depreciation and amortization		133,125			150,785
	Taxes, other than income tax		313,586			328,948
	Income tax		176,152			131,824

TOTAL OPERATING EXPENSES			2,306,625			2,435,906

OPERATING INCOME			386,245			384,873
OTHER INCOME (DEDUCTIONS)
	Investment income		3,080			1,520
	Allowance for equity funds used during construction		286			542
	Other income less miscellaneous deductions		(6,562	)		6,682
	Income tax		5,574			(2,076	)

TOTAL OTHER INCOME (DEDUCTIONS)			2,378			6,668

INCOME BEFORE INTEREST CHARGES			388,623			391,541
	Interest on long-term debt		100,587			95,399
	Other interest		9,230			14,021
	Allowance for borrowed funds used during construction		(1,934	)		(1,148	)

NET INTEREST CHARGES			107,883			108,272

NET INCOME			280,740			283,269
PREFERRED STOCK DIVIDEND REQUIREMENTS			3,398			3,398

NET INCOME FOR COMMON STOCK		$	277,342		$	279,871

COMMON SHARES OUTSTANDING—AVERAGE BASIC (000)			212,206			211,974
COMMON SHARES OUTSTANDING—AVERAGE DILUTED (000)			213,171			212,069
BASIC EARNINGS PER SHARE		$	1.31		$	1.32

DILUTED EARNINGS PER SHARE		$	1.30		$	1.32

DIVIDENDS DECLARED PER SHARE OF COMMON STOCK		$	0.550		$	0.545

Consolidated Edison, Inc.

CONSOLIDATED INCOME STATEMENT

For the Nine Months Ended September 30, 2001 and 2000 (Unaudited)		2001			2000
		(Thousands of Dollars)
OPERATING REVENUES
	Electric	$	5,486,648		$	5,371,732
	Gas		1,173,814			894,380
	Steam		426,621			327,695
	Non-utility		604,265			587,458

TOTAL OPERATING REVENUES			7,691,348			7,181,265

OPERATING EXPENSES
	Purchased power		2,965,903			2,739,770
	Fuel		304,542			223,945
	Gas purchased for resale		723,990			562,533
	Other operations		799,472			865,426
	Maintenance		345,914			349,943
	Depreciation and amortization		404,991			439,125
	Taxes, other than income tax		878,056			893,280
	Income tax		379,938			268,332

TOTAL OPERATING EXPENSES			6,802,806			6,342,354

OPERATING INCOME			888,542			838,911
OTHER INCOME (DEDUCTIONS)
	Investment income		5,968			8,461
	Allowance for equity funds used during construction		787			451
	Other income less miscellaneous deductions		(18,451	)		2,432
	Income tax		12,727			(2,315	)

TOTAL OTHER INCOME (DEDUCTIONS)			1,031			9,029

INCOME BEFORE INTEREST CHARGES			889,573			847,940
	Interest on long-term debt		298,149			266,370
	Other interest		29,254			38,558
	Allowance for borrowed funds used during construction		(5,156	)		(3,935	)

NET INTEREST CHARGES			322,247			300,993

NET INCOME			567,326			546,947
PREFERRED STOCK DIVIDEND REQUIREMENTS			10,194			10,194

NET INCOME FOR COMMON STOCK		$	557,132		$	536,753

COMMON SHARES OUTSTANDING - AVERAGE BASIC (000)			212,119			212,240
COMMON SHARES OUTSTANDING - AVERAGE DILUTED (000)			212,870			212,319
BASIC EARNINGS PER SHARE		$	2.63		$	2.53

DILUTED EARNINGS PER SHARE		$	2.62		$	2.53

DIVIDENDS DECLARED PER SHARE OF COMMON STOCK		$	1.650		$	1.635

Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF RETAINED EARNINGS

(Unaudited)

		September 30, 2001		December 31, 2000
		As at
		(Thousands of Dollars)
BALANCE, JANUARY 1		$	5,040,931	$	4,921,089
	Less: Stock options exercised		5,237		1,026
	Orange & Rockland purchase accounting adjustment		72		(46	)
	Net income for common stock for the period		557,060		582,835

TOTAL			5,592,826		5,502,852

DIVIDENDS DECLARED ON COMMON, $1.65 AND $2.18 PER SHARE, RESPECTIVELY			350,005		461,921

ENDING BALANCE		$	5,242,821	$	5,040,931

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

Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Nine Months Ended September 30, 2001 and 2000 (Unaudited)		2001			2000
		(Thousands of Dollars)
NET INCOME FOR COMMON STOCK		$	557,132		$	536,753
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES
	Investment in marketable equity securities, net of $552 taxes		(576	)		-
	Minimum pension liability adjustments, net of $1,656 taxes		(2,055	)		-
	Unrealized (losses)/gains on derivatives qualified as hedges arising during the period due to cumulative effect of a change in accounting principle, net of $5,587 taxes		(8,050	)		-
	Unrealized (losses)/gains on derivatives qualified as hedges, net of $17,363 taxes		(24,375	)		-
	Less: Reclassification adjustment for (losses)/gains included in net income, net of $7,278 taxes		(10,284	)		-

TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES			(24,772	)		-

COMPREHENSIVE INCOME		$	532,360		$	536,753

Consolidated Edison, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Nine Months Ended September 30, 2001 and 2000 (Unaudited)				2001			2000
				(Thousands of Dollars)
OPERATING ACTIVITIES
	Net income for common stock			$	557,132		$	536,753
	PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
		Depreciation and amortization			404,765			439,125
		Income tax deferred (excluding taxes resulting from divestiture of plant)			46,692			164,031
		Common equity component of allowance for funds used during construction			(787	)		(451	)
		Prepayments—accrued pension credits			(248,779	)		(177,040	)
		Other non-cash charges			35,118			28,437
	CHANGES IN ASSETS AND LIABILITIES
		Accounts receivable—customer, less allowance for uncollectibles			46,707			(152,474	)
		Materials and supplies, including fuel and gas in storage			(18,664	)		(36,410	)
		Prepayments (other than pensions), other receivables and other current assets			12,931			(151,154	)
		Deferred recoverable energy costs			146,421			(123,404	)
		Cost of removal less salvage			(71,680	)		(83,386	)
		Accounts payable			(282,448	)		216,281
		Other-net			232,378			116,176

NET CASH FLOWS FROM OPERATING ACTIVITIES					859,786			776,484

INVESTING ACTIVITIES INCLUDING CONSTRUCTION
		Utility construction expenditures			(750,559	)		(662,377	)
		Nuclear fuel expenditures			(6,111	)		(26,473	)
		Contributions to nuclear decommissioning trust			(89,185	)		(15,975	)
		Common equity component of allowance for funds used during construction			787			451
		Divestiture of utility plant (net of federal income tax)			653,694			—
		Investments by unregulated subsidiaries			(17,062	)		(19,072	)
		Non-utility plant			(51,042	)		(256,392	)

NET CASH FLOWS USED IN INVESTING ACTIVITIES INCLUDING CONSTRUCTION					(259,478	)		(979,838	)

FINANCING ACTIVITIES INCLUDING DIVIDENDS
		Repurchase of common stock			—			(68,531	)
		Net reduction from short-term debt			(139,192	)		(252,367	)
		Additions to long-term debt			624,600			858,660
		Retirement of long-term debt			(378,150	)		(395,000	)
		Issuance and refunding costs			(20,254	)		(4,894	)
		Common stock dividends			(349,997	)		(346,754	)

NET CASH FLOWS USED IN FINANCING ACTIVITIES INCLUDING DIVIDENDS					(262,993	)		(208,886	)

NET INCREASE/(DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS					337,315			(412,240	)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1					94,828			485,050

CASH AND TEMPORARY CASH INVESTMENTS AT SEPTEMBER 30				$	432,143		$	72,810

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
		Cash paid during the period for:
			Interest	$	272,396		$	241,157
			Income taxes		227,735			74,245

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

NOTES TO FINANCIAL STATEMENTS - CON EDISON

Note A - General

These footnotes accompany and form an integral part of the interim consolidated financial statements of Consolidated Edison, Inc. (Con Edison) and its subsidiaries, including the regulated utility Consolidated Edison Company of New York, Inc. (Con Edison of New York), the regulated utility Orange and Rockland Utilities, Inc. (O&R) and several non-utility subsidiaries. These financial statements are unaudited but, in the opinion of Con Edison's management, reflect all adjustments (which include only normally recurring adjustments) necessary for a fair statement of the results for the interim periods presented. These financial statements should be read together with the audited Con Edison financial statements (including the notes thereto) included in the combined Con Edison, Con Edison of New York and O&R Annual Reports on Form 10-K for the year ended December 31, 2000 (the Form 10-K).

Recoverable Energy Costs

Con Edison's utility subsidiaries generally recover all of their prudently incurred fuel, purchased power and gas costs in accordance with rate provisions approved by their state public utility commissions. At September 30, 2001, Con Edison's New Jersey utility subsidiary, Rockland Electric Company, had deferred $73.5 million of such costs for charge to customers in the manner and at such time as is to be determined by the New Jersey Board of Public Utilities. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Guarantees of Subsidiary Obligations

Con Edison has guaranteed certain obligations of its subsidiaries in an aggregate amount of approximately $1 billion at September 30, 2001. Con Edison does not expect to incur losses as a result of the guarantees. See "Guarantees of Subsidiary Obligations" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Earnings Per Common Share

For the three months ended September 30, 2001 and 2000, the weighted average number of shares used to calculate the diluted earnings per common share included dilutive common stock equivalents of approximately 213,171,000 shares and 212,069,000 shares, respectively. For the nine months ended September 30, 2001 and 2000, the weighted average number of shares used to calculate the diluted earnings per common share included dilutive common stock equivalents of 212,870,000 shares and 213,319,000 shares, respectively. See "Earnings Per Common Share" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

New Accounting Standards

During 2001, the Financial Accounting Standards Board has issued four new accounting standards: Statement of Financial Accounting Standards (SFAS) No. 141, "Business Combinations," SFAS No. 142, "Accounting for Goodwill and Other Intangible Assets," SFAS No. 143, "Accounting for Asset Retirement Obligations" and SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The company has not yet determined the impact the new accounting standards will have on its financial statements.

SFAS No. 141 requires that all business combinations initiated after June 30, 2001 use the purchase method of accounting, which includes recognition of goodwill.

SFAS No. 142, which the company is required to adopt on January 1, 2002, provides that goodwill, including amounts previously recognized under the purchase method, will no longer be subject to amortization and instead will be subject to periodic reviews for impairment. If determined to be impaired, goodwill will be reduced to its fair value and an impairment charge will be recognized in income. Con Edison is required to determine whether or not its goodwill is impaired following its adoption of SFAS 142. In accordance with SFAS 142, Con Edison is also required to review its goodwill for impairment each year and whenever an event or series of events occurs indicating that goodwill might be impaired.

SFAS No. 143, which the company is required to adopt on January 1, 2003, requires entities to record the fair value of a liability associated with an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related asset. The liability is increased to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon retirement of the asset, the entity either settles the obligation for the amount recorded or incurs a gain or loss.

SFAS No. 144, which the company is required to adopt on January 1, 2002, replaces SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 144 requires that long-lived assets be measured at the lower of carrying amount or fair value less cost to sell, whether reported in continuing or discontinued operations. The statement also broadens the reporting of discontinued operations.

Note B - Environmental Matters

Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and coal tar, have been used or generated in the course of operations of Con Edison's utility subsidiaries and may be present in their facilities and equipment.

The Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund) and similar state statutes impose joint and several strict liability, regardless of fault, upon generators of hazardous substances for resulting removal and remedial costs and environmental damages. Liabilities under these laws can be material and in some instances may be imposed without regard to fault, or may be imposed for past acts, even though such past acts may have been lawful at the time they occurred.

At September 30, 2001, Con Edison had accrued $130.9 million as its best estimate of the utility subsidiaries' liability for sites as to which they have received process or notice alleging that hazardous substances generated by them (and, in most instances, other potentially responsible parties) were deposited. There will be additional liability at these sites and other sites, the amount of which is not presently determinable but may be material to Con Edison's financial position, results of operations or liquidity.

Con Edison's utility subsidiaries are permitted under current rate agreements to defer for subsequent recovery through rates certain site investigation and remediation costs with respect to hazardous waste. At September 30, 2001, $60.6 million of such costs had been deferred as regulatory assets.

Suits have been brought in New York State and federal courts against Con Edison's utility subsidiaries and many other defendants, wherein a large number of plaintiffs sought large amounts of compensatory and punitive damages for deaths and injuries allegedly caused by exposure to asbestos at various premises of the utility subsidiaries. Many of these suits have been disposed of without any payment by the utility subsidiaries, or for immaterial amounts. The amounts specified in all the remaining suits total billions of dollars but Con Edison believes that these amounts are greatly exaggerated, as were the claims already disposed of. Based on the information and relevant circumstances known to Con Edison at this time, it does not believe that these suits will have a material adverse effect on its financial position, results of operations or liquidity.

Note C - Nuclear Generation

In September 2001, the sale of Con Edison of New York's nuclear generating unit and related assets, and the transfer to the buyer of the company's nuclear decommissioning trust funds, was completed. The net after-tax loss from the sale, which has been deferred as a regulatory asset, was $166.5 million. The loss on the sale is recoverable from customers pursuant to the agreements covering the company's electric rates, which provide that the company "will be given a reasonable opportunity to recover stranded and strandable costs remaining at March 31, 2005, including a reasonable return on investments, under the parameters and during the time periods set forth therein." See"Rate and Restructuring Agreements" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

The New York State Public Service Commission (PSC) is investigating the February 2000 to January 2001 outage of the nuclear generating unit, its causes and the prudence of the company's actions regarding the operation and maintenance of the generating unit. An appeal is pending in the United States Court of Appeals for the Second Circuit of the October 2000 decision by the United States District Court for the Northern District of New York, in an action entitled Consolidated Edison Company of New York, Inc. v. Pataki, et al., in which the court determined that the law that directed the PSC to prohibit the company from recovering replacement power costs for the outage from customers was unconstitutional and granted the company's motion for a permanent injunction to prevent its implementation. The company is unable to predict whether or not any proceedings, lawsuits, legislation or other actions relating to the nuclear generating unit will have a material adverse effect on its financial position, results of operations or liquidity. For additional information, see Note G to Con Edison's financial statements included in Item 8 of the Form 10-K.

Note D - Northeast Utilities

In May 2001, Con Edison amended its complaint against Northeast Utilities in the proceeding it commenced in March 2001 in the United States District Court for the Southern District of New York, entitled Consolidated Edison, Inc. v. Northeast Utilities, with respect to their agreement and plan of merger, dated as of October 13, 1999, as amended and restated as of January 11, 2000 (the merger agreement). As amended, Con Edison's complaint seeks, among other things, recovery of damages

sustained by it as a result of the material breach of the merger agreement by Northeast Utilities and the court's declaration that under the merger agreement Con Edison has no further or continuing obligations to Northeast Utilities, and that Northeast Utilities has no further or continuing rights as against Con Edison.

In June 2001, Northeast Utilities withdrew the separate action it commenced in March 2001 in the same court and filed as a counter-claim to Con Edison's amended complaint its claim that Con Edison materially breached the merger agreement and that as a result Northeast Utilities and its shareholders have suffered substantial damages, including the difference between the consideration to be paid to Northeast Utilities shareholders pursuant to the merger agreement and the current market value of Northeast Utilities common stock, expenditures in connection with regulatory approvals and lost business opportunities. Pursuant to the merger agreement, Con Edison agreed to acquire Northeast Utilities for $26.00 per share (an estimated aggregate of not more than $3.9 billion) plus $0.0034 per share for each day after August 5, 2000 through the day prior to the completion of the transaction, payable 50 percent in cash and 50 percent in stock.

Con Edison believes that Northeast Utilities has materially breached the merger agreement and that Con Edison has not materially breached the merger agreement and is not obligated to acquire Northeast Utilities because Northeast Utilities does not meet the merger agreement's conditions that Northeast Utilities perform all of its obligations under the merger agreement, including the obligation that it carry on its businesses in the ordinary course consistent with past practice; that the representations and warranties made by it in the merger agreement were true and correct when made and remain true and correct; and that there be no material adverse change with respect to Northeast Utilities. Con Edison is unable to predict whether or not any Northeast Utilities-related lawsuits or other actions will have a material adverse effect on Con Edison's financial position, results of operations or liquidity.

Note E - Derivative Instruments and Hedging Activities

As of January 2001, Con Edison adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, "Deferral of the Effective Date of FASB Statement No. 133," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities — an amendment of FASB Statement No. 133" (collectively, SFAS No. 133).

Energy Price Hedging

Con Edison's subsidiaries use derivative financial instruments to hedge market price fluctuations in related underlying transactions for the physical purchase or sale of electricity and gas (Hedges).

Con Edison's utility subsidiaries, pursuant to SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation" (SFAS No. 71), defer recognition in income of gains and losses on a Hedge until the underlying transaction is completed. Pursuant to rate provisions that permit the recovery of the cost of purchased power and gas, Con Edison's utility subsidiaries credit or charge to their customers gains or losses on Hedges and related transaction costs. See "Recoverable Energy Costs" in Note A to the company's financial statements included in Item 8 of the Form 10-K. To the extent SFAS No. 71 does not allow deferred recognition in income, Con Edison's utility subsidiaries have elected special hedge

accounting pursuant to SFAS No. 133 (Cash Flow Hedge Accounting). Consolidated Edison Solutions, Inc., a wholly-owned subsidiary of Con Edison (which provides competitive gas and electric supply and energy-related products and services), has also elected Cash Flow Hedge Accounting.

Pursuant to Cash Flow Hedge Accounting, except as described in the following paragraph, the mark-to-market unrealized gain or loss on each Hedge is recorded in other comprehensive income and reclassified to income at the time the underlying transaction is completed. Upon adoption of SFAS No. 133, Con Edison's subsidiaries recognized after-tax transition gains of $1.6 million in other comprehensive income and $0.4 million in income. For the quarter and nine month period ended September 30, 2001, the company reclassified to income from accumulated other comprehensive income after-tax net losses relating to Hedges of $8.4 million and $8.9 million, respectively. These losses, which were recognized in net income as fuel or purchased power costs, were largely offset by inverse changes in the market value of the underlying commodities.

Under Cash Flow Hedge Accounting, any gain or loss relating to any portion of the Hedge determined to be "ineffective" is recognized in income in the period in which such determination is made. As a result, changes in value of a Hedge may be recognized in income in an earlier period than the period in which the underlying transaction is recognized in income. The company expects, however, that these changes in values will be offset, at least in part, when the underlying transactions are recognized in income. For the quarter and nine-month periods ended September 30, 2001, Con Edison Solutions recognized in income mark-to-market unrealized pre-tax net losses of $1.1 million and $11.0 million, respectively, relating primarily to derivative transactions that were determined to be "ineffective."

As of September 30, 2001, the subsidiaries' Hedges for which Cash Flow Hedge Accounting was used were for a term of less than two years and $7.5 million of losses relating to such Hedges were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months.

Consolidated Edison Energy, Inc., a wholly-owned subsidiary of Con Edison (which markets specialized energy supply services to wholesale customers), enters into over-the-counter and exchange traded contracts for the purchase and sale of electricity, and installed capacity gas or oil (which may provide for either physical or financial settlement) and is considered an "energy trading organization" required to account for such trading activities in accordance with FASB Emerging Issues Task Force Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading and Risk Management Activities". With respect to such contracts, the company recognized in income unrealized mark-to-market pre-tax net losses of $2.4 million and $0.8 million in the quarter and nine month period ended September 30, 2001, respectively. Con Edison Energy has also entered into transactions for another subsidiary of Con Edison, as to which the company recognized in income an unrealized mark-to-market pre-tax net loss of $1.8 million in the quarter and an unrealized mark-to-market pre-tax net gain of $5.8 million in the nine month period ended September 30, 2001.

Interest Rate Hedging

O&R and Consolidated Edison Development, Inc., a wholly-owned subsidiary of Con Edison (which invests in and manages energy infrastructure projects), use Cash Flow Hedge Accounting for their interest rate swap agreements.

In connection with its $55 million promissory note issued to the New York State Energy Research and Development Authority for the net proceeds of the Authority's variable rate Pollution Control Refunding Revenue Bonds, 1994 Series A (the 1994 Bonds), O&R has a swap agreement pursuant to which it pays interest at a fixed rate of 6.09 percent and is paid interest at the same variable rate as is paid on the 1994 Bonds. Upon adoption of SFAS No. 133, the company recognized after-tax transition adjustment losses relating to the swap agreement of $8.1 million in other comprehensive income. In the quarter and nine-month period ended September 30, 2001, the company reclassified $0.3 million and $0.8 million, respectively, of such losses from accumulated other comprehensive income to income. As of September 30, 2001, $1.2 million of losses relating to the swap agreement were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months. If the swap agreement had been terminated on September 30, 2001, O&R would have been required to pay approximately $16.2 million.

In connection with $95 million of variable rate loans undertaken relating to the Lakewood electric generating plant, Con Edison Development has swap agreements pursuant to which it pays interest at a fixed rate of 6.68 percent and is paid interest at a variable rate equal to the three-month London Interbank Offered Rate. Upon adoption of SFAS No. 133, the company recognized after-tax transition adjustment losses relating to the swap agreements of $1.6 million in other comprehensive income. In the quarter and nine-month period ended September 30, 2001, the company reclassified $0.4 million and $0.6 million, respectively, of such losses from accumulated other comprehensive income to income. As of September 30, 2001, $1.7 million of losses relating to the swap agreements were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months. If these swap agreements had been terminated on September 30, 2001, Con Edison Development would have been required to pay approximately $7.6 million.

Comprehensive Income

Unrealized market-to-market gains/(losses) on derivatives included in accumulated other comprehensive income was as follows:

(Millions of Dollars, Net of Tax)		Three Months Ended September 30, 2001			Nine Months Ended September 30, 2001
Unrealized mark-to-market gain/(loss) on derivatives qualified as hedges, beginning of period		$	(19.3	)	$	-
Unrealized mark-to-market gain/(loss) arising during period:
	Cumulative effect of change in accounting principle at January 1, 2001		-			(8.1	)
	Other unrealized gain/(loss)		(12.0	)		(24.4	)
	Less: Reclassification for gain/(loss) included in net income		(9.1	)		(10.3	)
Unrealized mark-to-market gain/(loss) on derivatives qualified as hedges, end of period		$	(22.2	)	$	(22.2	)

Note F - Financial Information by Business Segment

Consolidated Edison, Inc.

SEGMENT FINANCIAL INFORMATION

$000's

For the three months ended September 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
	2001		2000		2001			2000
Operating revenues	$	2,247,325	$	2,328,220	$	166,601		$	177,891
Intersegment revenues		2,929		4,623		795			719
Depreciation and amortization		103,493		119,943		17,973			17,482
Operating income		395,801		390,410		(1,276	)		525

	Regulated Steam						Unregulated Subsidiaries & Other
	2001			2000			2001			2000
Operating revenues	$	78,703		$	82,837		$	200,241		$	231,831
Intersegment revenues		476			467			1,629			157
Depreciation and amortization		4,521			4,631			7,138			8,729
Operating income		(6,479	)		(11,468	)		(1,801	)		5,406

	Consolidated
	2001		2000
Operating revenues	$	2,692,870	$	2,820,779
Intersegment revenues		5,829		5,966
Depreciation and amortization		133,125		150,785
Operating income		386,245		384,873

For the nine months ended September 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
	2001		2000		2001		2000
Operating revenues	$	5,486,648	$	5,371,732	$	1,173,814	$	894,380
Intersegment revenues		9,671		36,359		2,386		5,155
Depreciation and amortization		316,744		355,664		53,730		51,624
Operating income		728,878		695,039		126,933		130,209

	Regulated Steam				Unregulated Subsidiaries & Other
	2001		2000		2001		2000
Operating revenues	$	426,621	$	327,695	$	604,265	$	587,458
Intersegment revenues		1,428		1,401		6,796		848
Depreciation and amortization		13,357		13,841		21,160		17,996
Operating income		27,973		14,906		4,758		(1,243	)

	Consolidated
	2001		2000
Operating revenues	$	7,691,348	$	7,181,265
Intersegment revenues		20,281		43,763
Depreciation and amortization		404,991		439,125
Operating income		888,542		838,911

Consolidated Edison Company of New York, Inc.

CONSOLIDATED BALANCE SHEET

(Unaudited)

			As at
			September 30, 2001		December 31, 2000
			(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST
	Electric		$	10,343,083	$	11,135,764
	Gas			2,084,888		2,020,395
	Steam			754,984		740,189
	General			1,212,551		1,282,254

	TOTAL			14,395,506		15,178,602
	Less: Accumulated depreciation			3,926,714		4,819,626

	NET			10,468,792		10,358,976
	Construction work in progress			506,270		476,379
	Nuclear fuel assemblies and components, less accumulated amortization			-		107,641

NET UTILITY PLANT				10,975,062		10,942,996

NON-UTILITY PLANT
	Non-utility property			16,264		4,087

NET PLANT				10,991,326		10,947,083

CURRENT ASSETS
	Cash and temporary cash investments			417,910		70,273
	Accounts receivable - customer, less allowance for uncollectible accounts of $23,789 and $25,800			732,120		743,883
	Other receivables			88,610		155,656
	Fuel, at average cost			18,625		28,455
	Gas in storage, at average cost			82,870		64,144
	Materials and supplies, at average cost			81,157		118,344
	Prepayments			808,725		497,884
	Other current assets			34,733		50,977

TOTAL CURRENT ASSETS				2,264,750		1,729,616

INVESTMENTS
	Nuclear decommissioning trust funds			-		328,969
	Other			15,080		15,068

TOTAL INVESTMENTS				15,080		344,037

DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS
	Regulatory assets
		Future federal income tax		542,716		642,868
		Loss on Indian Point Sale		166,494		-
		Recoverable energy costs		108,760		274,288
		Real estate sale costs - First Avenue properties		104,449		103,009
		Divestiture - capacity replacement reconciliation		73,850		73,850
		Workers' compensation reserve		66,162		47,097
		Deferred special retirement program costs		43,330		46,743
		Accrued unbilled gas revenue		43,594		43,594
		WTC attack non-capital costs		35,626		-
		Deferred revenue taxes		35,237		36,542
		Other		104,154		100,843

	TOTAL REGULATORY ASSETS			1,324,372		1,368,834
	Other deferred charges and noncurrent assets			155,158		158,371

TOTAL DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS				1,479,530		1,527,205

TOTAL			$	14,750,686	$	14,547,941

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

Consolidated Edison Company of New York, Inc.

CONSOLIDATED BALANCE SHEET

(Unaudited)

					As at
					September 30, 2001			December 31, 2000
					(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
	Common stock				$	1,482,341		$	1,482,341
	Repurchased Consolidated Edison, Inc. common stock					(962,092	)		(962,092	)
	Retained earnings					4,189,572			3,995,825
	Capital stock expense					(35,614	)		(35,817	)
	Accumulated other comprehensive income					(3,111	)		(673	)

	TOTAL COMMON SHAREHOLDER'S EQUITY					4,671,096			4,479,584

	Preferred stock
			Subject to mandatory redemption
				6¹/8% Series J		37,050			37,050

	TOTAL SUBJECT TO MANDATORY REDEMPTION					37,050			37,050

	Other preferred stock
			$5 Cumulative Preferred			175,000			175,000
			4.65% Series C			15,330			15,330
			4.65% Series D			22,233			22,233

	TOTAL OTHER PREFERRED STOCK					212,563			212,563

	TOTAL PREFERRED STOCK					249,613			249,613

	Long-term debt					5,013,206			4,915,108

TOTAL CAPITALIZATION						9,933,915			9,644,305

NONCURRENT LIABILITIES
	Obligations under capital leases					41,687			31,432
	Accumulated provision for injuries and damages					164,786			148,047
	Pension and benefits reserve					125,056			105,124
	Other noncurrent liabilities					14,822			14,822

TOTAL NONCURRENT LIABILITIES						346,351			299,425

CURRENT LIABILITIES
	Long-term debt due within one year					450,000			300,000
	Notes payable					-			139,969
	Accounts payable					622,217			879,602
	Customer deposits					202,807			195,762
	Accrued taxes					146,584			49,509
	Accrued interest					85,924			78,230
	Accrued wages					76,034			70,951
	Other current liabilities					250,315			237,634

TOTAL CURRENT LIABILITIES						1,833,881			1,951,657

DEFERRED CREDITS AND REGULATORY LIABILITIES
	Accumulated deferred federal income tax					2,079,759			2,134,973
	Accumulated deferred investment tax credits					113,254			124,532
	Regulatory liabilities
		NYISO reconciliation				77,606			-
		Gain on divestiture				63,199			50,000
		Deposit from sale of First Avenue properties				50,000			50,000
		Accrued electric rate reduction				38,018			38,018
		DC service termination funding				25,995			18,169
		NYPA revenue deficiency				18,338			35,021
		Other				170,370			201,841

	TOTAL REGULATORY LIABILITIES					443,526			393,049

TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES						2,636,539			2,652,554

TOTAL					$	14,750,686		$	14,547,941

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

Consolidated Edison Company of New York, Inc.

CONSOLIDATED INCOME STATEMENT

For the Three Months Ended September 30, 2001 and 2000 (Unaudited)				2001			2000
				(Thousands of Dollars)
OPERATING REVENUES
	Electric			$	2,069,413		$	2,156,383
	Gas				148,891			159,439
	Steam				78,703			82,837

TOTAL OPERATING REVENUES					2,297,007			2,398,659

OPERATING EXPENSES
	Purchased power				892,012			984,022
	Fuel				88,207			95,977
	Gas purchased for resale				65,490			72,866
	Other operations				210,438			212,756
	Maintenance				94,564			107,544
	Depreciation and amortization				117,727			134,651
	Taxes, other than income tax				294,617			307,983
	Income tax				167,500			123,067

TOTAL OPERATING EXPENSES					1,930,555			2,038,866

OPERATING INCOME					366,452			359,793
OTHER INCOME (DEDUCTIONS)
	Investment income				1,033			547
	Allowance for equity funds used during construction				286			439
	Other income less miscellaneous deductions				(211	)		7,627
	Income tax				1,721			(2,501	)

TOTAL OTHER INCOME (DEDUCTIONS)					2,829			6,112

INCOME BEFORE INTEREST CHARGES					369,281			365,905
	Interest on long-term debt				91,693			85,633
	Other interest				6,700			11,541
	Allowance for borrowed funds used during construction				(1,540	)		(994	)

NET INTEREST CHARGES					96,853			96,180

NET INCOME					272,428			269,725
PREFERRED STOCK DIVIDEND REQUIREMENTS					3,398			3,398

NET INCOME FOR COMMON STOCK				$	269,030		$	266,327

CON EDISON OF NEW YORK SALES
	Electric (thousands of kilowatthours)
		Con Edison of New York customers			9,550,529			9,263,651
		Delivery service for Retail Choice			3,052,518			2,597,461
		Delivery service to NYPA and others			2,856,223			2,682,320

	Total sales in service territory				15,459,270			14,543,432
	Gas (dekatherms)
		Firm sales and transportation			10,626,220			10,914,927
		Off-peak firm/interruptible			2,630,760			3,049,018

	Total sales to Con Edison of New York customers				13,256,980			13,963,945
		Transportation of customer-owned gas
			NYPA		6,233,891			6,626,479
			Other		40,218,620			33,674,972

	Total sales and transportation				59,709,491			54,265,396
	Steam (thousands of pounds)				5,846,306			5,500,759

Consolidated Edison Company of New York, Inc.

CONSOLIDATED INCOME STATEMENT

For the Nine Months Ended September 30, 2001 and 2000 (Unaudited)				2001			2000
				(Thousands of Dollars)
OPERATING REVENUES
	Electric			$	5,049,023		$	5,009,046
	Gas				1,015,659			770,461
	Steam				426,621			327,695

TOTAL OPERATING REVENUES					6,491,303			6,107,202

OPERATING EXPENSES
	Purchased power				2,267,955			2,241,446
	Fuel				304,542			223,906
	Gas purchased for resale				563,995			323,046
	Other operations				654,625			709,050
	Maintenance				325,738			329,786
	Depreciation and amortization				359,254			399,149
	Taxes, other than income tax				821,548			835,402
	Income tax				360,426			251,184

TOTAL OPERATING EXPENSES					5,658,083			5,312,969

OPERATING INCOME					833,220			794,233
OTHER INCOME (DEDUCTIONS)
	Investment income				1,307			2,097
	Allowance for equity funds used during construction				787			214
	Other income less miscellaneous deductions				413			5,330
	Income tax				5,842			(1,685	)

TOTAL OTHER INCOME (DEDUCTIONS)					8,349			5,956

INCOME BEFORE INTEREST CHARGES					841,569			800,189
	Interest on long-term debt				270,187			243,532
	Other interest				21,679			34,303
	Allowance for borrowed funds used during construction				(4,235	)		(3,579	)

NET INTEREST CHARGES					287,631			274,256

NET INCOME					553,938			525,933
PREFERRED STOCK DIVIDEND REQUIREMENTS					10,194			10,194

NET INCOME FOR COMMON STOCK				$	543,744		$	515,739

CON EDISON OF NEW YORK SALES
	Electric (thousands of kilowatthours)
		Con Edison of New York customers			24,617,695			24,282,320
		Delivery service for Retail Choice			7,893,171			6,973,290
		Delivery service to NYPA and others			7,846,326			7,494,113

	Total sales in service territory				40,357,192			38,749,723
	Gas (dekatherms)
		Firm sales and transportation			76,065,976			71,562,503
		Off-peak firm/interruptible			11,260,737			11,404,662

	Total sales to Con Edison of New York customers				87,326,713			82,967,165
		Transportation of customer-owned gas
			NYPA		7,810,064			15,607,822
			Other		65,695,290			78,807,982

	Total sales and transportations				160,832,067			177,382,969
	Steam (thousands of pounds)				21,036,158			20,392,813

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

Consolidated Edison Company of New York, Inc.

CONSOLIDATED STATEMENT OF RETAINED EARNINGS

(Unaudited)

		As at
		September 30, 2001		December 31, 2000
		(Thousands of Dollars)
BALANCE, JANUARY 1		$	3,995,825	$	3,887,993
	Net income for the period		553,938		583,715

TOTAL			4,549,763		4,471,708

DIVIDENDS DECLARED ON CAPITAL STOCK
	Cumulative Preferred, at required annual rates		10,194		13,593
	Common		349,997		462,290

TOTAL DIVIDENDS DECLARED			360,191		475,883

ENDING BALANCE		$	4,189,572	$	3,995,825

Consolidated Edison Company of New York, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Nine Months Ended September 30, 2001 and 2000 (Unaudited)		2001			2000
		(Thousands of Dollars)
NET INCOME FOR COMMON STOCK		$	543,744		$	515,739
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES
	Minimum pension liability adjustments, net of $1,593 taxes		(2,118	)		-
	Unrealized (losses)/gains on derivatives qualified as hedges, net of $2,191 taxes		(2,983	)		-
	Less: Reclassification adjustment for (losses)/gains included in net income, net of $1,863 taxes		(2,663	)		-

TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES			(2,438	)		-

COMPREHENSIVE INCOME		$	541,306		$	515,739

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

Consolidated Edison Company of New York, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS

For The Nine Months Ended September 30, 2001 and 2000 (Unaudited)				2001			2000
				(Thousands of Dollars)
OPERATING ACTIVITIES
	Net income			$	553,938		$	525,933
	PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
		Depreciation and amortization			359,028			399,149
		Income tax deferred (excluding taxes resulting from divestiture of plant)			10,883			153,943
		Common equity component of allowance for funds used during construction			(787	)		(214	)
		Prepayments - accrued pension credits			(248,779	)		(177,040	)
		Other non-cash charges			57,790			4,256
	CHANGES IN ASSETS AND LIABILITIES
		Accounts receivable - customer, less allowance for uncollectibles			11,763			(107,716	)
		Materials and supplies, including fuel and gas in storage			(14,028	)		(32,683	)
		Prepayments (other than pensions), other receivables and other current assets			(207	)		(133,559	)
		Deferred recoverable energy costs			165,528			(103,334	)
		Cost of removal less salvage			(69,818	)		(83,386	)
		Accounts payable			(255,927	)		191,685
		Other-net			208,501			105,451

NET CASH FLOWS FROM OPERATING ACTIVITIES					777,885			742,485

INVESTING ACTIVITIES INCLUDING CONSTRUCTION
		Construction expenditures			(715,469	)		(631,277	)
		Nuclear fuel expenditures			(6,111	)		(26,473	)
		Contributions to nuclear decommissioning trust			(89,185	)		(15,975	)
		Divestiture of utility plant (net of federal income tax)			653,694			-
		Common equity component of allowance for funds used during construction			787			214

NET CASH FLOWS USED IN INVESTING ACTIVITIES INCLUDING CONSTRUCTION					(156,284	)		(673,511	)

FINANCING ACTIVITIES INCLUDING DIVIDENDS
		Repurchase of common stock			-			(29,454	)
		Net reduction from short-term debt			(139,969	)		(330,402	)
		Additions to long-term debt			624,600			625,000
		Retirement of long-term debt			(378,150	)		(275,000	)
		Issuance and refunding costs			(20,254	)		(4,894	)
		Common stock dividends			(349,997	)		(346,754	)
		Preferred stock dividends			(10,194	)		(10,194	)

NET CASH FLOWS USED IN FINANCING ACTIVITIES INCLUDING DIVIDENDS					(273,964	)		(371,698	)

NET INCREASE/(DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS					347,637			(302,724	)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1					70,273			349,033

CASH AND TEMPORARY CASH INVESTMENTS AT SEPTEMBER 30				$	417,910		$	46,309

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
		Cash paid during the period for:
			Interest	$	247,076		$	226,346
			Income taxes		222,531			67,515

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

NOTES TO FINANCIAL STATEMENTS - CON EDISON OF NEW YORK

Note A - General

These footnotes accompany and form an integral part of the interim consolidated financial statements of Consolidated Edison Company of New York, Inc. (Con Edison of New York) and its subsidiaries. Consolidated Edison, Inc. (Con Edison) owns all of the outstanding common stock of Con Edison of New York. These financial statements are unaudited but, in the opinion of Con Edison of New York's management, reflect all adjustments (which include only normally recurring adjustments) necessary for a fair statement of the results for the interim periods presented. These financial statements should be read together with the audited Con Edison of New York financial statements (including the notes thereto) included in the combined Con Edison, Con Edison of New York and Orange and Rockland Utilities, Inc. Annual Reports on Form 10-K for the year ended December 31, 2000 (the Form 10-K).

New Accounting Standards

Reference is made to Note A to the Con Edison financial statements included in Part 1, Item 1 of this report for a description of four new accounting standards that the Financial Accounting Standards Board has issued in 2001. The company has not yet determined the impact the new accounting standards will have on its financial statements.

Note B - Environmental Matters

Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and coal tar, have been used or generated in the course of operations of Con Edison of New York and may be present in its facilities and equipment.

At September 30, 2001, Con Edison of New York had accrued $92.4 million as its best estimate of its liability for sites as to which it has received process or notice alleging that hazardous substances generated by the company and, in most instances, other potentially responsible parties) were deposited. There will be additional liability at these sites and other sites, the amount of which is not presently determinable but may be material to the company's financial position, results of operations or liquidity.

Under Con Edison of New York's current electric, gas and steam rate agreements, site investigation and remediation costs in excess of $5 million annually incurred with respect to hazardous waste for which it is responsible are to be deferred and subsequently reflected in rates. At September 30, 2001, $20.5 million of such costs had been deferred as regulatory assets.

Suits have been brought in New York State and federal courts against Con Edison of New York and many other defendants, wherein a large number of plaintiffs sought large amounts of compensatory and punitive damages for deaths and injuries allegedly caused by exposure to asbestos at various premises of

the company. Many of these suits have been disposed of without any payment by the company, or for immaterial amounts. The amounts specified in all the remaining suits total billions of dollars but the company believes that these amounts are greatly exaggerated, as were the claims already disposed of. Based on the information and relevant circumstances known to the company at this time, it does not believe that these suits will have a material adverse effect on its financial position, results of operations or liquidity.

Note C - Nuclear Generation

In September 2001, the sale of Con Edison of New York's nuclear generating unit and related assets, and the transfer to the buyer of the company's nuclear decommissioning trust funds, was completed. The net after-tax loss from the sale, which has been deferred as a regulatory asset, was $166.5 million. The loss on the sale is recoverable from customers pursuant to the agreements covering the company's electric rates, which provide that the company "will be given a reasonable opportunity to recover stranded and strandable costs remaining at March 31, 2005, including a reasonable return on investments, under the parameters and during the time periods set forth therein." See "Rate and Restructuring Agreements" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

The New York State Public Service Commission (PSC) is investigating the February 2000 to January 2001 outage of the nuclear generating unit, its causes and the prudence of the company's actions regarding the operation and maintenance of the generating unit. An appeal is pending in the United States Court of Appeals for the Second Circuit of the October 2000 decision by the United States District Court for the Northern District of New York, in an action entitled Consolidated Edison Company of New York, Inc. v. Pataki, et al., in which the court determined that the law that directed the PSC to prohibit the company from recovering replacement power costs for the outage from customers was unconstitutional and granted the company's motion for a permanent injunction to prevent its implementation. The company is unable to predict whether or not any proceedings, lawsuits, legislation or other actions relating to the nuclear generating unit will have a material adverse effect on its financial position, results of operations or liquidity. For additional information, see Note G to Con Edison of New York's financial statements included in Item 8 of the Form 10-K.

Note D - Derivative Instruments and Hedging Activities

As of January 2001, Con Edison of New York adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, "Deferral of the Effective Date of FASB Statement No. 133," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities — an amendment of FASB Statement No. 133" (collectively, SFAS No. 133).

Con Edison of New York uses derivative financial instruments to hedge market price fluctuations in related underlying transactions for the physical purchase or sale of electricity and gas (Hedges).

Pursuant to SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation," the company defers recognition in income of gains and losses on a Hedge until the underlying transaction is completed. Pursuant to rate provisions that permit the recovery of the cost of purchased power and gas, the company credits or charges to its customers gains or losses on Hedges and related transaction costs.

See "Recoverable Energy Costs" in Note A to the company's financial statements included in Item 8 of the Form 10-K. To the extent SFAS No. 71 does not allow deferred recognition in income, the company has elected special hedge accounting pursuant to SFAS No. 133 (Cash Flow Hedge Accounting).

Pursuant to Cash Flow Hedge Accounting, the mark-to-market unrealized gain or loss on each Hedge is recorded in other comprehensive income and reclassified to income at the time the underlying transaction is completed (except that any gain or loss relating to any portion of the Hedge determined to be "ineffective" is recognized in income in the period in which such determination is made).

Upon adoption of SFAS No. 133, the company had no transition adjustments to recognize in other comprehensive income. For the quarter and nine month period ended September 30, 2001, the company reclassified to income from accumulated other comprehensive income after-tax net losses relating to Hedges of $2.2 million and $2.7 million, respectively. These losses, which were recognized in net income as purchased power costs, were largely offset by inverse changes in the market value of the underlying commodity. As of September 30, 2001, Hedges for which Cash Flow Hedge Accounting was used were for a term of less than 12 months and $0.3 million of losses relating to such Hedges were expected to be reclassified from accumulated other comprehensive income to income within the next 12 months.

Comprehensive Income

Unrealized mark-to-market gains/(losses) on derivatives included in accumulated other comprehensive income was as follows:

(Millions of Dollars, Net of Tax)		Three Months Ended September 30, 2001			Nine Months Ended September 30, 2001
Unrealized mark-to-market gain/(loss) on derivatives qualified as hedges, beginning of period		$	(2.1	)	$	-
Unrealized mark-to-market gain/(loss) arising during period:
	Cumulative effect of change in accounting principle at January 1, 2001		-			-
	Other unrealized gain/(loss)		(0.4	)		(3.0	)
	Less: Reclassification for gain/(loss) included in net income		(2.2	)		(2.7	)
Unrealized mark-to-market gain/(loss) on derivatives qualified as hedges, end of period		$	(0.3	)	$	(0.3	)

Note E - Financial Information by Business Segment

Consolidated Edison Company of New York, Inc.

SEGMENT FINANCIAL INFORMATION

$000's

For the three months ended September 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
	2001		2000		2001			2000
Operating revenues	$	2,069,413	$	2,156,383	$	148,891		$	159,439
Intersegment revenues		2,929		2,663		795			719
Depreciation and amortization		97,005		114,835		16,201			15,185
Operating income		373,176		368,097		(245	)		3,164

	Regulated Steam						Total
	2001			2000			2001		2000 2000
Operating revenues	$	78,703		$	82,837		$	2,297,007	$	2,398,659
Intersegment revenues		476			467			4,200		3,849
Depreciation and amortization		4,521			4,631			117,727		134,651
Operating income		(6,479	)		(11,468	)		366,452		359,793

For the nine months ended September 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
	2001		2000		2001		2000
Operating revenues	$	5,049,023	$	5,009,046	$	1,015,659	$	770,461
Intersegment revenues		8,787		7,990		2,386		2,155
Depreciation and amortization		298,070		340,448		47,827		44,860
Operating income		686,782		654,857		118,465		124,470

	Regulated Steam				Total
	2001		2000		2001		2000
Operating revenues	$	426,621	$	327,695	$	6,491,303	$	6,107,202
Intersegment revenues		1,428		1,401		12,601		11,546
Depreciation and amortization		13,357		13,841		359,254		399,149
Operating income		27,973		14,906		833,220		794,233

Orange and Rockland Utilities, Inc.

CONSOLIDATED BALANCE SHEET

(Unaudited)

			As at
			September 30, 2001		December 31, 2000
			(Thousands of Dollars)
ASSETS
UTILITY PLANT, AT ORIGINAL COST:
	Electric		$	680,236	$	672,338
	Gas			287,109		279,661
	Common			108,230		106,348

	TOTAL			1,075,575		1,058,347
	Less: accumulated depreciation			383,249		366,432

	NET			692,326		691,915
	Construction work in progress			38,110		28,091

	Net Utility Plant			730,436		720,006

NON-UTILITY PLANT
	Non-utility property, less accumulated depreciation of $215 and $239			2,624		3,249

NET PLANT				733,060		723,255

CURRENT ASSETS:
	Cash and cash equivalents			4,073		8,483
	Customer accounts receivable, less allowance for uncollectable accounts of $2,500 and $3,845			80,209		82,183
	Other accounts receivable, less allowance for uncollectable accounts of $1,033 and $818			9,494		7,551
	Account receivable from affiliated company			5,652		-
	Accrued utility revenue			20,428		29,025
	Gas in storage, at average cost			20,373		16,567
	Materials and supplies, at average cost			5,386		4,815
	Prepayments			23,984		23,854
	Other current assets			14,838		20,735

TOTAL CURRENT ASSETS				184,437		193,213

INVESTMENTS:
	Other			6		6

TOTAL INVESTMENTS				6		6

DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS
	Regulatory assets
		Recoverable fuel costs		85,314		66,207
		Deferred pension and other postretirement benefits		40,396		41,890
		Deferred environmental remediation costs		40,129		34,056
		Future federal income tax		34,094		33,659
		Other regulatory assets		26,725		26,761
		Deferred revenue taxes		7,378		7,337
		Hedges on energy trading		3,004		-

	TOTAL REGULATORY ASSETS			237,040		209,910
	Other deferred charges and noncurrent assets			13,106		12,273

TOTAL DEFERRED CHARGES, REGULATORY ASSETS AND NONCURRENT ASSETS				250,146		222,183

TOTAL			$	1,167,649	$	1,138,657

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

Orange and Rockland Utilities, Inc.

CONSOLIDATED BALANCE SHEET

(Unaudited)

			As at
			September 30, 2001			December 31, 2000
			(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
	Common stock		$	5		$	5
	Additional paid In capital			194,499			194,498
	Retained earnings			152,359			139,610
	Accumulated comprehensive Income			(11,529	)		(1,473	)

	TOTAL COMMON SHAREHOLDERS' EQUITY			335,334			332,640
	Long term debt			335,743			335,656

TOTAL CAPITALIZATION				671,077			668,296

NON-CURRENT LIABILITIES
	Pension and Benefit Reserve			87,808			76,222
	Other noncurrent liabilities			14,957			16,636

TOTAL NON-CURRENT LIABILITIES				102,765			92,858

CURRENT LIABILITIES
	Notes payable			37,850			40,820
	Accounts payable			66,153			58,664
	Accounts payable to affiliated companies			-			9,169
	Accrued federal income and other taxes			11,864			4,863
	Customer deposits			8,470			7,126
	Accrued interest			11,208			7,087
	Accrued environmental costs			38,544			32,852
	Other current liabilities			30,180			27,756

TOTAL CURRENT LIABILITIES				204,269			188,337

DEFERRED CREDITS AND REGULATORY LIABILITIES
	Accumulated deferred federal income tax			115,953			120,497
	Deferred investment tax credits			6,543			6,897
	Regulatory liabilities
		Pension and other benefits		7,820			15,587
		Gas recoveries and pipeline refunds		12,853			15,076
		Competition enhancement fund		13,378			14,198
		Gain on divesture		7,199			10,338
		Other regulatory liabilities		9,471			6,358

	TOTAL REGULATORY LIABILITIES			50,721			61,557
	Deferred credits
		Termination cost long-term debt		16,247			-
		Other deferred credits		73			215

	TOTAL DEFERRED CREDITS			16,320			215

TOTAL DEFERRED CREDITS AND REGULATORY LIABILITIES				189,537			189,166

TOTAL			$	1,167,649		$	1,138,657

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

Orange And Rockland Utilities, Inc.

CONSOLIDATED INCOME STATEMENT

For the Three Months Ended September 30, 2001 and 2000 (Unaudited)			2001			2000
			(Thousands of Dollars)
OPERATING REVENUES
	Electric		$	177,912		$	173,794
	Gas			17,710			18,452
	Non-utility			28			4,390

TOTAL OPERATING REVENUES				195,650			196,636

OPERATING EXPENSES
	Purchased power			97,855			97,827
	Gas purchased for resale			10,302			11,148
	Other operations			26,596			27,782
	Maintenance			6,564			7,426
	Depreciation and amortization			8,260			7,406
	Taxes, other than income tax			14,117			15,850
	Income Taxes			10,465			7,329

TOTAL OPERATING EXPENSES				174,159			174,768

OPERATING INCOME				21,491			21,868
OTHER INCOME (DEDUCTIONS)
	Investment income			340			817
	Allowance for equity funds used during construction			-			102
	Other income and deductions			(237	)		325
	Income Taxes			779			(442	)

TOTAL OTHER INCOME (DEDUCTIONS)				882			802

INCOME BEFORE INTEREST CHARGES				22,373			22,670
INTEREST CHARGES
	Interest on long-term debt			5,463			5,616
	Other interest			483			887
	Allowance for borrowed funds used during construction			(394	)		(154	)

TOTAL INTEREST CHARGES				5,552			6,349

NET INCOME FOR COMMON STOCK			$	16,821		$	16,321

ORANGE AND ROCKLAND SALES & DELIVERIES
	Electric - (thousands of killowatthours)
		Orange and Rockland customers		1,247,031			1,307,980
		Delivery service for Retail Choice		239,861			133,435

	Total sales in service territory			1,486,892			1,441,415
	Gas - (dekatherms)
	Firm sales and transportation			2,202,278			2,186,510
	Interruptible sales and transportation			1,115,332			1,331,302

	Total sales to Orange and Rockland customers			3,317,610			3,517,812
		Transportation of customer-owned gas		6,506,143			3,655,891

TOTAL SALES AND TRANSPORTATION				9,823,753			7,173,703

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

Orange and Rockland Utilities, Inc.

CONSOLIDATED INCOME STATEMENT

For the Nine Months Ended September 30, 2001 and 2000 (Unaudited)			2001			2000
			(Thousands of Dollars)
OPERATING REVENUES
	Electric		$	438,497		$	391,046
	Gas			158,154			126,919
	Non-utility			62			4,506

TOTAL OPERATING REVENUES				596,713			522,471

OPERATING EXPENSES
	Purchased power			242,825			206,998
	Fuel			-			39
	Gas purchased for resale			107,368			78,074
	Other operations			84,681			85,524
	Maintenance			20,176			20,158
	Depreciation and amortization			24,578			21,982
	Taxes, other than income tax			42,382			44,743
	Income Taxes			24,635			17,228

TOTAL OPERATING EXPENSES				546,645			474,746

OPERATING INCOME				50,068			47,725
OTHER INCOME (DEDUCTIONS)
	Investment income			1,549			5,202
	Allowance for equity funds used during construction			-			237
	Other income and deductions			(578	)		84
	Income Taxes			648			(1,813	)

TOTAL OTHER INCOME (DEDUCTIONS)				1,619			3,710

INCOME BEFORE INTEREST CHARGES				51,687			51,435
INTEREST CHARGES
	Interest on long-term debt			16,483			17,286
	Other interest			2,378			2,140
	Allowance for borrowed funds used during construction			(923	)		(356	)

TOTAL INTEREST CHARGES				17,938			19,070

NET INCOME FOR COMMON STOCK			$	33,749		$	32,365

ORANGE AND ROCKLAND SALES & DELIVERIES
	Electric - (thousands of killowatthours)
		Orange and Rockland customers		3,441,638			3,359,326
		Delivery service for Retail Choice		560,606			486,091

	Total sales in service territory			4,002,244			3,845,417
	Gas - (dekatherms)
		Firm sales and transportation		14,896,513			14,948,988
		Interruptible sales and transportation		5,195,611			5,799,179

	Total sales to Orange and Rockland customers			20,092,124			20,748,167
		Transportation of customer-owned gas		9,998,396			11,055,417

TOTAL SALES AND TRANSPORTATION				30,090,520			31,803,584

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

Orange and Rockland Utilities, Inc.

CONSOLIDATED STATEMENT OF RETAINED EARNINGS

(Unaudited)

		As at
		September 30, 2001			December 31, 2000
		(Thousands of Dollars)
BALANCE, JANUARY 1		$	139,610		$	134,995
	Net income for the period		33,749			32,365

TOTAL			173,359			167,360
	Dividends declared on Capital Stock		(21,000	)		(27,750	)

ENDING BALANCE		$	152,359		$	139,610

Orange and Rockland Utilities, Inc.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Nine Months Ended September 30, 2001 and 2000 (Unaudited)		2001			2000
		(Thousands of Dollars)
NET INCOME FOR COMMON STOCK		$	33,749		$	32,365
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES
	Investment in marketable securities, net of $(552) taxes		(576	)		-
	Minimum pension liability adjustments, net of $63 taxes		63			-
	Unrealized (losses)/gains on derivatives qualified as hedges due to cumulative effect of a change in accounting principle, net of $5,751 taxes		(8,107	)		-
	Unrealized (losses)/gains on derivatives qualified as hedges during 2001, net of ($1,580) taxes		(2,227	)		-
	Less: Reclassification adjustment for (losses)/gains included in net income, net of $626 taxes		(791	)		-

TOTAL OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAXES			(10,056	)		-

COMPREHENSIVE INCOME		$	23,693		$	32,365

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

Orange and Rockland Utilities, Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Nine Ended September 30, 2001 and 2000 (Unaudited)				2001			2000
				(Thousands of Dollars)
OPERATING ACTIVITIES
	Net income			$	33,749		$	32,365
	PRINCIPAL NON-CASH CHARGES (CREDITS) TO INCOME
		Depreciation and amortization			24,341			21,982
		Amortization of investment tax credit			(354	)		(341	)
		Federal and state income tax deferred			(4,980	)		(6,839	)
		Common equity component of allowance for funds used during construction			-			(237	)
		Other non-cash changes (debits)			(333	)		1,765
	CHANGES IN ASSETS AND LIABILITIES
		Accounts receivable—net, and accrued utility revenue			4,919			(10,328	)
		Materials and supplies, including fuel and gas in storage			(4,376	)		277
		Prepayments, other receivables and other current assets			3,823			(8,442	)
		Deferred recoverable fuel costs			(14,323	)		(11,665	)
		Accounts payable			(1,680	)		3,075
		Other—net			15,725			16,135

NET CASH FLOWS FROM OPERATING ACTIVITIES					56,511			37,747

INVESTING ACTIVITIES INCLUDING CONSTRUCTION
		Construction expenditures			(37,071	)		(31,100	)
		Proceeds from disposition of property			120			-
		Common equity component of allowance for funds used during construction			-			237

NET CASH FLOWS USED IN INVESTING ACTIVITIES INCLUDING CONSTRUCTION					(36,951	)		(30,863	)

FINANCING ACTIVITIES
		Issuance of capital lease obligation
		Issuance of long-term debt			-			55,000
		Retirement of long-term debt			-			(120,030	)
		Short-term debt arrangements			(2,970	)		5,900
		Dividend to parent			(21,000	)		(18,500	)
		Preferred stock dividends			-			-

NET CASH FLOWS FROM FINANCING ACTIVITIES INCLUDING DIVIDENDS					(23,970	)		(77,630	)

NET DECREASE IN CASH AND TEMPORARY CASH INVESTMENTS					(4,410	)		(70,746	)
CASH AND TEMPORARY CASH INVESTMENTS AT JANUARY 1					8,483			78,927

CASH AND TEMPORARY CASH INVESTMENTS AT SEPTEMBER 30				$	4,073		$	8,181

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
		Cash paid during the period for:
			Interest	$	14,761		$	20,878
			Income Taxes	$	14,503		$	27,819

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

NOTES TO FINANCIAL STATEMENTS - O&R

Note A - General

These footnotes accompany and form an integral part of the interim consolidated financial statements of Orange and Rockland Utilities, Inc. (O&R), a wholly-owned subsidiary of Consolidated Edison, Inc. (Con Edison). These financial statements are unaudited but, in the opinion of O&R's management, reflect all adjustments (which include only normally recurring adjustments) necessary for a fair statement of the results for the interim periods presented. These financial statements should be read together with the audited O&R financial statements (including the notes thereto) included in the combined Con Edison, Consolidated Edison Company of New York, Inc. (Con Edison of New York) and O&R Annual Reports on Form 10-K for the year ended December 31, 2000.

Recoverable Energy Costs

O&R and it's New Jersey utility subsidiary, Rockland Electric Company (RECO), generally recover all of their prudently incurred purchased power and gas costs in accordance with rate provisions approved by their state public utility commissions. At September 30, 2001, RECO had $73.5 million of purchase power costs deferred for charge to customers in the manner and at such time as is to be determined by the New Jersey Board of Public Utilities. See "Rate Regulation" and "Energy Costs" in Note A to the O&R financial statements included in Item 8 of the Form 10-K.

New Accounting Standards

Note B - Environmental Matters

Hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and coal tar, have been used or generated in the course of operations of O&R and may be present in its facilities and equipment.

At September 30, 2001, O&R had accrued $38.5 million as its best estimate of its liability for sites as to which it has received process or notice alleging that hazardous substances generated by the company (and, in most instances, other potentially responsible parties) were deposited. There will be additional liability at these sites and other sites, including the costs of investigating and remediating sites where the company or its predecessors manufactured gas. The total amount of liability is not presently determinable but may be material to the company's financial position, results of operations or liquidity.

Under O&R's current gas rate agreement, O&R may defer for subsequent recovery through rates the cost of investigating and remediating manufactured gas sites. At September 30, 2001, $40.1 million of such costs had been deferred as a regulatory asset.

Suits have been brought in New York State and federal courts against O&R and many other defendants, wherein a large number of plaintiffs sought large amounts of compensatory and punitive damages for deaths and injuries allegedly caused by exposure to asbestos at various premises of the company. Many of these suits have been disposed of without any payment by O&R, or for immaterial amounts. The amounts specified in all the remaining suits total billions of dollars but the company believes that these amounts are greatly exaggerated, as were the claims already disposed of. Based on the information and relevant circumstances known to the company at this time, it does not believe that these suits will have a material adverse effect on its financial position, results of operations or liquidity.

In May 2000, the New York State Department of Environmental Conservation (DEC) issued notices of violation to O&R and four other companies that have operated coal — fired electric generating facilities in New York State. The notices allege violations of the federal Clean Air Act and the New York State Environmental Conservation law resulting from the alleged failure of the companies to obtain DEC permits for physical modifications to their generating facilities and to install pollution control equipment that would have reduced harmful emissions. The notice of violation received by O&R relates to the Lovett Generating Station that it sold in June 1999. O&R is unable to predict whether or not the alleged violations will have a material adverse effect on its financial position, results of operations or liquidity.

Note C - Related Party Transactions

O&R is invoiced monthly by Con Edison and its affiliates for the cost of any services they render to the company. These services, provided primarily by Con Edison of New York, include substantially all administrative support operations such as corporate directorship and associated ministerial duties, accounting, treasury, investor relations, information resources, legal, human resources, fuel supply and energy management services. The cost of these services totaled $10.4 million during the first nine months of 2001. In addition, O&R purchased $114.8 million of gas and $26.5 million of electricity (including the cost of energy price hedging) from Con Edison of New York during this period. See Note D for information about energy price hedging which Con Edison of New York entered into on behalf of O&R.

O&R provides certain recurring services to Con Edison of New York on a monthly basis, including cash receipts processing and certain other services. The cost of these services totaled $8.2 million during the first nine months of 2001.

Note D - Derivative Instruments and Hedging Activities

As of January 2001, O&R adopted SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137, "Deferral of the Effective Date of FASB Statement No. 133," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities —an amendment of FASB Statement No. 133" (collectively, SFAS No. 133).

Energy Price Hedging

O&R uses derivative financial instruments to hedge market price fluctuations in related underlying transactions for the physical purchase or sale of electricity and gas (Hedges).

Pursuant to SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation", the company defers recognition in income of gains and losses on a Hedge until the underlying transaction is completed. Pursuant to rate provisions that permit the recovery of the cost of purchased power and gas, the company credits or charges to its customers gains or losses on Hedges and related transaction costs. See "Rate Regulation" and "Energy Costs" in Note A to the company's financial statements included in Item 8 of the Form 10-K. Upon adoption of SFAS No. 133, the company had no transition adjustments relating to Hedges to recognize in other comprehensive income.

Interest Rate Hedging

Comprehensive Income

Unrealized mark-to-market gains/(losses) on derivatives included in accumulated other comprehensive income was as follows:

(Millions of Dollars, Net of Tax)		Three Months Ended September 30, 2001			Nine Months Ended September 30, 2001
Unrealized mark-to-market gain/(loss) on derivatives qualified as hedges, beginning of period		$	(7.6	)	$	-
Unrealized mark-to-market gain/(loss) arising during period:
	Cumulative effect of change in accounting principle at January 1, 2001		-			(8.1	)
	Other unrealized gain/(loss)		(2.2	)		(2.2	)
	Less: Reclassification for gain/(loss) included in net income		(0.3	)		(0.8	)
Unrealized mark-to-market gain/(loss) on derivatives qualified as hedges, End of period		$	(9.5	)	$	(9.5	)

Note E - Financial Information by Business Segment

Orange and Rockland Utilities, Inc.

SEGMENT FINANCIAL INFORMATION

$000's

For the three months ended September 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
	2001		2000		2001			2000
Sales Revenues	$	177,910	$	173,791	$	17,710		$	18,452
Intersegment Revenues		-		3		-			-
Depreciation and amortization		6,488		5,175		1,772			2,297
Operating Income		22,710		22,313		(1,031	)		(2,639	)

	Unregulated Subsidiaries & Other					Consolidated
	2001			2000		2001		2000
Sales Revenues	$	30		$	4,390	$	195,650	$	196,633
Intersegment Revenues		-			-		-		3
Depreciation and amortization		-			1		8,260		7,473
Operating Income		(103	)		2,194		21,576		21,868

For the nine months ended September 30, 2001 and 2000 (Unaudited)	Regulated Electric				Regulated Gas
	2001		2000		2001		2000
Sales Revenues	$	438,478	$	391,037	$	158,154	$	126,919
Intersegment Revenues		12		9		-		-
Depreciation and amortization		18,674		15,417		5,903		6,764
Operating Income		42,200		40,182		8,468		5,739

	Unregulated Subsidiaries & Other					Consolidated
	2001			2000		2001		2000
Sales Revenues	$	69		$	4,506	$	596,701	$	522,462
Intersegment Revenues		-			-		12		9
Depreciation and amortization		-			2		24,577		22,183
Operating Income		(496	)		1,804		50,172		47,725

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

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

CON EDISON

Consolidated Edison, Inc. (Con Edison) is a holding company that operates only through its subsidiaries and has no material assets other than the stock of its subsidiaries. Con Edison's principal subsidiaries are regulated utilities: Consolidated Edison Company of New York, Inc. (Con Edison of New York) and Orange and Rockland Utilities, Inc. (O&R). Con Edison also has several unregulated subsidiaries.

The following discussion and analysis, which relates to the interim consolidated financial statements of Con Edison and its subsidiaries (including Con Edison of New York and O&R) included in Part I, Item 1 of this report, should be read in conjunction with Con Edison's Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of the combined Con Edison, Con Edison of New York and O&R Annual Reports on Form 10-K for the year ended December 31, 2000 (File Nos. 1-14514, 1-1217 and 1-4315, the Form 10-K) and Con Edison's Management's Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2 of the combined Con Edison, Con Edison of New York and O&R Quarterly Reports on Form 10-Q for the quarterly period ended March 31, 2001 and June 30, 2001. Reference is also made to the notes to the Con Edison financial statements in Part I, Item 1 of this report, which notes are incorporated herein by reference.

Liquidity and Capital Resources

Cash and temporary cash investments and outstanding notes payable (principally commercial paper) at September 30, 2001 and December 31, 2000 were:

(Millions of dollars)			September 30, 2001			December 31, 2000
	Cash and temporary cash investments		$	432.1		$	94.8
	Notes payable		$	202.1		$	255.0

The increase in cash and temporary cash investments at September 30, 2001 compared with December 31, 2000 reflects primarily the net cash flows from the sales of the company's nuclear generating unit and its interest in another generating plant.

Cash Flows from Operating Activities

Net cash flows from operating activities during the first nine months of 2001 increased $83.3 million compared with the first nine months of 2000, reflecting principally increased net income and decreased accounts receivable and recoverable energy costs, offset in part by increased accrued pension credits and decreased accounts payable.

Customer accounts receivable, less allowance for uncollectible accounts, was $46.7 million lower at September 30, 2001 than at year-end 2000, due primarily to lower customer billings by Con Edison's non-utility subsidiaries, reflecting reduced gas volumes in September 2001 as compared to December 2000 and lower energy costs, offset in part by the timing of customer payments. Con Edison of New York's equivalent number of days of revenue outstanding (ENDRO) of customer accounts receivable was 29.8 days at September 30, 2001 compared with 29.7 days at December 31, 2000. For O&R, the ENDRO was 52.8 days at September 30, 2001 and 35.4 days at December 31, 2000. The O&R

ENDRO at September 30, 2001 reflects amounts due from a major customer that were paid in October 2001; excluding this customer O&R's ENDRO at September 30, 2001 would have been 46.2 days.

Prepayments include cumulative credits to pension expense for Con Edison of New York amounting to $615.5 million at September 30, 2001 compared with $366.7 million at December 31, 2000. Pension credits, which result primarily from favorable performance by the company's pension fund in past years, increase net income but do not provide cash for the company's operations. See Note D to the Con Edison financial statements included in Item 8 of the Form 10-K.

The regulatory asset for deferred recoverable energy costs decreased $146.4 million at September 30, 2001 compared with December 31, 2000, due primarily to the ongoing recovery of previously deferred amounts, offset in part by the deferral for future recovery of additional purchased power and gas costs. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Part I, Item 1 of this report.

In September 2001, Con Edison of New York completed the sale of its nuclear generating unit and related assets, and the transfer to the buyer of its nuclear decommissioning trust funds. The resulting loss of $166.5 million has been deferred as a regulatory asset for future recovery under the terms of the agreements covering the company's electric rates. In addition the regulatory asset for future federal income tax was reduced by $89.0 million to reflect the loss. See Note C to the Con Edison financial statements included in Part I, Item 1 of this report.

The regulatory asset for World Trade Center incident is for the company's non-capital costs relating to the September 11, 2001 attack. See "World Trade Center Attack", below.

The accumulated provision for injuries and damages increased $16.4 million at September 30, 2001 compared with year-end 2000, due primarily to increased workers' compensation claims.

Unfunded pension and other post-employment benefit (OPEB) obligations (shown as pension and benefit reserve on the balance sheet) increased $31.8 million at September 30, 2001 compared with year-end 2000. Con Edison of New York's policy is to fund its pension and OPEB costs to the extent deductible under current tax regulations. O&R's policy is to fund the amounts recovered in rates for its pension and OPEB costs to the extent those contributions are tax deductible. The reserve also includes a minimum liability for supplemental executive retirement programs, a portion of which liability has been included in other comprehensive income. See Note E to the Con Edison financial statements included in Item 8 of the Form 10-K.

Accounts payable decreased $283.9 million at September 30, 2001 compared with year-end 2000, due primarily to lower energy purchases in September 2001 as compared to December 2000, offset in part by higher energy costs.

Accrued taxes increased $71.6 million at September 30, 2001 compared with year-end 2000, due principally to timing differences.

Regulatory liabilities increased $39.6 million at September 30, 2001 compared with year-end 2000, reflecting the deferral pending future disposition by the New York State Public Service Commission (PSC) of a $77.6 million refund from the New York Independent System Operator resulting from bill reconciliations. This increase was offset in part by a reduction of $18.2 million of previously deferred gas credits and other provisions of the gas rate agreement approved by the PSC in November 2000. The decrease of $16.7 million in NYPA revenue deficiency represents the amortization of the New York Power Authority revenue deficiency pursuant to the terms of the agreements covering the company's electric rates.

Other deferred credits increased $16.1 million at September 30, 2001 compared with year-end 2000, reflecting $23.8 million of interest rate swap agreements related to O&R and Con Edison Development. If the swaps had been terminated on September 30, 2001, O&R and Con Edison Development would have been required to pay approximately $16.2 million and $7.6 million, respectively. See Note E to the Con Edison financial statements included in Part I, Item 1 of this report.

Cash Flows Used in Investing and Financing Activities

Cash flows used in investing activities during the first nine months of 2001 decreased $720.4 million compared with the first nine months of 2000, reflecting the receipt of proceeds from the sale of the company's nuclear generating unit and related assets ($553.7 million, net of federal income tax), and the sale of the company's 480 MW interest in the Roseton generating station in January 2001 ($100.0 million, net of federal income tax) and decreased investment in non-utility plant ($205.4 million). The proceeds from the sales were partially offset by additional payments made to the nuclear decommissioning trust funds in connection with their transfer to the buyer of the nuclear generating unit ($73.8 million) and increased construction expenditures ($88.2 million). Construction expenditures increased principally to meet load growth on Con Edison of New York's electric distribution system. Cash used in investment in non-utility plant decreased in the 2001 period, primarily because the 2000 period included the $96.3 million purchase of an 80 percent interest in a 200 MW electric generating unit in Lakewood, New Jersey.

Cash flows used in financing activities during the first nine months of 2001 increased $54.1 million compared with the first nine months of 2000. The company issued $246.5 million of long-term debt, net of retirements, in the 2001 period compared with $463.7 million in the 2000 period.

In June 2001 Con Edison of New York issued $400 million of 7.5 percent 40-year debentures. In addition, Con Edison of New York issued $224.6 million of variable rate 35-year tax-exempt debt (with an initial weekly rate of 2.25 percent) through the New York State Energy Research and Development Authority (NYSERDA), the proceeds of which (along with other funds of the company) were used in July 2001 to redeem, in advance of maturity, $228.2 million of tax-exempt debt with a weighted average interest rate of 7.2 percent.

World Trade Center Attack

distribution facilities damaged as a result of the September 11, 2001 attack on the World Trade Center. Most of the costs are expected to be capital in nature. The company estimates that its insurers will cover approximately $65 million of the costs. The company is seeking Federal reimbursement of the remaining costs. At September 30, 2001, the company had capitalized $12 million of such costs as utility plant and deferred $35.6 million of such costs as a regulatory asset.

A number of buildings to which Con Edison of New York supplied utility service were destroyed or severely damaged as a result of the attack. Annual net after-tax revenues in 2000 for electric, gas and steam services to these buildings were approximately $15 million.

Capital Resources

Con Edison's ratio of earnings to fixed charges (for the 12 months ended on the date indicated) and common equity ratio (as of the date indicated) were:

		September 30, 2001		December 31, 2000
Earnings to fixed charges (SEC basis)		3.25		3.10
Common equity ratio*		49.6		49.1

* Common shareholders' equity as a percentage of total capitalization

Con Edison's ratio of earnings to fixed charges increased for the 12-month period ending September 30, 2001 compared to the 12-month period ending December 31, 2000 as a result of increased earnings, offset in part by increased interest expense. Excluding charges of $130 million for replacement power costs related to an outage of the company's nuclear generating unit (which it sold in September 2001; see Note C to the Con Edison financial statements included in Part I, Item 1 of this report and Note G to the Con Edison financial statements included in Item 8 of the Form 10-K) and a $36 million charge for merger-related expenses (see Note P to the Con Edison financial statements included in Item 8 of the Form 10-K), Con Edison's ratio of earnings to fixed charges would have been 3.48 and 3.47 for the 12-month periods ended September 30, 2001 and December 31, 2000, respectively.

FERC RTO Order

In July 2001, the Federal Energy Regulatory Commission (FERC) concluded that the three independent system operators in the Northeastern United States, including the New York Independent System Operator (NYISO), should combine to form one regional transmission organization (RTO) and initiated a process with respect to issues associated with its formation. The terms and conditions pursuant to which an RTO for the Northeastern United States would be formed and operate have not been determined. FERC has, however, indicated that an RTO should have certain characteristics, including independence from market participants and operational authority for all transmission assets under its control, and perform certain functions, including tariff administration and design, congestion management, market monitoring, planning and expansion and interregional coordination. Con Edison of New York's transmission facilities, other than those located underground, and O&R's transmission facilities are controlled and operated by the NYISO. For a description of the transmission facilities, see Item 2 of the Form 10-K.

Market Risks

Reference is made to "Financial Market Risks" in the Con Edison Management's Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of the Form 10-K and to Note E to the Con Edison financial statements included in Part I, Item 1 of this report. At September 30, 2001 neither the fair value of derivatives outstanding nor potential derivative losses from reasonably possible near-term changes in market prices were material to the financial position, results of operations or liquidity of the company.

Environmental Matters

For information concerning potential liabilities of the company arising from laws and regulations protecting the environment, including the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund), see the notes to Con Edison's financial statements included in Part I, Item 1 of this report.

Results of Operations

Third Quarter of 2001 Compared with Third Quarter of 2000

Con Edison's net income for common stock for the third quarter of 2001 was $277.3 million or $1.31 a share (based upon an average of 212.2 million common shares outstanding) compared with $279.9 million or $1.32 a share (based upon an average of 212.0 million common shares outstanding) for the third quarter of 2000. On a diluted basis Con Edison's earnings per share for the third quarter were $1.30 a share. The decrease in the company's net income reflects electric rate reductions in the 2001 period, offset in part by higher sales volumes and increased pension credits, as well as non-recurring charges relating to Con Edison of New York's nuclear replacement power costs in the 2000 period (see Note C to the Con Edison financial statements included in Part I, Item 1 of this report and Note G to the Con Edison financial statements included in Item 8 of the Form 10-K). The September 11, 2001 attack on the World Trade Center did not significantly affect the company's results of operations for the 2001 period. See "Liquidity and Capital Resources-World Trade Center Attack," above.

Earnings for the quarters ended September 30, 2001 and 2000 were as follows:

(Millions of dollars)		2001			2000
Con Edison of New York		$	269.0		$	266.3
O&R			16.8			16.3
Unregulated subsidiaries			(2.1	)		2.6
Other*			(6.4	)		(5.3	)

	Con Edison	$	277.3		$	279.9

* Includes parent company expenses, goodwill amortization and inter-company eliminations.

A comparison of the results of operations of Con Edison for the third quarter of 2001 with the results for the third quarter of 2000 follows.

Three Months Ended September 30, 2001 Compared With Three Months Ended September 30, 2000

(Millions of dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	(127.9	)	(4.5)	%
Purchased power - electric and steam		(68.9	)	(5.7	)
Fuel - electric and steam		(7.8	)	(8.1	)
Gas purchased for resale		(45.1	)	(34.2	)
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		(6.1	)	(0.4	)
Other operations and maintenance		(18.8	)	(5.0	)
Depreciation and amortization		(17.6	)	(11.7	)
Taxes, other than income tax		(15.4	)	(4.7	)
Income tax		44.3		33.6
Operating income		1.4		0.4
Other income less deductions and related federal income tax		(4.3	)	(64.3	)
Net interest charges		(0.4	)	(0.4	)
Net income for common stock	$	(2.5	)	(0.9)	%

A discussion of Con Edison's operating revenues and operating income by business segment follows. Con Edison's principal business segments are its regulated electric, gas and steam utility businesses. For additional information about the segments, see Note F to the Con Edison financial statements included in Part I, Item 1 of this report.

Electric

Con Edison's electric operating revenues in the third quarter of 2001 decreased $80.9 million compared with the third quarter of 2000, reflecting lower purchased power costs (discussed below) and rate reductions of approximately $89.2 million in the 2001 period, partially offset by higher sales volume in the 2001 period. See "Recoverable Energy Costs" and "Rate and Restructuring Agreements" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Electricity sales volumes for Con Edison's utility subsidiaries increased 6.0 percent in the third quarter of 2001 compared with the third quarter of 2000. The increase in sales volume reflects the warmer 2001 weather compared to the 2000 period and continued sales growth. Con Edison of New York and O&R electric sales volumes for these periods are shown at the bottom of their consolidated income statements included in Part I, Item 1 of this report. After adjusting for variations, principally weather and billing days, in each period, electricity sales volumes for Con Edison of New York and O&R increased 3.3 percent and decreased 0.4 percent, respectively, in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Purchased power costs decreased $88.4 million in the third quarter of 2001 compared with the third quarter of 2000, due to a decrease in purchased volumes resulting from the availability the company's nuclear generating unit in the 2001 period (prior to the completion of its sale in September 2001). Fuel costs decreased $2.6 million as a result of a decrease in the unit cost of fuel, offset in part by increased generation. In general, Con Edison's utility subsidiaries recover prudently incurred purchased power

costs pursuant to rate provisions approved by the relevant state public utility commission. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Part I, Item 1 of this report.

Con Edison's electric operating income increased $5.4 million for the third quarter of 2001 compared with the third quarter of 2000. The principal components of this increase were an increase in net revenues (operating revenues less fuel and purchased power costs) of $10.1 million, decreased other operations and maintenance expenses ($15.0 million) and decreased depreciation and amortization expense ($16.5 million), offset in part by increased property taxes ($12.5 million) and increased income tax. The income tax increase reflects a change in New York law that effectively transferred the tax liability from a revenue-based tax to a net income tax. Other operations and maintenance expenses in the 2001 period reflect decreased transmission expenses ($10.2 million) and lower expenses relating to the company's nuclear generating unit ($13.7 million), offset in part by higher charges ("System Benefits Charges") for research and development energy efficiency and other programs that are recoverable from customers under the agreements covering the company's electric rates ($9.8 million).

Gas

Con Edison's gas operating revenues decreased $11.3 million and gas operating income in decreased $1.8 million in the third quarter of 2001 compared with the third quarter of 2000. The lower revenues reflect reduced sales to gas customers. The decrease in operating income of $1.8 million reflects primarily a decrease in net revenues (operating revenues less gas purchased for resale) of $3.1 million, increased property tax expense ($3.8 million) and increased distribution expenses attributable to the relocation of Company facilities to avoid interference with municipal infrastructure projects ($1.9 million), offset in part by decreased inquiries and damages expense ($1.0 million) and decreased income tax expense.

Firm gas sales and transportation volumes for Con Edison's utility subsidiaries decreased 3.4 percent in the third quarter of 2001 compared with the third quarter of 2000. Con Edison of New York and O&R gas sales and transportation volumes for these periods are shown at the bottom of their consolidated income statements included in Part I, Item 1 of this report. After adjusting for variations, principally weather and billing days, in each period, firm gas sales and transportation volumes in the 2001 period decreased 2.7 percent for Con Edison of New York and decreased 3.5 percent for O&R. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

A weather-normalization provision that applies to the gas business of Con Edison's utility subsidiaries operating in New York moderates, but does not eliminate, the effect of weather-related changes on gas operating income.

Steam

volumes. The increase in operating income reflects the rate increase and increased sales volumes. See "Rate and Restructuring Agreements" and "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's steam sales volume (see bottom of the company's consolidated income statement included in Part I, Item 1 of this report) increased 6.3 percent in the 2001 period compared with the 2000 period. After adjusting for variations, principally weather and billing days, in each period, steam sales volume decreased 2.8 percent.

Other Income

Other income decreased $4.3 million in the 2001 period compared with the 2000 period principally because the 2000 period includes an increase in the market value of the investments of a company (in which Con Edison of New York has an interest) that invests in New York City related businesses. The decrease also reflects unrealized losses relating to an unregulated subsidiary's commodity hedges entered into in connection with transactions for the sale of electricity and gas, and decreased income tax. In accordance with Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), the company recognizes in income unrealized mark-to-market change in the value of these hedging instruments. The company expects that gains or losses on these instruments will be offset, at least in part, by the value of the related sales transactions. See Note E to the Con Edison financial statements included in Part I, Item 1 of this report. The decrease in income tax is due to deductions for merger-related expenses (see Note D to the Con Edison financial statements included in Part I, Item 1 of this report and Note P to the Con Edison financial statements included in Item 8 of the Form 10-K) and New York State income tax benefits recorded in year 2001.

Net Interest Charges

Net interest charges decreased $0.4 million in the 2001 period compared with the 2000 period, reflecting a $2.4 million decrease in interest related to short-term borrowings and a $3.9 million charge in 2000 for interest accrued on a deferred gain on generation divestiture, offset in part by a $5.9 million increase in interest on long-term debt balances.

Nine Months Ended September 30, 2001 Compared with Nine Months Ended
September 30, 2000

Con Edison's net income for common stock for the nine months ended September 30, 2001 was $557.1 million or $2.63 a share (based upon an average of 212.1 million common shares outstanding) compared with $536.8 million or $2.53 a share (based upon an average of 212.2 million common shares outstanding) for the nine months ended September 30, 2000. On a diluted basis Con Edison's earnings per share for the nine months ended September 30, 2001 were $2.62 a share. The increase in the company's net income reflects higher sales volumes, increased pension credits and non-recurring charges relating to Con Edison of New York's nuclear replacement power costs in the 2000 period (see Note C to the Con Edison financial statements included in Part I, Item 1 of this report and Note G to the Con Edison financial statements included in Item 8 of the Form 10-K), partially offset by electric rate reductions in the 2001 period.

Earnings for the nine months ended September 30, 2001 and 2000 were as follows:

(Millions of dollars)		2001			2000
Con Edison of New York		$	543.7		$	515.7
O&R			33.7			32.4
Unregulated subsidiaries			(4.4	)		0.9
Other*			(15.9	)		(12.2	)

	Con Edison	$	557.1		$	536.8

* Includes parent company expenses, goodwill amortization and inter-company eliminations.

A comparison of the results of operations of Con Edison for the nine months ended September 30, 2001 with the results for the nine months ended September 30, 2000 follows.

Nine Months Ended September 30, 2001 Compared With Nine Months Ended September 30, 2000

(Millions of dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	510.1		7.1	%
Purchased power - electric and steam		226.1		8.3
Fuel - electric and steam		80.6		36.0
Gas purchased for resale		161.5		28.7
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		41.9		1.1
Other operations and maintenance		(70.0	)	(5.8	)
Depreciation and amortization		(34.1	)	(7.8	)
Taxes, other than income tax		(15.2	)	(1.7	)
Income tax		111.6		41.6
Operating income		49.6		5.9
Other income less deductions and related federal income tax		(8.0	)	(88.6	)
Net interest charges		21.2		7.1
Net income for common stock	$	20.4		3.8	%

Electric

Con Edison's electric operating revenues in the nine months ended September 30, 2001 increased $114.9 million compared with the nine months ended September 30, 2000 reflecting lower purchased power costs (discussed below) and higher sales, partially offset by rate reductions of approximately $220.2 million in 2001. See "Recoverable Energy Costs" and "Rate and Restructuring Agreements" in Note A to the Con Edison financial statements included in Item 8 of the Form 10-K.

Electricity sales volumes for Con Edison's utility subsidiaries increased 4.1 percent in the nine months ended September 30, 2001 compared with the nine months ended September 30, 2000. The increase in sales volumes reflects the warmer 2001 weather compared to the 2000 period and continued sales growth. Con Edison of New York and O&R electric sales volumes for these periods are shown at the bottom of their consolidated income statements included in Part I, Item 1 of this report. After adjusting for

variations, principally weather and billing days, in each period, electricity sales volumes for Con Edison of New York and O&R increased 3.0 percent and 2.7 percent, respectively, in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Purchased power costs increased $45.6 million in the nine months ended September 30, 2001 compared with the nine months ended September 30, 2000, due to an increase in the cost of purchased power, offset in part by a decrease in purchased volumes resulting from the availability of the company's nuclear generating unit in the 2001 period. Fuel costs increased $26.9 million as a result of increased generation, offset in part by a decrease in the unit cost of fuel. In general, Con Edison's utility subsidiaries recover prudently incurred purchased power costs pursuant to rate provisions approved by the relevant state public utility commission. See "Recoverable Energy Costs" in Note A to the Con Edison financial statements included in Part I, Item 1 of this report.

Con Edison's electric operating income increased $33.8 million for the nine months ended September 30, 2001 compared with the nine months ended September 30, 2000. The principal components of this increase were decreased other operations expenses ($57.0 million) and depreciation and amortization expense ($38.9 million), offset in part by higher property taxes ($37.9 million) and income taxes. Other operations and maintenance expenses in the 2001 period reflect increased pension credits ($49.0 million), decreased transmission expenses ($9.5) and lower expenses relating to the company's nuclear generating unit, which was sold in September 2001 ($42.9 million), offset in part by higher System Benefits Charges ($23.0 million), and increased distribution expenses resulting from 2000-2001 winter weather conditions, relocation of company facilities to avoid interference with municipal infrastructure projects, and preparations for and operations during summer 2001 ($15.0 million). Income taxes increased, and taxes other than income tax decreased, reflecting a change in New York law that effectively transferred the tax liability from a revenue based tax to a net income tax.

Gas

Con Edison's gas operating revenues increased $279.4 million and gas operating income decreased $3.3 million in the nine months ended September 30, 2001 compared with the nine months ended September 30, 2000. The higher revenues reflect an increased cost of purchased gas, offset in part by a reduction in customer bills of $20.0 million, reflecting a refund of previously deferred credits and other provisions of the Con Edison of New York gas rate agreement approved by the PSC in November 2000. The decrease in operating income of $3.3 million reflects primarily increased depreciation and amortization expense ($2.2 million), increased transportation and distribution expenses ($2.2 million), increased income tax expense ($12.9 million) offset in part by an increase in net revenues (operating revenues less gas purchased for resale of 9.4 million). Income taxes increased, and taxes, other than income tax decreased reflecting a change in New York law that effectively transferred the tax liability from a revenue based tax to a net income tax.

Firm gas sales and transportation volumes for Con Edison's utility subsidiaries increased 4.2 percent in the nine months ended September 30, 2001 compared with the nine months ended September 30, 2000. Con Edison of New York and O&R gas sales and transportation volumes for these periods are shown at

the bottom of their consolidated income statements included in Part I, Item 1 of this report. After adjusting for variations, principally weather and billing days, in each period, firm gas sales and transportation volumes in the 2001 period increased 2.1 percent for Con Edison of New York and decreased 1.3 percent for O&R. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Steam

Con Edison of New York's steam operating revenues increased $98.9 million and steam operating income increased $13.1 million for the nine months ended September 30, 2001 compared with the nine months ended September 30, 2000, reflecting an October 2000 rate increase and increased sales volumes. The higher revenues also reflect increased fuel and purchased power costs. See "Rate and Restructuring Agreements" and "Recoverable Energy Costs" in Note A to the company's financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's steam sales volume (see bottom of the company's consolidated income statement included in Part I, Item 1 of this report) increased 3.2 percent in the 2001 period compared with the 2000 period. After adjusting for variations, principally weather and billing days, in each period, steam sales volume decreased 2.2 percent.

Other Income

Other income decreased $8.0 million in the 2001 period compared with the 2000 period principally because the 2000 period includes an increase in the market value of the investments of a company (in which Con Edison of New York has an interest) that invests in New York City related businesses. The decrease also reflects unrealized losses relating to an unregulated subsidiary's commodity hedges entered into in connection with transactions for the sale of electricity and gas and decreased income tax. In accordance with SFAS 133, the company has recognized in income a portion of the unrealized mark-to-market change in the value of these hedging instruments. The company expects that gains or losses on these instruments will be offset, at least in part, by the value of the related sales transactions. See Note E to the Con Edison financial statements included in Part I, Item 1 of this report. The decrease in income tax is due to deductions for merger-related expenses (see Note D to the Con Edison financial statements included in Part I, Item 1 of this report and Note P to the Con Edison financial statements included in Item 8 of the Form 10-K) and New York State income tax benefits recorded in year 2001.

Net Interest Charges

Net interest charges increased $21.3 million in the 2001 period compared with the 2000 period, reflecting $26.1 million of interest on increased long-term debt balances and $5.9 million of interest expense of an unregulated subsidiary, offset in part by a $5.9 million decrease in interest related to short-term borrowings and an $8.0 million charge in 2000 for interest accrued on a deferred gain on generation divestiture.

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

Con Edison of New York

Consolidated Edison Company of New York, Inc. (Con Edison of New York) is a regulated utility that provides electric service to over three million customers and gas service to over one million customers in New York City and Westchester County. It also provides steam service in parts of Manhattan. All of the common stock of Con Edison of New York is owned by Consolidated Edison, Inc. (Con Edison).

This discussion and analysis should be read in conjunction with Con Edison of New York's Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of the combined Con Edison, Con Edison of New York and Orange and Rockland Utilities, Inc. (O&R) Annual Reports on Form 10-K for the year ended December 31, 2000 (File Nos. 1-14514, 1-1217 and 1-4315, the Form 10-K) and Con Edison of New York's Management's Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2 of the combined Con Edison, Con Edison of New York and O&R Quarterly Reports on Form 10-Q for the quarterly periods ending March 31, 2001 and June 30, 2001. Reference is also made to the notes to the financial statements in Part I, Item 1 of this report, which notes are incorporated herein by reference.

Liquidity and Capital Resources

Cash and temporary cash investments and outstanding commercial paper (shown as notes payable on the balance sheet) at September 30, 2001 and December 31, 2000 were:

(Millions of dollars)			September 30, 2001			December 31, 2000
	Cash and temporary cash investments		$	417.9		$	70.3
	Commercial paper		$	0.0		$	140.0

Cash Flows from Operating Activities

Net cash flows from operating activities during the first nine months of 2001 increased $35.4 million compared with the first nine months of 2000, reflecting principally increased net income and decreased recoverable energy costs, offset in part by increased accrued pension credits and decreased accounts payable.

Con Edison of New York's customer accounts receivable, less allowance for uncollectible accounts, was $11.8 million lower at September 30, 2001 than at year-end 2000, due primarily to lower customer billings reflecting lower energy costs, offset in part by the timing of customer payments. The company's equivalent number of days of revenue outstanding (ENDRO) of customer accounts receivable was 29.8 days at September 30, 2001 compared with 29.7 days at December 31, 2000.

Prepayments include cumulative credits to pension expense amounting to $615.5 million at September 30, 2001 compared with $366.7 million at December 31, 2000. Pension credits, which result primarily from favorable performance by the company's pension fund in past years, increase net income but do not provide cash for the company's operations. See Note D to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

The regulatory asset for deferred recoverable energy costs decreased $165.5 million at September 30, 2001 compared with December 31, 2000, due primarily to the recovery of previously deferred amounts, offset in part by the deferral for future recovery of additional purchased power and gas costs. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Other regulatory assets increased $3.3 million at September 30, 2001 compared with year-end 2000, in part reflecting unrealized mark-to-market losses on transactions entered into hedge purchases of electricity and gas against adverse market price fluctuations. The company refunds to or collects from its customers its hedging gains or losses, pursuant to rate provisions that permit recovery of the cost of purchased power and gas. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K and Note D to the Con Edison of New York financial statements included in Part I, Item 1 of this report.

In September 2001, Con Edison of New York completed the sale of its nuclear generating unit and related assets, and the transfer to the buyer of its nuclear decommissioning trust funds. The resulting loss of $166.5 million has been deferred as a regulatory asset for future recovery under the terms of the agreements covering the company's electric rates. In addition, the regulatory asset for future federal income tax was reduced by $89.0 million to reflect the loss. See Note C to the Con Edison of New York financial statements included in Part I, Item 1 of this report.

The regulatory asset for World Trade Center incident is for the company's non-capital costs relating to the September 11, 2001 attack. See "World Trade Center Attack," below.

The accumulated provision for injuries and damages increased $16.7 million at September 30, 2001 compared with year-end 2000, due primarily to increased workers' compensation claims.

Unfunded pension and other post-employment benefit (OPEB) obligations (shown as pension and benefit reserve on the balance sheet) increased $19.9 million at September 30, 2001 compared with year-end 2000. The company's policy is to fund its pension and OPEB costs to the extent deductible under current tax regulations. The reserve also includes a minimum liability for the company's supplemental executive retirement program, a portion of which has been included in other comprehensive income. See Note E to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Accounts payable decreased $257.4 million at September 30, 2001 compared with year-end 2000, due primarily to lower energy purchases in September 2001 as compared to December 2000, offset in part by higher energy costs and the accrual of a liability for unrealized losses on energy price hedging transactions for which, as discussed above, an other regulatory asset was established.

Regulatory liabilities increased $50.5 million at September 30, 2001 compared with year-end 2000, reflecting the deferral, pending future disposition by the New York State Public Service Commission (PSC), of a $77.6 million refund from the New York Independent System Operator resulting from bill reconciliations. This increase was offset, in part by a reduction of $18.2 million of previously deferred credits and other provisions of the gas rate agreement approved by the PSC in November 2000. The decrease of $16.7 million in NYPA revenue increase represents the amortization of the New York Power Authority revenue deficiency pursuant to terms of the agreements covering the company's electric rates.

Cash Flows Used in Investing and Financing Activities

Cash flows used in investing activities during the first nine months of 2001 decreased $517.2 million compared with the first nine months of 2000, reflecting the receipt of proceeds from the sale of the company's nuclear generating unit and related assets ($553.7 million, net of federal income tax), and the sale of the company's 480 MW interest in the Roseton generating station in January 2001 ($100.0 million, net of federal income tax). The proceeds from the sales were partially offset by additional payments made to the nuclear decommissioning trust funds in connection with their transfer to the buyer of the nuclear generating unit ($73.8 million) and increased construction expenditures ($84.2 million). Construction expenditures increased principally to meet load growth on the company's electric distribution system.

Cash flows used in financing activities during the first nine months of 2001 decreased $97.7 million compared with the first nine months of 2000, primarily because the company increased short-term debt in December 1999 in anticipation of its January 2000 cash requirements but financed its January 2001 cash requirements in January 2001. In addition, the company issued $246.5 million of long-term debt, net of retirements, in the 2001 period compared with $350 million in the 2000 period.

In June 2001 the company issued $400 million of 7.5 percent 40-year debentures. In addition, the company issued $224.6 million of variable rate 35-year tax-exempt debt (with an initial weekly rate of 2.25 percent) through the New York State Energy Research and Development Authority (NYSERDA), the proceeds of which (along with other funds of the company) were used in July 2001 to redeem, in advance of maturity, $228.2 million of tax-exempt debt with a weighted average interest rate of 7.2 percent.

World Trade Center Attack

Con Edison of New York estimates that it will incur approximately $400 million of costs for emergency response, temporary restoration and permanent replacement of electric, gas and steam transmission and distribution facilities damaged as a result of the September 11, 2001 attack on the World Trade Center. Most of the costs are expected to be capital in nature. The company estimates that its insurers will cover approximately $65 million of the costs. The company is seeking Federal reimbursement of the remaining costs. At September 30, 2001, the company had capitalized $12 million of such cost as utility plant and deferred $35.6 million of such costs as a regulatory asset.

Capital Resources

Con Edison of New York's ratio of earnings to fixed charges (for the 12 months ended on the date indicated) and common equity ratio (as of the date indicated) were:

		September 30, 2001		December 31, 2000
Earnings to fixed charges (SEC basis)		3.47		3.23
Common equity ratio*		47.0		46.4

* Common shareholder's equity as a percentage of total capitalization

Con Edison of New York's ratio of earnings to fixed charges increased for the 12-month period ending September 30, 2001 compared to the 12-month period ending December 31, 2000 as a result of increased earnings, offset in part by increased interest expense. Excluding charges of $130 million for replacement power costs related to an outage of the company's nuclear generating unit (which it sold in September 2001; see Note C to the Con Edison of New York financial statements included in Part I, Item 1 of this report and Note G to the Con Edison of New York financial statements included in Item 8 of the Form 10-K). Con Edison of New York's ratio of earnings to fixed charges would have been 3.65 and 3.56 for the 12-month periods ended September 30, 2001 and December 31, 2000, respectively.

FERC RTO Order

In July 2001, the Federal Energy Regulatory Commission (FERC) concluded that the three independent system operators in the Northeastern United States, including the New York Independent System Operator (NYISO), should combine to form one regional transmission organization (RTO) and initiated a process with respect to issues associated with its formation. The terms and conditions pursuant to which an RTO for the Northeastern United States would be formed and operate have not been determined. FERC has, however, indicated that an RTO should have certain characteristics, including independence from market participants and operational authority for all transmission assets under its control, and perform certain functions, including tariff administration and design, congestion management, market monitoring, planning and expansion and interregional coordination. Con Edison of New York's transmission facilities, other than those located underground, are controlled and operated by the NYISO. For a description of the transmission facilities, see Item 2 of the Form 10-K.

Market Risks

Reference is made to "Financial Market Risks" in the Con Edison of New York Management's Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of the Form 10-K and to Note D to the Con Edison of New York financial statements included in Part I, Item 1 of this report. At September 30, 2001 neither the fair value of derivatives outstanding nor potential derivative losses from reasonably possible near-term changes in market prices were material to the financial position, results of operations or liquidity of the company.

Environmental Matters

For information concerning potential liabilities of Con Edison of New York arising from laws and regulations protecting the environment, including the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (Superfund), see the notes to the Con Edison of New York financial statements included in Part I, Item 1 of this report.

Results of Operations

Third Quarter of 2001 Compared with Third Quarter of 2000

Con Edison of New York's net income for common stock for the third quarter of 2001 was $269.0 million compared with $266.3 million for the third quarter of 2000. The increase in the company's net income reflects higher sales volumes and increased pension credits, partially offset by electric rate reductions in the 2001 period, as well as non-recurring charges relating to nuclear replacement power costs in the 2000 period (see Note C to the Con Edison of New York financial statements included in Part I, Item 1 of this report and Note G to the Con Edison of New York financial statements included in Item 8 of the Form 10-K). The September 11, 2001 attack on the World Trade Center did not significantly affect the company's results of operations for the 2001 period. See "Liquidity and Capital Resources—World Trade Center Attack," above.

A comparison of the results of operations of Con Edison of New York for the third quarter of 2001 with the results for the third quarter of 2000 follows.

Three Months Ended September 30, 2001 Compared With Three Months Ended September 30, 2000

(Millions of dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	(101.7	)	(4.2	)%
Purchased power - electric and steam		(92.0	)	(9.4	)
Fuel - electric and steam		(7.8	)	(8.1	)
Gas purchased for resale		(7.4	)	(10.1	)
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		5.5		0.4
Other operations and maintenance		(15.3	)	(4.8	)
Depreciation and amortization		(16.9	)	(12.6	)
Taxes, other than income tax		(13.4	)	(4.3	)
Income tax		44.4		36.1
Operating income		6.7		1.9
Other income less deductions and related federal income tax		(3.3	)	(53.7	)
Net interest charges		0.7		0.7
Net income for common stock	$	2.7		1.0	%

A discussion of Con Edison of New York's operating revenues and operating income by business segment follows. Con Edison of New York's principal business segments are its regulated electric, gas and steam utility businesses. For additional information about the segments, see Note E to the Con Edison of New York financial statements included in Part I, Item 1 of this report.

Electric

Con Edison of New York's electric operating revenues in the third quarter of 2001 decreased $87.0 million compared with the third quarter of 2000. The decrease reflects rate reductions of approximately $88.4 million and lower purchased power costs (discussed below), partially offset by higher sales volume in the 2001 period. See "Recoverable Energy Costs" and "Rate and Restructuring Agreements" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's electric sales, excluding off-system sales, for the third quarter of 2001 compared with the third quarter of 2000 were:

	Millions of Kwhrs.
Description	Three Months Ended Sept. 30, 2001	Three Months Ended Sept. 30, 2000	Variation		Percent Variation
Residential/Religious	3,871	3,517	354		10.1	%
Commercial/Industrial	5,641	5,679	(38	)	(0.1	)
Other	39	68	(29	)	(42.6	)

TOTAL FULL SERVICE CUSTOMERS	9,551	9,264	287		3.1
Retail Choice Customers	3,052	2,597	455		17.5

SUB-TOTAL	12,603	11,861	742		6.3
NYPA, Municipal Agency and Other Sales	2,856	2,682	174		6.5

TOTAL SERVICE AREA	15,459	14,543	916		6.3	%

Electricity sales volume in Con Edison of New York's service territory increased 6.3 percent in the third quarter of 2001 compared with the third quarter of 2000. The increase in sales volume reflects the warmer 2001 weather compared to the 2000 period and continued sales growth. After adjusting for variations, principally weather and billing days, in each period, electricity sales volume in the service territory increased 3.3 percent in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Con Edison of New York's purchased power costs decreased $88.3 million in the third quarter of 2001 compared with the third quarter of 2000, due to a decrease in the price of purchased power and decreased purchased volumes resulting from the availability of the company's nuclear generating unit in the 2001 period (prior to the completion of its sale in September 2001). Fuel costs decreased $2.6 million as a result of a decrease in the unit cost of fuel, offset in part by increased generation. In general, Con Edison of New York recovers prudently incurred purchased power costs pursuant to rate provisions approved by the PSC. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's electric operating income increased $5.1 million in the third quarter of 2001 compared with the third quarter of 2000. The principal components of the increase were an increase in net revenues (operating revenues less fuel and purchased power costs) of $4.0 million, decreased other operations and maintenance expenses ($15.4 million) and decreased depreciation and amortization expense ($17.8 million), offset in part by increased property taxes ($12.3 million) and increased income tax. The increase in state income tax reflects the decrease in Gross Receipts Tax, due to a tax law change

in New York that effectively transferred the tax liability from a revenue-based tax to a net income tax. The amounts applicable to old tax laws will continue to be collected through base rates and tariff surcharges until the PSC directs otherwise, with differences between those collections and the tax expense under the new law to be deferred. Other operations and maintenance expenses in the 2001 period reflect decreased transmission expenses ($8.9 million) and lower expenses relating to the company's nuclear generating unit ($13.7 million), offset in part by higher charges ("System Benefits Charges") for research and development energy efficiency and other programs that are recoverable from customers under the agreements covering the company's electric rates ($9.8 million), and higher distribution expenses ($0.5 million).

Gas

Con Edison of New York's gas operating revenues decreased $10.5 million and gas operating income decreased $3.4 million in the third quarter of 2001 compared with the third quarter of 2000. The lower revenues reflect reduced sales to gas customers. The decrease in operating income of $3.4 million reflects primarily a decrease in net revenues (operating revenues less gas purchased for resale) of $3.2 million, increased depreciation and amortization expenses ($1.0 million), increased meter reading expenses ($1.3 million), increased property tax expense ($3.6 million) and increased distribution expenses attributable to the relocation of company facilities to avoid interference with municipal infrastructure projects ($1.9 million), offset in part by decreased injuries and damages expense ($1.0 million) and decreased income tax expense.

Con Edison of New York's gas sales and transportation volumes for firm customers (see bottom of the company's consolidated income statement included in Part I, Item 1 of this report) decreased 2.6 percent in the third quarter of 2001 compared with the 2000 period. After adjusting for variations, principally weather and billing days, in each period, firm gas sales and transportation volumes in the company's service territory decreased 2.7 percent in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

A weather-normalization provision that applies to Con Edison of New York's gas business moderates, but does not eliminate, the effect of weather-related changes on gas operating income.

Steam

Con Edison of New York's steam operating revenues decreased $4.1 million and steam operating income increased $5.0 million for the third quarter of 2001 compared with the third quarter of 2000. The lower revenues reflect lower purchased power costs, offset by an October 2000 rate increase and increased sales volumes. The increase in operating income reflects the rate increase and increased sales volumes. See "Rate and Restructuring Agreements" and "Recoverable Energy Costs" in Note A to the company's financial statements included in Item 8 of the Form 10-K.

Other Income

Other income decreased $3.3 million in the 2001 period compared to the 2000 period principally because the 2000 period included an increase in the market value of the investments of a company (in which Con Edison of New York has an interest) that invests in New York City related businesses.

Net Interest Charges

Net interest charges increased $0.7 million in the third quarter of 2001 compared to the 2000 period, reflecting principally $6.1 million of interest on increased long-term debt balances, offset in part by a $2.3 million decrease in interest related to short-term borrowings and a $3.9 million charge in 2000 for interest accrued on a deferred gain on generation divestiture.

Nine Months Ended September 30, 2001 Compared with Nine Months Ended
September 30, 2000

Con Edison of New York's net income for common stock for the nine months ended September 30, 2001 was $543.7 million compared with $515.7 million for the nine months ended September 30, 2000. The increase in the company's net income reflects higher sales volumes and increased pension credits, and non-recurring charges for nuclear replacement power costs in the 2000 period (see Note C to the Con Edison of New York financial statements included in Part I, Item 1 of this report and Note G to the Con Edison of New York financial statements included in Item 8 of the Form 10-K), partially offset by electric rate reductions in the 2001 period.

A comparison of the results of operations of Con Edison of New York for the nine months ended September 30, 2001 with the results for the nine months ended September 30, 2000 follows.

Nine Months Ended September 30, 2001 Compared With Nine Months Ended September 30, 2000

(Millions of dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	384.1		6.3	%
Purchased power - electric and steam		26.5		1.2
Fuel - electric and steam		80.6		36.0
Gas purchased for resale		241.0		74.6
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		36.0		1.1
Other operations and maintenance		(58.4	)	(5.6	)
Depreciation and amortization		(39.9	)	(10.0	)
Taxes, other than income tax		(13.9	)	(1.7	)
Income tax		109.2		43.5
Operating income		39.0		4.9
Other income less deductions and related federal income tax		2.4		40.2
Net interest charges		13.4		4.9
Net income for common stock	$	28.0		5.4	%

Electric

Con Edison of New York's electric operating revenues in the nine months ended September 30, 2001 increased $40.0 million compared with the nine months ended September 30, 2000. The increase reflects increased recoverable purchased power costs, higher sales and $58.0 million of replacement power costs for the nuclear generating unit that were not recovered from customers in the 2000 period, partially offset by rate reductions of $218.1 million. See "Recoverable Energy Costs" and "Rate and Restructuring Agreements" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's electric sales, excluding off-system sales, for the nine months ended September 30, 2001 compared with the nine months ended September 30, 2000 were:

	Millions of Kwhrs.
Description	Nine Months Ended Sept. 30, 2001	Nine Months Ended Sept. 30, 2000	Variation		Percent Variation
Residential/Religious	9,318	8,925	393		4.4	%
Commercial/Industrial	15,169	15,049	120		0.8
Other	131	308	(177	)	(57.5	)

TOTAL FULL SERVICE CUSTOMERS	24,618	24,282	336		1.4
Retail Choice Customers	7,893	6,973	920		13.2

SUB-TOTAL	32,511	31,255	1,256		4.0
NYPA, Municipal Agency and Other Sales	7,846	7,495	351		4.7

TOTAL SERVICE AREA	40,357	38,750	1,607		4.1	%

Electricity sales volume in Con Edison of New York's service territory increased 4.1 percent in the nine months ended September 30, 2001 compared with the nine months ended September 30, 2000. The increase in sales volume reflects the continued sales growth and warmer summer weather in 2001 compared to the 2000 period. After adjusting for variations, principally weather and billing days, in each period, electricity sales volume in the service territory increased 3.0 percent in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Con Edison of New York's purchased power costs increased $9.6 million in the nine months ended September 30, 2001 compared with the nine months ended September 30, 2000, due primarily to an increase in the price of purchased power, offset in part by decreased purchased volumes resulting from the availability of the company's nuclear generating unit in the 2001 period. Fuel costs increased $26.9 million as a result of increased generation, offset in part by a decrease in the unit cost of fuel. In general, Con Edison of New York recovers prudently incurred purchased power costs pursuant to rate provisions approved by the PSC. See "Recoverable Energy Costs" in Note A to the Con Edison of New York financial statements included in Item 8 of the Form 10-K.

Con Edison of New York's electric operating income increased $31.9 million in the nine months ended September 30, 2001 compared with the nine months ended September 30, 2000. The principal components of the increase were decreased other operations expenses ($61.5 million) and depreciation and

amortization expense ($42.4 million), offset in part by higher property taxes ($37.6 million) and income taxes. Other operations and maintenance expenses in the 2001 period reflect increased pension credits ($49.0 million), decreased transmission expenses ($8.6 million) and lower expenses relating to the company's nuclear generating unit ($42.9 million), offset in part by higher System Benefits Charges ($23.0 million) and increased distribution expenses resulting from 2000-2001 winter weather conditions, relocation of company facilities to avoid interference with municipal infrastructure projects, and preparations for and operations during summer 2001 ($14.3 million). Income taxes increased, and taxes, other than income tax decreased, reflecting a change in New York law that effectively transferred the tax liability from a revenue-based tax to a net income tax.

Gas

Con Edison of New York's gas operating revenues increased $245.2 million and gas operating income decreased $6.0 million in the nine months ended September 30, 2001 compared with the nine months ended September 30, 2000. The higher revenues reflect an increased cost of purchased gas, offset in part by a reduction in customer bills of $20.0 million, reflecting a refund of previously deferred credits and other provisions of the gas rate agreement approved by the PSC in November 2000. The decrease in operating income of $6.0 million reflects primarily increased transmission and distribution expenses ($2.2 million), increased uncollectible accounts ($1.2 million), increased depreciation and amortization expense ($3.0 million) and, increased state income tax and gross receipts tax ($17.7 million), offset in part by an increase in net revenues (operating revenues less gas purchased for resale) of $4.2 million and increased pension credits ($9.4 million).

Con Edison of New York's gas sales and transportation volumes for firm customers (see bottom of the company's consolidated income statement included in Part I, Item 1 of this report) increased 5.3 percent in the nine months ended September 30, 2001 compared with the 2000 period. After adjusting for variations, principally weather and billing days, in each period, firm gas sales and transportation volumes in the company's service territory increased 2.1 percent in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

A weather-normalization provision that applies to Con Edison of New York's gas business moderates, but does not eliminate, the effect of weather-related changes on gas operating income.

Steam

Con Edison of New York's steam sales volume (see bottom of the company's consolidated income statement included in Part I, Item 1 of this report) increased 3.2 percent in the 2001 period compared

with the 2000 period. After adjusting for variations, principally weather and billing days, in each period, steam sales volume decreased 2.2 percent.

Other Income

Other income increased $2.4 million due principally to a decrease in Federal income tax of $7.9 million, offset in part because the 2000 period included an increase in the market value of the investments of a company (in which Con Edison of New York has an interest) that invests in New York City related businesses. The decrease in Federal income tax reflects principally the recognition in the 2001 period of approximately $4.0 million of deferred Federal income tax credits relating to the Roseton generating plant sale and decreased income taxes reflected to lower other income.

Net Interest Charges

Net interest charges increased $13.4 million in the nine months ended September 30, 2001 compared to the 2000 period, reflecting principally $26.7 million of interest on increased long-term debt balances, offset by a $6.2 million decrease in interest related to short-term borrowings and an $8.0 million charge in 2000 for interest accrued on a deferred gain on generation divestiture.

O&R Management's Narrative Analysis of the Results of Operations

Orange and Rockland Utilities, Inc. (O&R), a wholly-owned subsidiary of Consolidated Edison, Inc. (Con Edison), meets the conditions specified in General Instruction H to Form 10-Q and is permitted to use the reduced disclosure format for wholly-owned subsidiaries of companies, such as Con Edison, that are reporting companies under the Securities Exchange Act of 1934. Accordingly, this O&R Management's Narrative Analysis of the Results of Operations is included in this report, and O&R has omitted from this report the information called for by Part I, Item 2 (Management's Discussion and Analysis of Financial Condition and Results of Operations).

O&R's net income for common stock for the nine-month period ended September 30, 2001 was $33.7 million, $1.4 million higher than the corresponding 2000 period. This increase was due primarily to a 4.1 percent increase in the volume of electric sales and the recognition in income in the 2001 period of $6.0 million of previously deferred credits pursuant to its New York gas rate agreement, offset in part by $2.1 million of electric rate reductions in the 2001 period pursuant to its New Jersey subsidiary's electric restructuring plan. In addition, the operating results for 2000 included a non-recurring after-tax gain of $2.4 million from the sale of assets of a non-utility subsidiary that was winding down operations. See "Rate Regulation" in Note A to the O&R financial statements in Item 8 of the combined O&R, Con Edison and Consolidated Edison Company of New York, Inc. Annual Reports on Form 10-K for the year ended December 31, 2000 (File Nos. 1-4315, 1-14514 and 1-1217, the Form 10-K).

A comparison of the results of operations of O&R for the nine months ended September 30, 2001 to the nine months ended September 30, 2000, follows.

(Millions of dollars)	Increases (Decreases) Amount			Increases (Decreases) Percent
Operating revenues	$	74.2		14.2	%
Purchased power - electric		35.8		17.3
Gas purchased for resale		29.3		37.5
Operating revenues less purchased power, fuel and gas purchased for resale (net revenues)		9.1		3.9
Other operation and maintenance expenses		(0.8	)	(0.8	)
Depreciation and amortization		2.6		11.8
Taxes, other than income tax		(2.4	)	(5.3	)
Income tax		7.4		43.0
Operating income		2.3		4.9
Other income less deductions and related income tax		(2.1	)	(56.4	)
Net interest charges		(1.2	)	(5.9	)
Net income for common stock	$	1.4		4.3	%

A discussion of O&R's operating revenues by business segment follows. O&R's principal business segments are its electric and gas utility businesses. For additional information about O&R's business segments, see the notes to the O&R financial statements included in Part I, Item 1 of this report.

Electric operating revenues increased $47.4 million during the nine months ended September 30, 2001 compared to the 2000 period. This increase was attributable primarily to an increase in sales volume and the billing to customers of higher purchased power costs in the 2001 period.

Electric sales volumes for the 2001 and 2000 periods are shown at the bottom of O&R's consolidated income statement for those periods included in Part I, Item 1 of this report. Electric sales volumes in the nine months ended September 30, 2001 increased 4.1 percent compared to the 2000 period. After adjusting for weather variations, electricity sales volumes were 2.6 percent higher in the 2001 period. Weather-adjusted sales represent an estimate of the sales that would have been made if historical average weather conditions had prevailed.

Purchased power costs increased $35.8 million for the nine months ended September 30, 2001 compared to the 2000 period, reflecting increases in the cost of purchased power and higher customer sales. O&R and its New Jersey utility subsidiary recover all of their prudently incurred purchased power costs in accordance with rate provisions approved by their state public utility commissions. For O&R's New York operations, the difference between the actual purchased power costs for a given month and the amount billed to customers for that month is deferred for recovery from, or refund to, customers during the next billing cycle (normally within one to two months). For O&R's New Jersey utility subsidiary, differences between actual and billed electricity costs (which amounted to a cumulative excess of actual over billed costs of $73.5 million including interest at September 30, 2001) are deferred for future charge or refund to customers, as the case may be. For O&R's Pennsylvania utility subsidiary; Pike County Light & Power Company (Pike), recovery of purchased power costs is limited to a predetermined fixed price. Pike incurred $1.1 million of purchased power costs in each of the 2001 and 2000 periods that it was not permitted to charge to customers. In October 2001, an administrative law judge recommended that the Pennsylvania Public Utility Commission (PaPUC) approve Pike's requested $1.4 million electric rate increase. The PaPUC is scheduled to address this request prior to the end of 2001.

Gas operating revenues increased $31.2 million in the 2001 period, compared to the 2000 period. The increase was due primarily to recovery from customers of higher gas costs in the 2001 period. Gas sales volumes for the 2001 and 2000 periods are shown at the bottom of O&R's consolidated income statement for those periods included in Part I, Item 1 of this report. Firm gas sales volumes in the nine months ended September 30, 2001 decreased 0.4 percent compared to the 2000 period. O&R's revenues from gas sales in New York are subject to a weather normalization clause that moderates, but does not eliminate, the effect of weather-related changes on net income. After adjusting for weather variations in each period, firm sales and transportation volumes were 1.3 percent lower for the 2001 period compared to the 2000 period. Interruptible gas sales and transportation volumes were down 10.4%. After adjusting for weather variations in each period, interruptible sales and transportation volumes were 11.3 percent lower for the 2001 period, compared to the 2000 period. Interruptible sales are dependent upon the availability and price competitiveness of alternative fuel sources and, as a result of applicable tariff regulations, do not have a substantial impact on earnings.

The cost of gas purchased for resale increased $29.3 million in the 2001 period compared to the 2000 period, due to higher unit costs.

Non-utility operating revenues decreased in the 2001 period compared to the corresponding 2000 period, primarily as a result of a $2.4 million after-tax gain which was realized last year from the sale of assets by a non-utility subsidiary of O&R that was winding down its business.

Book depreciation expense increased by $2.6 million in the 2001 period compared to the 2000 period due to higher average plant balances in the 2001 period.

Taxes other than income tax decreased by $2.4 million in the 2001 period compared to the 2000 period. State income taxes increased by a like amount, reflecting a change in New York law that effectively transferred the tax liability from a revenue based tax to a net income tax.

Income tax increased $7.4 million in the 2001 period compared to the 2000 period due to the change in New York law and higher income from operations.

Other income decreased $2.1 million in the 2001 period compared to the 2000 period. The 2000 period included a market gain of $2.9 million in relation to O&R's supplemental employee retirement plan. Excluding the impact of the gain, investment income decreased $0.8 million, due primarily to lower short-term investment balances, offset by a decrease in income tax.

Interest charges decreased by $1.2 million in the 2001 period compared to the 2000 period, reflecting lower average debt balances and a lower average interest rate in the 2001 period, offset in part by an increase in the allowance for borrowed funds used during construction $0.6 million.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Con Edison

For information about Con Edison's primary market risks associated with activities in derivative financial instruments, other financial instruments and derivative commodity instruments, see "Market Risks" in Con Edison's Management's Discussion and Analysis of Financial Condition and Results of Operations in Part 1, Item 2 of this report and Item 7A of the combined Con Edison, Con Edison of New York and O&R Annual Report on Form 10-K for the year ended December 31, 2000 (the Form 10-K), which information is incorporated herein by reference.

Con Edison of New York

For information about Con Edison of New York's primary market risks associated with activities in derivative financial instruments, other financial instruments and derivative commodity instruments, see "Market Risks" in Con Edison of New York's Management's Discussion and Analysis of Financial Condition and Results of Operations in Part 1, Item 2 of this report and Item 7A of the Form 10-K, which information is incorporated herein by reference.

PART II.		OTHER INFORMATION
Item 1.		Legal Proceedings

Con Edison

Northeast Utilities Litigation

For information about legal proceedings relating to Con Edison's October 1999 agreement to acquire Northeast Utilities, see Note D to the Con Edison financial statements included in Part 1, Item 1 of this report (which information is incorporated herein by reference).

Con Edison of New York

Employee Class Action

Reference is made to "Employee Class Action" in Part I, Item 3, Legal Proceedings of the Form 10-K. In October 2001, the court preliminarily approved a new settlement agreement which is substantially similar to the settlement agreement that the court disapproved in December 2000 other than with respect to how the $10 million to be paid by the company will be distributed.

Washington Heights Power Outage

Reference is made to "Washington Heights Power Outage" in Part I, Item 3, Legal Proceedings of the Form 10-K. Plaintiffs' have discontinued their lawsuits for damages and injunctive relief and their appeal of the court's denial of their motion to certify a class action.

Item 6.		Exhibits and Reports on Form 8-K
(a) Exhibits

Con Edison

Exhibit 12.1

Statement of computation of Con Edison's ratio of earnings to fixed charges for the twelve-month periods ended September 30, 2001 and 2000.

Con Edison of New York

Exhibit 10.2.1		Participation Agreement, dated as of November 1, 2001, between New York State Energy Research and Development Authority (NYSERDA) and Con Edison of New York.
Exhibit 10.2.2		Indenture of Trust, dated as of November 1, 2001 between NYSERDA and The Bank of New York, as trustee.
Exhibit 12.2		Statement of computation of Con Edison of New York's ratio of earnings to fixed charges for the twelve-month periods ended September 30, 2001 and 2000.

O&R

Exhibit 12.3

Statement of computation of O&R's ratio of earnings to fixed charges for the twelve-month periods ended September 30, 2001 and 2000.

(b): Reports on Form 8-K

Con Edison

Con Edison, along with Con Edison of New York, filed a combined Current Report on Form 8-K, dated September 17, 2001, furnishing (under Item 9) certain material pursuant to Regulation FD. Con Edison filed no other Current Reports on Form 8-K during the quarter ended September 30, 2001.

Con Edison, along with Con Edison of New York, filed a combined Current Report on Form 8-K, dated October 18, 2001, reporting (under Item 5) unaudited net income for common stock for the three and twelve month periods ended September 30, 2001 and 2000 and information with respect to the World Trade Center attack.

Con Edison of New York

During the quarter ended September 30, 2001 and through the date of this filing, Con Edison of New York filed no Current Reports on Form 8-K other than the combined Current Reports on Form 8-K discussed above under "Con Edison."

O&R

O&R filed no Current Reports on Form 8-K during the quarter ended September 30, 2001.

Signatures

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

	Consolidated Edison, Inc.
	Consolidated Edison Company of New York, Inc.
Date: November 13, 2001	By	/s/ JOAN S. FREILICH Joan S. Freilich Executive Vice President, Chief Financial Officer and Duly Authorized Officer
	Orange and Rockland Utilities, Inc.
Date: November 13, 2001	By	/s/ EDWARD J. RASMUSSEN Edward J. Rasmussen Vice President, Chief Financial Officer and Duly Authorized Officer




                                                                  Exhibit 10.2.1


Execution Copy

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



                         NEW YORK STATE ENERGY RESEARCH

                            AND DEVELOPMENT AUTHORITY


                                       and

                  CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.


                            -----------------------


                             PARTICIPATION AGREEMENT


                            -----------------------


                          Dated as of November 1, 2001

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

                                   relating to
               $98,000,000 Facilities Revenue Bonds, Series 2001B
             (Consolidated Edison Company of New York, Inc. Project)




                                TABLE OF CONTENTS

                             PARTICIPATION AGREEMENT
                                                                            PAGE
                                                                            ----

PARTIES  ...................................................................  1
RECITALS ...................................................................  1


                                    ARTICLE I
                    DEFINITIONS; EFFECTIVE DATE AND DURATION
                           OF PARTICIPATION AGREEMENT

Section 1.01. Definitions...................................................  3
Section 1.02. Effective Date of Participation Agreement; Duration of
              Participation Agreement.......................................  3

                                   ARTICLE II
                                 REPRESENTATIONS

Section 2.01. Representations and Warranties by the Authority...............  4
Section 2.02. Representations and Warranties by the Company.................  4

                                   ARTICLE III
                         THE PROJECT; ISSUANCE OF BONDS

Section 3.01. The Project...................................................  6
Section 3.02. Sale of Bonds and Deposit of Proceeds.........................  6
Section 3.03. Disbursements from Project Fund...............................  6
Section 3.04. Adequacy of Project Fund......................................  6
Section 3.05. Ownership and Possession of the Project.......................  6
Section 3.06. Operation, Maintenance and Repair.............................  6
Section 3.07. Investment of Monies in Funds Under the Indenture.............  7

                                   ARTICLE IV
                                NOTE AND PAYMENTS

Section 4.01. Execution and Delivery of Note to Trustee.....................  8
Section 4.02. Payments Payable; Note Payments; Additional Payments..........  8
Section 4.03  Notice to Pay; Medium of Payment; Acceleration................ 10
Section 4.04  Prepayment of Note Payments................................... 10
Section 4.05  Company's Payments as Trust Funds............................. 11
Section 4.06  Absolute Obligation to Make Payments.......................... 11
Section 4.07  Assignment of Authority's Rights.............................. 12
Section 4.08  Actions with Respect to or by or on behalf of the Authority
              under the Indenture........................................... 13
Section 4.09  Agreements of Company relating to Support Facilities.......... 13


                                       -i-



Section 4.10  Compensation of Trustee and Paying Agents..................... 13
Section 4.11  Project not Security for Bonds................................ 13
Section 4.12  Payment of Taxes and Assessments; No Liens or Charges......... 13
Section 4.13  Company to Pay Attorneys' Fees and Disbursements.............. 14
Section 4.14  No Abatement of Administration Fees and Other Charges......... 14

                                    ARTICLE V
                                SPECIAL COVENANTS

Section 5.01  No Warranty as to Suitability of Project...................... 15
Section 5.02  Authority's Right to Inspect Project.......................... 15
Section 5.03  Company Consent to Amendment of Indenture..................... 15
Section 5.04  Tax Covenant.................................................. 15
Section 5.05  Company Agrees to Perform Obligations Imposed by Indenture.... 15
Section 5.06. Authority Agrees to Take Certain Actions at Direction of
              Company....................................................... 15
Section 5.07  Certificates as to Defaults................................... 15
Section 5.08  Limited Obligation of Authority; Indemnification of
              Authority, Registrar and Paying Agent, Auction Agent and
              Trustee....................................................... 16
Section 5.09  Provision of Information...................................... 17
Section 5.10  Ratings....................................................... 17
Section 5.11  Notices....................................................... 17
Section 5.12  Maintenance of Office or Agency............................... 17
Section 5.13  Maintenance of Properties..................................... 18
Section 5.14  Insurance..................................................... 18
Section 5.15  Proper Books of Record and Account............................ 18
Section 5.16  Compliance with Laws.......................................... 18
Section 5.17  Consolidation, Merger or Sale of Assets....................... 18
Section 5.18  Financial Statements of Company............................... 19

                                   ARTICLE VI
                               REDEMPTION OF BONDS

Section 6.01  Redemption of Bonds........................................... 20

                                   ARTICLE VII
                         EVENTS OF DEFAULT AND REMEDIES

Section 7.01  Events of Default Defined..................................... 21
Section 7.02  Remedies on Default........................................... 22
Section 7.03  No Remedy Exclusive........................................... 23
Section 7.04  No Additional Waiver Implied by One Waiver.................... 24


                                      -ii-



                                  ARTICLE VIII
                                  MISCELLANEOUS

Section 8.01  Disposition of Amounts after Payment of Bonds................. 25
Section 8.02  Notices....................................................... 25
Section 8.03  Successors and Assigns........................................ 25
Section 8.04  Amendment of Participation Agreement.......................... 25
Section 8.05  Participation Agreement Supersedes Any Prior Agreements....... 25
Section 8.06  Further Assurances and Corrective Instruments................. 25
Section 8.07  Counterparts.................................................. 26
Section 8.08  Severability.................................................. 26
Section 8.09  Delegation of Duties by Authority............................. 26
Section 8.10  Survival of Representations, Warranties and Covenants......... 26
SECTION 8.11  NEW YORK LAW TO GOVERN........................................ 26

TESTIMONIUM   .............................................................. 27

SIGNATURES AND SEALS       ................................................. 27

ACKNOWLEDGMENTS............................................................. 27

EXHIBIT A     Description of Project Exempt Facilities..................... A-1

EXHIBIT B     Description of Other Project Facilities...................... B-1

EXHIBIT C     Form of Note................................................. C-1


                                      -iii-



                  This PARTICIPATION AGREEMENT, dated as of November 1, 2001,
between NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY, a body
corporate and politic, constituting a public benefit corporation, established
and existing under and by virtue of the laws of the State of New York (the
"Authority") and CONSOLIDATED EDISON COMPANY OF NEW YORK, INC., a corporation
duly organized and existing and qualified to do business as a public utility
under the laws of the State of New York (the "Company"),

                              W I T N E S S E T H :
                              -------------------

                  WHEREAS, pursuant to a special act of the Legislature of the
State of New York (Title 9 of Article 8 of the Public Authorities Law of New
York, as from time to time amended and supplemented, herein called the "Act"),
the Authority has been established, as a body corporate and politic,
constituting a public benefit corporation; and

                  WHEREAS, pursuant to the Act, the Authority is empowered to
contract with any power company to participate in the construction of facilities
for the furnishing of electric energy and the furnishing of gas to the extent
required by the public interest in development, health, recreation, safety,
conservation of natural resources and aesthetics; and

                  WHEREAS, pursuant to the Act, the Authority is also authorized
to extend credit and make loans from bond proceeds to any person for the
construction, acquisition, installation, reconstruction, improvement,
maintenance, equipping, furnishing or leasing of any special energy project (as
defined in the Act) including, but not limited to, facilities for the
distribution of steam or for the reimbursement to any person for costs incurred
in connection with a special energy project completed or not completed at the
time of such credit or loan, which credits or loans may, but need not, be
secured by mortgages, contracts, leases or other instruments, upon such terms
and conditions as the Authority shall determine reasonable in connection with
such credits or loans; and

                  WHEREAS, the Authority is also authorized under the Act to
borrow money and issue its negotiable bonds and notes to provide sufficient
monies for achieving its corporate purposes, including the refunding of its
outstanding obligations; and

                  WHEREAS, the Authority is also authorized under the Act to
enter into any contracts and to execute all instruments necessary or convenient
for the exercise of its corporate powers and the fulfillment of its corporate
purposes; and

                  WHEREAS, the Company is a public utility corporation doing
business in the State of New York and provides electric energy and gas service
in The City of New York and the County of Westchester, New York and provides
steam service in the Borough of Manhattan; and

                  WHEREAS, the Company has requested that the Authority issue
bonds for the purpose of refunding the Authority's 6 3/8% Facilities Revenue
Bonds, Series 1992 B (Consolidated Edison Company of New York, Inc. Project), in
the aggregate principal amount of $100,000,000 (the "Prior Bonds") issued to
finance the acquisition, construction and installation of certain facilities for
the furnishing of electric energy within the Company's service area; and


                  WHEREAS, the Authority proposes to issue a series of such
bonds in the aggregate principal amount of $98,000,000 Facilities Revenue Bonds,
Series 2001B (Consolidated Edison Company of New York, Inc. Project) (the
"Bonds"), in order to refund a portion of the Prior Bonds, such bonds to be
issued under and secured by a Trust Indenture dated as of November 1, 2001,
between the Authority and The Bank of New York, as Trustee (the "Indenture");
and

                  WHEREAS, the Authority, by Resolution No. 999, adopted
September 24, 2001, has determined to issue the Bonds, in an aggregate principal
amount not to exceed $100,000,000, for the purpose of refunding the Prior Bonds,
all such Bonds to be issued under and secured by the Indenture;

                  NOW, THEREFORE, for and in consideration of the premises and
of the mutual covenants and agreements hereinafter set forth, it is hereby
agreed by and between the parties as follows:



                                        2



                                    ARTICLE I

                    DEFINITIONS; EFFECTIVE DATE AND DURATION
                           OF PARTICIPATION AGREEMENT

                  Section 1.01. DEFINITIONS. The terms used in this
Participation Agreement which are defined in the Indenture shall have the
meanings, respectively, herein which such terms are given in the Indenture.

                  Section 1.02. EFFECTIVE DATE OF PARTICIPATION AGREEMENT;
DURATION OF PARTICIPATION AGREEMENT. This Participation Agreement shall become
effective upon its execution and delivery, and shall continue in full force and
effect until the principal of and premium, if any, and interest on the Note and
Bonds have been fully paid (or provision for their payment has been made in
accordance with the provisions of the Indenture), and all sums to which the
Authority or the Trustee are entitled hereunder have been fully paid.


                                        3



                                   ARTICLE II

                                 REPRESENTATIONS

                  Section 2.01. REPRESENTATIONS AND WARRANTIES BY THE AUTHORITY.
The Authority represents and warrants as follows:

                  (a) The Authority is a body corporate and politic,
         constituting a public benefit corporation, established and existing
         under the laws of the State of New York;

                  (b) The Authority has full power and authority to execute and
         deliver the Bonds, this Participation Agreement, the Tax Regulatory
         Agreement, the Indenture, the Bond Purchase Trust Agreement and to
         consummate the transactions contemplated hereby and thereby and perform
         its obligations hereunder and thereunder;

                  (c) The Authority is not in violation of or in default under
         any of the provisions of the laws or the Constitution of the State of
         New York which would affect its existence or its powers referred to in
         the preceding paragraph (b);

                  (d) The Authority has determined that its participation in the
         Project and the refunding of the Prior Bonds, as contemplated by this
         Participation Agreement, is in the public interest;

                  (e) The Authority has duly authorized the execution and
         delivery of this Participation Agreement, the Indenture, the Tax
         Regulatory Agreement and the Bond Purchase Trust Agreement and the
         execution and delivery of the other documents incidental to this
         transaction and all necessary authorizations therefor or in connection
         with the performance by the Authority of its obligations hereunder or
         thereunder have been obtained and are in full force and effect; and

                  (f) The execution and delivery by the Authority of the Bonds,
         this Participation Agreement, the Tax Regulatory Agreement, the
         Indenture, the Bond Purchase Trust Agreement and the other documents
         incidental to this transaction and the consummation of the transactions
         herein or therein contemplated will not violate or cause a default
         under any indenture, mortgage, loan agreement or other contract or
         instrument to which the Authority is a party or by which it is bound,
         or any judgment, decree, order, statute, rule or regulation applicable
         to the Authority.

                  Section 2.02. REPRESENTATIONS AND WARRANTIES BY THE COMPANY.
The Company represents and warrants as follows:

                  (a) The Company is a corporation duly incorporated and in good
         standing under the laws of the State of New York, is duly qualified and
         authorized to transact business as a public utility in the State of New
         York and is not in violation of any provision of its Certificate of
         Incorporation or its By-Laws, has power to enter into, execute and
         deliver this Participation Agreement, the Tax Regulatory Agreement and
         the Note and by proper corporate


                                        4






         action has duly authorized the execution and delivery of this
         Participation Agreement, the Tax Regulatory Agreement and the Note;

                  (b) The execution and delivery by the Company of this
         Participation Agreement, the Tax Regulatory Agreement and the Note and
         the consummation of the transactions herein and therein contemplated
         will not conflict with or constitute a breach of or a default under the
         Company's Certificate of Incorporation or By-Laws or a default in any
         material respect under any indenture, mortgage, loan agreement or other
         contract or instrument to which the Company is a party or by which it
         is bound, or any judgment, decree, order, statute, rule or regulation
         applicable to the Company;

                  (c) This Participation Agreement, the Tax Regulatory Agreement
         and the Note constitute valid and legally binding obligations of the
         Company, enforceable against the Company in accordance with their
         respective terms, except as enforcement may be limited by applicable
         bankruptcy, insolvency, moratorium, reorganization or other laws
         relating to or affecting the enforcement of creditors' rights or
         contractual obligations generally or principles of equity or judicial
         discretion;

                  (d) The execution and delivery by the Company of this
         Participation Agreement and the Note in the manner and for the purposes
         herein set forth have been duly authorized by order of the Public
         Service Commission of the State of New York; and

                  (e) No additional authorizations for or approvals of the
         execution and delivery by the Company of this Participation Agreement,
         the Tax Regulatory Agreement and the Note need be obtained by the
         Company or if any such authorization or approval is necessary it has
         been obtained.


                                        5



                                   ARTICLE III

                         THE PROJECT; ISSUANCE OF BONDS

                  Section 3.01. THE PROJECT. Construction of the Project is
complete. The Project is the property of the Company. In order to effectuate the
purposes of this Participation Agreement, the Company, in its own name, will do
or cause to be done all things requisite or proper for the fulfillment of the
obligations of the Company under this Participation Agreement.

                  Section 3.02. SALE OF BONDS AND DEPOSIT OF PROCEEDS. In order
to provide funds for the refunding of the Prior Bonds, the Authority, on the
date specified in the Bond Purchase Agreement or as soon thereafter as
practicable, and concurrently with the issuance and delivery to the Trustee of
the Note as provided in Section 4.01 hereof, will issue, sell and deliver the
Bonds, all pursuant to and as provided in the Bond Purchase Agreement and
subject to the conditions set forth in Section 2.06 of the Indenture, and will
deposit the proceeds of such sale including the accrued interest, if any, paid
by the initial purchasers of the Bonds in the Project Fund.

                  Section 3.03. DISBURSEMENTS FROM PROJECT FUND. 1. The
Authority has in the Indenture authorized and directed the Trustee to make
payments from the Project Fund in accordance with Section 8.01 of the Indenture,
to pay the redemption price of the Prior Bonds and costs related thereto upon
receipt from time to time of letters signed by an Authorized Company
Representative in accordance with Section 8.01 of the Indenture. Concurrently
with the delivery by the Company of each such letter to the Trustee, the Company
will deliver to the Authority a copy thereof and any attachments thereto. The
Company will indemnify and save harmless the Authority and the Trustee from any
liability incurred in connection with any letter so delivered and any payments
made in reliance thereon.

                  2. All monies remaining in the Project Fund after the
redemption of the Prior Bonds and payment of all costs related thereto shall, at
the written direction of an Authorized Company Representative, be paid to the
Company.

                  Section 3.04. ADEQUACY OF PROJECT FUND. The Company
acknowledges that the monies in the Project Fund are not sufficient to pay the
redemption price of the Prior Bonds and costs related thereto in full. The
Company shall pay that portion of the redemption price of the Prior Bonds and
costs related thereto in excess of the monies available therefor in the Project
Fund with its own funds.

                  Section 3.05. OWNERSHIP AND POSSESSION OF THE PROJECT.
Issuance of the Bonds will not vest in the owners thereof, the Trustee, the
Authority or any other person, ownership, or the right to possession, of the
Project. The Company is entitled to sole and exclusive ownership and possession
of the Project.

                  Section 3.06. OPERATION, MAINTENANCE AND REPAIR. The Company
agrees to proceed in good faith to maintain the availability of the Project for
use as an authorized project under the Act. Notwithstanding the foregoing, the
Authority and the Company recognize that the Project will constitute integrated
portions of electric distribution facilities of the Company and that it is not


                                        6


feasible to administer the Project separately from such facilities. The Company
shall operate the Project (with such changes, improvements or additions as the
Company may deem desirable) as part of such facilities for the joint useful
lives of the Project and such facilities and shall maintain and repair the
Project in conformity with the Company's normal maintenance and repair programs
for such facilities; provided that the Company shall have no obligation to
operate, maintain or repair any element or item of the Project the operation,
maintenance or repair of which becomes uneconomic to the Company because of
damage or destruction or obsolescence (including physical, functional and
economic obsolescence), or change in government standards and regulations, or
the termination by the Company of the operation of the facilities to which the
element or item of the Project is an adjunct.

                  Section 3.07. INVESTMENT OF MONIES IN FUNDS UNDER THE
INDENTURE. Any monies held as a part of any fund created under the Indenture
shall, at the direction of an Authorized Company Representative, be invested or
reinvested by the Trustee as provided in Article IX of the Indenture.


                                        7



                                   ARTICLE IV

                                NOTE AND PAYMENTS

                  Section 4.01. EXECUTION AND DELIVERY OF NOTE TO TRUSTEE.
Concurrently with the authentication by the Trustee and delivery by the
Authority of the Bonds and in order to evidence the obligation of the Company to
the Authority to repay the Bonds, the Authority hereby directs the Company, and
the Company hereby agrees, to execute and deliver to the Trustee its Note, duly
and validly executed and delivered, relating to the Bonds. The Note shall be in
substantially the form attached hereto as Exhibit A with only such changes to
such form as may be approved by the Authority. Thereafter, the Company shall be
obligated to make the Note Payments, constituting payments of principal of, and
premium, if any, and interest on the Note, and the Additional Payments required
by this Participation Agreement. Such obligations shall terminate on the date
when the Note has been paid in full. The Note may be prepaid in accordance with
Section 4.04 hereof. Upon payment or provision for payment in full of all
amounts payable or to become payable under the Note, the Trustee shall cancel
the Note and deliver the same to the Company. Provision for payment in full of
all amounts payable or to become payable under the Note shall be deemed to have
occurred upon receipt by the Trustee of written notice from the Authority
acknowledging that the Company has satisfied its obligations to the Authority
under the Note. The Authority agrees to deliver such written notice to the
Trustee promptly when such provision for payment in full has been made.

                  Section 4.02. PAYMENTS PAYABLE; NOTE PAYMENTS; ADDITIONAL
PAYMENTS. (a) The Company covenants and agrees to pay the Payments as and when
the same are due and payable in accordance with the Note and this Section 4.02.
The Company shall provide the Trustee with a written allocation of amounts paid
under this Section 4.02 among the various purposes set forth in this Section
4.02.

                  (b) The Note Payments shall be in an aggregate amount
sufficient for, together with other amounts held by the Trustee and available
under the Indenture for application to, the payment in full of the Bonds
consisting of (i) the total interest becoming due and payable on the Bonds to
the date of payment thereof, and (ii) the total principal amount plus premium,
if any, of the Bonds.

                  (c) The Company shall make Note Payments as set forth in
Section 4.02(b) at or prior to the time the corresponding payment is due on the
Bonds. Each installment of Note Payments paid by the Company shall be increased
as may be necessary to make up any previous deficiency of any of the required
payments and to make up any deficiency in the Bond Fund.

                  (d) In addition, the Company shall pay to the Registrar and
Paying Agent for deposit in the Bond Purchase Fund and credit to the Company
Account therein an amount sufficient to provide for the payment of the Purchase
Price (as defined in the Bond Purchase Trust Agreement) of any Bond tendered for
purchase pursuant to the Bond Purchase Trust Agreement to the extent that
sufficient moneys are not available for the payment of such Purchase Price from
the other sources described therein.


                                        8



                  (e) The Company covenants that it shall deposit, or cause to
be deposited with the Trustee, sufficient funds to assure that no default shall
occur in the payment of the principal of or premium, if any, or the interest on,
or the Purchase Price of, the Bonds as and when due, and that no unreasonable
delay shall occur in the payment of the costs and expenses payable from
Additional Payments.

                  (f) The Company further covenants and agrees to pay, when due
and payable, as Additional Payments, certain additional amounts and costs and
expenses. Each installment of Additional Payments, if any, shall be equal to the
sum of the amounts set forth in clauses (i) to (iv), inclusive, below, and shall
be paid directly to the persons entitled to such payments. "Additional Payments"
is hereby defined to be the aggregate of the installments of the following:

                  (i) the reasonable fees and expenses payable to the Trustee,
         any Indexing Agent, the Registrar and Paying Agent, any issuer of a
         Support Facility (and in the case of Auction Rate Bonds, the Auction
         Agent under the Auction Agency Agreement, any Broker-Dealers under the
         respective Broker-Dealer Agreements, and any Remarketing Agent under
         any Remarketing Agreement), and of any counsel or agents of any of the
         foregoing;

                  (ii) all costs incurred in connection with the transfer,
         exchange, purchase or redemption of Bonds not otherwise paid by the
         holders thereof, including all charges of the Authority (and in the
         case of Auction Rate Bonds, the Auction Agent, any Broker-Dealer and
         any Remarketing Agent), the Registrar and Paying Agent and the Trustee
         with respect thereto, to the extent monies are not otherwise available
         therefor;

                  (iii) the reasonable fees and other costs incurred for
         services of such attorneys and accountants as are employed to make
         examinations, provide services, render opinions and prepare reports
         required under this Participation Agreement, the Tax Regulatory
         Agreement, the Bond Purchase Trust Agreement, and the Indenture; and

                  (iv) initial administration fees in the amount of $245,000 on
         the date of authentication and delivery of the Bonds to the initial
         purchasers thereof, an annual fee equal to $130 per million dollar
         principal amount of the Bonds on November 1, 2002 and on November 1 of
         each year thereafter, based upon the amount of Bonds Outstanding as of
         such November 1 and for purposes of the calculation of such fee,
         rounding up to the nearest whole million dollars, and all reasonable
         expenses, disbursements, advances, taxes, assessments or impositions,
         not otherwise paid under this Participation Agreement or the Indenture,
         incurred by or imposed upon the Authority in connection with its
         administration and enforcement of, and compliance with, this
         Participation Agreement, the Auction Agency Agreement, the Bond
         Purchase Trust Agreement, any Remarketing Agreement and the Indenture,
         which amounts the Company is obligated to pay, including, but not
         limited to, reasonable attorneys' fees. In addition, the Company shall
         deliver to the Authority a check payable to the State of New York with
         respect to a bond issuance charge applicable to the Bonds pursuant to
         Section 2976 of the Public Authorities Law of the State of New York in
         the amount specified by such section on the date of authentication and
         delivery of the Bonds.


                                        9



                  (g) In the event that the Company shall fail to make any
Payment as required by Sections 4.02(a) - (e) hereof, the Payment so in default
shall continue as an obligation of the Company until the amount in default shall
have been fully paid, and the Company agrees to pay the same with interest
thereon, which interest shall also constitute an obligation of the Company at
the maximum rate of interest payable on the Bonds pursuant to the Indenture, to
the extent permitted by law, from the date of default until paid; provided, that
the Company agrees in the event the Company shall fail to make any Payment
during an Auction Rate Period, the Payment so in default shall continue as an
obligation of the Company until the amount in default shall have been fully
paid, and the Company agrees to pay the same with interest thereon, which
interest shall also constitute an obligation of the Company at the Overdue Rate,
to the extent permitted by law, from the date of default until paid. Nothing in
this Section 4.02 shall require the Company to pay costs and expenses mentioned
in clause (f)(iii) above so long as the validity or the reasonableness thereof
shall be contested in good faith unless the Trustee shall receive an opinion of
independent counsel that such contest jeopardizes the respective interests of
the Authority and the Trustee in this Participation Agreement, the Auction
Agency Agreement, the Bond Purchase Trust Agreement, the Indenture or any
Remarketing Agreement, in which event the Company shall pay such costs and
expenses (without prejudice to any rights of the Company to recover such costs
and expenses if not valid or reasonable) to the end that the respective
interests of the Authority and the Trustee, in the opinion of independent
counsel, are not jeopardized.

                  Section 4.03 NOTICE TO PAY; MEDIUM OF PAYMENT; ACCELERATION.
Failure to receive any prior notice of the due date of any Payment will not
relieve the Company of its obligation to pay such Payment when it is due and
payable. The Company covenants and agrees that it will pay or cause to be paid
when due and payable hereunder the Payments, and every installment thereof,
without notice or demand therefor and without abatement, reduction or set-off of
any kind or nature whatsoever, in lawful money of the United States of America.

                  If pursuant to the provisions of Section 12.03 of the
Indenture, the Bonds are accelerated or shall otherwise be declared due and
payable immediately, then the Company shall forthwith pay or cause to be paid to
the Trustee an amount sufficient with all other funds available therefor, to pay
the Bonds in full and, secondly an amount which shall be sufficient, with all
other funds available therefor, to pay all other obligations of the Authority or
the Company incurred or to be incurred under the Indenture, this Participation
Agreement, the Auction Agency Agreement, the Bond Purchase Trust Agreement or
any Remarketing Agreement.

                  Section 4.04 PREPAYMENT OF NOTE PAYMENTS. The Note may be
prepaid, in whole or in part, at the option of the Company in connection with an
optional redemption of the Bonds pursuant to Article V of the Indenture and
shall be prepaid, in whole or in part, in connection with any mandatory
redemption of the Bonds pursuant to Article V of the Indenture other than a
mandatory redemption pursuant to Section 5.07 of the Indenture. Prepayment of
the Note pursuant to the preceding sentence shall be with or without premium, as
required to provide sufficient funds to redeem the Bonds being redeemed pursuant
to Article V of the Indenture. The Note also may be prepaid in whole or in part
at any time, without premium, at the option of the Company subsequent to the
redemption of the Bonds with moneys furnished by the State of New York pursuant
to Section 5.07 of the Indenture.


                                       10



                  The Company shall give notice to the Trustee and the Authority
of any intention to prepay the Note in whole or in part and of the principal
amount to be prepaid not more than sixty (60) nor less than thirty-five (35)
days prior to the date on which such prepayment is to be made on the Note. Such
optional prepayment may be made not later than one (1) Business Day prior to the
date of prepayment of the Bonds.

                   The Company may also elect to provide for the defeasance of
the Bonds in accordance with Article XV of the Indenture and upon the defeasance
of the Bonds, the Note will be deemed paid, in whole or in applicable part.

                  Section 4.05 COMPANY'S PAYMENTS AS TRUST FUNDS. All Note
Payments and Additional Payments required to be made by the Company under this
Participation Agreement and the Note to the Authority, the Trustee or the
Registrar and Paying Agent which under the Indenture are required to be applied
in payment of or as security for the Bonds, shall be and constitute and are
hereby declared to be trust funds, whether held by the Authority, the Trustee,
the Registrar and Paying Agent, or any bank or trust company, designated for
such purpose and shall continue to be impressed with a trust until such monies
are applied in the manner provided in the Indenture.

                  Section 4.06 ABSOLUTE OBLIGATION TO MAKE PAYMENTS. The
obligation of the Company to pay the Note Payments and the Additional Payments,
as required by this Participation Agreement and the Note, and to satisfy any
other financial liabilities incurred hereunder and thereunder shall be an
absolute, direct, general obligation, and shall be unconditional and shall not
be abated, rebated, set off, reduced, abrogated, waived, diminished or otherwise
modified in any manner or to any extent whatsoever (other than for prior
payment), regardless of any rights of set- off, recoupment or counterclaim that
the Company might otherwise have against the Authority or the Trustee or any
other party or parties and regardless of any contingency, act of God, event or
cause whatsoever and notwithstanding any circumstance or occurrence that may
arise or take place including, but without limiting the generality of the
foregoing, the following:

         (a)      any damage to or destruction of any part or all of the
                  Project;

         (b)      the taking or damaging of any part or all of the Project by
                  any public authority or agency in the exercise of the power of
                  eminent domain or otherwise;

         (c)      any assignment, novation, merger, consolidation, transfer of
                  assets, subleasing or other similar transaction of or
                  affecting the Company whether with or without the approval of
                  the Trustee, except as otherwise expressly provided in this
                  Participation Agreement;

         (d)      with respect solely to the obligation of the Company to pay
                  the Additional Payments, the termination of this Agreement and
                  payment or provision for payment in full of the amount due
                  under the Note pursuant to the provisions hereof;

         (e)      any failure of any party to perform or observe any agreement
                  or covenant, whether express or implied, or any duty,
                  liability or obligation arising out of or in connection with
                  this Participation Agreement, the Note, the Auction Agency
                  Agreement, any


                                       11



                  Broker-Dealer Agreement, any Remarketing Agreement, the Bond
                  Purchase Trust Agreement or the Indenture;

         (f)      any change or delay in the time of availability of the Project
                  or any part thereof for use of the Project or any part
                  thereof;

         (g)      any acts or circumstances that may constitute an eviction or
                  constructive eviction from any part of the Project;

         (h)      failure of consideration, failure of title to any part of the
                  Project or commercial frustration; and

         (i)      any change in the tax or other laws of the United States or of
                  any state or other governmental authority;

provided, however, that the foregoing shall not be deemed to be a waiver of any
right of recourse the Company may have against the Authority, the holder of any
Bond or others, including but not limited to, the rights, causes of action or
claims which may arise out of the breach of their respective obligations or the
inaccuracy of their respective warranties, provided, however, that the Company
may pursue any such right, claim or cause of action only by a separate
proceeding or action and not by counterclaim or set-off hereunder and the
bringing of such separate proceeding or action shall not affect the Company's
absolute, irrevocable and unconditional obligation to make payments pursuant to
this Section 4.06.

                  Section 4.07 ASSIGNMENT OF AUTHORITY'S RIGHTS. As security for
the payment of the Bonds, the Authority will assign to the Trustee the
Participation Agreement and the Note and all of the Authority's rights, remedies
and interest under this Participation Agreement and the Note, including the
right to receive payments under the Participation Agreement and the Note (except
the Authority's rights with respect to (a) administrative compensation,
attorney's fees and indemnification, (b) the receipt of notices, opinions,
reports, copies of instruments and other items of a similar nature required to
be delivered to the Authority under the Participation Agreement, (c) granting
approvals and consents and making determinations when required under the
Participation Agreement, (d) making requests for information and inspections in
accordance with the Participation Agreement, (e) Article III and Sections
4.02(f), 4.14 and 5.08 of the Participation Agreement and, insofar as the
obligations of the Company under Section 4.12 relate to taxes and assessments
imposed upon the Authority and not the Trustee, Section 4.12 thereof and (f) the
right to amend the Participation Agreement) and hereby directs the Company to
make said payments directly to the Trustee or in the case of the Purchase Price
to the Registrar and Paying Agent. The Company herewith assents to such
assignment and will make payments under this Participation Agreement and the
Note (except payments made pursuant to Sections 4.02(f) and 5.08 hereof which
shall be made directly to the Authority) directly to the Trustee (or in the case
of the Purchase Price, to the Registrar and Paying Agent) without defense or
set-off by reason of any dispute between any of the Company, the Trustee or
Registrar and Paying Agent. Except as provided in the Indenture, the Authority
will not sell, assign, transfer, convey or otherwise dispose of its interest in
this Participation Agreement during the term of this Participation Agreement.


                                       12



                  Section 4.08 ACTIONS WITH RESPECT TO OR BY OR ON BEHALF OF THE
AUTHORITY UNDER THE INDENTURE. The Authority hereby grants the right to the
Company to request the Authority to take certain actions under the Indenture
and/or to perform or undertake certain actions as specified under the Indenture.
The Company agrees to request the Authority to take action or undertake or
perform any action solely in compliance with or after complying with the
requirements and provisions of the Indenture. The Company further agrees to
consent to any removal and appointment of the Auction Agent by the Authority
pursuant to the second paragraph of Section 11.21 of the Indenture.

                  Section 4.09 AGREEMENTS OF COMPANY RELATING TO SUPPORT
FACILITIES. The Company agrees not to request that the interest rate mode
applicable to the Bonds be adjusted to an Adjustable Rate other than an Auction
Rate unless there shall be in effect, prior to the applicable Change in the
Interest Rate Mode, one or more Support Facilities which (i) meet the
requirements of Article VI of the Indenture and (ii) permit the Bonds to be
rated at least "A" by S&P or "A" by Moody's or its equivalent by any nationally
recognized rating agency.

                  The Company further agrees that it will maintain a Liquidity
Facility issued by a financial institution rated not less than "A" by at least
one nationally recognized rating agency in effect with respect to the Bonds at
all times, except with respect to Bonds bearing an Auction Rate or a Fixed Rate.

                  Section 4.10 COMPENSATION OF TRUSTEE AND PAYING AGENTS. The
Company agrees:

                  (1) to pay to the Trustee from time to time such compensation
         for all services rendered by it in any capacity under the Indenture as
         shall from time to time be agreed in writing (which compensation shall
         not be limited by any provision of law in regard to the compensation of
         a trustee of an express trust);

                  (2) except as otherwise expressly provided herein, to
         reimburse the Trustee upon its request for all reasonable expenses,
         disbursements and advances incurred by the Trustee under the Indenture
         (including the reasonable compensation and the expenses and
         disbursements of its agents and counsel), except any such expense,
         disbursement or advance as may be attributable to its negligence or bad
         faith; and

                  (3) to pay to the Registrar and Paying Agent, if other than
         the Trustee, reasonable compensation for all services rendered by it as
         Registrar and Paying Agent under the Indenture and reimburse it for its
         reasonable expenses incurred under the Indenture, except any such
         expense as may be attributable to its negligence or bad faith.

                  Section 4.11 PROJECT NOT SECURITY FOR BONDS. It is expressly
recognized by the parties that the Project will not constitute any part of the
security for the Bonds. The principal security for the Bonds shall be the Note
and the absolute, irrevocable and unconditional obligation of the Company to
make the Note Payments.

                  Section 4.12 PAYMENT OF TAXES AND ASSESSMENTS; NO LIENS OR
CHARGES. The Company will (a) pay, when the same shall become due and
payable, all taxes and assessments, including income, profits, property or
excise taxes, if any, or other municipal or governmental

                                       13



charges, imposed, levied or assessed by the Federal, state or any municipal
government upon the Authority or the Trustee in respect of any payments
(other than payments made pursuant to Section 4.10) made or to be made
pursuant to this Participation Agreement or the Notes and (b) pay or cause to
be discharged, within sixty (60) days after the same shall accrue, any lien
or charge upon any such payment (except as aforesaid) made or to be made
under this Participation Agreement; provided that the Company shall not be
required to pay any such tax, assessment or charge so long as (i) the Company
at its expense contests by appropriate legal proceedings conducted in good
faith and with due diligence the amount, validity or application of any such
tax, assessment or charge, (ii) such proceedings shall have the effect of
suspending the collection thereof from the Authority and the Trustee, and
(iii) the Company shall indemnify and hold the Authority and the Trustee
harmless from any losses, costs, charges, expenses (including reasonable
attorneys' fees and disbursements), judgments and liabilities arising in
respect of such tax, assessment or charge and the nonpayment thereof.

                  Section 4.13 COMPANY TO PAY ATTORNEYS' FEES AND DISBURSEMENTS.
If the Company shall default under any of the provisions of this Participation
Agreement and the Authority or the Trustee or both shall employ attorneys or
incur other expenses for the collection of payments due under this Participation
Agreement or the Note or for the enforcement of performance or observance of any
obligation or agreement on the part of the Company contained in this
Participation Agreement, the Company will on demand therefor reimburse the
reasonable fees of such attorneys and such other reasonable disbursements so
incurred.

                  Section 4.14 NO ABATEMENT OF ADMINISTRATION FEES AND OTHER
CHARGES. It is understood and agreed that so long as any Bonds are outstanding
under the Indenture, the Administration Fees and other charges payable to the
Authority pursuant to this Participation Agreement or the Note shall continue to
be payable at the times and in the amount herein specified, whether or not the
Project, or any portion thereof, shall have been destroyed by fire or other
casualty, or title thereto or the use thereof shall have been taken by the
exercise of the power of eminent domain, and that there shall be no abatement of
any such Administration Fees and other charges by reason thereof.


                                       14



                                    ARTICLE V

                                SPECIAL COVENANTS


                  Section 5.01 NO WARRANTY AS TO SUITABILITY OF PROJECT. The
Authority makes no warranty, either express or implied, with respect to actual
or designed capacity of the Project, as to the suitability of the Project for
the purposes specified in this Participation Agreement, as to the condition of
the Project, or that the Project will be suitable for the Company's purposes or
needs.

                  Section 5.02 AUTHORITY'S RIGHT TO INSPECT PROJECT. The
Authority shall have the right at all reasonable times to examine and inspect
the Project.

                  Section 5.03 COMPANY CONSENT TO AMENDMENT OF INDENTURE . The
Authority and the Trustee shall not enter into any indenture supplemental to or
amendatory of the Indenture which affects the rights or obligations of the
Company without the prior consent of the Company as evidenced by a certificate
in writing signed by an Authorized Company Representative.

                  Section 5.04 TAX COVENANT. Notwithstanding any other provision
hereof, the Company covenants and agrees that it will not take or authorize any
action or permit any action within its reasonable control to be taken, or fail
to take any action within its reasonable control, with respect to the Project,
or the proceeds of any series of the Bonds, including any amounts treated as
proceeds of the Bonds for any purpose of Section 103 of the Code, which will
result in the loss of the exclusion of interest on any series of Bonds from
gross income for Federal income tax purposes under Section 103 of the Code
(except for any Bond during any period while any such Bond is held by a person
referred to in Section 147(a) of the Code). This provision shall control in case
of conflict or ambiguity with any other provision of this Participation
Agreement. In furtherance of such covenant and agreement as it relates to the
Bonds, the Authority and the Company have entered into the Tax Regulatory
Agreement and the Company hereby covenants and agrees to comply with the
provisions thereof.

                  Section 5.05 COMPANY AGREES TO PERFORM OBLIGATIONS IMPOSED BY
INDENTURE. The Company agrees to perform such obligations as may be required of
it by the provisions of the Indenture.

                  Section 5.06. AUTHORITY AGREES TO TAKE CERTAIN ACTIONS AT
DIRECTION OF COMPANY. The Authority agrees to exercise any option to redeem the
Bonds pursuant to Section 5.01 of the Indenture at the direction of the Company.
The Authority agrees to exercise its rights under Article XV of the Indenture
upon the request of the Company.

                  Section 5.07 CERTIFICATES AS TO DEFAULTS. The Company shall
file with the Trustee, on or before November 1 of each year, commencing on
November 1, 2002, a certificate signed by an Authorized Company Representative
stating that, to the best of his or her knowledge, information and belief, the
Company has kept, observed, performed and fulfilled each and every one of its
covenants and obligations contained in this Participation Agreement, the Tax
Regulatory Agreement and in the Note and, to the best of his knowledge,
information and belief, there does not exist at the


                                       15



date of such certificate any Event of Default hereunder or other event which,
with notice or the lapse of time specified in Section 7.01 hereof, or both,
would become an Event of Default or, if any such Event of Default or other event
shall so exist, specifying the same and the nature and status thereof.

                  Section 5.08 LIMITED OBLIGATION OF AUTHORITY; INDEMNIFICATION
OF AUTHORITY, REGISTRAR AND PAYING AGENT, AUCTION AGENT AND TRUSTEE. The Bonds
shall not be general obligations of the Authority, and shall not constitute an
indebtedness of or a charge against the general credit of the Authority or give
rise to any pecuniary liability of the Authority. The liability of the Authority
under the Bonds shall be enforceable only to the extent provided in the
Indenture, and the Bonds shall be payable solely from the Note Payments and any
other funds held by the Trustee under the Indenture and available for such
payment. The Bonds shall not be a debt of the State of New York, and the State
of New York shall not be liable thereon.

                  No member, officer, agent or employee of the Authority shall
be personally liable for the payment of the Bonds or any money or damages
hereunder or related hereto. Notwithstanding the fact that it is the intention
of the parties hereto that the Authority and all officers and employees thereof
shall not incur pecuniary liability by reason of the terms of this Participation
Agreement, or the undertakings required of the Authority hereunder or any
officer or employee thereof, by reason of the issuance of the Bonds, the
execution and delivery of any document, including, but not limited to, the
Indenture, the Tax Regulatory Agreement, this Participation Agreement, the Note,
the Auction Agency Agreement, any Remarketing Agreement, the Bond Purchase Trust
Agreement, any Broker-Dealer Agreement or any final official statement, or by
reason of the performance or non-performance of any act required of it by this
Participation Agreement or any such other agreement, or the performance or
non-performance of any act requested of it by the Company, including all claims,
liabilities or losses arising in connection with the violation of any statutes
or regulations pertaining to the foregoing; nevertheless, if the Authority
(including any person at any time serving as an officer or employee of the
Authority) should incur any such pecuniary liability, then in such event the
Company shall indemnify and hold harmless the Authority (including any person at
any time serving as an officer or employee of the Authority) against all claims
by or on behalf of any person, firm or corporation or other legal entity,
arising out of the same, and all costs and expenses incurred in connection with
any such claim or in connection with any action or proceeding brought thereon.

                  The Company releases the Authority (including any person at
any time serving as an officer or employee of the Authority), the Registrar and
Paying Agent, the Auction Agent and the Trustee (including any person at any
time serving as an officer or employee of the Trustee, the Registrar and Paying
Agent or the Auction Agent) from, agrees that the Authority (including any
person at any time serving as an officer or employee of the Authority), the
Registrar and Paying Agent, the Auction Agent and the Trustee (including any
person at any time serving as an officer or employee of the Trustee, the
Registrar and Paying Agent or the Auction Agent) shall not be liable for, and
agrees to indemnify and hold the Authority (including any person at any time
serving as an officer or employee of the Authority) and the Trustee, the Auction
Agent, the Registrar and Paying Agent (including any person at any time serving
as an officer or employee of the Trustee, Auction Agent or the Registrar and
Paying Agent) harmless, to the fullest extent permitted by law from any losses,
costs, charges, expenses (including reasonable attorneys' and agents' fees and
expenses), by reason of (i) any liability for any loss or damage to property or
any injury to, or death of, any person that may be occasioned by any cause
whatsoever arising out of the construction or operation of the Project, or


                                       16



(ii) any action, suit or proceeding instituted or threatened in connection with
the transactions contemplated by this Participation Agreement, the Indenture and
the Note, provided, however, that the Company shall not be liable as the result
of the negligence of the Authority, the Trustee, the Registrar and Paying Agent,
any Remarketing Agent or the Auction Agent or bad faith or wilful misconduct of
the Authority, the Trustee, the Registrar and Paying Agent, any Remarketing
Agent or the Auction Agent (including any person at any time serving as an
officer or employee of the Authority or the Trustee, the Registrar and Paying
Agent, any Remarketing Agent or the Auction Agent). If any such claim is
asserted, the Authority, any individual indemnified herein, the Trustee, the
Registrar and Paying Agent, any Remarketing Agent or the Auction Agent, as the
case may be, shall give prompt notice to the Company and permit the Company to
participate in the defense thereof at its own expense. The Company will
reimburse the indemnified parties for any legal or other expenses reasonably
incurred by the indemnified parties in investigating or defending against any
such claim, provided that the Company shall not be required to reimburse any of
the indemnified parties for fees and expenses of counsel other than one counsel
selected by the Trustee in its sole discretion for all indemnified parties in
which proceedings are brought or threatened to be brought unless and to the
extent there are actual or potential conflicts of interest between or among
indemnified parties or defenses available to some indemnified parties that are
not available to other indemnified parties in which case, the Company will
reimburse the indemnified parties for any legal or other expenses reasonably
incurred by the indemnified parties in investigating or defending against any
such claim by each counsel of each of the indemnified parties affected. The
obligation of the parties hereto under this Section shall survive the
termination of this Participation Agreement and the Indenture.

                  Section 5.09 PROVISION OF INFORMATION. The Company shall
provide the Trustee with the forms of any notices required to be sent to holders
of Bonds in connection with any redemption of Bonds, a change in the Auction
Period, the Interest Period or Change in the Interest Rate Mode pursuant to
Articles III, IV and V of the Indenture or the establishment of a Fixed Rate on
the Bonds pursuant to Section 4.02 of the Indenture.

                  Section 5.10. RATINGS. During any Auction Rate Period, the
Company shall take all reasonable action necessary to enable at least two
nationally recognized, statistical rating organizations (as that term is used in
the rules and regulations of the Commission under the Exchange Act) to provide
ratings for the Auction Rate Bonds.

                  Section 5.11 NOTICES. During any Auction Rate Period, the
Company on behalf of the Authority shall provide the Trustee and, so long as no
Event of Default has occurred and is continuing and the ownership of any Auction
Rate Bonds is maintained in book-entry form by the Securities Depository, the
Auction Agent, with notice of any change in (a) the Statutory Corporate Tax Rate
under the Indenture, (b) the Applicable Percentage, or (c) the maximum rate
permitted by law on the Bonds. There is currently no such maximum rate.

                  Section 5.12 MAINTENANCE OF OFFICE OR AGENCY. So long as the
Note remains outstanding and unpaid, the Company will at all times keep, in New
York, New York, or another location in the State of New York, an office or
agency where notices and demands with respect to the Note may be served, and
will, from time to time, give written notice to the Trustee of the location of


                                       17



such office or agency; and, in case the Company shall fail so to do, notices may
be served and demands may be made at the principal office of the Trustee.

                  Section 5.13 MAINTENANCE OF PROPERTIES. So long as the Note
remains outstanding and unpaid, the Company will at all times make or cause to
be made such expenditures for repairs, maintenance and renewals, or otherwise,
as shall be necessary to maintain its properties in good repair, working order
and condition as an operating system or systems to the extent necessary to meet
the Company's obligations under the Public Service Law of the State of New York
and the Participation Agreement.

                  Section 5.14 INSURANCE. So long as the Note remains
outstanding and unpaid, the Company will keep or cause to be kept its properties
that are of an insurable nature, insured against loss or damage by fire or other
risks, the risk of which in the opinion of an Authorized Company Representative
(who shall be an officer or employee of the Company responsible for the
management of such risks) is customarily insured against by companies similarly
situated and operating like properties, to the extent that property of similar
character is, in such Authorized Company Representative's opinion, customarily
insured against by such companies, either (a) by reputable insurers or (b) in
whole or in part in the form of reserves or of one or more insurance funds
created by the Company, whether alone or with other Corporations.

                  Section 5.15 PROPER BOOKS OF RECORD AND ACCOUNT. So long as
the Note remains outstanding and unpaid, the Company will at all times keep or
cause to be kept proper books of record and account, in which full, true and
correct entry will be made of all dealings, business and affairs of the Company,
including proper and complete entries to capital or property accounts covering
property worn out, obsolete, abandoned or sold, all in accordance with the
requirements of any system of accounting or keeping accounts or the rules,
regulations or orders prescribed by a regulatory commission with jurisdiction
over the rates of the Company giving rise to at least fifty-one percent (51%) of
the Company's gross revenues, or if there are no such requirements or rules,
regulations or orders, then in compliance with generally accepted accounting
principles.

                  Section 5.16 COMPLIANCE WITH LAWS. So long as the Note remains
outstanding and unpaid, the Company agrees to use its best efforts to comply in
all material respects with all applicable laws, rules and regulations and orders
of any governmental authority, non-compliance with which would have a material
adverse effect on its business, financial condition or results of operations (to
the extent the Company deems it can reasonably comply while maintaining its
public utility operations) or would materially adversely affect the Company's
ability to perform its obligations hereunder or under the Participation
Agreement, except laws, rules, regulations or orders being contested in good
faith or laws, rules, regulations or orders which the Company has applied for
variances from, or exceptions to.

                  Section 5.17 CONSOLIDATION, MERGER OR SALE OF ASSETS. So long
as the Note remains outstanding and unpaid, the Company will not consolidate
with or permit itself to be merged into any other corporation or corporations,
or sell, transfer or otherwise dispose of all or substantially all of its
properties and assets, except in the manner and upon the terms and conditions
set forth in this Section 5.17.


                                       18



                  Nothing contained herein or in the Note shall prevent (and the
Note shall be construed as permitting and authorizing, without acceleration of
the maturity of the Note) any lawful consolidation or merger of the Company with
or into any other corporation or corporations lawfully authorized to acquire and
operate the properties of the Company, or a series of consolidations or mergers,
or successive consolidations or mergers, in which the Company or its successor
or successors shall be a party, or any sale of all or substantially all the
properties of the Company as an entirety to a corporation lawfully authorized to
acquire and operate the same; provided that, upon any consolidation, merger or
sale, the corporation formed by such consolidation, or into which such merger
may be made if other than the Company, or making such purchase shall execute and
deliver to the Trustee an instrument, in form reasonably satisfactory to the
Trustee, whereby such corporation shall effectually assume the due and punctual
payment of the principal of and premium, if any, and interest on the Note
according to its tenor and the due and punctual performance and observance of
all covenants and agreements to be performed by the Company pursuant to the Note
and the Participation Agreement on the part of the Company to be performed and
observed; and, thereupon, such corporation shall succeed to and be substituted
for the Company hereunder, with the same effect as if such successor corporation
had been named herein as obligor.

                  Every such successor corporation shall possess, and may
exercise, from time to time, each and every right and power hereunder of the
Company, in its name or otherwise; and any act, proceeding, resolution or
certificate by any of the terms of the Note required or provided to be done,
taken and performed or made, executed or verified by any board or officer of the
Company shall and may be done, taken and performed or made, executed and
verified with like force and effect by the corresponding board or officer of any
such successor Company.

                  If consolidation, merger or sale or other transfer is made as
permitted by this Section, the provisions of this Section shall continue in full
force and effect and no further consolidation, merger or sale or other transfer
shall be made except in compliance with the provisions of this Section.

                  Section 5.18 FINANCIAL STATEMENTS OF COMPANY. The Company
agrees to have an annual audit made by independent accountants and to furnish
the Trustee with a balance sheet and statements of income, retained earnings and
cash flow showing the financial condition of the Company and its consolidated
subsidiaries, if any, at the close of each fiscal year, and the results of
operations of the Company and its consolidated subsidiaries, if any, for each
fiscal year, as audited by said accountants, on or before the last day of the
third month following the close of the fiscal year or as soon thereafter as they
are reasonably available. The Company further agrees to furnish to the Trustee,
the Authority and to any owner of Bonds if requested in writing by such owner
all financial statements which it sends to its shareholders. The delivery of
such financial statements to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein, including the Company's compliance with any of
its covenants hereunder.


                                       19



                                   ARTICLE VI

                               REDEMPTION OF BONDS

                  Section 6.01 REDEMPTION OF BONDS. If the Company is not in
default in making Note Payments, the Authority and the Trustee, at the request
of the Company, at any time the aggregate monies in the Bond Fund are sufficient
to effect a redemption of Bonds and if the same are then redeemable under the
provisions of the Indenture and the Bonds, shall forthwith take all steps that
may be necessary under the applicable redemption provisions of Article V of the
Indenture to effect redemption of all or part of the then Outstanding Bonds as
may be specified by the Company on such redemption date.


                                       20



                                   ARTICLE VII

                         EVENTS OF DEFAULT AND REMEDIES

                  Section 7.01 EVENTS OF DEFAULT DEFINED. The following shall be
an "Event of Default" under this Participation Agreement and the term "Event of
Default" shall mean, whenever it is used in this Participation Agreement, any
one or more of the following events:

                  (a) Failure by the Company to pay or cause to be paid, when
         due and payable, any installment of Note Payments and, in the case of
         failure to pay any installment of interest on the Note, continuance of
         such failure for one (1) Business Day.

                  (b) Failure by the Company to observe and perform any
         covenant, condition or agreement in this Participation Agreement or the
         Note on its part to be observed or performed, other than as referred to
         in subsection (a) of this Section 7.01 (and other than failure to pay
         the amounts due under Sections 4.02(f), 4.13 and 5.08 of this
         Participation Agreement), for a period of ninety (90) days after
         written notice, specifying such failure and requesting that it be
         remedied, has been given to the Company unless the Trustee (with any
         required consent of Bondholders under the provisions of the Indenture)
         shall agree in writing to an extension of such time prior to its
         expiration, provided that if any such failure shall be such that it
         cannot be cured or corrected within such ninety-day period, it shall
         not constitute an Event of Default hereunder if curative or corrective
         action is instituted within such period and diligently pursued until
         the failure of performance is cured or corrected.

                  (c) The dissolution or liquidation of the Company or the
         filing by the Company of a voluntary petition in bankruptcy, or failure
         by the Company promptly to discharge or cause to be discharged any
         execution, garnishment or attachment of such consequence as will impair
         its ability to carry on its operations generally or the commission by
         the Company of any act of bankruptcy, or adjudication of the Company as
         a bankrupt, or assignment by the Company for the benefit of its
         creditors, or the entry by the Company into an agreement of composition
         with its creditors, or the approval by a court of competent
         jurisdiction of a petition applicable to the Company in any proceeding
         for its reorganization instituted under the provisions of the federal
         bankruptcy laws. The term "dissolution or liquidation of the Company",
         as used in this subsection, shall not be construed to include the
         cessation of the corporate existence of the Company resulting either
         from a merger or consolidation of the Company into or with another
         corporation or a dissolution or liquidation of the Company following a
         transfer of all or substantially all of its assets as an entirety,
         under the conditions permitting such action with respect to the Company
         contained in Section 5.17 hereof.

                  (d) The occurrence of an event of default as defined in
         Section 12.01 of the Indenture.

                  Subsection (b) of this Section 7.01 is subject to the
following limitations: Except for the obligations of the Company contained in
Article IV hereof, if by reason of force majeure the Company is unable in whole
or in part to carry out the agreements on its part herein contained, the Company
shall not be deemed in default during the continuance of such inability. The
term "force


                                       21



majeure" as used herein shall include the following: acts of God; strikes,
lockouts or other industrial disturbances; acts of public enemies; orders of any
kind of the government of the United States or of the State of New York or any
of their departments, agencies, or officials, or any civil or military
authority; insurrections; riots; epidemics; landslides; lightning; earthquake;
fire; typhoons; storms; floods; washouts; droughts; arrests; civil disturbances;
explosions; breakage or accident to machinery, transmission pipes or canals;
partial or entire failure of utilities; or any other cause or event not
reasonably within the control of the Company. The Company agrees, however, to
remedy with all reasonable dispatch the cause or causes preventing the Company
from carrying out its agreements; provided, that the settlement of strikes,
lockouts and other industrial disturbances shall be entirely within the
discretion of the Company, and the Company shall not be required to make
settlement of strikes, lockouts and other industrial disturbances by acceding to
the demands of the opposing party or parties when such course is in the judgment
of the Company unfavorable to the Company.

                  Section 7.02 REMEDIES ON DEFAULT. In the event any of the
Bonds shall at the time be Outstanding and unpaid and provision for the payment
thereof shall not have been made in accordance with the provisions of the
Indenture, whenever any Event of Default referred to in Section 7.01 hereof
shall have happened and be subsisting, the Authority or the Trustee, following
acceleration of the Bonds in accordance with provisions of Section 12.03 of the
Indenture where so provided, may take any one or more of the following remedial
steps:

                  (a) The Trustee as provided in the Indenture may, at its
         option, or shall, to the extent required by the Indenture, declare all
         payments payable under clauses (a) - (e) of Section 4.02 hereof and the
         Note for the remainder of the term of this Participation Agreement to
         be immediately due and payable, whereupon the same shall become
         immediately due and payable.

                  (b) The Authority or the Trustee may take whatever action at
         law or in equity that may appear necessary or desirable to collect the
         amounts then due and thereafter to become due, or to enforce
         performance and observance of any obligation, agreement or covenant of
         the Company under this Participation Agreement or the Note whether for
         specific performance of any covenant or agreement contained herein or
         therein or in aid of the execution of any power herein granted.

                  Any amounts collected pursuant to action taken under this
Section 7.02 shall be paid into the Bond Fund and applied in accordance with the
provisions of the Indenture.

                  If any such declaration of acceleration of the Bonds shall
have been annulled pursuant to the terms of the Indenture and if, at any time
after such declaration, but before all the Bonds shall have matured by their
terms, all arrears of interest upon the Note, and interest on overdue
installments of interest (to the extent enforceable under applicable law) at the
rate or rates per annum specified for the Note and the principal of and premium,
if any, on the Note which shall have become due and payable otherwise than by
acceleration, and all other sums payable hereunder, except the principal of, and
interest on, the Note which pursuant to such declaration shall have become due
and payable, shall have been paid by or on behalf of the Company or provision
satisfactory to the Trustee shall have been made for such payment, then such
acceleration of the Note shall IPSO FACTO be deemed to be rescinded and any such
Default and its consequences shall IPSO FACTO be deemed to be annulled,


                                       22



but no such annulment shall extend to or affect any subsequent Default or impair
or exhaust any right or remedy consequent thereon.

                  Section 7.03 NO REMEDY EXCLUSIVE. No remedy herein conferred
upon or reserved to the Authority or to the Trustee is intended to be exclusive
of any other available remedy or remedies, but each and every such remedy shall
be cumulative and shall be in addition to every other remedy given under this
Participation Agreement or now or hereafter existing at law or in equity or by
statute. No delay or omission to exercise any right or power accruing upon any
Default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient. In order to entitle the Authority or
the Trustee to exercise any remedy reserved to it in this Article, it shall not
be necessary to give any notice, other than such notice as may be herein
expressly required. Such rights and remedies as are given the Authority
hereunder shall also extend to the Trustee and the Trustee and the Holders of
the Bonds issued under the Indenture shall be deemed third party beneficiaries
of all covenants and agreements herein contained.

                  In case the Trustee (as assignee of the Authority under the
Indenture) or the Authority shall have proceeded to enforce its rights under
this Participation Agreement and such proceedings shall have been discontinued
or abandoned for any reason or shall have been determined adversely to the
Trustee or the Authority, then and in every such case, the Company, the
Authority and the Trustee shall be restored respectively to their several
positions and rights hereunder, and all rights, remedies and powers of the
Company, the Authority and the Trustee shall continue as though no such
proceeding had been taken.

                  The Company covenants that, in case an Event of Default shall
occur with respect to any Note Payments payable under Sections 4.02(a) - (e)
hereof and the Note, then, upon demand of the Trustee (as assignee of the
Authority under the Indenture) the Company will pay to the Trustee the whole
amount that then shall have become due and payable under said Sections, with
interest (to the extent permitted by law) on said amount at the rate of interest
then borne by the Bonds pursuant to the Indenture, but not exceeding the maximum
rate permitted by law, until paid, and in addition thereto, such further amounts
as shall be sufficient to cover the costs and expenses of collection, including
reasonable compensation to the Trustee, its agents, attorneys, and counsel, and
any other expenses or liabilities incurred by the Trustee other than those
incurred through bad faith or negligence.

                  In case the Company shall fail forthwith to pay such amounts
upon such demand, the Authority or the Trustee (as assignee of the Authority
under the Indenture) shall be entitled and empowered to institute any action or
proceeding at law or in equity for the collection of the sums so due and unpaid,
and may prosecute any such action or proceeding to judgment or final decree, and
may enforce any such judgment or final decree against the Company and collect,
in the manner provided by law out of the property of the Company, the monies
adjudged or decreed to be payable.

                  In case there shall be pending proceedings for the bankruptcy
or for the reorganization of the Company under the Federal bankruptcy laws or
any other applicable law, or in case a receiver or trustee shall have been
appointed for the property of the Company or in the case of any other similar
judicial proceedings relative to the Company or to the creditors or property of
the Company,


                                       23



the Trustee shall be entitled and empowered, by intervention in such proceedings
or otherwise, to file and provide a claim or claims for the whole amount owing
and unpaid pursuant to this Participation Agreement and, in case of any judicial
proceedings, to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Holders and the
Trustee allowed in such judicial proceedings relative to the Company, its
creditors, or its property, and to collect and receive any monies or other
property payable or deliverable on any such claims, and to distribute the same
after the deduction of its charges and expenses; and any receiver, assignee or
trustee in bankruptcy or reorganization is hereby authorized to make such
payments to the Trustee, and to pay to the Trustee any amount due it for
compensation and expenses, including reasonable counsel fees and expenses
incurred by it up to the date of such distribution.

                  Nothing herein contained shall be construed to prevent the
Authority from enforcing directly any of its rights under Sections 4.02, 4.13
and 5.08 hereof; provided that, in case the Company shall have failed to pay
amounts required to be paid under Sections 4.02(f), 4.13 and 5.08 hereof which
event shall have continued for a period of thirty (30) days after the date on
which written notice of such failure, requiring the Company to remedy the same,
shall have been given to the Company by the Authority or the Trustee, the
Authority or the Trustee may take whatever action at law or in equity as may
appear necessary or desirable to enforce performance or observance of any
obligations or agreements of the Company under Sections 4.02(f), 4.13 and 5.08
hereof.

                  Section 7.04 NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In
the event any agreement contained herein or in the Note should be breached by
any party and thereafter waived by the other party, such waiver shall be limited
to the particular breach so waived and shall not be deemed to waive any other
breach hereunder.


                                       24



                                  ARTICLE VIII

                                  MISCELLANEOUS

                  Section 8.01 DISPOSITION OF AMOUNTS AFTER PAYMENT OF BONDS.
Any amounts remaining in the funds created under the Indenture after payment in
full of principal of and premium, if any, and interest on all the Bonds, or
provision for payment thereof having been made in accordance with the provisions
of the Indenture, and payment of all the fees, charges and expenses of the
Authority, the Trustee, the Auction Agent, any Remarketing Agent, and the
Registrar and Paying Agent and any other paying agent in accordance with the
Indenture and this Participation Agreement, shall belong to and be promptly paid
to the Company by the Trustee in accordance with the provisions of the
Indenture.

                  Section 8.02 NOTICES. All notices, certificates, requests or
other communications between the Authority, the Company and the Trustee required
to be given under this Participation Agreement or under the Indenture shall be
sufficiently given and shall be deemed given when delivered by hand or first
class mail, postage prepaid, addressed as follows: if to the Authority, at
Corporate Plaza West, 286 Washington Avenue Extension, Albany, New York 12203,
Attention: President; if to the Company, at 4 Irving Place, New York, New York
10003, Attention: Secretary; and if to the Trustee or the Registrar and Paying
Agent, at The Bank of New York, 101 Barclay Street - 8W, New York, New York
10286, Attention: Corporate Trust Trustee Administration. A duplicate copy of
each notice, certificate, request or other communication given hereunder to the
Authority, the Company or the Trustee shall also be given to the others. The
Company, the Authority and the Trustee may, by notice given hereunder, designate
any further or different addresses to which subsequent notices, certificates,
requests or other communications shall be sent.

                  Section 8.03 SUCCESSORS AND ASSIGNS. This Participation
Agreement shall inure to the benefit of and shall be binding upon the Authority,
the Company, the Trustee and their respective successors and assigns.

                  Section 8.04 AMENDMENT OF PARTICIPATION AGREEMENT. This
Participation Agreement may not be amended except by an instrument in writing
signed by the parties and upon compliance with the provisions of Sections 14.06
and 14.07 of the Indenture.

                  Section 8.05 PARTICIPATION AGREEMENT SUPERSEDES ANY PRIOR
AGREEMENTS. This Participation Agreement and the Bond Purchase Agreement
supersede any other prior agreements or understandings, written or oral, between
the parties with respect to the transactions contemplated hereby and thereby.

                  Section 8.06 FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS.
The Authority and the Company agree that they will, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such supplements hereto and such further instruments as may reasonably be
required for correcting any inadequate or incorrect description of the Project
or for carrying out the expressed intention of this Participation Agreement in
accordance with the provisions of the Indenture.


                                       25




                  Section 8.07 COUNTERPARTS. This Participation Agreement may be
executed in any number of counterparts, each of which when so executed and
delivered shall be an original; but such counterparts shall together constitute
but one and the same Participation Agreement.

                  Section 8.08 SEVERABILITY. If any clause, provision or section
of this Participation Agreement is held illegal, invalid or unenforceable by any
court or administrative body, this Participation Agreement shall be construed
and enforced as if such illegal or invalid or unenforceable clause, provision or
section had not been contained in this Participation Agreement. In case any
agreement or obligation in this Participation Agreement be held to be in
violation of law, then such agreement or obligation shall be deemed to be the
agreement or obligation of the Authority or the Company, as the case may be, to
the full extent permitted by law.

                  Section 8.09 DELEGATION OF DUTIES BY AUTHORITY. It is agreed
that under the terms of this Participation Agreement and also under the terms of
the Indenture the Authority has delegated certain of its duties hereunder to the
Company. The fact of such delegation shall be deemed a sufficient compliance by
the Authority to satisfy the duties so delegated and the Authority shall not be
liable in any way by reason of acts done or omitted by the Company or any
Authorized Company Representative. The Authority shall have the right at all
times to act in reliance upon the authorization, representation or certification
of an Authorized Company Representative unless such reliance is in bad faith.

                  Section 8.10 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. The respective agreements, representations, warranties and covenants
set forth herein will remain in full force and will survive the execution and
delivery of this Participation Agreement.

                  SECTION 8.11 NEW YORK LAW TO GOVERN. THE LAW OF THE STATE OF
NEW YORK SHALL GOVERN THE CONSTRUCTION OF THIS PARTICIPATION AGREEMENT.







                   [Signature Page of this Agreement Follows]







                                       26


                  IN WITNESS WHEREOF, the parties hereto have caused this
Participation Agreement to be duly executed as of the day and year first written
above.

                                            NEW YORK STATE ENERGY RESEARCH
                                              AND DEVELOPMENT AUTHORITY



(SEAL)                                      By
                                              ----------------------------------
                                                       President


Attest:



- ---------------------------------------
               Secretary

                                            CONSOLIDATED EDISON COMPANY OF
                                              NEW YORK, INC.



(SEAL)                                      By
                                              ----------------------------------
                                                 Executive Vice President and
                                                    Chief Financial Officer

Attest:



- ---------------------------------------
             Secretary








                   [Signature Page of Participation Agreement]






                                    EXHIBIT A

                          (To Participation Agreement,
                          dated as of November 1, 2001,
        between New York State Energy Research and Development Authority
               and Consolidated Edison Company of New York, Inc.)


                             DESCRIPTION OF PROJECT
                                EXEMPT FACILITIES

               [A copy of Exhibit A to the Participation Agreement
entered into in connection with the Prior Bonds will be inserted at this place]





                                       A-1



                                    EXHIBIT B

                           (To Participation Agreement
                          dated as of November 1, 2001,
        between New York State Energy Research and Development Authority
               and Consolidated Edison Company of New York, Inc.)


                     DESCRIPTION OF OTHER PROJECT FACILITIES

               [A copy of Exhibit B to the Participation Agreement
 entered into in connection with the Prior Bonds will be inserted at this place]








                                       B-1



                                    EXHIBIT C

        (To Participation Agreement dated as of November 1, 2001 between
          New York State Energy Research and Development Authority and
                 Consolidated Edison Company of New York, Inc.,
                         relating to Series 2001B Bonds)

                  CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.

                           $98,000,000 PROMISSORY NOTE

                                       FOR

                     FACILITIES REVENUE BONDS, SERIES 2001B
             (CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. PROJECT)


                               New York, New York
                                November 1, 2001


                  FOR VALUE RECEIVED, Consolidated Edison Company of New York,
Inc., a New York corporation (the "Company"), promises to pay to the order of
The Bank of New York, as trustee (the "Trustee") under the hereinafter referred
to Indenture, in lawful money of the United States, moneys that are in the
aggregate sufficient for, together with other amounts held by the Trustee and
available under the Indenture (as defined below) for application to, the payment
of the principal sum of $98,000,000, together with interest thereon at such rate
or rates and with such redemption premiums, if any, becoming due and payable on
the Facilities Revenue Bonds, Series 2001B (Consolidated Edison Company of New
York, Inc. Project) (the "Bonds"), issued by New York State Energy Research and
Development Authority (the "Authority") in the aggregate principal amount of
$98,000,000 pursuant to a Trust Indenture (the "Indenture") dated as of November
1, 2001, between the Authority and the Trustee, and at such times as provided in
the Indenture. This Note is being delivered pursuant to and in accordance with
the Participation Agreement dated as of November 1, 2001, between the Company
and the Authority (the "Participation Agreement"), the terms and provisions of
which are incorporated herein by reference and made a part hereof. All terms
used and not otherwise defined herein are used as defined in the Indenture.

                  In the event the Company should fail to make any payment
required by this Note, the Company's obligation to make such payment shall
continue as an obligation of the Company until the amount in default shall have
been fully paid, and the Company agrees to pay the same with interest thereon at
the rate of interest borne by the Bonds, to the extent, but not exceeding the
maximum rate, permitted by law, until paid.


                                       C-1



                  This Note, unless paid earlier as permitted by the
Participation Agreement, shall mature on October 1, 2036.

                  This Note is subject to optional and mandatory prepayment and
to acceleration as provided in the Participation Agreement.

                  All payments hereunder shall be payable at the principal
office of the Trustee in New York, New York.

                  The obligation of the Company to make payments under this Note
shall be an absolute, direct, general obligation, and shall be unconditional and
shall not be abated, rebated, set off, reduced, abrogated, waived, diminished or
otherwise modified in any manner or to any extent whatsoever (other than for
prior payment).

                  The Company hereby waives presentment for payment, demand,
demand and protest and notice of protest, demand and dishonor and nonpayment of
this Note.

                  THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NEW YORK.

                                            CONSOLIDATED EDISON COMPANY OF
                                              NEW YORK, INC.

                                            By:
                                               ---------------------------------
                                                 Executive Vice President and
                                                    Chief Financial Officer

(SEAL)


ATTEST:

- ---------------------------------------
          Assistant Secretary



                                       C-2




                                                                  Exhibit 10.2.2


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

                                                       Execution Copy

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



- --------------------------------------------------------------------------------


- --------------------------------------------------------------------------------





                                 TRUST INDENTURE


                                     BETWEEN

                         NEW YORK STATE ENERGY RESEARCH
                            AND DEVELOPMENT AUTHORITY



                                       AND

                              THE BANK OF NEW YORK,
                                   as Trustee

                          Dated as of November 1, 2001



                                  -relating to-


               $98,000,000 Facilities Revenue Bonds, Series 2001B
             (Consolidated Edison Company of New York, Inc. Project)



- --------------------------------------------------------------------------------


- --------------------------------------------------------------------------------





                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

                                    ARTICLE I

                     DEFINITIONS; COMPUTATIONS; CERTIFICATES
                  AND OPINIONS; EVIDENCE OF ACTION BY AUTHORITY

SECTION 1.01.     Definitions of Specific Terms.........................    I-1
SECTION 1.02.     Definitions of General Terms..........................   I-25

                                   ARTICLE II

                             AUTHORIZATION OF BONDS

SECTION 2.01.     Limitation on Issuance of Bonds.......................   II-1
SECTION 2.02.     Authorization of Bonds................................   II-1
SECTION 2.03.     Global Form; Securities Depository....................   II-2
SECTION 2.04.     Limitations on Transfer...............................   II-4
SECTION 2.05.     Application of Bond Proceeds..........................   II-5
SECTION 2.06.     Delivery of the Bonds.................................   II-5

                                   ARTICLE III

                                INTEREST ON BONDS

SECTION 3.01.     Interest on Bonds-General.............................  III-1
SECTION 3.02.     Commercial Paper Rate.................................  III-4
SECTION 3.03.     Auction Rate Period - Auction Rate: Auction Period -
                  General...............................................  III-4
SECTION 3.04.     Auction Rate Period - Auction Rate Bonds: Change of
                  Auction Period by Authority...........................  III-6
SECTION 3.05.     Auction Rate Period - Auction Rate Bonds: Change of
                  Auction Date by Remarketing Agent.....................  III-7
SECTION 3.06.     Auction Rate Period - Auction Rate Bonds: Orders by
                  Existing Holders and Potential Holders................  III-7
SECTION 3.07.     Auction Rate Period - Auction Rate Bonds: Submission of
                  Orders by Broker-Dealers to Auction Agent.............  III-9
SECTION 3.08.     Auction Rate Period - Auction Rate Bonds:
                  Determination of Sufficient Clearing Bids,
                  Winning Bid Rate and Auction Rate..................... III-11
SECTION 3.09.     Auction Rate Period - Auction Rate Bonds:
                  Acceptance and Rejection of Submitted Bids and
                  Submitted Sell Orders and Allocation of Auction
                  Rate Bonds............................................ III-13
SECTION 3.10.     Auction Rate Period - Auction Rate Bonds: Adjustment
                  in Percentage......................................... III-16


                                       (i)



                                   ARTICLE IV

                        CHANGES IN THE INTEREST RATE MODE

SECTION 4.01.     Optional Conversion to an Adjustable Rate by
                  Authority.............................................   IV-1
SECTION 4.02.     Optional Conversion to a Fixed Rate...................   IV-3
SECTION 4.03.     Conversion Generally..................................   IV-5

                                    ARTICLE V

                        REDEMPTION AND PURCHASE OF BONDS

SECTION 5.01.     Optional Redemption...................................    V-1
SECTION 5.02.     [Reserved]............................................    V-2
SECTION 5.03.     Tender for and Purchase upon Election of Holder.......    V-2
SECTION 5.04.     Mandatory Tender for Purchase upon Change in the
                  Interest Rate Mode or on Business Day Following
                  Certain Calculation Periods...........................    V-3
SECTION 5.05.     Extraordinary Optional Redemption.....................    V-4
SECTION 5.06.     Special Tax Redemption Provisions.....................    V-4
SECTION 5.07.     Redemption at Demand of the State.....................    V-6
SECTION 5.08.     Mandatory Tender for Purchase Upon Expiration of any
                  Support Facility or Upon Delivery of an
                  Alternate Support Facility............................    V-6
SECTION 5.09.     Mandatory Tender Upon Occurrence of any Terminating
                  Event.................................................    V-7
SECTION 5.10.     General Provisions Applicable to Mandatory and Optional
                  Tenders for Purchase of Bonds.........................    V-7
SECTION 5.11.     Selection of Bonds to be Redeemed.....................    V-8
SECTION 5.12.     Notice of Redemption..................................    V-9
SECTION 5.13.     Bonds purchased for account of Liquidity Facility
                  Issuer................................................   V-10
SECTION 5.14.     Effect of Redemption..................................   V-10
SECTION 5.15.     Cancellation of Redeemed Bonds........................   V-10

                                   ARTICLE VI

                                SUPPORT FACILITY

SECTION 6.01.     Support Facility - General............................   VI-1
SECTION 6.02.     Alternate Support Facility............................   VI-1
SECTION 6.03.     Trustee not Responsible for Enforcement of Support
                  Facility..............................................   VI-2
SECTION 6.04.     Payments Pursuant to the Insurance Policy.............   VI-2
SECTION 6.05.     Rights of Credit Facility Issuer After an Event of
                  Default...............................................   VI-2


                                      (ii)



                                   ARTICLE VII

                      GENERAL TERMS AND PROVISIONS OF BONDS

SECTION 7.01.     Execution and Authentication of Bonds.................  VII-1
SECTION 7.02.     Books of Registry.....................................  VII-1
SECTION 7.03.     Transfer, Registration and Exchange of Bonds..........  VII-1
SECTION 7.04.     Mutilated, Lost, Stolen, or Destroyed Bonds...........  VII-2
SECTION 7.05.     Temporary Bonds.......................................  VII-3
SECTION 7.06.     Disposition of Bonds..................................  VII-4

                                  ARTICLE VIII

                        ESTABLISHMENT OF THE PROJECT FUND

SECTION 8.01.     Project Fund.......................................... VIII-1

                                   ARTICLE IX

                     CREATION OF SPECIAL FUNDS AND ACCOUNTS;
                     APPLICATION AND INVESTMENT OF REVENUES

SECTION 9.01.     Creation of Funds and Accounts........................   IX-1
SECTION 9.02.     Deposit of Note Payments..............................   IX-1
SECTION 9.03.     Application of Monies in the Bond Fund................   IX-3
SECTION 9.04.     Investment of Funds...................................   IX-6

                                    ARTICLE X

                      PARTICULAR COVENANTS OF THE AUTHORITY

SECTION 10.01.    Payment of Principal of and Interest and Redemption
                  Premium on Bonds......................................    X-1
SECTION 10.02.    Performance of Covenants..............................    X-1
SECTION 10.03.    Further Instruments...................................    X-1
SECTION 10.04.    Inspection of Project Books...........................    X-1
SECTION 10.05.    No Extension of Time of Payment of Interest...........    X-1
SECTION 10.06.    Trustee's, Auction Agent's, Remarketing Agent's,
                  Broker-Dealers' Registrar and Paying Agent's and
                  Indexing Agent's Fees, Charges and Expenses...........    X-1
SECTION 10.07.    Agreement of the State of New York....................    X-2
SECTION 10.08.    Recording and Filing..................................    X-2
SECTION 10.09.    Rights Under the Participation Agreement and the
                  Note..................................................    X-2



                                      (iii)



                                   ARTICLE XI

                     CONCERNING THE TRUSTEE; APPOINTMENT OF
                 REGISTRAR AND PAYING AGENT, REMARKETING AGENT,
                        AUCTION AGENT AND INDEXING AGENT

SECTION 11.01.    Appointment of Trustee.................................  XI-1
SECTION 11.02.    Indemnification of Trustee as Condition for
                  Remedial Action........................................  XI-1
SECTION 11.03.    Trustee Not Liable for Failure of the Authority or
                  Company to Act.........................................  XI-1
SECTION 11.04.    Certain Duties and Responsibilities of the Trustee.....  XI-2
SECTION 11.05.    Limitations on Obligations and Responsibilities
                  of Trustee.............................................  XI-4
SECTION 11.06.    Compensation and Indemnification of Trustee............  XI-4
SECTION 11.07.    Statements from Trustee................................  XI-4
SECTION 11.08.    Notice of Default......................................  XI-5
SECTION 11.09.    Trustee May Deal in Bonds..............................  XI-5
SECTION 11.10.    Trustee Not Responsible For Recitals...................  XI-5
SECTION 11.11.    Qualification of the Trustee...........................  XI-5
SECTION 11.12.    Resignation and Removal of Trustee.....................  XI-6
SECTION 11.13.    Successor Trustee......................................  XI-7
SECTION 11.14.    Appointment of Remarketing Agent.......................  XI-7
SECTION 11.15.    Appointment of Registrar and Paying Agent..............  XI-8
SECTION 11.16.    General Provisions Regarding Registrar and
                  Paying Agent...........................................  XI-8
SECTION 11.17.    Payment of Registrar and Paying Agent;
                  Indemnification........................................  XI-9
SECTION 11.18.    Registrar and Paying Agent's Performance;
                  Duty of Care...........................................  XI-9
SECTION 11.19.    Qualifications of Registrar and Paying Agent........... XI-10
SECTION 11.20.    Resignation or Removal of Registrar and Paying Agent and
                  Successor to Registrar and Paying Agent; Termination of
                  Registrar and Paying Agent's Obligations............... XI-10
SECTION 11.21.    Appointment of Auction Agent; Qualifications of
                  Auction Agent, Resignation; Removal.................... XI-10
SECTION 11.22.    Appointment of Broker-Dealers.......................... XI-11
SECTION 11.23.    Appointment of Additional Paying Agents;
                  Each Paying Agent to Hold Money in Trust............... XI-11
SECTION 11.24.    Appointment and Duties of Indexing Agents.............. XI-11
SECTION 11.25.    Qualifications of Indexing Agents...................... XI-12

                                             ARTICLE XII

                                  EVENTS OF DEFAULT; REMEDIES UPON
                                         OCCURRENCE THEREOF

SECTION 12.01.    Events of Default...................................... XII-1
SECTION 12.02.    Notice to Holders and Others Upon Occurrence of
                  an Event of Default or a Payment Default............... XII-1
SECTION 12.03.    Declaration of Principal and Interest As Due........... XII-2


                                      (iv)



SECTION 12.04.    Action by Trustee Upon Occurrence of Event of Default.. XII-3
SECTION 12.05.    Powers of Trustee With Respect to
                  Participation Agreement and Other Agreements........... XII-4
SECTION 12.06.    Disposition of Monies in Event of Insufficiencies
                  in Funds and Accounts.................................. XII-5
SECTION 12.07.    Effect of Delay or Omission; Waiver of Default;
                  Direction of Remedial Proceedings by the Holders....... XII-7
SECTION 12.08.    Suits or Actions by Holders; Any Holder May Enforce
                  Overdue Payment of His or Her Bond or Interest
                  Thereon................................................ XII-7
SECTION 12.09.    Remedies Not Exclusive................................. XII-8
SECTION 12.10.    Effect of Abandonment of Proceedings on Default........ XII-8
SECTION 12.11.    Interest on Overdue Amounts............................ XII-9

                                  ARTICLE XIII

                   EXECUTION OF INSTRUMENTS BY BONDHOLDERS AND
                     OWNERSHIP OF BONDS; EXCLUSION OF BONDS
                      OWNED BY THE AUTHORITY OR THE COMPANY

SECTION 13.01.    Execution of Requests, Directions and Consents
                  and Other Instruments and Proof of Same;
                  Ownership of Bonds and Proof of Same................... XIII-1
SECTION 13.02.    Meetings of Holders.................................... XIII-2
SECTION 13.03.    Exclusion of Bonds Held by or for the Authority,
                  the Company and of Bonds No Longer Deemed Outstanding
                  Hereunder.............................................. XIII-3

                                   ARTICLE XIV

                    AMENDING AND SUPPLEMENTING THE INDENTURE,
             THE PARTICIPATION AGREEMENT, THE REMARKETING AGREEMENT,
               AUCTION AGENCY AGREEMENT, BROKER-DEALER AGREEMENTS,
                          BOND PURCHASE TRUST AGREEMENT

SECTION 14.01.    Amending and Supplementing Indenture Without Consent
                  of Holders.............................................  XIV-1
SECTION 14.02.    Amending and Supplementing Indenture with Consent
                  of Holders.............................................  XIV-2
SECTION 14.03.    Notation upon Bonds; New Bonds Issued upon Amendments..  XIV-3
SECTION 14.04.    Effectiveness of Supplemental Indentures...............  XIV-4
SECTION 14.05.    Supplemental Indenture Affecting Support Facility
                  Provider...............................................  XIV-4
SECTION 14.06.    Supplemental Participation Agreements Not Requiring the
                  Consent of the Holders.................................  XIV-4
SECTION 14.07.    Notice and Consent for Supplemental Participation
                  Agreements Requiring the Consent of the Holders........  XIV-5
SECTION 14.08.    Effectiveness of Supplemental Participation Agreement..  XIV-6


                                       (v)




SECTION 14.09.    Amending and Supplementing the Remarketing Agreement,
                  Auction Agency Agreement, Broker-Dealer Agreements or
                  Bond Purchase Trust Agreement..........................  XIV-6
SECTION 14.10.    Supplemental Participation Agreement Affecting Support

                  Facility Provider......................................  XIV-6

                                   ARTICLE XV

                     DEFEASANCE; MONEYS HELD FOR PAYMENT OF
                                 DEFEASED BONDS

SECTION 15.01.    Discharge of Liens and Pledges; Bonds No Longer
                  Deemed to be Outstanding Hereunder.....................   XV-1
SECTION 15.02.    Release of Indenture, Termination of Right,
                  Title and Interest of Trustee..........................   XV-2
SECTION 15.03.    Bonds Not Presented for Payment When Due; Monies Held
                  for the Bonds after Due Date of Bonds..................   XV-2

                                   ARTICLE XVI

                                  FORM OF BONDS
                    AND ENDORSEMENT AND ASSIGNMENT PROVISIONS

SECTION 16.01.    Form of Bonds and Endorsement and Assignment
                  Provisions.............................................  XVI-1

                                  ARTICLE XVII

                                  MISCELLANEOUS

SECTION 17.01.    Benefits of Indenture Limited to Authority, Company,
                  Trustee, Registrar and Paying Agent, Support
                  Facility Issuer, and Auction Agent and Holders
                  of the Bonds........................................... XVII-1
SECTION 17.02.    Indenture a Contract; Indenture Binding Upon
                  Successors or Assigns of the Authority................. XVII-1
SECTION 17.03.    Notice to Holders of Bonds............................. XVII-1
SECTION 17.04.    Waiver of Notice....................................... XVII-1
SECTION 17.05.    Effect of Saturdays, Sundays and Non-Business Days..... XVII-2
SECTION 17.06.    Partial Invalidity..................................... XVII-2
SECTION 17.07.    Law and Place of Enforcement of Indenture.............. XVII-2
SECTION 17.08.    Requests, Approvals and Directions of Authority........ XVII-2
SECTION 17.09.    Notices, Demands; Requests............................. XVII-2
SECTION 17.10.    Effect of Article and Section Headings and
                  Table of Contents...................................... XVII-4
SECTION 17.11.    Indenture May be Executed in Counterparts;
                  Effectiveness of Indenture............................. XVII-4
SECTION 17.12.    Liability of Authority Limited to Revenues............. XVII-4


                                      (vi)



SECTION 17.13     Waiver of Personal Liability........................... XVII-4

APPENDIX A        Form of Bonds..........................................    A-1

EXHIBIT A         Notice of Change in the Interest Rate Mode.............  A-1-1
EXHIBIT B         Certificate Pursuant to Section 4.01.3(a)(ii) or
                    4.02.3(a)(ii) of the Indenture.......................    B-1
EXHIBIT C         Certificate Pursuant to Section 4.01.3(b) or
                    4.02.3(b)(ii) of the Indenture.......................    C-1
EXHIBIT D         Notice of Failure of Conditions........................    D-1
EXHIBIT E         Notice of Election to Tender...........................    E-1
EXHIBIT F         Notice of Mandatory Tender upon Expiration,
                    Termination, or Substitution of Support Facility.....    F-1


                                      (vii)



                  THIS TRUST INDENTURE, made and dated as of November 1, 2001,
by and between New York State Energy Research and Development Authority (the
"Authority"), a body corporate and politic, constituting a public benefit
corporation, and The Bank of New York, as trustee (the "Trustee"), a corporation
organized and existing under and by virtue of the laws of the State of New York
with its principal corporate trust office located in The City of New York.

                          W I T N E S S E T H  T H A T:

                  WHEREAS, pursuant to special act of the Legislature of the
State of New York (Title 9 of Article 8 of the Public Authorities Law of New
York, as from time to time amended and supplemented, herein called the "Act"),
the Authority has been established as a body corporate and politic, constituting
a public benefit corporation; and

                  WHEREAS, pursuant to the Act, the Authority is empowered to
contract with any power company to participate in the construction of facilities
to be used for the furnishing of electric energy to the extent required by the
public interest in development, health, recreation, safety, conservation of
natural resources and aesthetics; and

                  WHEREAS, pursuant to the Act, the Authority has also been
empowered to extend credit and make loans from bond and note proceeds to any
person for the construction, acquisition and installation of, or for the
reimbursement to any person for costs not limited to, any land, works, system,
building or other improvement, and all real and personal properties of any
nature or any interest in any of them which are suitable for or related to the
furnishing, generation or production of energy or the conversion of oil-burning
facilities to alternate fuel; and

                  WHEREAS, the Authority is also authorized under the Act to
borrow money and issue its negotiable bonds and notes to provide sufficient
monies for achieving its corporate purposes including the refunding of
outstanding obligations of the Authority; and

                  WHEREAS, the Authority is also authorized under the Act to
enter into any contracts and to execute all instruments necessary or convenient
for the exercise of its corporate powers and the fulfillment of its corporate
purposes; and

                  WHEREAS, contemporaneously with the execution hereof,
Consolidated Edison Company of New York, Inc. (the "Company") and the Authority
have entered into a Participation Agreement of even date herewith (herein
referred to as the "Participation Agreement"), providing for the refunding of
6 3/8% Facilities Revenue Bonds, Series 1992 B (Consolidated Edison Company
of New York, Inc. Project) (the "Prior Bonds") of the Authority which were
issued to finance the acquisition, construction and installation of certain
facilities for the furnishing of electric energy within the Company's service
area and as part of such participation, that the Authority issue bonds
pursuant to the Act to provide funds to refund the Prior Bonds; and

                  WHEREAS, the Participation Agreement provides that the
Authority will issue its bonds and make the proceeds of such bonds available to
the Company to refund the Prior Bonds; and



                  WHEREAS, simultaneously with the issuance and delivery of such
bonds, the Company will execute and deliver a promissory note dated the date of
issuance of such bonds (the "Note") as evidence of its obligation to make
payments required by the Participation Agreement; and

                  WHEREAS, pursuant to Resolution No. 999 adopted September 24,
2001, the Authority has determined to issue its Facilities Revenue Bonds, Series
2001B (Consolidated Edison Company of New York, Inc. Project) in an aggregate
amount not exceeding $100,000,000 (the "Bonds") for the purpose of paying a
portion of the redemption price of the Prior Bonds; and

                  WHEREAS, all acts, conditions and things necessary or required
by the Constitution and statutes of the State of New York, or otherwise, to
exist, happen, and be performed as prerequisites to the passage of this
Indenture, do exist, have happened, and have been performed; and

                  WHEREAS, the Trustee has accepted the trusts created by this
Trust Indenture and in evidence thereof has joined in the execution hereof;

                  NOW, THEREFORE, THIS TRUST INDENTURE WITNESSETH:

                  That in order to declare the terms and conditions upon which
the Bonds are authenticated, issued and delivered, and in consideration of the
premises and the acceptance by the Trustee of the trusts hereby created and of
the purchase and acceptance of the Bonds by the Holders thereof, and for other
good and valuable consideration, the receipt of which is hereby acknowledged,
and in order to secure payment of the principal of and premium, if any, and
interest on the Bonds according to their tenor and effect and the performance
and observance by the Authority of all covenants, agreements and conditions
herein and in the Bonds contained, the Authority has acknowledged, executed,
signed and delivered this Indenture and hereby assigns, confirms, pledges with
and sets over and entrusts to the Trustee hereunder, its successors in trust and
assigns, subject to the provisions of this Indenture (the following being called
the "Trust Estate"): (1) the Revenues (as hereinafter defined); (2) the
Participation Agreement and the Note and all rights, remedies and interest of
the Authority under the Participation Agreement and the Note, and any other
agreement relating to the Project (exclusive of the Authority's rights with
respect to (a) administrative compensation, attorney's fees and indemnification,
(b) the receipt of notices, opinions, reports, copies of instruments and other
items of a similar nature required to be delivered to the Authority under the
Participation Agreement, (c) granting approvals and consents and making
determinations when required under the Participation Agreement, (d) making
requests for information and inspections in accordance with the Participation
Agreement, (e) Article III and Sections 4.02(f), 4.14 and 5.08 of the
Participation Agreement and, insofar as the obligations of the Company under
Section 4.12 relate to taxes and assessments imposed upon the Authority and not
the Trustee, Section 4.12 thereof, and (f) the right to amend the Participation
Agreement); (3) the Tax Regulatory Agreement, and all rights, remedies and
interest of the Authority thereunder, subject to the provisions of the Tax
Regulatory Agreement relating to the amendment thereof and to a reservation by
the Authority of the right to enforce the obligations of the Company thereunder
independently of the Trustee; (4) all other monies, rights and properties held
by the Trustee or other depositary under this Indenture including, but only for
the benefit of the persons specified herein, the proceeds of any draw, borrowing
or payment under any Credit Facility (as hereinafter defined), and the
securities (and the interest, income and profits therefrom) in which such monies
may from time to time be invested


                                       -2-



(exclusive of the proceeds of a Liquidity Facility (as hereinafter defined) or
the Project Fund (as hereinafter defined)); and (5) any and all other real or
personal property of every nature from time to time hereafter by delivery or by
writing of any kind specially mortgaged, pledged, or hypothecated, as and for
additional security hereunder, by the Company in favor of the Trustee or the
Authority which are hereby authorized to receive any and all such property at
any and all times and to hold and apply the same subject to the terms hereof.

                  TO HAVE AND TO HOLD, all and singular of said Trust Estate
unto the Trustee, its successors in trust and assigns, forever, in trust,
nevertheless, to inure to the use and benefit of the Holders of all the Bonds,
for the securing of the observance or performance of all the terms, provisions
and conditions therein and herein contained and for the equal and proportionate
benefit and security of all and singular the present and future Holders of the
Bonds, without preference, priority, prejudice or distinction as to lien or
otherwise of any Bond over any other Bond, to the end that each Holder of a Bond
shall have the same rights, privileges and lien under and by virtue of this
Trust Indenture, except as hereinafter otherwise specifically provided;

                  AND UPON THE CONDITION THAT, if the Authority shall cause to
be paid fully and promptly and indefeasibly when due all of its indebtedness,
liabilities, obligations and sums at any time secured hereby, including
interest, its Trustee's fees and reasonable expenses (including its reasonable
attorneys' fees and expenses), and shall promptly, faithfully and strictly keep,
perform and observe, or cause to be kept, performed and observed, all of its
covenants, obligations, warranties and agreements contained herein, then and in
such event, this Trust Indenture shall be and become void and of no further
force and effect, otherwise the same shall remain in full force and effect.

                  THIS TRUST INDENTURE FURTHER WITNESSETH, and it is expressly
declared, that all Bonds issued and secured hereunder are to be issued,
authenticated and delivered and all said income and Revenues hereby pledged are
to be dealt with and disposed of under, upon and subject to the terms,
conditions, stipulations, covenants, agreements, trusts, uses and purposes as
hereinafter expressed, and the Authority has agreed and covenanted, and does
hereby agree and covenant, with the Trustee and with the respective Holders,
from time to time, of the said Bonds, or any part thereof, as follows (provided
that in the performance of the agreements of the Authority herein contained any
obligation it may thereby incur for the payment of money shall never constitute
a general or moral obligation of the State of New York or any political
subdivision thereof within the meaning of any state constitutional provision or
statutory limitation, and shall not be secured directly or indirectly by the
full faith and credit, the general credit or any revenue or taxes of the State
of New York or any political subdivision thereof, but shall be payable solely
out of the income and Revenues derived under the Participation Agreement and the
Note and from drawings under the Credit Facility, if any, and other monies,
rights and properties of the Trust Estate), that is to say:


                                       -3-



                                    ARTICLE I

                     DEFINITIONS; COMPUTATIONS; CERTIFICATES
                  AND OPINIONS; EVIDENCE OF ACTION BY AUTHORITY

                  SECTION 1.01. DEFINITIONS OF SPECIFIC TERMS. Unless the
context shall clearly indicate some other meaning or may otherwise require, the
terms defined in this Section shall, for all purposes of this Indenture and of
any indenture, resolution or other instrument amendatory hereof or supplemental
hereto and of any certificate, opinion, instrument or document herein or therein
mentioned, have the meanings herein specified, with the following definitions to
be equally applicable to both the singular and plural forms of any terms herein
defined and vice versa.

                  "ACT" shall mean the New York State Energy Research and
Development Authority Act, Title 9 of Article 8 of the Public Authorities Law of
the State of New York, as from time to time amended and supplemented.

                  "ADDITIONAL PAYMENTS" shall mean the Additional Payments as
defined in Section 4.02(f) of the Participation Agreement.

                  "ADJUSTABLE RATE" shall mean any of the following types of
interest rates: a Commercial Paper Rate, an Auction Rate, a Daily Rate, a Weekly
Rate, a Monthly Rate, a Semi- annual Rate and a Term Rate.

                  "ADMINISTRATION FEES" shall mean the amounts payable by the
Company to the Authority pursuant to Section 4.02(f) of the Participation
Agreement to defray a portion of the expenses incurred by the Authority in
conducting and administering its special energy project programs and the amount
payable as state bond issuance charge pursuant to Section 4.02(f) of the
Participation Agreement.

                  "AFFILIATE" shall mean any person known to the Auction Agent
to be controlled by, in control of or under common control with the Company;
provided that no Broker-Dealer controlled by, in control of or under common
control with the Company shall be an Affiliate nor shall any corporation or any
person controlled by, in control of or in common control with such corporation
be an Affiliate solely because a director or executive officer of such
Broker-Dealer is also a director of the Company.

                  "AFTER-TAX EQUIVALENT RATE" on any date of determination shall
mean with respect to Auction Rate Bonds, the interest rate per annum equal to
the product of (x) Commercial Paper/Treasury Rate on such date and (y) (1.00
minus the Statutory Corporate Tax Rate on such date).

                  "AGENT MEMBER" shall mean a member of, or participant in, the
Securities Depository.

                  "ALL HOLD RATE" shall mean on any date of determination with
respect to Auction Rate Bonds the rate per annum equal to 85% (as such
percentage may be adjusted pursuant to Section 3.10) of the lesser of (i) the
BMA Index on such date and (ii) the After-Tax Equivalent Rate on such


                                       I-1




date; PROVIDED, HOWEVER, that in no event shall such All Hold Rate exceed the
Maximum Allowed Rate.

                  "ALTERNATE SUPPORT FACILITY" shall mean any Support Facility
obtained pursuant to the provisions of Section 6.02 in replacement of an
existing Support Facility.

                  "APPLICABLE PERCENTAGE" on any date of determination shall
mean the percentage determined as set forth below (as such percentage may be
adjusted for Auction Rate Bonds pursuant to Section 3.10) based on the
prevailing long-term rating of the Auction Rate Bonds in effect at the close of
business on the Business Day immediately preceding such date of determination:

                                               Applicable
                Prevailing Rating              Percentage
                -----------------              ----------

                AAA/"Aaa"                         175%
                AA/"Aa"                           175%
                A/"A"                             175%
                BBB/"Baa"                         200%
                Below BBB/"Baa"                   265%

                  For purposes of this definition, the "prevailing rating" of
the Auction Rate Bonds will be (a) AAA/"Aaa," if the Auction Rate Bonds have a
rating of AAA or better by S&P and a rating of "Aaa" or better by Moody's, or
the equivalent of such ratings by a substitute rating agency or agencies
selected as provided below, (b) if not AAA/"Aaa," then AA/"Aa" if the Auction
Rate Bonds have a rating of AA- or better by S&P and a rating of "Aa3" or better
by Moody's, or the equivalent of such ratings by a substitute rating agency or
agencies selected as provided below, (c) if not AAA/"Aaa" or AA/"Aa," then A/"A"
if the Auction Rate Bonds have a rating of A- or better by S&P and a rating of
"A3" or better by Moody's, or the equivalent of such ratings by a substitute
rating agency or agencies selected as provided below, (d) if not AAA/"Aaa,"
AA/"Aa" or A/"A," then BBB/"Baa," if the Auction Rate Bonds have a rating of
BBB- or better by S&P and a rating of "Baa3" or better by Moody's, or the
equivalent of such ratings by a substitute rating agency or agencies selected as
provided below, and (e) if not AAA/"Aaa," AA/"Aa", A/"A" or BBB/"Baa," then
below BBB/"Baa," whether or not the Auction Rate Bonds are rated by any
securities rating agency.

                  If (x) the Auction Rate Bonds, are rated by a rating agency or
agencies other than Moody's or S&P and (y) the Company has delivered on behalf
of the Authority to the Trustee and the Auction Agent an instrument designating
one or two of such rating agencies to replace Moody's or S&P, or both, then for
purposes of the definition of "prevailing rating" Moody's or S&P, or both, will
be deemed to have been replaced in accordance with such instrument; provided,
however, that such instrument must be accompanied by the consent of the Market
Agent. For purposes of this definition, S&P's rating categories of AAA, AA-, A-
and BBB-, and Moody's rating categories of "Aaa," "Aa3," "A3" and "Baa3," refer
to and include the respective rating categories correlative thereto in the event
that either or both of such rating agencies have changed or modified their
generic rating categories. If the prevailing ratings for the Bonds are split
between the categories set forth above, the lower rating will determine the
prevailing rating.


                                       I-2



                  "AUCTION" shall mean each periodic implementation of the
Auction Procedures for Auction Rate Bonds.

                  "AUCTION AGENCY AGREEMENT" shall mean the Auction Agency
Agreement to be entered into between the Company and the Auction Agent with
respect to the Auction Rate Bonds, as from time to time amended and
supplemented.

                  "AUCTION AGENT" shall mean any entity appointed as such
pursuant to Section 11.21 and its successors and assigns.

                  "AUCTION DATE" shall mean with respect to each Auction Period,
the last Wednesday of the immediately preceding Auction Period (or such other
day that the applicable Market Agent shall establish as the Auction Date
therefor pursuant to Section 3.05); provided, that if such day is not a Business
Day, the Auction Date shall be the next succeeding Business Day.

                  "AUCTION PERIOD" shall mean the period from and including the
Closing Date to and including the initial Auction Date and thereafter, or after
a Change in the Interest Rate Mode to an Auction Rate, until the effective date
of a Change in the Interest Rate Mode or the Stated Maturity, each period from
and including the last Interest Payment Date for the immediately preceding
Auction Period or Calculation Period, as the case may be, to and including the
next succeeding Auction Date or, in the event of a Change in the Interest Rate
Mode, to but excluding the effective date of such change, provided, if any day
that would be the last day of any such period does not immediately precede a
Business Day, such period shall end on the next day which immediately precedes a
Business Day.

                  "AUCTION PROCEDURES" shall mean with respect to the Auction
Rate Bonds the procedures set forth in Sections 3.06 through 3.09.

                  "AUCTION RATE" shall mean with respect to Auction Rate Bonds
and each Auction Period for such Auction Rate Bonds, the rate of interest per
annum determined for the Bonds pursuant to Article III.

                  "AUCTION RATE BONDS" shall mean with respect to an Auction
Rate Period, any Bonds or subseries of Bonds which bear interest at the Auction
Rate.

                  "AUCTION RATE BONDS PERIOD RECORD DATE" shall mean, with
respect to each Interest Payment Date during an Auction Rate Period, the
Business Day immediately preceding such Interest Payment Date.

                  "AUCTION RATE PERIOD" shall mean any period during which the
Auction Rate Bonds bear interest at an Auction Rate determined pursuant to the
implementation of Auction Procedures established under Article III, which period
shall commence on the Closing Date if the Bonds initially are offered as Auction
Rate Bonds or on the effective date of a Change in the Interest Rate Mode to an
Auction Rate and shall extend through the day immediately preceding the earlier
of (a) the effective date of a Change in the Interest Rate Mode or (b) the
Stated Maturity.


                                       I-3




                  "AUTHORITY" shall mean New York State Energy Research and
Development Authority, the public benefit corporation created by the Act, and
its successors and assigns.

                  "AUTHORIZED COMPANY REPRESENTATIVE" shall mean any officer or
other employee of the Company at the time designated to act on behalf of the
Company by written certificate furnished to the Authority and the Trustee
containing the specimen signature of such person and signed on behalf of the
Company by its Chairman, President or a Vice President and its Secretary or an
Assistant Secretary.

                  "AUTHORIZED OFFICER" shall mean the Chair, Vice-Chair,
President, Vice President, Treasurer, Assistant Treasurer or Secretary of the
Authority.

                  "AVAILABLE AUCTION RATE BONDS" shall mean with respect to the
Auction Rate Bonds, Available Auction Rate Bonds as defined in Section 3.08.

                  "BID" shall mean with respect to the Auction Rate Bonds, Bid
as defined in Section 3.06.

                  "BIDDER" shall mean with respect to the Auction Rate Bonds,
Bidder as defined in Section 3.06.

                  "BMA INDEX" shall mean, as of any date of determination, The
Bond Market Association Municipal Swap Index that is most recently released by
Municipal Market Data to its subscribers prior to such date of determination;
PROVIDED, HOWEVER, that if the BMA Index is unavailable for a period of over 21
days preceding such date of determination, references to the BMA Index shall be
replaced by the After-Tax Equivalent Rate.

                  "BOND COUNSEL" shall mean an attorney or firm or firms of
attorneys, satisfactory to the Authority and the Trustee, nationally recognized
and experienced in matters relating to tax exemption of interest on bonds issued
by states and their political subdivisions.

                  "BOND FUND" shall mean the special trust fund of the Authority
designated as "Consolidated Edison Company of New York, Inc. Project Bond Fund"
created and established under, and to be held and administered by the Trustee as
provided in, Section 9.01 and, unless the context shall clearly indicate
otherwise, shall include the "Interest Account," the "Principal Account," and
the "Redemption Account" created and established therein.

                  "BOND INSURER" shall mean Ambac Assurance Corporation, or any
successor thereto.

                  "BOND PURCHASE AGREEMENT" shall mean the Bond Purchase
Agreement, dated October 31, 2001, among the Authority, the Company and the
underwriters named therein.

                  "BOND PURCHASE FUND" shall mean the Bond Purchase Fund
established pursuant to the Bond Purchase Trust Agreement.


                                       I-4




                  "BOND PURCHASE TRUST AGREEMENT" shall mean the Bond Purchase
Trust Agreement dated as of the date hereof between the Authority and the
Registrar and Paying Agent, as from time to time amended or supplemented.

                  "BOND YEAR" shall have the meaning set forth in the Tax
Regulatory Agreement.

                  "BONDHOLDER", "HOLDER OF A BOND" or "HOLDER" shall mean any
registered owner of a Bond.

                  "BONDS" shall mean $98,000,000 aggregate principal amount of
the "Facilities Revenue Bonds, Series 2001B (Consolidated Edison Company of New
York, Inc. Project)" issued as authorized in Section 2.02 at any time
Outstanding.

                  "BROKER-DEALER" shall mean any broker-dealer (as defined in
the Securities Exchange Act), commercial bank or other entity permitted by law
to perform the functions required of a Broker-Dealer set forth in the Auction
Procedures (i) that is an Agent Member (or an affiliate of an Agent Member),
(ii) that has been selected by the Auction Agent and the Company with the
consent of the Authority, and (iii) that has entered into a Broker-Dealer
Agreement with the Auction Agent and the Company that remains effective.

                  "BROKER-DEALER AGREEMENT" shall mean each agreement applicable
to the Auction Rate Bonds, between a Broker-Dealer, the Company and the Auction
Agent pursuant to which the Broker-Dealer, among other things, agrees to
participate in Auctions as set forth in the Auction Procedures, as from time to
time amended and supplemented.

                  "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or other day on which the New York Stock Exchange or banks are authorized
or obligated by law or executive order to close in New York, New York, or any
city in which is located the principal corporate trust office of the Trustee or
the office of an issuer of a Support Facility at which demands for a draw on, or
borrowing or payment under, the Support Facility will be made.

                  "CALCULATION PERIOD" shall mean (a) during any Commercial
Paper Rate Period following a Change in the Interest Rate Mode to a Commercial
Paper Rate Period, the period from and including the effective date of the
Change in the Interest Rate Mode to a Commercial Paper Rate Period to but not
including any day not more than 270 days thereafter which is a day immediately
preceding a Business Day established by the Remarketing Agent pursuant to
Section 3.02 and, thereafter, any Calculation Period established by the
Remarketing Agent pursuant to Section 3.02 which shall end on a day not later
than 270 days from the commencement thereof; (b) during any Daily Rate Period,
the period from and including a Business Day to but not including the next
succeeding Business Day; (c) during any Weekly Rate Period following a Change in
the Interest Rate Mode to a Weekly Rate, the period from and including the
effective date of the Change in the Interest Rate Mode to and including the
following Tuesday, and, thereafter, the period from and including Wednesday of
each week to and including the following Tuesday; (d) during any Monthly Rate
Period following a Change in the Interest Rate Mode to a Monthly Rate, the
period from and including the effective date of the Change in the Interest Rate
Mode to but excluding the first Business Day of the following month, and,
thereafter each period from and including the first


                                                        I-5




Business Day of the month to but excluding the first Business Day of the
following month; (e) during any Semi-annual Rate Period following a Change in
the Interest Rate Mode to a Semi-annual Rate, the period from and including the
effective date of the Change in the Interest Rate Mode to but excluding the next
succeeding Interest Payment Date and, thereafter, each period from and including
the day following the end of the last Calculation Period to but excluding the
next succeeding Interest Payment Date; (f) during any Term Rate Period, any
period of not less than 365 days from and including a Business Day to and
including any day (established by the Remarketing Agent pursuant to Section
4.01.1) not later than the day prior to the Stated Maturity; and (g) during any
Fixed Rate Period following a Change in the Interest Rate Mode to a Fixed Rate,
the period from and including the effective date of the Change in the Interest
Rate Mode through the day immediately preceding the earlier of (x) the effective
date of another Change in the Interest Rate Mode, or (y) the Stated Maturity.

                  "CHANGE IN THE INTEREST RATE MODE" shall mean any change in
the type of interest rate borne by the Bonds pursuant to Section 4.01 or Section
4.02.

                  "CHANGE OF PREFERENCE LAW" shall mean any amendment to the
Code or other statute enacted by the Congress of the United States or any
temporary, proposed or final regulation promulgated by the United States
Treasury, after the date hereof which (a) changes or would change any deduction,
credit or other allowance allowable in computing liability for any federal tax
with respect to, or (b) imposes, or would impose, or increases or would increase
any federal tax (including, but not limited to, preference or excise taxes)
upon, any interest earned by any holder of bonds the interest on which is
excluded from federal gross income under Section 103 of the Code.

                  "CLOSING DATE" shall mean the date on which the Note becomes
legally effective, the same being the date on which the Bonds are paid for by
and delivered to the original purchasers thereof.

                  "CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time. Each reference to a section of the Code herein shall
be deemed to include the United States Treasury Regulations proposed or in
effect thereunder and applied to the Bonds or the use of proceeds thereof, and
also includes all amendments and successor provisions unless the context clearly
requires otherwise.

                  "COMMERCIAL PAPER DEALERS" shall mean Lehman Commercial Paper
Inc. and CS First Boston Corporation or any other commercial paper dealers
specified by the Authority at the request of the Company at the time of any
Change in the Interest Rate Mode to an Auction Rate, or in lieu of any thereof,
their respective affiliates or successors, provided that any such entity is a
commercial paper dealer and, if not, as replaced by the Substitute Commercial
Paper Dealer.

                  "COMMERCIAL PAPER PERIOD RECORD DATE" shall mean, with respect
to each Interest Payment Date during a Commercial Paper Rate Period, the
Business Day next preceding such Interest Payment Date.

                  "COMMERCIAL PAPER RATE" shall mean with respect to each
Calculation Period during a Commercial Paper Rate Period, a rate or rates of
interest equal to the rate or rates of interest per


                                       I-6



annum established and certified to the Trustee (with a copy to the Authority,
the Registrar and Paying Agent and the Company) by the Remarketing Agent no
later than 12:00 noon (New York City time) on and as of the Determination Date
as the minimum rate or rates of interest per annum which, in the opinion of the
Remarketing Agent, would be necessary on and as of such day to remarket Bonds in
a secondary market transaction at a price equal to the principal amount thereof;
provided that such rate or rates of interest shall not exceed the lesser of 110%
of the Commercial Paper Rate Index on and as of such date and the Maximum
Allowed Rate.

                  "COMMERCIAL PAPER RATE INDEX" shall mean with respect to the
Determination Date of each Calculation Period during a Commercial Paper Rate
Period, the average of yield evaluations at par, determined by the Indexing
Agent, of securities (whether or not actually issued) all of which shall have a
term as near as practicable to such Calculation Period or which are subject to
optional or mandatory tender by the owner thereof at the end of a term as near
as practicable to such Calculation Period, the interest on which is not included
in gross income for federal income tax purposes, of no fewer than ten Component
Issuers selected by the Indexing Agent, including issuers of commercial paper,
project notes, bond anticipation notes and tax anticipation notes, computed by
the Indexing Agent on and as of such day. If the Bonds are rated by a Rating
Agency in its highest note or commercial paper rating category or one of its two
highest long-term debt rating categories, each Component Issuer must (a) have
outstanding securities rated by a Rating Agency in its highest note or
commercial paper rating category or (b) not have outstanding notes or commercial
paper rated by a Rating Agency but have outstanding securities rated by a Rating
Agency in one of its two highest long-term debt rating categories. If the Bonds
are rated by a Rating Agency in a rating category that is lower than its highest
note or commercial paper rating category or its two highest long-term debt
rating categories (and the Bonds are not rated in one of such categories by the
other Rating Agency), each Component Issuer must (a) have outstanding securities
rated by a Rating Agency in its note or commercial paper rating category which
is the same or correlative, in the Indexing Agent's judgment, to the note or
commercial paper rating category or the long-term debt rating category of the
Bonds or (b) have outstanding securities rated by a Rating Agency in the same
long-term debt rating category as the Bonds are rated by that Rating Agency and
not have any outstanding notes or commercial paper rated by such Rating Agency.
The Indexing Agent may change the Component Issuers from time to time in its
discretion, subject to the foregoing requirements. In addition, at the request
of the Company and upon delivery to the Trustee of an Opinion of Bond Counsel
that such action will not adversely affect the exclusion of interest on the
Bonds from gross income of the owners thereof for federal income tax purposes,
the Authority, with the consent of the Company, may designate a new method of
setting the Commercial Paper Rate Index in the event any of the above-described
methods are determined by the Authority to be unavailable, impracticable or
unrealistic in the market place.

                  "COMMERCIAL PAPER RATE PERIOD" shall mean any period during
which the Bonds bear interest at a Commercial Paper Rate or Rates, which period
shall commence on the effective date of a Change in the Interest Rate Mode to a
Commercial Paper Rate or Rates, as the case may be, and extend through the day
immediately preceding the earlier of (a) the effective date of another Change in
the Interest Rate Mode or (b) the Stated Maturity.

                  "COMMERCIAL PAPER/TREASURY RATE" on any date of determination
shall mean with respect to Auction Rate Bonds (i) in the case of any Auction
Period of less than 49 days, the interest


                                       I-7




equivalent of the 30-day rate, (ii) in the case of any Auction Period of 49 days
or more and but less than 70 days, the interest equivalent of the 60-day rate,
(iii) in the case of any Auction Period of 70 days or more but less than 85
days, the arithmetic average of the interest equivalent of the 60-day and 90-day
rates, (iv) in the case of any Auction Period of 85 days or more but less than
99 days, the interest equivalent of the 90-day rate; (v) in the case of any
Auction Period of 99 days or more but less than 120 days, the arithmetic average
of the interest equivalent of the 90-day and 120-day rates, (vi) in the case of
any Auction Period of 120 days or more but less than 141 days, the interest
equivalent of the 120-day rate, (vii) in the case of any Auction Period of 141
days or more but less than 162 days, the arithmetic average of the interest
equivalent of the 120-day and 180-day rates, (viii) in the case of any Auction
Period of 162 days or more but less than 183 days, the interest equivalent of
the 180-day rate, and (ix) in the case of any Auction Period of 183 days or
more, the Treasury Rate for such Auction Period. The foregoing rates shall in
all cases, except with respect to the Treasury Rate, be rates on commercial
paper placed on behalf of issuers whose corporate bonds are rated "AA" by S&P,
or the equivalent of such rating by Moody's, as made available on a discount
basis or otherwise by the Federal Reserve Bank of New York for the Business Day
immediately preceding such date of determination, or in the event that the
Federal Reserve Bank of New York does not make available any such rate, then the
arithmetic average of such rates, as quoted on a discount basis or otherwise, by
the Commercial Paper Dealers, to the Auction Agent for the close of business on
the Business Day immediately preceding such date of determination.

If any Commercial Paper Dealer does not quote a commercial paper rate required
to determine the Commercial Paper/Treasury Rate, the Commercial Paper/Treasury
Rate shall be determined on the basis of a commercial paper quotation or
quotations furnished by the remaining Commercial Paper Dealer or Commercial
Paper Dealers and any Substitute Commercial Paper Dealer or Substitute
Commercial Paper Dealers selected by the Authority at the request of the Company
to provide such quotation or quotations not being supplied by any Commercial
Paper Dealer or Commercial Paper Dealers, as the case may be, or if the
Authority does not select any such Substitute Commercial Paper Dealer or
Substitute Commercial Paper Dealers, by the remaining Commercial Paper Dealer or
Commercial Paper Dealers. For purposes of this definition, the "interest
equivalent" of a rate stated on a discount basis (a "discount rate") for
commercial paper of a given day's maturity shall be equal to the product of (A)
100 times (B) the quotient (rounded upwards to the next higher one-thousandth
(.001) of 1%) of (x) the discount rate (expressed in decimals) divided by (y)
the difference between (1) 1.00 and (2) a fraction the numerator of which shall
be the product of the discount rate (expressed in decimals) times the number of
days in which such commercial paper matures and the denominator of which shall
be 360. In no event shall the Commercial Paper/Treasury Rate be greater than the
lesser of 15% or the maximum rate permitted by applicable law.

                  "COMMISSION" shall mean the Securities and Exchange
Commission.

                  "COMPANY" shall mean Consolidated Edison Company of New York,
Inc., and any surviving, resulting or transferee corporation as provided in
Section 5.17 of the Participation Agreement.

                  "COMPONENT ISSUERS" shall mean issuers of securities, the
interest on which is excluded from gross income for federal income tax purposes,
selected by the Indexing Agent.


                                       I-8




                  "COMPUTATION DATE" shall mean each date which is one (1)
Business Day prior to any Determination Date.

                  "COMPUTATION PERIOD" shall have the meaning set forth in the
Tax Regulatory Agreement.

                  "CREDIT FACILITY" shall mean any Support Facility which
provides for the payments referred to in clause (ii) of the definition thereof.

                  "CREDIT FACILITY ISSUER" shall mean any bank or banks or other
financial institution or institutions, having issued any Credit Facility.

                  "CURRENT ADJUSTABLE RATE" shall mean the interest rate borne
by Bonds immediately prior to a Change in the Interest Rate Mode or the
establishment of a Fixed Rate.

                  "DAILY PERIOD RECORD DATE" shall mean, with respect to each
Interest Payment Date during a Daily Rate Period, the Business Day next
preceding such Interest Payment Date.

                  "DAILY RATE" shall mean with respect to each Calculation
Period during a Daily Rate Period, a rate of interest equal to the rate of
interest per annum established and certified to the Trustee (with a copy to the
Authority, the Registrar and Paying Agent and the Company) by the Remarketing
Agent no later than 12:00 noon (New York City time) on and as of the
Determination Date as the minimum rate of interest per annum which, in the
opinion of the Remarketing Agent, would be necessary on and as of such day to
remarket Bonds in a secondary market transaction at a price equal to the
principal amount thereof plus accrued interest thereon; PROVIDED that such rate
of interest shall not exceed the lesser of 110% of the Daily Rate Index on and
as of such day and the Maximum Allowed Rate.

                  "DAILY RATE INDEX" shall mean with respect to the
Determination Date of each Calculation Period during a Daily Rate Period, the
average of one-day yield evaluations at par, determined by the Indexing Agent,
of securities (whether or not actually issued), the interest on which is not
included in gross income for federal income tax purposes, of no fewer than ten
Component Issuers selected by the Indexing Agent and which have redemption or
tender provisions comparable to the then applicable provisions of the Bonds,
computed by the Indexing Agent on and as of the Determination Date. If the Bonds
are rated by a Rating Agency, each Component Issuer must have outstanding
securities rated by a Rating Agency in a short-term debt rating category which
is the same as the short-term debt rating category in which the Bonds are rated.
The specific issuers included in the Component Issuers may be changed from time
to time by the Indexing Agent in its discretion and shall be issuers whose
securities, in the judgment of the Indexing Agent, have characteristics similar
to the Bonds. In addition, at the request of the Company and upon delivery to
the Trustee of an Opinion of Bond Counsel that such action will not adversely
affect the exclusion of interest on the Bonds from gross income of the owners
thereof for federal income tax purposes, the Authority, with the consent of the
Company, may designate a new method of setting the Daily Rate Index in the event
any of the above-described methods are determined by the Authority to be
unavailable, impracticable or unrealistic in the market place.


                                       I-9




                  "DAILY RATE PERIOD" shall mean any period during which Bonds
bear interest at a Daily Rate which period shall commence on the effective date
of the Change in the Interest Rate Mode to a Daily Rate and shall extend through
the day immediately preceding the earlier of (a) the effective date of a Change
in the Interest Rate Mode or (b) the Stated Maturity.

                  "DETERMINATION DATE" shall mean, for any Calculation Period,
the first Business Day occurring during such Calculation Period; provided,
however, with respect to Bonds which bear interest at the Weekly Rate, each
Wednesday or, if such Wednesday is not a Business Day, the Business Day next
preceding such Wednesday.

                  "DIRECT-PAY CREDIT FACILITY" shall mean any Credit Facility
which by its terms permits the Trustee to draw moneys thereunder for deposit in
the Bond Fund.

                  "EVENT OF DEFAULT" shall mean Event of Default as defined in
Section 12.01.

                  "EXISTING HOLDER" shall mean with respect to Auction Rate
Bonds a person that is listed as the beneficial owner of Auction Rate Bonds in
the records of the Auction Agent.

                  "FISCAL YEAR" shall mean the fiscal year of the Company as
established from time to time by the Company which as of the Closing Date is the
twelve-month period commencing on January 1 of each calendar year and ending on
December 31 of the next calendar year.

                  "FITCH" shall mean Fitch, Inc. and its successor or
successors, and if such corporation shall for any reason no longer perform the
functions of a securities rating agency or shall be replaced by some other
nationally recognized rating agency by the Authority at the request of the
Company, "Fitch" shall be deemed to refer to such other nationally recognized
rating agency designated by the Authority at the request of the Company.

                  "FIXED RATE" shall mean, with respect to a Fixed Rate Period,
the rate of interest per annum established and certified to the Trustee (with a
copy to the Authority, the Registrar and Paying Agent and the Company) by the
Remarketing Agent no later than 12:00 noon (New York City time) on and as of
such date as the minimum rate of interest per annum which, in the opinion of the
Remarketing Agent, would be necessary on and as of such date to remarket the
Bonds in a secondary market transaction at a price equal to 100% of the
Outstanding principal amount thereof; provided that such rate of interest shall
not exceed the lesser of 110% of the Fixed Rate Index on and as of such date and
18% per annum;

                  "FIXED RATE CONVERSION DATE" shall have the meaning set forth
in Section 4.02.

                  "FIXED RATE INDEX" shall mean with respect to a Fixed Rate
Conversion Date, the average of the yield evaluations (on the basis of full
coupon securities trading at par with a term approximately equal to the Fixed
Rate Period) of securities (whether or not actually issued), the interest on
which is not included in gross income for federal income tax purposes, of no
fewer than ten Component Issuers selected by the Indexing Agent and which have a
long-term rating by a Rating Agency in the same rating category as the Bonds are
rated at the time by such Rating Agency or, if


                                      I-10




no such bonds are so rated, shall be debt which, in the judgment of the Indexing
Agent, is of credit quality comparable to that of the Bonds, computed by the
Indexing Agent on and as of the Fixed Rate Conversion Date. In the event that
the Indexing Agent fails to compute the Fixed Rate Index and no other qualified
municipal securities evaluation service can be appointed Indexing Agent by the
Authority, the Fixed Rate Index shall be determined by the Remarketing Agent and
shall be 90% of the average yield shown for the most recent calendar month for
United States Treasury notes or bonds having the same number of years to
maturity as the number of 12-month periods (or months if the Fixed Rate Period
is less than one year) in the Fixed Rate Period, as published in the Federal
Reserve Bulletin in the last issue before the Fixed Rate Conversion Date. If
that issue does not contain such a yield, the Fixed Rate Index will be
determined by linear interpolation between the yields shown in that issue for
United States Treasury notes and bonds having the next shorter and next longer
number of years (or months) to maturity. In addition, at the request of the
Company and upon delivery to the Trustee of an Opinion of Bond Counsel that such
action will not adversely affect the exclusion of interest on the Bonds from
gross income of the owners thereof for federal income tax purposes, the
Authority, with the consent of the Company, may designate a new method of
setting the Fixed Rate Index in the event any of the above-described methods are
determined by the Authority to be unavailable, impracticable or unrealistic in
the market place.

                  "FIXED RATE PERIOD" shall mean any period during which Bonds
bear interest at a Fixed Rate, which period shall commence on the effective date
of a Change in the Interest Rate Mode to a Fixed Rate, and shall extend through
the day immediately preceding the earlier of (a) the effective date of another
Change in the Interest Rate Mode, or (b) the Stated Maturity.

                  "FIXED RATE RECORD DATE" shall mean, with respect to each
Interest Payment Date during a Fixed Rate Period, the fifteenth day of the month
next preceding such Interest Payment Date, or, if such day shall not be a
Business Day, the next preceding Business Day.

                  "GOVERNMENTAL OBLIGATIONS" shall mean any of the following
which are non- callable:

                  (a) direct general obligations of, or obligations the payment
         of the principal of and interest on which is unconditionally guaranteed
         by, the United States of America; and

                  (b) bonds, debentures or notes issued by Government National
         Mortgage Association, Federal Financing Bank, Federal Farm Credit Bank,
         Federal Land Bank, Federal Home Loan Bank, Farmers Home Administration,
         Federal Home Mortgage Association or any other comparable federal
         agency hereafter created to the extent that said obligations are
         unconditionally guaranteed by the United States of America.

                  "HOLD ORDER" shall mean with respect to the Auction Rate
Bonds, Hold Order as defined in Section 3.06.

                  "INDENTURE" shall mean this Trust Indenture dated as of
November 1, 2001 between the Authority and the Trustee, as the same may be
amended or supplemented.


                                      I-11



                  "INDEXING AGENT" shall mean the Indexing Agent appointed in
accordance with Section 11.24.

                  "INTEREST PAYMENT DATE" shall mean:

                  (a) during each Commercial Paper Rate Period, the Business Day
         immediately succeeding the last day of any Calculation Period;

                  (b) during an Auction Rate Period (i) for an Auction Period of
         91 days or less, the Business Day immediately succeeding such Auction
         Period and (ii) for an Auction Period of more than 91 days, each 13th
         Thursday after the first day of such Auction Period or the next
         Business Day if such Thursday is not a Business Day, and the Business
         Day immediately succeeding the last day of each such Auction Period;

                  (c) during each Daily Rate Period, the first Business Day of
         each month thereof;

                  (d) (i) during each Weekly Rate Period, the first Business Day
         of each month thereof;

                  (e) during each Monthly Rate Period, the first Business Day of
         each month thereof;

                  (f) during each Semi-annual Rate Period, (i) the first
         Business Day of the sixth calendar month following the month in which
         the first day of such Semi-annual Rate Period occurred, (ii) each
         anniversary of the date so determined, and (iii) each anniversary of
         the first day of the first month of such Semi-annual Rate Period;

                  (g) during each Term Rate Period, (i) the first Business Day
         of the sixth calendar month following the month in which the first day
         of such Term Rate Period occurred, (ii) each anniversary of the date so
         determined, (iii) each anniversary of the first day of the first month
         of such Term Rate Period, and (iv) the Business Day immediately
         succeeding such Term Rate Period;

                  (h) the April 1 or October 1 next succeeding a Fixed Rate
         Conversion Date and each April 1 and October 1 thereafter; provided,
         however, that if the April 1 or October 1 next succeeding a Fixed Rate
         Conversion Date occurs less than twenty-one (21) days after such Fixed
         Rate Conversion Date, the first Interest Payment Date shall be the
         second such date following such Fixed Rate Conversion Date;

                  (i) a Fixed Rate Conversion Date;

                  (j) any day on which Bonds are subject to mandatory tender for
         purchase pursuant to Section 5.04, 5.08 or 5.09 or redemption in whole
         pursuant to Section 5.01, 5.05, 5.06 or 5.07; and

                  (k) the Stated Maturity;


                                      I-12



provided, however, that if any such date determined in any of the foregoing
clauses is not a Business Day, the Interest Payment Date shall be the next
succeeding day which is a Business Day.

                  "INVESTMENT SECURITIES" shall mean any of the following which
at the time are legal investments under the laws of the State of New York for
the monies held hereunder:

                  (a) any obligation issued or guaranteed by, or backed by the
         full faith and credit of, the United States of America (including any
         certificates or any other evidence of an ownership interest in any such
         obligation or in specified portions thereof, which may consist of
         specified portions of the principal thereof or the interest thereon);

                  (b) deposit accounts in, or certificates of deposit issued by,
         and bankers acceptance of, any bank, trust company or national banking
         association which is a member of the Federal Reserve System (which may
         include the Trustee), having capital stock and surplus aggregating not
         less than $50,000,000;

                  (c) deposit accounts in, or certificates of deposit issued by
         and bankers acceptances of, any bank or trust company having capital
         stock and surplus aggregating not less than $50,000,000 and whose
         obligations are rated not less than "A" or equivalent by Moody's or
         S&P;

                  (d) obligations issued or guaranteed by any person controlled
         or supervised by and acting as an instrumentality of the United States
         of America pursuant to the authority granted by the Congress of the
         United States;

                  (e) commercial paper rated in the highest investment grade or
         next highest investment grade by Moody's or S&P;

                  (f) obligations rated not less than "A" or equivalent by
         Moody's or S&P issued or guaranteed by any state of the United States
         or the District of Columbia, or any political subdivision, agency or
         instrumentality of any such state or District, or issued by any
         corporation;

                  (g) obligations of a public housing authority fully secured by
         contracts with the United States;

                  (h) repurchase agreements with any bank or trust company
         organized under the laws of any state of the United States of America
         or any national banking association (including the Trustee) or any
         government bond dealer reporting to, trading with and recognized as a
         primary dealer by, the Federal Reserve Bank of New York with respect to
         any of the foregoing obligations or securities. Any repurchase
         agreement entered into pursuant to this Indenture shall, by its terms,
         permit the Trustee to sell the related obligations or securities if the
         other party to such repurchase agreement shall fail to repurchase
         promptly such obligation or security on the day required by the
         repurchase agreement. All such repurchase agreements shall also provide
         for the delivery of the related obligations or securities to the
         Trustee or a depositary of the Trustee;


                                      I-13




                  (i) money market or bond mutual funds, which funds have a
         composite investment grade rated not less than "A" or equivalent by
         Moody's or S&P; or

                  (j) investment agreements with any bank or trust company
         organized under the laws of any state of the United States of America
         or any national banking association (including the Trustee) or any
         governmental bond dealer reporting to, trading with and recognized as a
         primary dealer by, the Federal Reserve Bank of New York, which has, or
         the parent company of which has, long-term debt rated at least "A" or
         its equivalent by S&P or Moody's, with respect to any of the
         obligations or securities specified in (a), (d), (e), (f) and (g)
         above. Any investment agreement entered into pursuant to this Indenture
         shall, by its terms provide that (i) the invested funds are available
         for withdrawal without penalty or premium, at any time upon not more
         than seven days' prior notice (which notice may be amended or withdrawn
         at any time prior to the specified withdrawal date), and (ii) the
         investment agreement is the unconditional and general obligation of,
         and is not subordinated to any other obligation of, the provider
         thereof.

Any such Investment Securities may be held by the Trustee in book entry form,
whereby certificated securities are held by an independent custodian and the
Trustee is the beneficial owner of all or a portion of such certificated
securities.

                  "LIQUIDITY FACILITY" shall mean a Support Facility which
provides for the payments referred to in clause (i) of the definition thereof.

                  "LIQUIDITY FACILITY ISSUER" shall mean any bank or banks or
other financial institution or institutions, having issued any Liquidity
Facility.

                  "MARKET AGENT" shall mean the Remarketing Agent or Remarketing
Agents appointed pursuant to Section 11.14 to perform certain duties and
obligations hereunder while Bonds are in an Auction Rate Period.

                  "MARKET AGENT AGREEMENT" shall mean an agreement among the
Company and the Market Agents dated the Closing Date and any similar agreement
or agreements entered into between the Company and one or more successor Market
Agents, as from time to time amended, pursuant to which the applicable Market
Agent undertakes to perform its duties and obligations hereunder while Bonds are
in an Auction Rate Period.

                  "MAXIMUM ALLOWED RATE" shall mean as of any date 15% per
annum, or if lower, the rate specified as such in any Support Facility then in
effect, PROVIDED, HOWEVER, that such Maximum Allowed Rate shall not exceed the
maximum rate, if any, permitted by applicable law.

                  "MAXIMUM AUCTION RATE" shall mean on any date of determination
with respect to Auction Rate Bonds, the lesser of the Maximum Allowed Rate and
the following: (i) in all cases other than as provided in (ii) or (iii) below,
the interest rate per annum equal to the Applicable Percentage of the higher of
the After-Tax Equivalent Rate determined on such date with respect to a Standard
Auction Period and the BMA Index, (ii) with respect to any change in an Auction
Period and/or the Standard Auction Period pursuant to Section 3.04, including
any automatic reversion to


                                      I-14



a Standard Auction Period pursuant to Section 3.03, the interest rate per annum
equal to the highest of (a) the Applicable Percentage of the higher of the
After-Tax Equivalent Rate determined on such date with respect to a Standard
Auction Period, and the BMA Index, (b) the Applicable Percentage of the higher
of the After-Tax Equivalent Rate determined on such date with respect to the
Auction Period which is proposed to be established and the BMA Index, and (c)
the Applicable Percentage of the higher of the After-Tax Equivalent Rate
determined on such date with respect to the Auction Period in effect immediately
prior to such proposed change in the Auction Period and the BMA Index, or (iii)
with respect to any Change in the Interest Rate Mode from an Auction Rate
pursuant to Section 4.01 or any change from an Auction Rate to a Fixed Rate
pursuant to Section 4.02, the interest rate per annum equal to the higher of (a)
the Applicable Percentage of the higher of the After-Tax Equivalent Rate
determined on such date with respect to a Standard Auction Period and the BMA
Index, and (b) the Applicable Percentage of the higher of the After-Tax
Equivalent Rate determined on such date with respect to the Auction Period in
effect immediately prior to such proposed change and the BMA Index.

                  "MONTHLY PERIOD RECORD DATE" shall mean, with respect to each
Interest Payment Date during a Monthly Period, the Business Day next preceding
such Interest Payment Date.

                  "MONTHLY RATE" shall mean with respect to each Calculation
Period during a Monthly Rate Period, a rate of interest equal to the rate of
interest per annum established and certified to the Trustee (with a copy to the
Authority, the Registrar and Paying Agent, and the Company) by the Remarketing
Agent no later than 12:00 noon (New York City time) on and as of the
Determination Date as the minimum rate of interest per annum which, in the
opinion of the Remarketing Agent, would be necessary on and as of such day to
remarket Bonds in a secondary market transaction at a price equal to the
principal amount thereof; provided that such rate of interest shall not exceed
the lesser of 110% of the Monthly Rate Index on and as of such date and the
Maximum Allowed Rate.

                  "MONTHLY RATE INDEX" shall mean with respect to the
Determination Date of each Calculation Period during a Monthly Rate Period, the
average of 30-day yield evaluations at par, determined by the Indexing Agent, of
securities (whether or not actually issued), the interest on which is not
included in gross income for federal income tax purposes, of no fewer than ten
Component Issuers selected by the Indexing Agent, including issuers of
commercial paper, project notes, bond anticipation notes and tax anticipation
notes, computed by the Indexing Agent on and as of such day. If the Bonds are
rated by a Rating Agency in its highest note or commercial paper rating category
or one of its two highest long-term debt rating categories, each Component
Issuer must (a) have outstanding securities rated by a Rating Agency in its
highest note or commercial paper rating category or (b) not have outstanding
notes or commercial paper rated by a Rating Agency but have outstanding
securities rated by a Rating Agency in one of its two highest long- term debt
rating categories. If the Bonds are rated by a Rating Agency in a rating
category that is lower than its highest note or commercial paper rating category
or its two highest long-term debt rating categories (and the Bonds are not rated
in one of such categories by the other Rating Agency), each Component Issuer
must (a) have outstanding securities rated by a Rating Agency in its note or
commercial paper rating category which is the same or correlative, in the
Indexing Agent's judgment, to the note or commercial paper rating category or
the long-term debt rating category of the Bonds or (b) have outstanding
securities rated by a Rating Agency in the same long-term debt rating category
as the Bonds are rated by that Rating Agency and not have any outstanding notes
or

                                      I-15




commercial paper rated by such Rating Agency. The Indexing Agent may change the
Component Issuers from time to time in its discretion, subject to the foregoing
requirements. In addition, at the request of the Company and upon delivery to
the Trustee of an Opinion of Bond Counsel that such action will not adversely
affect the exclusion of interest on the Bonds from gross income of the owners
thereof for federal income tax purposes, the Authority, with the consent of the
Company, may designate a new method of setting the Monthly Rate Index in the
event any of the above-described methods are determined by the Authority to be
unavailable, impracticable or unrealistic in the market place.

                  "MONTHLY RATE PERIOD" shall mean any period during which Bonds
bear interest at a Monthly Rate which period shall commence with the effective
date of the Change in the Interest Rate Mode to a Monthly Rate and shall extend
through the day immediately preceding the earlier of (a) the effective date of
another Change in the Interest Rate Mode or (b) the Stated Maturity.

                  "MOODY'S" shall mean Moody's Investors Service, Inc., a
corporation organized and existing under the laws of the State of Delaware and
its successor or successors, and if such corporation shall for any reason no
longer perform the functions of a securities rating agency or if Moody's shall
be replaced, subject to the definition of "prevailing rating" in the definition
of Applicable Percentage, by some other nationally recognized rating agency by
the Authority at the request of the Company, "Moody's" shall be deemed to refer
to such other nationally recognized rating agency designated by the Authority at
the request of the Company.

                  "NO AUCTION PERCENTAGE" shall mean on any date of
determination with respect to Auction Rate Bonds, the percentage determined as
set forth below (as such percentage may be adjusted for Auction Rate Bonds
pursuant to Section 3.10) based on the prevailing long-term rating of the
Auction Rate Bonds in effect at the close of business on the Business Day
immediately preceding such date of determination:

                                             No Auction
                Prevailing Rating            Percentage
                -----------------            ----------

                AAA/"Aaa"                       100%
                AA/"Aa"                         125%
                A/"A"                           150%
                BBB/"Baa"                       175%
                Below BBB/"Baa"                 200%

                  For purposes of this definition, the "prevailing rating" of
the Auction Rate Bonds will be (a) AAA/"Aaa," if the Auction Rate Bonds have a
rating of AAA or better by S&P and a rating of "Aaa" or better by Moody's, or
the equivalent of such ratings by a substitute rating agency or agencies
selected as provided below, (b) if not AAA/"Aaa," then AA/"Aa" if the Auction
Rate Bonds have a rating of AA- or better by S&P and a rating of "Aa3" or better
by Moody's, or the equivalent of such ratings by a substitute rating agency or
agencies selected as provided below, (c) if not AAA/"Aaa" or AA/"Aa," then A/"A"
if the Auction Rate Bonds have a rating of A- or better by S&P and a rating of
"A3" or better by Moody's, or the equivalent of such ratings by a substitute
rating agency or agencies selected as provided below, (d) if not AAA/"Aaa,"
AA/"Aa" or A/"A," then


                                      I-16



BBB/"Baa," if the Auction Rate Bonds have a rating of BBB- or better by S&P and
a rating of "Baa3" or better by Moody's, or the equivalent of such ratings by a
substitute rating agency or agencies selected as provided below, and (e) if not
AAA/"Aaa," AA/"Aa", A/"A" or BBB/"Baa," then below BBB/"Baa," whether or not the
Auction Rate Bonds are rated by any securities rating agency.

                  If (x) the Auction Rate Bonds are rated by a rating agency or
agencies other than Moody's or S&P and (y) the Company has delivered on behalf
of the Authority to the Trustee and the Auction Agent an instrument designating
one or two of such rating agencies to replace Moody's or S&P, or both, then for
purposes of the definition of "prevailing rating" Moody's or S&P, or both, will
be deemed to have been replaced in accordance with such instrument; provided,
however, that such instrument must be accompanied by the consent of the Market
Agent. For purposes of this definition, S&P's rating categories of AAA, AA-, A-
and BBB-, and Moody's rating categories of "Aaa," "Aa3," "A3" and "Baa3," refer
to and include the respective rating categories correlative thereto in the event
that either or both of such rating agencies have changed or modified their
generic rating categories. If the prevailing ratings for the Bonds are split
between the categories set forth above, the lower rating will determine the
prevailing rating.

                  "NO AUCTION RATE" shall mean on any date of determination with
respect to Auction Rate Bonds, the lesser of the Maximum Allowed Rate and the
interest rate per annum equal to the No Auction Percentage of the higher of the
After-Tax Equivalent Rate determined on such date with respect to a Standard
Auction Period and the BMA Index.

                  "NOTE" shall mean the promissory note of the Company executed
by the Company and delivered to the Trustee, to evidence the obligations of the
Company to repay the loan to be made by the Authority pursuant to the
Participation Agreement.

                  "NOTE PAYMENTS" shall mean the portion of the Payments
required to be made pursuant to Section 4.02 of the Participation Agreement and
the Note to be applied to the payment of principal of, premium, if any, and
interest on the Bonds.

                  "NOTICE OF ELECTION TO TENDER" shall mean the notice given by
a Holder of Bonds pursuant to Section 5.03.

                  "OPINION OF BOND COUNSEL" shall mean a written opinion of Bond
Counsel.

                  "OPTION TO CONVERT" shall mean the Authority's right and
option to convert the rate of interest payable on the Bonds from an Adjustable
Rate to a Fixed Rate as provided in Section 4.02.

                  "ORDER" shall mean with respect to Auction Rate Bonds, an
Order as defined in Section 3.06.

                  "OUTSTANDING", whether appearing in upper or lower case, when
used with respect to any Bond shall mean, as of any date, any Bond theretofore
or thereupon being authenticated and delivered pursuant to this Indenture,
except:


                                      I-17



                  1. a Bond cancelled by the Trustee or delivered to the Trustee
         for cancellation at or prior to such date;

                  2. a Bond in lieu of or in substitution for which another Bond
         shall have been issued under Sections 5.10, 5.11, 7.03 , 7.04 or 7.05;
         and

                  3. a Bond or portion thereof deemed to have been paid in
         accordance with Section 15.01;

provided, however, that with respect to Auction Rate Bonds for the purposes of
the Auction Procedures on any Auction Date, Auction Rate Bonds as to which the
Company or any person known to the Auction Agent to be an Affiliate of the
Company is the Existing Holder thereof shall be disregarded and deemed not to be
Outstanding.

                  "OVERDUE RATE" shall mean on any date of determination 265% of
the higher of the After-Tax Equivalent Rate determined on such date with respect
to a Standard Auction Period and the BMA Index on such date of determination;
provided that in no event shall the Overdue Rate exceed the Maximum Allowed
Rate.

                  "PARTICIPATION AGREEMENT" shall mean the Participation
Agreement dated as of the date hereof, between the Authority and the Company, as
amended and supplemented by Supplemental Participation Agreements from time to
time.

                  "PAYMENTS" shall mean collectively the Note Payments and the
Additional Payments.

                  "PAYMENT DEFAULT" shall mean the receipt by the Auction Agent
of a notice from the Trustee of (i) failure to make payments of principal of and
premium, if any, or interest on any Bond when the same shall become due and
payable and (ii) the occurrence of a default by the Bond Insurer under the
Policy.

                  "POLICY" shall mean a Credit Facility issued by the Bond
Insurer on the Closing Date in the form of a financial guaranty insurance policy
insuring the regularly scheduled payments of principal of and interest on the
Bonds.

                  "POTENTIAL HOLDER" shall mean a person, including any Existing
Holder, who may be interested in acquiring a beneficial interest in Auction Rate
Bonds in addition to Auction Rate Bonds currently owned by such person, if any.

                  "PRINCIPAL CORPORATE TRUST OFFICE" shall mean the office of
the Trustee at which at any particular time its corporate trust business shall
be principally administered, which office at the date hereof is located at 101
Barclay Street - 8W, New York, New York 10286.

                  "PROJECT" shall mean any acquisition, purchase, construction,
reconstruction, improvement, betterment, extension and equipping, as described
in Exhibit A and Exhibit B to the Participation Agreement as the same may be
revised from time to time to reflect any changes or


                                      I-18




substitutions therein, additions thereto, or deletions therefrom permitted by
the Participation Agreement.

                  "PROJECT FUND" shall mean the special trust fund designated as
"Consolidated Edison Company of New York, Inc. Series 2001B Project Fund"
created and established under, and to be held and administered by the Trustee as
provided in, Section 8.01.

                  "PURCHASE PRICE" shall mean the purchase price of Bonds
tendered or deemed tendered for purchase pursuant to Section 5.03, 5.04, 5.08 or
5.09, consisting of the principal amount of such Bonds together with any accrued
and unpaid interest plus, in the event Bonds bearing interest at a Term Rate or
a Fixed Rate are subject to tender for purchase pursuant to Section 5.04, any
premium which would have been required to be paid as part of redemption price on
any date on which such Bonds are subject to tender for purchase if such Bonds
were subject to optional redemption pursuant to Section 5.01 on such date. With
respect to Bonds tendered for purchase on an Interest Payment Date, Purchase
Price shall include any accrued interest on such Bonds which is not otherwise
being paid pursuant to Section 9.03(a).

                  "PURCHASER'S LETTER" shall mean a letter substantially in the
form required by the Auction Agency Agreement, addressed to, among others, the
Authority, the Auction Agent and a Broker-Dealer.

                  "RATE INDEX" means the Daily Rate Index, the Fixed Rate Index,
the Commercial Paper Rate Index, the Monthly Rate Index, the Semi-annual Rate
Index, the Term Rate Index, or the Weekly Rate Index.

                  "RATING AGENCY" means Moody's, if the Bonds are then rated by
Moody's, S&P, if the Bonds are then rated by S&P, and Fitch, if the Bonds are
then rated by Fitch.

                  "RATING CATEGORY" shall mean one of the generic rating
categories of a Rating Agency, without regard to any refinement or gradation of
such rating category by a numerical modifier, plus or minus sign, or otherwise.

                  "RECORD DATE", at any time, shall mean each Commercial Paper
Period Record Date during a Commercial Paper Rate Period, each Auction Rate
Bonds Period Record Date during an Auction Rate Period, each Daily Period Record
Date during a Daily Rate Period, each Weekly Period Record Date during a Weekly
Rate Period, each Monthly Period Record Date during a Monthly Rate Period, each
Semi-annual Period Record Date during a Semi-annual Rate Period, each Term
Period Record Date during a Term Rate Period and each Fixed Rate Record Date
during a Fixed Rate Period.

                  "REGISTRAR AND PAYING AGENT" shall mean The Bank of New York
in its separate capacity as Registrar and Paying Agent for the Bonds, or its
successors or assigns.

                  "REMARKETING AGENT" shall mean the Remarketing Agent or
Remarketing Agents appointed pursuant to Section 11.14, its or their successors
or assigns, including without limitation any Market Agent appointed in
connection with Auction Rate Bonds.


                                      I-19




                  "REMARKETING AGREEMENT" shall mean the Market Agent Agreement
among the Company and the Market Agents dated the Closing Date and any agreement
or agreements entered into between the Company and one or more successor
Remarketing Agents, as from time to time amended, including without limitation
any Market Agent Agreement, pursuant to which the applicable Remarketing Agent
undertakes to perform its duties and obligations hereunder during a period of
time specified in such agreement.

                  "REVENUES" shall mean and include all income, revenues and
monies derived by the Authority under the Participation Agreement and the Note
(except administrative compensation and indemnification payable under the
Participation Agreement), and, without limiting the generality of the foregoing,
shall include to the extent provided in this Indenture, earnings on the
investment of monies held under this Indenture and the proceeds of the sale of
any such investments. The term "Revenues" shall not include monies received as
proceeds from the sale of the Bonds or any other bonds, notes or evidences of
indebtedness or as grants or gifts.

                  "S&P" shall mean Standard & Poor's Ratings Services, a
division of The McGraw- Hill Companies and its successor or successors, and if
such corporation shall for any reason no longer perform the functions of a
securities rating agency or if S&P shall be replaced, subject to the definition
of "prevailing rating" in the definition of Applicable Percentage, by some other
nationally recognized rating agency by the Authority at the request of the
Company, "S&P" shall be deemed to refer to such other nationally recognized
rating agency designated by the Authority at the request of the Company.

                  "SECURITIES DEPOSITORY" shall mean The Depository Trust
Company and its successors and assigns or if (i) the then Securities Depository
resigns from its functions as depository of the Bonds or (ii) the Authority
discontinues use of the then Securities Depository pursuant to Section 2.03, any
other securities depository which agrees to follow the procedures required to be
followed by a Securities Depository in connection with the Bonds and which is
selected by the Authority, with the consent of the Company, the Trustee, the
Auction Agent and the Remarketing Agent pursuant to Section 2.03.

                  "SECURITIES EXCHANGE ACT" shall mean the Securities Exchange
Act of 1934, as amended.

                  "SELL ORDER" shall mean with respect to Auction Rate Bonds,
Sell Order as defined in Section 3.06.

                  "SEMI-ANNUAL PERIOD RECORD DATE" shall mean, with respect to
each Interest Payment Date during a Semi-annual Rate Period, the fifteenth day
of the calendar month next preceding such Interest Payment Date.

                  "SEMI-ANNUAL RATE" shall mean with respect to each Calculation
Period during a Semi-annual Rate Period, a rate of interest equal to the rate of
interest per annum established and certified to the Trustee (with a copy to the
Authority, the Registrar and Paying Agent and the Company) by the Remarketing
Agent no later than 12:00 noon (New York City time) on and as of the
Determination Date as the minimum rate of interest per annum which, in the
opinion of the

                                      I-20




Remarketing Agent, would be necessary on and as of such day to remarket Bonds in
a secondary market transaction at a price equal to the principal amount thereof;
provided that such rate of interest shall not exceed the lesser of 110% of the
Semi-annual Rate Index on and as of such date and the Maximum Allowed Rate.

                  "SEMI-ANNUAL RATE INDEX" shall mean with respect to the
Determination Date of each Calculation Period during a Semi-annual Rate Period,
the average of six-month yield evaluations at par, determined by the Indexing
Agent, of securities (whether or not actually issued), the interest on which is
not included in gross income for federal income tax purposes, of no fewer than
ten Component Issuers selected by the Indexing Agent, including issuers of
commercial paper, project notes, bond anticipation notes and tax anticipation
notes, computed by the Indexing Agent on and as of such day. If the Bonds are
rated by a Rating Agency in its highest note or commercial paper rating category
or one of its two highest long-term debt rating categories, each Component
Issuer must (a) have outstanding securities rated by a Rating Agency in its
highest note or commercial paper rating category or (b) not have outstanding
notes or commercial paper rated by a Rating Agency but have outstanding
securities rated by a Rating Agency in one of its two highest long-term debt
rating categories. If the Bonds are rated by a Rating Agency in a rating
category that is lower than its highest note or commercial paper rating category
or its two highest long-term debt rating categories (and the Bonds are not rated
in one of such categories by the other Rating Agency), each Component Issuer
must (a) have outstanding securities rated by a Rating Agency in its note or
commercial paper rating category which is the same or correlative, in the
Indexing Agent's judgment, to the note or commercial paper rating category or
the long-term debt rating category of the Bonds or the other debt obligations
supported by support facilities issued by the issuer of a Support Facility or
(b) have outstanding securities rated by a Rating Agency in the same long-term
debt rating category as the Bonds are rated by that Rating Agency and not have
any outstanding notes or commercial paper rated by such Rating Agency. The
Indexing Agent may change the Component Issuers from time to time in its
discretion, subject to the foregoing requirements. In addition, at the request
of the Company and upon delivery to the Trustee of an Opinion of Bond Counsel
that such action will not adversely affect the exclusion of interest on the
Bonds from gross income of the owners thereof for federal income tax purposes,
the Authority, with the consent of the Company, may designate a new method of
setting the Semi-annual Rate Index in the event any of the above-described
methods are determined by the Authority to be unavailable, impracticable or
unrealistic in the market place.

                  "SEMI-ANNUAL RATE PERIOD" shall mean any period during which
Bonds bear interest at a Semi-annual Rate, which period shall commence on the
effective date of a Change in the Interest Rate Mode to a Semi-annual Rate, and
shall extend through the day immediately preceding the earlier of (a) the
effective date of another Change in the Interest Rate Mode, or (b) the Stated
Maturity.

                  "STANDARD AUCTION PERIOD" initially shall mean an Auction
Period of 35 days, and after the establishment of a different Standard Auction
Period pursuant to Section 3.04, shall mean such different Standard Auction
Period.

                  "STATED MATURITY," with respect to each series of Bonds shall
mean October 1, 2036, provided that, subject to the next sentence, in any case
where the date of maturity of, or payment of


                                      I-21




premium on, interest on, or principal of, the Bonds or the date fixed for
redemption of any Bonds shall be on a day other than a Business Day, then
payment of interest, principal and premium, if any, need not be made on such
date but may be made (without additional interest) on the next succeeding
Business Day, with the same force and effect as if made on the date of maturity
or the date fixed for redemption. Notwithstanding anything in this Indenture to
the contrary, in no event shall the final maturity date of the Bonds extend
beyond 35 years from the Closing Date, and the length of any Auction Period
shall be reduced at the discretion of the Authority to the extent necessary to
ensure compliance with the provisions of this sentence.

                  "STATUTORY CORPORATE TAX RATE" shall mean as of any date of
determination the highest tax rate bracket (expressed in decimals) now or
hereafter applicable in each taxable year on the taxable income of every
corporation as set forth in Section 11 of the Code or any successor section
without regard to any minimum additional tax provision or provisions regarding
changes in rates during a taxable year, which on the date hereof is .35. Any
change in the Statutory Corporate Tax Rate shall be evidenced by a certificate
of the Company.

                  "SUBMISSION DEADLINE" shall mean 1:00 p.m., New York City
time, on any Auction Date or such other time on any such Auction Date by which
Broker-Dealers are required to submit Orders to the Auction Agent as specified
by the Auction Agent from time to time.

                  "SUBMITTED BID" shall mean with respect to Auction Rate Bonds,
Submitted Bid as defined in Section 3.08.

                  "SUBMITTED HOLD ORDER" shall mean with respect to Auction Rate
Bonds, Submitted Hold Order as defined in Section 3.08.

                  "SUBMITTED ORDER" shall mean with respect to Auction Rate
Bonds, Submitted Order as defined in Section 3.08.

                  "SUBMITTED SELL ORDER" shall mean with respect to Auction Rate
Bonds, Submitted Sell Order as defined in Section 3.08.

                  "SUBSTITUTE COMMERCIAL PAPER DEALERS" shall mean Merrill
Lynch, Pierce, Fenner & Smith Incorporated or any other commercial paper dealers
specified by the Authority at the request of the Company at the time of any
Change in the Interest Rate Mode to an Auction Rate or their respective
affiliates or successors, if any such person is a commercial paper dealer,
provided that none of such persons nor any of their affiliates or successors
shall be a Commercial Paper Dealer.

                  "SUBSTITUTE U.S. GOVERNMENT SECURITIES DEALER" shall mean
Merrill Lynch, Pierce, Fenner & Smith Incorporated or any other dealer or
dealers in U.S. government securities that may be specified by the Authority at
the request of the Company at the time of a Change in the Interest Rate Mode to
an Auction Rate, or their respective affiliates or successors, if any such
person is a dealer in U.S. government securities, provided that none of such
persons nor any of their affiliates or successors shall be a U.S. Government
Securities Dealer.


                                                       I-22




                  "SUFFICIENT CLEARING BIDS" shall mean with respect to Auction
Rate Bonds, Sufficient Clearing Bids as defined in Section 3.08.

                  "SUPPLEMENTAL INDENTURE" shall mean any indenture between the
Trustee and the Authority entered into pursuant to and in compliance with the
provisions of Article XIV hereof amending or supplementing the provisions of
this Indenture as originally executed or as theretofore amended or supplemented.

                  "SUPPLEMENTAL PARTICIPATION AGREEMENT" shall mean an agreement
supplementing or amending the Participation Agreement.

                  "SUPPORT FACILITY" shall mean any instrument satisfactory to
the Authority entered into or obtained in connection with the Bonds, such as a
letter of credit, committed line of credit, insurance policy, surety bond or
standby bond purchase agreement, or any combination of the foregoing, and issued
by a bank or banks, other financial institution or institutions, or any
combination of the foregoing which provides for the payment of (i) the Purchase
Price on Bonds tendered for purchase pursuant to the provisions hereof and the
Bond Purchase Trust Agreement and/or (ii) principal of and interest on all Bonds
coming due and payable during the term thereof.

                  "SUPPORT FACILITY ISSUER" shall mean any bank or banks, or
other financial institution or institutions which is the issuer of any Support
Facility.

                  "TAX REGULATORY AGREEMENT" shall mean the Tax Regulatory
Agreement, dated the Closing Date, between the Authority and the Company, and
any and all modifications, alterations, amendments and supplements thereto.

                  "TERM PERIOD RECORD DATE" shall mean, with respect to each
Interest Payment Date during a Term Rate Period, the fifteenth day of the month
next preceding such Interest Payment Date.

                  "TERM RATE" shall mean with respect to each Calculation Period
during a Term Rate Period, a rate of interest equal to the rate of interest per
annum established and certified to the Trustee (with a copy to the Authority,
the Registrar and Paying Agent and the Company) by the Remarketing Agent no
later than 12:00 noon (New York City time) on and as of the Determination Date
as the minimum rate of interest per annum which, in the opinion of the
Remarketing Agent, would be necessary on and as of such day to remarket such
Bonds in a secondary market transaction at a price equal to the principal amount
thereof; provided that such rate of interest shall not exceed the lesser of 110%
of the Term Rate Index on and as of such date and the Maximum Allowed Rate.

                  "TERM RATE INDEX" shall mean with respect to the Determination
Date of each Calculation Period during a Term Rate Period, the average of the
yield evaluations at par, determined by the Indexing Agent, of securities
(whether or not actually issued), having a term approximately equal to the Term
Rate Period or which are subject to optional or mandatory tender by the owner
thereof at the end of a term approximately equal to the Term Rate Period, the
interest on which is not included in gross income for federal income tax
purposes, of no fewer than ten Component Issuers selected by the Indexing Agent,
computed by the Indexing Agent on and as of such day. If the Bonds are rated by
a Rating Agency in one of its two highest long-term debt rating categories,


                                      I-23




each Component Issuer must have outstanding securities rated by a Rating Agency
in one of its two highest long-term debt rating categories. If the Bonds are
rated by a Rating Agency in a rating category that is lower than its two highest
long-term debt rating categories (and the Bonds are not rated in one of the two
highest such categories by the other Rating Agency), each Component Issuer must
have outstanding securities rated by a Rating Agency in the same long-term debt
rating category as the Bonds are rated by that Rating Agency. The Indexing Agent
may change the Component Issuers from time to time in its discretion, subject to
the foregoing requirements. In addition, at the request of the Company and upon
delivery to the Trustee of an Opinion of Bond Counsel that such action will not
adversely affect the exclusion of interest on the Bonds from gross income of the
owners thereof for federal income tax purposes, the Authority, with the consent
of the Company, may designate a new method of setting the Term Rate Index in the
event any of the above-described methods are determined by the Authority to be
unavailable, impracticable or unrealistic in the market place.

                  "TERM RATE PERIOD" shall mean any period during which Bonds
bear interest at a Term Rate which period shall commence with the effective date
of the Change in the Interest Rate Mode to a Term Rate and shall extend through
the day immediately preceding the earlier of (a) the effective date of another
Change in the Interest Rate Mode or (b) the Stated Maturity.

                  "TERMINATING EVENT" shall mean:

                  (a) Any event or events under the terms of a Support Facility
         or any agreement providing for the issuance of such Support Facility
         which would cause the termination of such Support Facility but would
         specifically allow for the mandatory tender of Bonds pursuant to
         Section 5.09 with a draw on or borrowing or payment under such Support
         Facility prior to such termination; or

                  (b) Receipt by the Trustee of written notice from the
         financial institution providing any Direct-Pay Credit Facility
         following a draw on or borrowing or payment under such Direct-Pay
         Credit Facility for payment of interest on the Bonds that the amount so
         drawn, borrowed or paid has not been reinstated in the amount of such
         drawing.

                  "TREASURY RATE" on any date, shall mean (i) the yield,
calculated in accordance with prevailing industry convention, of the rate on the
most recently auctioned direct obligations of the U.S. Government having a
maturity at the time of issuance of 364 days or less with a remaining maturity
closest to the length of such Auction Period, as quoted in The Wall Street
Journal on such date for the Business Day next preceding such date; or (ii) in
the event that any such rate is not published in The Wall Street Journal, then
the bond equivalent yield, calculated in accordance with prevailing industry
convention, as calculated by reference to the arithmetic average of the bid
price quotations of the most recently auctioned direct obligation of the U.S.
Government having a maturity at the time of issuance of 364 days or less with a
remaining maturity closest to the length of such Auction Period, based on bid
price quotations on such date obtained by the Auction Agent from a U.S.
Government Securities Dealer. If any U.S. Government Securities Dealer does not
quote a rate required to determine the Treasury Rate, the Treasury Rate shall be
determined on the basis of the quotation or quotations furnished by the
remaining U.S. Government Securities Dealer or Dealers and any Substitute U.S.
Government Securities Dealer or Dealers selected by the Authority at the


                                      I-24




request of the Company to provide such rate or rates not being supplied by any
U.S. Government Securities Dealer or U.S. Government Securities Dealers, as the
case may be, or, if the Authority does not select any such Substitute U.S.
Government Securities Dealer or Substitute U.S. Government Securities Dealers,
by the remaining U.S. Government Securities Dealer or U.S. Government Securities
Dealers.

                  "TRUST ESTATE" shall mean the meaning assigned to such term in
the first paragraph following the recitals herein.

                  "TRUSTEE" shall mean the corporation having trust powers
appointed by the Authority as Trustee hereunder and serving as such hereunder,
and any surviving, resulting or transferee corporation as provided in Section
11.13. References to principal office of the Trustee shall mean the Principal
Corporate Trust Office of the Trustee.

                  "U.S. GOVERNMENT" shall mean the federal government of the
United States of America.

                  "U.S. GOVERNMENT SECURITIES DEALERS" shall mean the Market
Agents for any Auction Rate Bonds, or, in lieu of any thereof, their respective
affiliates or successors, provided that any such entity is a U.S. Government
securities dealer.

                  "WEEKLY PERIOD RECORD DATE" shall mean, with respect to each
Interest Payment Date during a Weekly Rate Period, the Business Day next
preceding such Interest Payment Date.

                  "WEEKLY RATE" shall mean with respect to each Calculation
Period during a Weekly Rate Period, a rate of interest equal to the rate of
interest per annum established and certified to the Trustee (with a copy to the
Authority, the Registrar and Paying Agent and the Company) by the Remarketing
Agent no later than 12:00 noon (New York City time) on and as of the
Determination Date as the minimum rate of interest per annum which, in the
opinion of the Remarketing Agent, would be necessary on and as of such day to
remarket Bonds in a secondary market transaction at a price equal to the
principal amount thereof plus accrued interest thereon; provided that such rate
of interest shall not exceed the lesser of 110% of the Weekly Rate Index on and
as of such date and the Maximum Allowed Rate.

                  "WEEKLY RATE INDEX" shall mean with respect to the
Determination Date of each Calculation Period during a Weekly Rate Period, the
average of 30-day yield evaluations at par, determined by the Indexing Agent, of
securities (whether or not actually issued), the interest on which is not
included in gross income for federal income tax purposes, of no fewer than ten
Component Issuers selected by the Indexing Agent, including issuers of
commercial paper, project notes, bond anticipation notes and tax anticipation
notes, computed by the Indexing Agent on and as of such day. If the Bonds are
rated by a Rating Agency in its highest note or commercial paper rating category
or one of its two highest long-term debt rating categories, each Component
Issuer must (a) have outstanding securities rated by a Rating Agency in its
highest note or commercial paper rating category or (b) not have outstanding
notes or commercial paper rated by a Rating Agency but have outstanding
securities rated by a Rating Agency in one of its two highest long- term debt
rating categories. If the Bonds are rated by a Rating Agency in a rating
category that is lower


                                      I-25




than its highest note or commercial paper rating category or its two highest
long-term debt rating categories (and the Bonds are not rated in one of such
categories by the other Rating Agency), each Component Issuer must (a) have
outstanding securities rated by a Rating Agency in its note or commercial paper
rating category which is the same or correlative, in the Indexing Agent's
judgment, to the note or commercial paper rating category or the long-term debt
rating category of the Bonds or (b) have outstanding securities rated by a
Rating Agency in the same long-term debt rating category as the Bonds are rated
by that Rating Agency and not have any outstanding notes or commercial paper
rated by such Rating Agency. The Indexing Agent may change the Component Issuers
from time to time in its discretion, subject to the foregoing requirements. In
addition, at the request of the Company and upon delivery to the Trustee of an
Opinion of Bond Counsel that such action will not adversely affect the exclusion
of interest on the Bonds from gross income of the owners thereof for federal
income tax purposes, the Authority, with the consent of the Company, may
designate a new method of setting the Weekly Rate Index in the event any of the
above-described methods are determined by the Authority to be unavailable,
impracticable or unrealistic in the market place.

                  "WEEKLY RATE PERIOD" shall mean any period during which the
Bonds bear interest at a Weekly Rate; the first such period shall commence on
the effective date of a Change in the Interest Rate Mode to a Weekly Rate and
shall extend through the day immediately preceding the earlier of (a) the
effective date of a successive Change in the Interest Rate Mode or (b) the
Stated Maturity.

                  "WINNING BID RATE" shall mean with respect to Auction Rate
Bonds, Winning Bid Rate as defined in Section 3.08.

                  SECTION 1.02. DEFINITIONS OF GENERAL TERMS. Whenever in this
Indenture any governmental unit including the Authority or any official,
officer, director or department of a governmental unit, is defined or referred
to, such definition or reference shall be deemed to include the governmental
unit or official, officer, board, agency, commission, body or department
succeeding to or in whom or which is vested, the functions, rights, powers,
duties and obligations of such governmental unit, official, officer, director or
department, as the case may be, encompassed by this Indenture.

                  Unless the context shall clearly indicate otherwise or may
otherwise require, in this Indenture words importing persons include firms,
partnerships, associations, corporations (public and private), public bodies and
natural persons, and also include executors, administrators, trustees, receivers
or other representatives.

                  Unless the context shall clearly indicate otherwise or may
otherwise require computation on other than an annual basis, in this Indenture
whenever any interest rate or rate of interest is defined or referred to, such
rate shall be a rate per annum.

                  Unless the context shall clearly indicate otherwise or may
otherwise require, in this Indenture (not including in such term wherever used
in this paragraph any Supplemental Indenture): (i) references to articles,
sections and other subdivisions, whether by number or letter or otherwise, are
to the respective or corresponding articles, sections and subdivisions of this
Indenture, as such


                                      I-26



articles, sections or subdivisions may be amended from time to time; (ii) the
terms "herein," "hereunder," "hereby," "hereto," "hereof," and any similar
terms, refer to this Indenture and to this Indenture as a whole and not to any
particular article, section or subdivision hereof; and (iii) the word
"heretofore" means before the time of effectiveness of this Indenture; and the
word "hereafter" means after the time of effectiveness of this Indenture.


                                      I-27



                                   ARTICLE II

                             AUTHORIZATION OF BONDS

                  SECTION 2.01. LIMITATION ON ISSUANCE OF BONDS. No Bonds may be
issued under the provisions of this Indenture except in accordance with the
provisions of this Article.

                  SECTION 2.02. AUTHORIZATION OF BONDS. 1. There is hereby
created and established under this Indenture one issue of revenue bonds of the
Authority, limited to $98,000,000 in aggregate principal amount, of "Facilities
Revenue Bonds, Series 2001B (Consolidated Edison Company of New York, Inc.
Project)". In order to distinguish between Bonds which are subject to different
interest rate determination methods and other features and to distinguish the
portion of the Bonds to be offered or remarketed by any particular underwriter
or Remarketing Agent, the Bonds may be designated and redesignated from time to
time by the Authority in such a way as to identify one or more subseries of the
Bonds. Such subseries may be designated as subseries B-1, subseries B-2, or
subseries B-3, as the case may be, or may be further redesignated as subseries
B-1-1, subseries B-2-1, or subseries B-3-1, as the case may be, and so forth.
Each Bond shall bear upon the face thereof such designation or redesignation, if
any. In the event any series of Bonds is designated as one or more subseries,
all references to a series of the Bonds in this Indenture shall refer to each
such subseries unless the context otherwise requires. The Bonds, upon original
issuance, shall be issued in three separate subseries designated as "2001B-1" in
the principal amount of $33,000,000 (the "Series 2001B-1 Bonds"), "2001B-2" in
the principal amount of $33,000,000 (the "Series 2001B-2 Bonds") and "2001B-3"
in the principal amount of $32,000,000 (the "Series 2001B-3 Bonds").

                  2. The Bonds shall be secured by the Trust Estate. The lien,
pledge, charge and assignment of the Trust Estate created hereby shall be valid
and binding from the time of the effectiveness of this Indenture, as set forth
in Section 17.11, and the Note Payments made under the Note and the
Participation Agreement shall be immediately subject thereto upon receipt by the
Trustee.

                  3. The Bonds are limited obligations of the Authority payable
solely from payments to be made by the Company pursuant to the Note and the
Participation Agreement and the other monies, rights and properties pledged
hereunder including the proceeds of the Support Facility, if any, hereafter
obtained with respect thereto and secured by a pledge from the Authority to the
Trustee of the Participation Agreement and the Note. The Bonds shall not be a
debt of the State of New York, and the State of New York shall not be liable
thereon.

                  4. The covenants and agreements herein set forth to be
performed by the Authority shall be for the benefit, security and protection of
any Holder of the Bonds.

                  5. Neither the Trustee nor any Holder of the Bonds shall be
required to see that the monies derived from such Bonds are applied to the
purpose or purposes for which such Bonds are issued.


                                      II-1



                  6. The Bonds shall be issued under this Indenture for the
purpose of paying a portion of the redemption price of the Prior Bonds.

                  7. The Bonds bearing a Commercial Paper Rate, a Daily Rate, a
Weekly Rate or a Monthly Rate shall be fully registered Bonds in the
denomination of $100,000 or any integral multiple thereof. The Bonds bearing an
Auction Rate shall be fully registered Bonds in the denomination of $25,000 or
any integral multiple thereof. The Bonds bearing a Semi-annual Rate, a Term Rate
or a Fixed Rate shall be fully registered Bonds in the denomination of $5,000 or
any integral multiple thereof.

                  8. The Bonds shall be numbered consecutively from "2001B-
[insert "1, 2 or 3", as appropriate]-1" upwards as issued, or as otherwise
provided by the Registrar and Paying Agent. If the Bonds are redesignated to
identify one or more additional subseries, the Bonds shall be numbered in
accordance with their subseries designation. The Bonds shall mature on the
Stated Maturity.

                  9. The Bonds shall be initially issued in fully registered
form, without coupons, and dated their date of first authentication and
delivery.

                  10. Upon any Change in the Interest Rate Mode to an Auction
Rate for an Auction Rate Period, there shall be Outstanding an aggregate
principal amount of not less than $20,000,000 of Auction Rate Bonds and in the
applicable denominations set forth in Section 2.02.7.

                  SECTION 2.03. GLOBAL FORM; SECURITIES DEPOSITORY. 1. Except as
otherwise provided in this Section 2.03, the Bonds in the form of one separate
global bond for each subseries shall be registered in the name of the Securities
Depository or its nominee and ownership thereof shall be maintained in book
entry form by the Securities Depository for the account of the Agent Members
thereof.

                  Except as provided in subsections (3) and (4) of this Section
2.03, the Bonds of any subseries may be transferred, in whole but not in part,
only to the Securities Depository or a nominee of the Securities Depository, or
to a successor Securities Depository selected or approved by the Authority, with
the consent of the Company, the Trustee, the Auction Agent (if any) and the
Remarketing Agent for such subseries, or to a nominee of such successor
Securities Depository. Each global certificate for the Bonds shall bear a legend
substantially to the following effect: "Except as otherwise provided in Section
2.03 of the Indenture, this global bond may be transferred, in whole but not in
part, only to the Securities Depository as defined in the Indenture or a nominee
of the Securities Depository or to a successor Securities Depository or to a
nominee of a successor Securities Depository."

                  2. The Authority, the Company, the Trustee, the Registrar and
Paying Agent, the Auction Agent (if any) and the Remarketing Agent shall have no
responsibility or obligation with respect to:

                  (a) the accuracy of the records of the Securities Depository
         or any Agent Member with respect to any beneficial ownership interest
         in the Bonds;


                                      II-2




                  (b) the delivery to any Agent Member, beneficial owner of the
         Bonds or other person, other than the Securities Depository or its
         nominee as registered owner, of any notice with respect to the Bonds;

                  (c) the payment to any Agent Member, beneficial owner of the
         Bonds or other person, other than the Securities Depository or its
         nominee as registered owner, of any amount with respect to the
         principal or premium, if any, or interest on the Bonds;

                  (d) its acceptance of any consent given by the Securities
         Depository or other action taken by the Securities Depository as
         registered owner; or

                  (e) the selection by the Securities Depository or any Agent
         Members of any beneficial owners to receive payment in the event of a
         partial redemption of Bonds, except for the Trustee's obligations under
         Section 5.12.

So long as the certificates for the Bonds of any subseries issued under the
Indenture are not issued pursuant to subsection (4) of this Section 2.03, the
Authority, the Company, the Trustee, the Auction Agent (if any), the Remarketing
Agent and the Registrar and Paying Agent may treat the Securities Depository as,
and deem the Securities Depository to be, the absolute owner of such series or
subseries of Bonds for all purposes whatsoever, including without limitation:

                  (a) the payment of principal and premium, if any, and interest
         on such series or subseries of the Bonds;

                  (b) giving notices of redemption and other matters with
         respect to such series or subseries of the Bonds; and

                  (c) registering transfers with respect to such series or
         subseries of the Bonds.

                  Payment by the Trustee of principal or redemption price, if
any, of and premium, if any, and interest on such Bonds to or upon the order of
the Securities Depository or its nominee during any period when it is the
registered owner of such Bonds shall be valid and effective to satisfy and
discharge fully the Authority's obligation with respect to the amounts so paid.

                  3. (a) The Authority may discontinue the use of a Securities
         Depository for the Bonds at the time of a Change in the Interest Rate
         Mode.

                  (b) Registered ownership of the Bonds may be transferred on
         the registration books of the Authority maintained by the Registrar and
         Paying Agent and the Bonds may be delivered in physical form to the
         following: (i) any successor Securities Depository or its nominee; or
         (ii) any person, upon (A) the resignation of the Securities Depository
         or (B) the termination by the Authority of the use of the Securities
         Depository from its functions as depository as set forth in this
         section, or (C) upon any Change in the Interest Rate Mode to any
         Adjustable Rate other than an Auction Rate.


                                      II-3




                  (c) Upon any Change in the Interest Rate Mode to an Auction
         Rate, the Registrar and Paying Agent shall register the Auction Rate
         Bonds in the name of the Securities Depository or its nominee and on
         the effective date of such change provide the Company with a list of
         the Existing Holders of the Auction Rate Bonds.

                  4. If at any time the Securities Depository notifies the
Authority and the Company that it is unwilling or unable to continue as
Securities Depository with respect to the Bonds or if at any time the Securities
Depository shall no longer be registered or in good standing under the
Securities Exchange Act or other applicable statute or regulation and a
successor Securities Depository is not appointed by the Authority with the
consent of the Company, the Trustee, the Auction Agent (if any) and the
Remarketing Agent, within 90 days after the Authority and the Company receive
notice or become aware of such condition, as the case may be, this Section shall
no longer be applicable and the Authority shall execute and the Trustee shall
authenticate and deliver certificates representing the Bonds of such series or
subseries as provided below. In addition, the Authority may determine at any
time, at the request of the Remarketing Agent, that the Bonds shall no longer be
represented by global bonds and that the provisions of subsections (1) and (2)
above shall no longer apply to such series or subseries of Bonds. In any such
event the Authority shall execute and the Trustee shall authenticate and deliver
certificates representing the Bonds of such series or subseries as provided
below. Certificates for the Bonds of any series or subseries issued in exchange
for a global bond pursuant to this subsection shall be registered in such names
in authorized denominations as the Securities Depository, pursuant to
instructions from the Agent Members or otherwise, shall instruct the Authority
and the Trustee. The Trustee shall deliver such certificates representing the
Bonds of such series or subseries to the persons in whose names such Bonds are
so registered on the Business Day immediately preceding the first day of an
Auction Period (with respect to Auction Rate Bonds during any Auction Rate
Period), or the effective date of a Change in the Interest Rate Mode (with
respect to any other Change in the Interest Rate Mode), as the case may be.

                  5. The Authority and the Trustee are hereby authorized to
enter into any arrangements determined necessary or desirable with any
Securities Depository in order to effectuate this Section and both of them shall
act in accordance with this Indenture and any such agreement. Without limiting
the generality of the foregoing, any such arrangements may alter the manner of
effecting delivery of Bonds and the transfer of funds for the payment of Bonds
to the Securities Depository.

                  SECTION 2.04. LIMITATIONS ON TRANSFER. So long as the
ownership of the Auction Rate Bonds is maintained in book-entry form by the
Securities Depository, a beneficial owner or an Existing Holder may sell,
transfer or otherwise dispose of Auction Rate Bonds only pursuant to a Bid or
Sell Order placed in an Auction or to a Broker-Dealer, PROVIDED, HOWEVER, that
(a) sale, transfer or other disposition of Auction Rate Bonds from a customer of
a Broker- Dealer who is listed on the records of that Broker-Dealer as the
holder of such Auction Rate Bonds to that Broker-Dealer or another customer of
that Broker-Dealer shall not be deemed to be a sale, transfer or other
disposition for purposes of this Section 2.04 if such Broker-Dealer remains the
Existing Holder of the Auction Rate Bonds so sold, transferred or disposed of
immediately after such sale, transfer or disposition and (b) in the case of all
transfers other than pursuant to Auctions such Broker-Dealer to whom such
transfer is made shall advise the Auction Agent of such transfer.


                                      II-4




                  SECTION 2.05. APPLICATION OF BOND PROCEEDS. The proceeds of
sale of the Bonds shall be deposited with the Trustee for deposit in the Project
Fund to be paid out in accordance with Section 8.01.

                  SECTION 2.06. DELIVERY OF THE BONDS. The Bonds shall be
executed by the Authority substantially in the form prescribed by Section 16.01
and in the manner herein set forth and shall be deposited with the Trustee for
authentication, but before the Bonds shall initially be delivered by the
Trustee, there shall be filed with the Trustee the following:

                  (a) an order executed by an Authorized Officer directing the
         authentication and delivery of the Bonds to or upon the order of the
         Securities Depository or its nominee, upon payment to the Trustee of
         the purchase price therein set forth;

                  (b) a fully executed counterpart of this Indenture;

                  (c) a fully executed counterpart of the Participation
         Agreement;

                  (d) a fully executed counterpart of the Market Agent
         Agreement;

                  (e) the fully executed Policy;

                  (f) the fully executed Note;

                  (g) a fully executed counterpart of the Bond Purchase Trust
         Agreement;

                  (h) a fully executed counterpart of the Tax Regulatory
         Agreement;

                  (i) an opinion of Counsel to the Company, addressed to the
         Underwriters (as defined in the Bond Purchase Agreement), with reliance
         letter addressed to the Authority, the Trustee and the Bond Insurer,
         substantially to the effect, and dated as, required by Section
         7(d)(9)(ii) of the Bond Purchase Agreement;

                  (j) opinion of counsel to the Bond Insurer, addressed to the
         Authority, the Company, substantially to the effect required by Section
         7(d)(9)(iv) of the Bond Purchase Agreement;

                  (k) Opinion of Bond Counsel to the Authority and the Trustee
         (i) as to the validity of the Bonds and (ii) that all conditions
         precedent to the issuance of the Bonds have been met.

                  When the documents mentioned in clauses (a) to (k), inclusive,
of this Section shall have been filed with the Trustee, and when the Bonds shall
have been executed and authenticated as required by this Indenture, the Trustee
shall deliver the Bonds to the Securities Depository, but only upon payment to
the Trustee of the purchase price of the Bonds specified in said order.


                                      II-5




                                   ARTICLE III

                                INTEREST ON BONDS

                  SECTION 3.01. INTEREST ON BONDS-GENERAL. 1. Interest accruing
on Bonds bearing interest at a Commercial Paper Rate, a Daily Rate, a Weekly
Rate, a Monthly Rate or a Semi-annual Rate, shall be computed on the basis of a
365 or 366-day year, as applicable, for the number of days actually elapsed.
Interest accruing on Bonds bearing interest at a Term Rate or a Fixed Rate shall
be computed on the basis of a 360-day year, consisting of twelve (12) thirty
(30) day months. Interest accruing on Bonds bearing interest at an Auction Rate
during an Auction Period of 180 days or less shall be computed on the basis of a
360-day year for the number of days actually elapsed. Interest accruing on Bonds
bearing interest at an Auction Rate during an Auction Period of over 180 days
shall be computed on the basis of a 360-day year, consisting of twelve (12)
thirty (30) day months. Bonds shall bear interest from the date of issuance
thereof payable in arrears on each Interest Payment Date. The Bonds issued upon
registration of transfers or exchanges of Bonds shall bear interest from the
Interest Payment Date next preceding their date of authentication, unless the
date of authentication is an Interest Payment Date in which case such Bonds
shall bear interest from such date, or unless the date of authentication is
after the Record Date next preceding the next succeeding Interest Payment Date,
in which case such Bonds shall bear interest from such next succeeding Interest
Payment Date.

                  2. The Bonds shall initially bear interest at an Auction Rate.
From and after any Change in the Interest Rate Mode pursuant to Section 4.01 or
4.02, the Bonds with respect to which such change is effective shall bear
interest determined in accordance with the provisions of this Indenture
pertaining to the new Adjustable Rate or the Fixed Rate, as the case may be.
Bonds shall bear interest for each Calculation Period, Auction Period or Fixed
Rate Period, as the case may be, at the rate of interest per annum for such
Calculation Period, Auction Period or Fixed Rate Period established in
accordance with this Indenture. Interest shall be payable on each Interest
Payment Date by check mailed to the registered owner at his or her address as it
appears on the registration books kept by the Registrar and Paying Agent
pursuant to the Indenture at the close of business on the applicable Record
Date; provided, that (i) while the Securities Depository is the registered owner
of the Bonds, all payments of principal of, premium, if any, and interest on the
Bonds shall be paid to the Securities Depository or its nominee by wire
transfer, (ii) prior to and including a Fixed Rate Conversion Date, interest on
the Bonds shall be payable to any registered owner of at least one million
dollars ($1,000,000) in aggregate principal amount of Bonds by wire transfer,
upon written notice received by the Registrar and Paying Agent at least five
days prior to the applicable Record Date, from such registered owner containing
the wire transfer address (which shall be in the continental United States) to
which such registered owner wishes to have such wire directed and (iii) during a
Commercial Paper Rate Period, interest shall be payable on the Bonds only upon
presentation and surrender thereof to the Registrar and Paying Agent upon
purchase thereof pursuant to Section 5.03 and if such presentation and surrender
is made by 2:00 p.m. (New York City time) such payment shall be by wire
transfer. If and to the extent that there shall be a default in the payment of
the interest due on any Interest Payment Date, such interest shall cease to be
payable to the person in whose name each Bond of such series was registered on
such applicable Record Date and shall be payable, when and if paid to the person
in whose name each Bond of such series is registered at the close of business on
the record date fixed therefor by the Trustee, which shall be the


                                      III-1




fifth Business Day next preceding the date of the proposed payment. Except as
provided above, payment of the principal of and premium, if any, on all Bonds
shall be made upon the presentation and surrender of such Bonds at the principal
office of the Registrar and Paying Agent as the same shall become due and
payable. The principal of and premium, if any, and interest on the Bonds shall
be payable in lawful money of the United States of America.

                  3. Not less than one Business Day prior to each Computation
Date and two Business Days prior to a Fixed Rate Conversion Date, the Indexing
Agent shall establish and provide to the Remarketing Agent the related rate
index as set forth in the definition of such rate index in Section 1.01;
provided that, for each Calculation Period during a Daily Rate Period, the
Indexing Agent shall establish and provide the related rate index to the
Remarketing Agent on each Determination Date; and provided further that, for
each Calculation Period during a Monthly Rate Period, the Indexing Agent shall
establish and provide the related rate index to the Remarketing Agent not later
than each Computation Date. Notwithstanding the foregoing, in the event that the
Remarketing Agent, in its sole judgment, shall determine on a Determination Date
that any Daily Rate Index, Weekly Rate Index or any Commercial Paper Rate Index
so established is sufficiently non-representative of current market conditions
that the Bonds may not be remarketed at par if such rate is set at a rate not
greater than 110% of the applicable rate index, the Remarketing Agent may
establish a new rate index on a Determination Date in accordance with the
procedures and standards described in the definition of such rate index and for
purposes of such rate index so established, all references to Indexing Agent in
this Indenture shall be deemed to refer to the Remarketing Agent. On any date
when any Weekly Rate Index or any Commercial Paper Rate Index is established by
the Remarketing Agent pursuant to this paragraph, such rate index shall have the
respective meaning set forth in Section 1.01 (except as otherwise provided in
the preceding sentence); provided that for any Commercial Paper Rate Index, the
Remarketing Agent shall select securities (whether or not actually issued)
having a term approximately equal to the applicable Commercial Paper Rate Period
or which are subject to optional or mandatory tender by the owner thereof at the
end of a term approximately equal to (or as close thereto as is practicably
available) the applicable Commercial Paper Rate Period.

                  4. By 12:00 noon (New York City time) on each Determination
Date or by 3:00 p.m. (New York City time) on each Auction Date, as the case may
be, the Remarketing Agent or the Auction Agent, as the case may be, shall make
available to the Authority, the Trustee, the Registrar and Paying Agent, any
issuer of a Support Facility, the Company, any Broker-Dealer or any registered
owner of a Bond the interest rate or rates determined on such Determination Date
or Auction Date.

                  5. If for any reason on any Determination Date (A) any rate of
interest for a Calculation Period is not determined by the Remarketing Agent,
(B) no Remarketing Agent is serving as such hereunder or (C) the rate so
determined is held to be invalid or unenforceable by a final judgment of a court
of competent jurisdiction, (i) during any Daily Rate Period, the interest rate
for the next succeeding Calculation Period shall be the last interest rate in
effect, or, if a Daily Rate is not determined by the Remarketing Agent hereunder
for five or more consecutive Business Days on the next and each succeeding
Determination Date, the Daily Rate shall be a rate per annum equal to 80% of the
latest 30-day dealer taxable commercial paper rate published by the Federal
Reserve Bank of New York on or immediately before such Determination Date, (ii)
during any Weekly Rate

                                      III-2




Period, the interest rate for the next succeeding Calculation Period shall be
the last interest rate in effect, or, if a Weekly Rate is not determined by the
Remarketing Agent for two or more consecutive Calculation Periods, the Weekly
Rate shall be equal to 85% of the latest 30-day dealer taxable commercial paper
rate published by the Federal Reserve Bank of New York on or before the day next
preceding such Determination Date, (iii) during any Monthly Rate, Semi-annual
Rate or Term Rate Period, the interest rate per annum for the next succeeding
Calculation Period shall be equal to 85% of the rate listed in the table most
recently circulated by the United States Treasury Department known as "Table
[applicable dates shown on the most recent Table], Maximum Interest Rate Payable
on United States Treasury Certificates of Indebtedness, Notes and Bonds-State
and Local Government Series Subscribed for During Period [applicable dates shown
on the most recent Table]" or any substantially equivalent table circulated by
the United States Treasury Department for the maturity most closely
approximating the Calculation Period, and (iv) during any Commercial Paper Rate
Period, the next succeeding Calculation Period shall be a Calculation Period
which shall consist of the period from and including the prior Interest Payment
Date to but excluding the first Business Day of the following calendar month and
the Commercial Paper Rate shall be equal to 85% of the interest rate applicable
to 90-day United States Treasury Bills determined on the basis of the average
per annum discount rate at which such 90-day Treasury Bills shall have been sold
at the most recent Treasury auction within the 30 days next preceding such
Calculation Period, or if there shall have been no such auction within the 30
days next preceding such Calculation Period, the Commercial Paper Rate shall be
equal to the rate of interest borne by such Bond during the next preceding
Calculation Period for such Bond. The rate of interest or Calculation Period and
related Commercial Paper Rate shall be established pursuant to this subsection 5
until the Remarketing Agent again determines the rates of interest or
Calculation Periods and related Commercial Paper Rates in accordance with this
Indenture. The Trustee shall, upon the direction of the Company, select any
person otherwise meeting the qualifications of Section 11.14 to obtain,
calculate and prepare any of the information required by this subsection 5.

                  6. The determination of any rate of interest by the
Remarketing Agent in accordance with this Indenture or by the Auction Agent in
accordance with the Auction Procedures applicable to Auction Rate Bonds, or the
establishment of Calculation Periods or Auction Periods by the Remarketing Agent
as provided in this Indenture shall be conclusive and binding upon the
Authority, the Company, the Trustee, the Registrar and Paying Agent, the
Remarketing Agent, the Auction Agent, any issuer of a Support Facility, all
Broker-Dealers and the registered or beneficial owners of the Bonds. Failure of
the Remarketing Agent, the Trustee, the Registrar and Paying Agent, the Auction
Agent or the Securities Depository or any Securities Depository participant to
give any of the notices described in this Indenture, or any defect therein,
shall not affect the interest rate to be borne by any of the Bonds nor the
applicable Calculation Period or Auction Period nor in any way change the rights
of the registered owners of the Bonds to tender their Bonds for purchase or to
have them redeemed in accordance with this Indenture.

                  7. No transfer or exchange of Bonds shall be required to be
made by the Registrar and Paying Agent after a Record Date until the next
succeeding Interest Payment Date.

                  8. Except as otherwise provided in this subsection 8, the
Trustee shall calculate and notify the Registrar and Paying Agent of the amount
of interest due and payable on each Interest Payment Date or date on which a
Bond is subject to purchase by 10:00 a.m. on the Business Day


                                      III-3




next preceding such Interest Payment Date or date set for purchase, as the case
may be, unless such date is a date on which the interest rate is determined, in
which case the amount of interest due and payable shall be calculated by 12:15
p.m. on such date. In preparing such calculation the Trustee may conclusively
rely on calculations or other services provided by the Auction Agent, the
Remarketing Agent, the Company or any person or persons selected by the Trustee
in its discretion. During a Commercial Paper Rate Period, the Remarketing Agent
shall notify the Trustee, the Registrar and Paying Agent and the Company of the
amount of interest due and payable on each Interest Payment Date by 10:00 a.m.
on the Business Day next preceding such Interest Payment Date.

                  9. Anything herein to the contrary notwithstanding, in no
event shall the interest rate borne by any Bond exceed the Maximum Allowed Rate.

                  SECTION 3.02. COMMERCIAL PAPER RATE. 1. During any Commercial
Paper Rate Period, at or prior to 12:00 noon (New York City time) on each
Determination Date, the Remarketing Agent shall establish Calculation Periods
and related Commercial Paper Rates. In determining Calculation Periods, the
Remarketing Agent shall take the following factors into account: (i) existing
short-term taxable and tax-exempt market rates and indices of such short-term
rates, (ii) the existing market supply and demand for short-term tax-exempt
securities, (iii) existing yield curves for short-term and long-term tax-exempt
securities or obligations having a credit rating that is comparable to the
Bonds, (iv) general economic conditions, (v) economic and financial factors
present in the securities industry that may affect or that may be relevant to
the Bonds and (vi) any information available to the Remarketing Agent pertaining
to the Company regarding any events or anticipated events which could have a
direct impact on the marketability of or interest rates on the Bonds. The
Remarketing Agent shall select the Calculation Periods and the applicable
Commercial Paper Rates that, together with all other Calculation Periods and
related Commercial Paper Rates, in the sole judgment of the Remarketing Agent,
will result in the lowest overall borrowing cost on the Bonds or are otherwise
in the best financial interests of the Company, as determined in consultation
with the Company. Any Calculation Period established hereunder may not extend
beyond the second Business Day next preceding the expiration date of the Support
Facility or the day prior to the Stated Maturity.

                  2. The Authority, at the request of the Company, may place
such limitations upon the establishment of Calculation Periods pursuant to
subsection 1 hereof as may be set forth in a written direction from the
Authority, which direction must be received by the Trustee and the Remarketing
Agent prior to 10:00 a.m. (New York City time) on the day prior to any
Determination Date to be effective on such date, but only if the Trustee
receives an Opinion of Bond Counsel to the effect that such action is authorized
by this Indenture, is permitted under the Act and will not have an adverse
effect on the exclusion of interest on the Bonds from gross income for federal
income tax purposes.

                  SECTION 3.03. AUCTION RATE PERIOD - AUCTION RATE: AUCTION
PERIOD - GENERAL. 1. During any Auction Rate Period, the Auction Rate Bonds
shall bear interest at the Auction Rate determined as set forth in this Section
3.03 and Sections 3.04 through 3.10. The initial Auction Period for each
subseries of the Bonds immediately after the Closing Date shall be a period from
and including the Closing Date to and including the initial Auction Date for
each such subseries. The initial Auction Date immediately after the Closing Date
shall be December 5, 2001 in the case of the


                                      III-4




Series 2001B-1 Bonds, December 12, 2001 in the case of the Series 2001B-2 Bonds
and December 19, 2001 in the case of the Series 2001B-3 Bonds. The Auction Rate
for the initial Auction Period immediately after the Closing Date shall be 1.90%
in the case of the Series 2001B-1 Bonds, 1.90% in the case of the Series 2001B-2
Bonds and 1.90% in the case of the Series 2001B-3 Bonds. The initial Auction
Period for each subseries of the Bonds immediately after any Change in the
Interest Rate Mode to an Auction Rate, shall be a period from and including the
effective date of such Change in the Interest Rate Mode to and including the
initial Auction Date which shall be determined by the Authority, with notice to
the Trustee, on or prior to the effective date of the Change in the Interest
Rate Mode. The Auction Rate for any initial Auction Period immediately after any
Change in the Interest Rate Mode to an Auction Rate for an Auction Rate Period,
shall be the rate of interest per annum determined by the Remarketing Agent,
with notice to the Trustee, the Authority, the Registrar and Paying Agent and
the Company, on a date not later than the effective date of such Change in the
Interest Rate Mode as the minimum rate of interest which, in the opinion of the
Remarketing Agent, would be necessary as of such date to market Auction Rate
Bonds in a secondary market transaction at a price equal to the principal amount
thereof; provided that such interest rate shall not exceed the Maximum Allowed
Rate. For any other Auction Period, the Auction Rate shall be the rate of
interest per annum that results from implementation of the Auction Procedures.
If on any Auction Date the Auction Agent shall fail to determine, or for any
reason fail to timely provide, a rate of interest pursuant to the Auction
Procedures, the Auction Rate for the next succeeding Auction Period shall be
equal to the No Auction Rate on and as of such Auction Date. Determination of an
Auction Rate pursuant to the Auction Procedures shall be suspended upon a Change
in the Interest Rate Mode or the occurrence of a Payment Default. The Auction
Rate for any Auction Period or remaining portion thereof following the
occurrence of a Payment Default shall be equal to the Overdue Rate as determined
on and as of the immediately preceding Auction Date. Upon the occurrence of a
Payment Default that has not been waived or cured on or prior to any Auction
Date, no Auction will be held, all Submitted Bids and Submitted Sell Orders
shall be rejected, the existence of Sufficient Clearing Bids shall be of no
effect and the Auction Rate for the next succeeding Auction Period shall equal
the Overdue Rate on and as of such Auction Date. In the event of the suspension
of the Auction Procedures due to a Payment Default, the Auction Procedures shall
resume two Business Days after the date on which the Auction Agent receives
notice from the Trustee that the Bond Insurer has cured the default under the
Policy by making all scheduled payments thereunder, with the next Auction to
occur on the next regularly scheduled Auction Date occurring thereafter. The
Overdue Rate shall be determined by the Trustee on each succeeding Auction Date.

                  2. Auction Periods may be established pursuant to Section 3.04
at any time unless a Payment Default has occurred and has not been cured. Each
Auction Period shall be a Standard Auction Period unless a different Auction
Period is established pursuant to Section 3.04 and each Auction Period which
immediately succeeds a non-Standard Auction Period shall be a Standard Auction
Period unless a different Auction Period is established pursuant to Section
3.04.

                  SECTION 3.04. AUCTION RATE PERIOD - AUCTION RATE BONDS: CHANGE
OF AUCTION PERIOD BY AUTHORITY. 1. During an Auction Rate Period the Authority,
at the request of the Company, may change the length of a single Auction Period
or the Standard Auction Period by means of a written notice delivered at least
10 days prior to the Auction Date for such Auction Period to the Trustee, the
Market Agent, the Auction Agent and the Company in substantially the form
furnished


                                      III-5




to the Trustee and the Auction Agent at the time of a Change in the Interest
Rate Mode to an Auction Rate. Any Auction Period or Standard Auction Period
established by the Authority pursuant to this Section 3.04 may not exceed 365
days in duration. If such Auction Period will be of less than 28 days, such
notice shall be effective only if it is accompanied by a written statement of
the Registrar and Paying Agent, the Trustee, the Market Agent and the Auction
Agent to the effect that they are capable of performing their duties hereunder
and under the Market Agent Agreement and the Auction Agency Agreement with
respect to such Auction Period. If such notice specifies a change in the length
of the Standard Auction Period, such notice shall be effective only if it is
accompanied by the written consent of the Market Agent to such change. The
length of an Auction Period or the Standard Auction Period may not be changed
pursuant to this Section 3.04 unless Sufficient Clearing Bids existed at both
the Auction immediately preceding the date the notice of such change was given
and the Auction immediately preceding such changed Auction Period or if a
Payment Default has occurred and has not been cured.

                  2. The change in length of an Auction Period or the Standard
Auction Period by the Authority at the request of the Company shall take effect
only if (A) the Trustee, the Credit Facility Issuer and the Auction Agent
receive, by 11:00 a.m. (New York City time) on the Business Day immediately
preceding the Auction Date for such Auction Period, a certificate from the
Authority, on behalf of the Company, by telecopy or similar means in
substantially the form furnished to the Trustee and the Auction Agent at the
time of a Change in the Interest Rate Mode to an Auction Rate authorizing
establishment of and specifying the length of the new Auction Period or the
Standard Auction Period, which shall be specified in such certificate, and
confirming that Bond Counsel expects to be able to give an Opinion of Bond
Counsel on the first day of such Auction Period, (B) the Trustee shall not have
delivered to the Auction Agent by 12:00 noon (New York City time) on the Auction
Date for such Auction Period notice that a Payment Default has occurred, (C)
Sufficient Clearing Bids exist at the Auction on the Auction Date for such
Auction Period, and (D) the Trustee, the Credit Facility Issuer and the Auction
Agent receive by 9:30 a.m. (New York City time) on the first day of such Auction
Period, an opinion of Bond Counsel to the effect that the change in the Auction
Period or the Standard Auction Period is authorized by this Indenture, is
permitted under the Act and will not have an adverse effect on the exclusion of
interest on such Bonds from gross income for federal income tax purposes. If the
condition referred to in (A) above is not met, the Auction Rate for the next
succeeding Auction Period shall be determined pursuant to the Auction Procedures
and the next succeeding Auction Period shall be a Standard Auction Period. If
any of the conditions referred to in (B), (C) or (D) above is not met, the
Auction Rate for the next succeeding Auction Period shall equal the Maximum
Auction Rate as determined as of such Auction Date.

                  3. On the Auction Date immediately preceding the effective
date of any change in the length of an Auction Period or the Standard Auction
Period, any Bonds which are not the subject of a specific Order shall be deemed
to be subject to a Sell Order.

                  4. In the event of a Change in the Interest Rate Mode to an
Auction Rate, the Authority, at the request of the Company, shall determine the
length of the initial Auction Period and may change the length of a single or
the Standard Auction Period by means of a written notice delivered on or prior
to the effective date of such Change in the Interest Rate Mode to an Auction
Rate to the Trustee, the Market Agent, the Auction Agent and the Credit Facility
Issuer.


                                      III-6




Notwithstanding anything to the contrary in paragraphs 1 and 2 of this Section
3.04, the determination of the initial Auction Period shall take effect on the
effective date of such Change in the Interest Rate Mode to an Auction Rate.
Notwithstanding anything to the contrary in paragraphs 1 and 2 of this Section
3.04, the change in the length of a single Auction Period or the Standard
Auction Period shall take effect only if the Trustee, the Credit Facility Issuer
and the Auction Agent receive on the effective date of such Change in the
Interest Rate Mode to an Auction Rate, an opinion of Bond Counsel to the effect
that the change in the Auction Period or the Standard Auction Period is
authorized by this Indenture, is permitted under the Act and will not have an
adverse effect on the exclusion of interest on such Bonds from gross income for
federal income tax purposes.

                  SECTION 3.05. AUCTION RATE PERIOD - AUCTION RATE BONDS: CHANGE
OF AUCTION DATE BY MARKET AGENT. During an Auction Rate Period the Market Agent,
with the written consent of the Company, may change, in order to conform with
then-current market practice with respect to similar securities or to
accommodate economic and financial factors that may affect or be relevant to the
day of the week constituting an Auction Date, the Auction Date for all future
Auction Periods to a different day, so long as the first such Auction Date will
be a Business Day in the calendar week in which the next succeeding Auction Date
is then scheduled to occur. If a change in an Auction Date is undertaken in
conjunction with a change in an Auction Period and the conditions for the
establishment of such change in Auction Period are not met, the Auction Date may
be, and the next succeeding Auction Period may be adjusted to end on, a Business
Day in the calendar week in which such Auction Date was scheduled to occur and
such Auction Period was scheduled to end to accommodate the change in the
Auction Date. The Market Agent shall communicate its determination to change an
Auction Date by means of a written notice delivered at least 10 days prior to
the Auction Date immediately preceding such Auction Date, or with respect to a
Change in the Interest Rate Mode to an Auction Rate on or prior to the effective
date of such Change in the Interest Rate Mode, to the Authority, the Trustee,
the Auction Agent and the Company which shall state (i) the determination of the
Market Agent to change the Auction Date, (ii) the new Auction Date and (iii) the
date on which such Auction Date shall be changed. If as a result of any proposed
change in the Auction Date any Auction Period would be less than 28 days in
duration, such notice shall be effective only if it is accompanied by a written
statement of the Auction Agent, the Registrar and Paying Agent and the Trustee
to the effect that they are capable of performing their duties hereunder and
under the Auction Agency Agreement with respect to any such Auction Period.

                  SECTION 3.06. AUCTION RATE PERIOD - AUCTION RATE BONDS: ORDERS
BY EXISTING HOLDERS AND POTENTIAL HOLDERS. (a) Prior to the Submission Deadline
on each Auction Date during the Auction Rate Period, the following orders may be
submitted:

                  (i) each Existing Holder may submit to the Broker-Dealer by
         telephone or otherwise information as to:

                           (A) the principal amount of Auction Rate Bonds, if
                  any, held by such Existing Holder which such Existing Holder
                  desires to continue to hold without regard to the Auction Rate
                  for the next succeeding Auction Period;

                           (B) the principal amount of Auction Rate Bonds, if
                  any, held by such Existing Holder which such Existing Holder
                  offers to sell if the Auction Rate for the


                                      III-7




                  next succeeding Auction Period shall be less than the rate per
                  annum specified by such Existing Holder and/or

                           (C) the principal amount of Auction Rate Bonds, if
                  any, held by such Existing Holder which such Existing Holder
                  offers to sell without regard to the Auction Rate for the next
                  succeeding Auction Period;

                  (ii) one or more Broker-Dealers may contact Potential Holders
         by telephone or otherwise to determine the principal amount of Auction
         Rate Bonds which each such Potential Holder offers to purchase if the
         Auction Rate for the next succeeding Auction Period shall not be less
         than the interest rate per annum specified by such Potential Holder.

For the purposes hereof, the communication to a Broker-Dealer of information
referred to in clause (i)(A), (i)(B) or (i)(C) or clause (ii) above is
hereinafter referred to as an "Order" and collectively as "Orders" and each
Existing Holder and each Potential Holder placing an Order is hereinafter
referred to as a "Bidder" and collectively as "Bidders"; an Order containing the
information referred to in clause (i)(A) above is hereinafter referred to as a
"Hold Order" and collectively as "Hold Orders"; an Order containing the
information referred to in clause (i)(B) or clause (ii) above is hereinafter
referred to as a "Bid" and collectively as "Bids"; and an Order containing the
information referred to in clause (i)(C) above is hereinafter referred to as a
"Sell Order" and collectively as "Sell Orders". The submission by a
Broker-Dealer of an Order to the Auction Agent shall likewise be referred to
herein as an "Order" and collectively as "Orders".

                  Orders may be submitted only in principal amounts of $25,000
or any integral multiple thereof.

                  (b)(i) Subject to the provisions of Section 3.07, a Bid by an
         Existing Holder shall constitute an irrevocable offer to sell:

                           (A) the principal amount of Auction Rate Bonds
                  specified in such Bid if the Auction Rate determined on such
                  Auction Date shall be less than the interest rate per annum
                  specified therein; or

                           (B) such principal amount or a lesser principal
                  amount of Auction Rate Bonds to be determined as set forth in
                  subsection (a)(iv) of Section 3.09 if the Auction Rate
                  determined on such Auction Date shall be equal to the interest
                  rate per annum specified therein; or

                           (C) such principal amount or a lesser principal
                  amount of Auction Rate Bonds to be determined as set forth in
                  subsection (b)(iii) of Section 3.09 if such specified rate
                  shall be higher than the Maximum Auction Rate and Sufficient
                  Clearing Bids do not exist.

                  (ii) Subject to the provisions of Section 3.07, a Sell Order
         by an Existing Holder shall constitute an irrevocable offer to sell:


                                      III-8




                           (A) the principal amount of Auction Rate Bonds
                  specified in such Sell Order; or

                           (B) such principal amount or a lesser principal
                  amount of Auction Rate Bonds as set forth in subsection
                  (b)(iii) of Section 3.09 if Sufficient Clearing Bids do not
                  exist.

                  (iii) Subject to the provisions of Section 3.07, a Bid by a
         Potential Holder shall constitute an irrevocable offer to purchase:

                           (A) the principal amount of Auction Rate Bonds
                  specified in such Bid if the Auction Rate determined on such
                  Auction Date shall be higher than the rate specified therein;
                  or

                           (B) such principal amount or a lesser principal
                  amount of Auction Rate Bonds as set forth in subsection (a)(v)
                  of Section 3.09 if the Auction Rate determined on such Auction
                  Date shall be equal to such specified rate.

                  SECTION 3.07. AUCTION RATE PERIOD - AUCTION RATE BONDS:
SUBMISSION OF ORDERS BY BROKER-DEALERS TO AUCTION AGENT. (a) During an Auction
Rate Period each Broker- Dealer shall submit in writing to the Auction Agent
prior to the Submission Deadline on each Auction Date, all Orders obtained by
such Broker-Dealer, and shall specify with respect to each such Order:

                  (i) the name of the Bidder placing such Order;

                  (ii) the aggregate principal amount of Auction Rate Bonds that
         are subject to such Order;

                  (iii) to the extent that such Bidder is an Existing Holder:

                           (A) the principal amount of Auction Rate Bonds, if
                  any, subject to any Hold Order placed by such Existing Holder;

                           (B) the principal amount of Auction Rate Bonds, if
                  any, subject to any Bid placed by such Existing Holder and the
                  rate specified in such Bid; and

                           (C) the principal amount of Auction Rate Bonds, if
                  any, subject to any Sell Order placed by such Existing Holder;
                  and

                  (iv) to the extent such Bidder is a Potential Holder, the
         principal amount of Auction Rate Bonds subject to any Bid placed by
         such Potential Holder and the rate specified in such Bid.

                  (b) If any rate specified in any Bid contains more than three
figures to the right of the decimal point, the Auction Agent shall round such
rate up to the next highest one thousandth (.001) of 1%.


                                      III-9




                  (c) If an Order or Orders covering all Auction Rate Bonds held
by an Existing Holder is not submitted to the Auction Agent prior to the
Submission Deadline, the Auction Agent shall deem a Hold Order to have been
submitted on behalf of such Existing Holder covering the principal amount of
Auction Rate Bonds held by such Existing Holder and not subject to Orders
submitted to the Auction Agent; PROVIDED, HOWEVER, that if there is a change in
the length of the Auction Period or the Standard Auction Period in accordance
with Section 3.04 hereof or an amendment or modification to the Indenture or the
Participation Agreement in accordance with Section 14.02 or 14.07 hereof, as the
case may be, and Orders have not been submitted to the Auction Agent prior to
the Submission Deadline covering the aggregate principal amount of Auction Rate
Bonds that are subject to such change in the length of the Auction Period or the
Standard Auction Period or amendment or modification, as the case may be, the
Auction Agent shall deem a Sell Order to have been submitted on behalf of such
Existing Holder covering the principal amount of Auction Rate Bonds subject to
such change or modification or amendment and not subject to Orders submitted to
the Auction Agent.

                  (d) Neither the Authority, the Company, the Trustee nor the
Auction Agent shall be responsible for any failure of a Broker-Dealer to submit
an Order to the Auction Agent on behalf of any Existing Holder or Potential
Holder.

                  (e) If any Existing Holder submits through a Broker-Dealer to
the Auction Agent one or more Orders covering in the aggregate more than the
principal amount of Auction Rate Bonds held by such Existing Holder, such Orders
shall be considered valid as follows and in the following order of priority:

                           (i) all Hold Orders shall be considered valid, but
         only up to and including the principal amount of Auction Rate Bonds
         held by such Existing Holder, and, if the aggregate principal amount of
         Auction Rate Bonds subject to such Hold Orders exceeds the aggregate
         principal amount of Auction Rate Bonds held by such Existing Holder,
         the aggregate principal amount of Auction Rate Bonds subject to each
         such Hold Order shall be reduced pro rata to cover the aggregate
         principal amount of Auction Rate Bonds held by such Existing Holder;

                           (ii) (A) any Bid shall be considered valid up to and
                  including the excess of the principal amount of Auction Rate
                  Bonds held by such Existing Holder over the aggregate
                  principal amount of Auction Rate Bonds subject to any Hold
                  Orders referred to in paragraph (i) above;

                                    (B) subject to clause (A) above, if more
                           than one Bid with the same rate is submitted on
                           behalf of such Existing Holder and the aggregate
                           principal amount of Auction Rate Bonds subject to
                           such Bids is greater than such excess, such Bids
                           shall be considered valid up to and including the
                           amount of such excess, and, the principal amount of
                           Auction Rate Bonds subject to each Bid with the same
                           rate shall be reduced pro rata to cover the principal
                           amount of Auction Rate Bonds equal to such excess;


                                     III-10




                                    (C) subject to clauses (A) and (B) above, if
                           more than one Bid with different rates is submitted
                           on behalf of such Existing Holder, such Bids shall be
                           considered valid in the ascending order of their
                           respective rates until the highest rate is reached at
                           which such excess exists and then at such rate up to
                           and including the amount of such excess; and

                                    (D) in any such event, the aggregate
                           principal amount of Auction Rate Bonds, if any,
                           subject to any portion of Bids not valid under this
                           paragraph (ii) shall be treated as the subject of a
                           Bid by a Potential Holder at the rate therein
                           specified; and

                           (iii) all Sell Orders shall be considered valid up to
                  and including the excess of the principal amount of Auction
                  Rate Bonds held by such Existing Holder over the aggregate
                  principal amount of Auction Rate Bonds subject to valid Hold
                  Orders referred to in paragraph (i) of this subsection (e) and
                  valid Bids referred to in paragraph (ii) of this subsection
                  (e).

                  (f) If more than one Bid for Auction Rate Bonds is submitted
on behalf of any Potential Holder, each Bid submitted shall be a separate Bid
for Auction Rate Bonds with the rate and principal amount therein specified.

                  (g) Any Bid or Sell Order submitted by an Existing Holder
covering an aggregate principal amount of Auction Rate Bonds not equal to
$25,000 or an integral multiple thereof shall be rejected and shall be deemed a
Hold Order. Any Bid submitted by a Potential Holder covering an aggregate
principal amount of Auction Rate Bonds not equal to $25,000 or an integral
multiple thereof shall be rejected.

                  SECTION 3.08. AUCTION RATE PERIOD - AUCTION RATE BONDS:
DETERMINATION OF SUFFICIENT CLEARING BIDS, WINNING BID RATE AND AUCTION RATE.
(a) During an Auction Rate Period not earlier than the Submission Deadline on
each Auction Date, the Auction Agent shall assemble all valid Orders submitted
or deemed submitted to it by the Broker-Dealers (each such Order as submitted or
deemed submitted by a Broker-Dealer being hereinafter referred to as a
"SUBMITTED HOLD ORDER," a "SUBMITTED BID" or a "SUBMITTED SELL ORDER," as the
case may be, or as a "SUBMITTED ORDER") and shall determine:

                           (i) the excess of the total principal amount of
                  Auction Rate Bonds over the aggregate principal amount of
                  Auction Rate Bonds subject to Submitted Hold Orders (such
                  excess being hereinafter referred to as the "Available Auction
                  Rate Bonds"); and

                           (ii) from the Submitted Orders whether the aggregate
                  principal amount of Auction Rate Bonds subject to Submitted
                  Bids by Potential Holders specifying one or more rates equal
                  to or lower than the Maximum Auction Rate exceeds or is equal
                  to the sum of:


                                     III-11




                                    (A) the aggregate principal amount of
                           Auction Rate Bonds subject to Submitted Bids by
                           Existing Holders specifying one or more rates higher
                           than the Maximum Auction Rate; and

                                    (B) the aggregate principal amount of
                           Auction Rate Bonds subject to Submitted Sell Orders

                  (in the event of such excess or such equality (other than
                  because the sum of the principal amounts of Auction Rate Bonds
                  in clauses (A) and (B) above is zero because all of the
                  Auction Rate Bonds are subject to Submitted Hold Orders), such
                  Submitted Bids by Potential Holders are hereinafter referred
                  to collectively as "SUFFICIENT CLEARING BIDS"); and

                           (iii) if Sufficient Clearing Bids exist, the lowest
                  rate specified in the Submitted Bids (the "WINNING BID RATE")
                  which if:

                                    (A)(I) each Submitted Bid from Existing
                           Holders specifying such lowest rate and (II) all
                           other Submitted Bids from Existing Holders specifying
                           lower rates were rejected, thus entitling such
                           Existing Holders to continue to hold the principal
                           amount of Auction Rate Bonds that are the subject of
                           such Submitted Bids; and

                                    (B)(I) each Submitted Bid from Potential
                           Holders specifying such lowest rate and (II) all
                           other Submitted Bids from Potential Holders
                           specifying lower rates were accepted,

                  would result in such Existing Holders described in clause (A)
                  above continuing to hold an aggregate principal amount of
                  Auction Rate Bonds which, when added to the aggregate
                  principal amount of Auction Rate Bonds to be purchased by such
                  Potential Holders described in clause (B) above, would equal
                  not less than the Available Auction Rate Bonds.

                  (b) Promptly after the Auction Agent has made the
         determinations pursuant to subsection (a) of this Section 3.08, the
         Auction Agent, by telecopy confirmed in writing, shall advise the
         Company, the Trustee and the Broker-Dealers of the Maximum Auction
         Rate and the components thereof on the Auction Date and, based on such
         determinations, the Auction Rate for the next succeeding Auction Period
         as follows:

                           (i) if Sufficient Clearing Bids exist, the Auction
                  Rate for the next succeeding Auction Period therefor shall be
                  equal to the Winning Bid Rate so determined;

                           (ii) if Sufficient Clearing Bids do not exist (other
                  than because all of the Auction Rate Bonds are the subject of
                  Submitted Hold Orders), the Auction Rate for the next
                  succeeding Auction Period therefor shall be equal to the
                  Maximum Auction Rate; and


                                     III-12




                           (iii) if all of the Auction Rate Bonds are subject to
                  Submitted Hold Orders, the Auction Rate for the next
                  succeeding Auction Period therefor shall be equal to the All
                  Hold Rate.

                  SECTION 3.09. AUCTION RATE PERIOD - AUCTION RATE BONDS:
ACCEPTANCE AND REJECTION OF SUBMITTED BIDS AND SUBMITTED SELL ORDERS AND
ALLOCATION OF AUCTION RATE BONDS. During an Auction Rate Period Existing Holders
shall continue to hold the principal amounts of Auction Rate Bonds that are
subject to Submitted Hold Orders, and, based on the determinations made pursuant
to subsection (a) of this Section 3.09, the Submitted Bids and Submitted Sell
Orders shall be accepted or rejected, and the Auction Agent shall take such
other actions as are set forth below:

                  (a) If Sufficient Clearing Bids exist, all Submitted Sell
         Orders shall be accepted and, subject to the provisions of paragraphs
         (e) and (f) of this Section 3.09, Submitted Bids shall be accepted or
         rejected as follows in the following order of priority:

                           (i) Existing Holders' Submitted Bids specifying any
                  rate that is higher than the Winning Bid Rate shall be
                  accepted, thus requiring each such Existing Holder to sell the
                  aggregate principal amount of Auction Rate Bonds subject to
                  such Submitted Bids;

                           (ii) Existing Holders' Submitted Bids specifying any
                  rate that is lower than the Winning Bid Rate shall be
                  rejected, thus entitling each such Existing Holder to continue
                  to hold the aggregate principal amount of Auction Rate Bonds
                  subject to such Submitted Bids;

                           (iii) Potential Holders' Submitted Bids specifying
                  any rate that is lower than the Winning Bid Rate shall be
                  accepted, thus requiring each such Potential Holder to
                  purchase the aggregate principal amount of Auction Rate Bonds
                  subject to such Submitted Bids;

                           (iv) each Existing Holder's Submitted Bid specifying
                  a rate that is equal to the Winning Bid Rate shall be
                  rejected, thus entitling such Existing Holder to continue to
                  hold the aggregate principal amount of Auction Rate Bonds
                  subject to such Submitted Bid, unless the aggregate principal
                  amount of Auction Rate Bonds subject to all such Submitted
                  Bids shall be greater than the principal amount of Auction
                  Rate Bonds (the "remaining principal amount") equal to the
                  excess of Available Auction Rate Bonds over the aggregate
                  principal amount of the Auction Rate Bonds subject to
                  Submitted Bids described in paragraphs (ii) and (iii) of this
                  subsection (a), in which event such Submitted Bid of such
                  Existing Holder shall be rejected in part, and such Existing
                  Holder shall be entitled to continue to hold the principal
                  amount of Auction Rate Bonds subject to such Submitted Bid,
                  but only in an amount equal to the principal amount of Auction
                  Rate Bonds obtained by multiplying the remaining principal
                  amount by a fraction, the numerator of which shall be the
                  principal amount of Auction Rate Bonds held by such Existing
                  Holder subject to such Submitted Bid and the denominator of
                  which shall be the sum of the


                                     III-13




                  principal amounts of Auction Rate Bonds subject to such
                  Submitted Bids made by all such Existing Holders that
                  specified a rate equal to the Winning Bid Rate; and

                           (v) each Potential Holder's Submitted Bid specifying
                  a rate that is equal to the Winning Bid Rate shall be accepted
                  but only in an amount equal to the principal amount of Auction
                  Rate Bonds obtained by multiplying the excess of the Available
                  Auction Rate Bonds over the aggregate principal amount of
                  Auction Rate Bonds subject to Submitted Bids described in
                  paragraphs (ii), (iii) and (iv) of this subsection (a) by a
                  fraction the numerator of which shall be the aggregate
                  principal amount of Auction Rate Bonds subject to such
                  Submitted Bid of such Potential Holder and the denominator of
                  which shall be the sum of the principal amount of Auction Rate
                  Bonds subject to Submitted Bids made by all such Potential
                  Holders that specified a rate equal to the Winning Bid Rate.

                  (b) If Sufficient Clearing Bids do not exist (other than
         because all of the Auction Rate Bonds are subject to Submitted Hold
         Orders), subject to the provisions of subsection (e) of this Section
         3.09, Submitted Orders shall be accepted or rejected as follows in the
         following order of priority:

                           (i) Existing Holders' Submitted Bids specifying any
                  rate that is equal to or lower than the Maximum Auction Rate
                  shall be rejected, thus entitling each such Existing Holder to
                  continue to hold the aggregate principal amount of Auction
                  Rate Bonds subject to such Submitted Bids;

                           (ii) Potential Holders' Submitted Bids specifying any
                  rate that is equal to or lower than the Maximum Auction Rate
                  shall be accepted, thus requiring each such Potential Holder
                  to purchase the aggregate principal amount of Auction Rate
                  Bonds subject to such Submitted Bids; and

                           (iii) each Existing Holder's Submitted Bid specifying
                  any rate that is higher than the Maximum Auction Rate and the
                  Submitted Sell Order of each Existing Holder shall be
                  accepted, thus entitling each Existing Holder that submitted
                  any such Submitted Bid or Submitted Sell Order to sell the
                  Auction Rate Bonds subject to such Submitted Bid or Submitted
                  Sell Order, but in both cases only in an amount equal to the
                  aggregate principal amount of Auction Rate Bonds obtained by
                  multiplying the aggregate principal amount of Auction Rate
                  Bonds subject to Submitted Bids described in paragraph (ii) of
                  this subsection (b) by a fraction, the numerator of which
                  shall be the aggregate principal amount of Auction Rate Bonds
                  held by such Existing Holder subject to such Submitted Bid or
                  Submitted Sell Order and the denominator of which shall be the
                  aggregate principal amount of Auction Rate Bonds subject to
                  all such Submitted Bids and Submitted Sell Orders.

                  (c) If all Auction Rate Bonds are subject to Submitted Hold
         Orders, all Submitted Bids shall be rejected.



                                     III-14




                  (d) If (i) the Auction Agent shall fail to determine, or for
         any reason fail to timely provide, an interest rate pursuant to the
         Auction Procedures or (ii) the conditions set forth in subsection 2 of
         Section 3.04 to effect a change in the Auction Period are not met, all
         Submitted Bids and Submitted Sell Orders shall be rejected and the
         existence of Sufficient Clearing Bids shall be of no effect.

                  (e) If, as a result of the procedures described in subsection
         (a) or (b) of this Section 3.09, any Existing Holder would be entitled
         or required to sell, or any Potential Holder would be required to
         purchase, a principal amount of Auction Rate Bonds that is not equal to
         $25,000 or an integral multiple thereof, the Auction Agent shall, in
         such manner as, in its sole discretion, it shall determine, round up or
         down the principal amount of such Auction Rate Bonds to be purchased or
         sold by any Existing Holder or Potential Holder so that the principal
         amount purchased or sold by each Existing Holder or Potential Holder
         shall be equal to $25,000 or an integral multiple thereof.

                  (f) If, as a result of the procedures described in subsection
         (a) of this Section 3.09, any Potential Holder would be entitled or
         required to purchase less than $25,000 in aggregate principal amount of
         Auction Rate Bonds, the Auction Agent shall, in such manner as, in its
         sole discretion, it shall determine, allocate Auction Rate Bonds for
         purchase among Potential Holders so that only Auction Rate Bonds in
         principal amounts of $25,000 or an integral multiple thereof are
         purchased by any Potential Holder, even if such allocation results in
         one or more of such Potential Holders not purchasing any Auction Rate
         Bonds.

                  (g) Based on the results of each Auction, the Auction Agent
         shall determine the aggregate principal amounts of Auction Rate Bonds
         to be purchased and the aggregate principal amounts of Auction Rate
         Bonds to be sold by Potential Holders and Existing Holders on whose
         behalf each Broker-Dealer submitted Bids or Sell Orders and, with
         respect to each Broker-Dealer, to the extent that such aggregate
         principal amount of Auction Rate Bonds to be sold differs from such
         aggregate principal amount of Auction Rate Bonds to be purchased,
         determine to which other Broker-Dealer or Broker-Dealers acting for one
         or more purchasers or Auction Rate Bonds such Broker-Dealer shall
         deliver, or from which other Broker-Dealer or Broker-Dealers acting for
         one or more sellers of Auction Rate Bonds such Broker-Dealer shall
         receive, as the case may be, Auction Rate Bonds.

                  (h) None of the Authority, the Company or any Affiliate
         thereof may submit an Order in any Auction except as set forth in the
         next sentence. Any Broker-Dealer that is an Affiliate of the Company
         may submit Orders in an Auction but only if such Orders are not for its
         own account, except that if such affiliated Broker-Dealer holds Auction
         Rate Bonds for its own account, it must submit a Sell Order on the next
         Auction Date with respect to such Auction Rate Bonds.

                  SECTION 3.10. AUCTION RATE PERIOD - AUCTION RATE BONDS:
ADJUSTMENT IN PERCENTAGE. 1. During an Auction Rate Period the Market Agent may
adjust the percentage used in determining the All Hold Rate, the No Auction
Percentages used in determining the No Auction Rate and the Applicable
Percentages used in determining the Maximum Auction Rate if any such


                                     III-15



adjustment is necessary, in the judgment of the Market Agent, to reflect any
Change of Preference Law such that the All Hold Rate, No Auction Rate and
Maximum Auction Rate shall have substantially equal market values before and
after such Change of Preference Law. In making any such adjustment, the Market
Agent shall take the following factors, as in existence both before and after
such Change of Preference Law, into account: (i) short-term taxable and
tax-exempt market rates and indices of such short-term rates, (ii) the market
supply and demand for short- term tax-exempt securities, (iii) yield curves for
short-term and long-term tax-exempt securities or obligations having a credit
rating that is comparable to the Bonds, (iv) general economic conditions and (v)
economic and financial factors present in the securities industry that may
affect or that may be relevant to the Bonds.

                  2. The Market Agent shall communicate its determination to
adjust the percentage used in determining the All Hold Rate, the No Auction
Percentages used in determining the No Auction Rate and the Applicable
Percentages used in determining the Maximum Auction Rate pursuant to subsection
1 hereof by means of a written notice delivered at least ten days prior to the
Auction Date on which the Market Agent desires to effect the change to the
Authority, the Trustee, the Auction Agent and the Company. Such notice is
required to state the determination of the Market Agent to change such
percentage and the date such adjustment is proposed to take effect (which date
shall be an Auction Date). Such notice shall be effective only if it is
accompanied by the form of opinion that Bond Counsel expects to be able to give
on such Auction Date to the effect that such adjustment is authorized by this
Indenture, is permitted under the Act and will not have an adverse effect on the
exclusion of interest on the Auction Rate Bonds from gross income for federal
income tax purposes. The Auction Agent is required to mail notice thereof to the
Existing Holders within two Business Days of receipt thereof.

                  3. An adjustment in the percentage used in determining the All
Hold Rate, the No Auction Percentages used in determining the No Auction Rate
and the Applicable Percentages used in determining the Maximum Auction Rate
shall take effect on an Auction Date only if (A) the Trustee, the Credit
Facility Issuer and the Auction Agent receive, by 11:00 a.m. (New York City
time) on the Business Day immediately preceding such Auction Date, a certificate
from the Market Agent by telecopy or similar means, (i) authorizing the
adjustment of the percentage used in determining the All Hold Rate, the No
Auction Percentages used in determining the No Auction Rate and the Applicable
Percentages used in determining the Maximum Auction Rate which shall be
specified in such authorization, and (ii) confirming that Bond Counsel expects
to be able to give an opinion on such Auction Date to the effect that the
adjustment in the percentage used in determining the All Hold Rate, the No
Auction Percentages used in determining the No Auction Rate and the Applicable
Percentages used in determining the Maximum Auction Rate is authorized by this
Indenture, is permitted under the Act and will not have an adverse effect on the
exclusion of interest on the Auction Rate Bonds from gross income for federal
income tax purposes, and (B) the Trustee, the Credit Facility Issuer and the
Auction Agent receive by 9:30 a.m. (New York City time) on such Auction Date, an
opinion of Bond Counsel to the effect that the adjustment in the percentage used
in determining the All Hold Rate, the No Auction Percentages used in determining
the No Auction Rate and the Applicable Percentages used in determining the
Maximum Auction Rate is authorized by this Indenture, is permitted under the Act
and will not have an adverse effect on the exclusion of interest on the Auction
Rate Bonds from gross income for federal income tax purposes. If the condition
referred to in (A) above is not met, the existing percentage used in determining
the All


                                     III-16




Hold Rate, the No Auction Percentages used in determining the No Auction Rate
and the Applicable Percentages used in determining the Maximum Auction Rate
shall remain in effect and the Auction Rate for the next succeeding Auction
Period shall be determined pursuant to the Auction Procedures. If the condition
referred to in (B) above is not met, the existing percentage used in determining
the All Hold Rate, the No Auction Percentages used in determining the No Auction
Rate and the Applicable Percentages used in determining the Maximum Auction Rate
shall remain in effect and the Auction Rate for the next succeeding Auction
Period shall equal the Maximum Auction Rate as determined on such Auction Date.


                                     III-17




                                   ARTICLE IV

                        CHANGES IN THE INTEREST RATE MODE

                  SECTION 4.01. OPTIONAL CONVERSION TO AN ADJUSTABLE RATE BY
AUTHORITY. 1. At the times specified below, the Bonds, in whole or in part,
shall cease to bear interest at the Adjustable Rate or the Fixed Rate then borne
by the Bonds and shall bear interest at such Adjustable Rate as shall be
specified by the Authority, at the request of the Company, in a written notice
delivered at least 30 days prior to the proposed effective date of the Change in
the Interest Rate Mode to the Trustee, the Remarketing Agent, the Registrar and
Paying Agent and the Company (and to the Auction Agent and the Securities
Depository if such Change in the Interest Rate Mode is to or from an Auction
Rate) in substantially the form attached hereto as, or containing substantially
the information contained in EXHIBIT A hereto. A Change in the Interest Rate
Mode may only be effected on a day on which the affected Bonds may be redeemed
at the option of the Authority. A notice of Change in the Interest Rate Mode
shall be effective only if it is accompanied by the form of opinion that Bond
Counsel expects to be able to give on the proposed effective date of such Change
in the Interest Rate Mode to the effect that such Change in the Interest Rate
Mode is authorized by this Indenture, is permitted under the Act and will not
have an adverse effect on the exclusion of interest on such Bonds from gross
income for federal income tax purposes.

                  In the case of any Change in the Interest Rate Mode to a Term
Rate, the notice required by this section shall specify the length of the
Calculation Period and, unless otherwise specified, such Calculation Period
shall thereafter apply to the Bonds until a Change in the Interest Rate Mode
effected pursuant to Section 4.01 or Section 4.02. Any change in the Calculation
Period during a Term Rate Period shall be deemed an optional conversion pursuant
to this Section 4.01 and may not be made unless all the requirements of a
conversion pursuant to this Section 4.01 are met.

                  2. The Trustee shall mail, or cause the Registrar and Paying
Agent to mail, the notice received pursuant to subsection 1 of this Section 4.01
on or before the third Business Day after receipt thereof to the Bondholders.

                  3. A Change in the Interest Rate Mode to an Adjustable Rate
shall be effective pursuant to Subsection 1 of this Section 4.01 only if

                  (A) with respect to any Change in the Interest Rate Mode from
an Auction Rate or from a Fixed Rate to an Adjustable Rate, the Trustee and the
Auction Agent (if any) shall receive:

                           (i) a certificate of an Authorized Company
         Representative by no later than the tenth day prior to the effective
         date of such Change in the Interest Rate Mode stating that a written
         agreement between the Company and the Remarketing Agent to remarket the
         Bonds on such effective date at a price of 100% of the principal amount
         thereof has been entered into, which agreement (i) may be subject to
         such reasonable terms and conditions agreed to by the Remarketing Agent
         which in the judgment of the Remarketing Agent reflect the current
         market standards regarding investment banking risk and (ii) must
         include a provision requiring payment by the Remarketing Agent in
         same-day funds for any Bond tendered or deemed tendered; and that a
         Liquidity Facility is in effect or has been obtained

                                      IV-1




         by the Company with respect to the Bonds and shall be in effect on or
         prior to such Change in the Interest Rate Mode and thereafter for a
         period of at least 364 days;

                           (ii) by 11:00 a.m. (New York City time) on the second
         Business Day prior to the effective date of such Change in the Interest
         Rate Mode by telecopy or other similar means, a certificate in
         substantially the form attached hereto as, or containing substantially
         the information contained in, EXHIBIT B hereto, from the Authority on
         behalf of the Company (y) authorizing the establishment of the new
         Adjustable Rate and (z) confirming that Bond Counsel has advised the
         Authority that it expects to be able to give an opinion on the
         effective date of such Change in the Interest Rate Mode to the effect
         that such Change in the Interest Rate Mode is authorized by this
         Indenture, is permitted under the Act and will not have an adverse
         effect on the exclusion of interest on the affected Bonds from gross
         income for federal income tax purposes;

                           (iii) by 4:00 p.m. (New York City time) on the
         effective date of such Change in the Interest Rate Mode a certificate
         from an Authorized Company Representative to the effect that all of the
         Bonds tendered or deemed tendered have been purchased at a price equal
         to the principal amount thereof with funds provided from the
         remarketing of such Bonds in accordance with the Remarketing Agreement
         and that premium, if any, and any accrued and unpaid interest on such
         Bonds has been paid from funds deposited with the Trustee or the
         Registrar and Paying Agent; and

                  (B) with respect to any Change in the Interest Rate Mode other
than with respect to a Change in the Interest Rate Mode from an Auction Rate or
a Fixed Rate, the Trustee (and the Auction Agent in the case of any Change in
the Interest Rate Mode to an Auction Rate), shall receive by 4:00 p.m., New York
City time, on the effective date of such Change in the Interest Rate Mode, a
certificate in substantially the form attached hereto as, or containing
substantially the information contained in, EXHIBIT C hereto, from an Authorized
Company Representative that all of the Bonds tendered or deemed tendered have
been purchased at a price equal to the principal amount thereof plus premium, if
any, plus any accrued and unpaid interest with funds provided from the
remarketing of such Bonds in accordance with the Remarketing Agreement, from the
proceeds of a Liquidity Facility, or from funds deposited with the Trustee or
the Registrar and Paying Agent;

                  (C) with respect to any Change in the Interest Rate Mode, the
Trustee (and the Auction Agent in the case of any Change in the Interest Rate
Mode to or from an Auction Rate) shall receive, by 9:30 a.m. (New York City
time) on the effective date of such Change in the Interest Rate Mode, an Opinion
of Bond Counsel to the effect that such Change in the Interest Rate Mode is
authorized by this Indenture, is permitted under the Act and will not have an
adverse effect on the exclusion of interest on such Bonds from gross income for
federal income tax purposes; and

                  (D) with respect to any Change in the Interest Rate Mode to an
Adjustable Rate other than to an Auction Rate, the Trustee shall receive a
Liquidity Facility meeting the requirements of this Indenture and the
Participation Agreement on or prior to the effective date of such Change in the
Interest Rate Mode which is, by its terms, in effect on or prior to such
effective date.


                                      IV-2




                  If any of the conditions referred to in (A)(i) or (ii) above
is not met with respect to any Change in the Interest Rate Mode from an Auction
Rate, the Auction Rate Bonds shall not be subject to mandatory tender for
purchase, Existing Holders shall continue to hold their Auction Rate Bonds and
the Auction Rate for the next succeeding Auction Period shall be determined
pursuant to the Auction Procedures applicable to the Auction Rate Bonds. If any
of the conditions referred to in (A)(iii),(C) or (D) above is not met with
respect to any Change in the Interest Rate Mode from an Auction Rate, the
Auction Rate Bonds shall not be subject to mandatory tender for purchase,
Existing Holders shall continue to hold their Bonds and the Auction Rate for the
next succeeding Auction Period shall equal the Maximum Auction Rate as
determined on the Auction Date for such Auction Period and the next succeeding
Auction Period shall be a 7-day Auction Period. Thereafter, the Auction Rate for
each succeeding Auction Period shall be determined pursuant to the Auction
Procedures applicable to Auction Rate Bonds and each Auction Period shall
continue to be a 7-day Auction Period until the length of an Auction Period
and/or the Standard Auction Period is changed pursuant to Section 3.04 hereof.
If any of the conditions referred to in (A)(i), A(ii), A(iii), (C) or (D) above
is not met with respect to any Change in the Interest Rate Mode from a Fixed
Rate, the Bonds shall continue to bear interest at the current Fixed Rate. If
any of the conditions referred to in (B), (C) or (D) above is not met with
respect to any Change in the Interest Rate Mode other than with respect to a
Change in the Interest Rate Mode from an Auction Rate or a Fixed Rate, the Bonds
shall continue to bear interest at the Current Adjustable Rate and be subject to
the provisions of this Indenture applicable thereto while the Bonds bear
interest at such Current Adjustable Rate; provided, however, that
notwithstanding the failure to meet such conditions, the Bonds shall remain
subject to mandatory tender for purchase in accordance with Section 5.04. If any
of the foregoing conditions for a Change in the Interest Rate Mode other than
with respect to a Change in the Interest Rate Mode from an Auction Rate is not
met, the Trustee shall mail, or cause the Registrar and Paying Agent to mail to
the Authority, the Company and the Holders notice thereof in substantially the
form attached hereto as, or containing substantially the information contained
in, EXHIBIT D hereto within 3 Business Days after the failure to meet any of
such conditions.

                  SECTION 4.02. OPTIONAL CONVERSION TO A FIXED RATE. 1. The
Authority reserves the right, at the request of the Company, to fix the rate of
interest per annum which Bonds will bear, in whole or in part, for the balance
of the term thereof or until the effective date of a Change in the Interest Rate
Mode; provided however, that the Authority shall not exercise such right and the
Company shall not request the Authority to exercise such right except on a day
on which the affected Bonds may be redeemed at the option of the Authority. In
the event the Authority, at the request of the Company, as herein provided,
exercises its Option to Convert, the Bonds so converted shall cease to bear
interest at the Adjustable Rate then borne by the Bonds and shall bear interest
at a Fixed Rate until maturity or until the effective date of a Change in the
Interest Rate Mode, subject to the terms and conditions hereof (the date on
which a Fixed Rate shall take effect being herein called a "Fixed Rate
Conversion Date"). The Option to Convert may be exercised at any time through a
written notice given by the Authority, at the direction of the Company, not less
than 30 nor more than 45 days prior to the proposed Fixed Rate Conversion Date
to the Trustee, the Registrar and Paying Agent, the Remarketing Agent (and the
Auction Agent and the Securities Depository in the case of any change to a Fixed
Rate from an Auction Rate), in substantially the form attached hereto as, or
containing substantially the information contained in, EXHIBIT A hereto. A
notice of conversion to a Fixed Rate shall be effective only if it is
accompanied by the form of opinion that Bond Counsel expects to give on a Fixed
Rate Conversion Date to the effect that the establishment


                                      IV-3





of a Fixed Rate is authorized by this Indenture, is permitted under the Act and
will not have an adverse effect on the exclusion of interest on such Bonds from
gross income for federal income tax purposes.

                  2. The Trustee shall mail, or cause the Registrar and Paying
Agent to mail, the notice received pursuant to subsection 1 of this Section 4.02
on or before the third Business Day after receipt thereof to the Holders.

                  3. A Fixed Rate shall take effect only if

                  (A) with respect to a change to a Fixed Rate from an Auction
Rate, the Trustee and the Auction Agent shall receive:

                  (i) a certificate of an Authorized Company Representative by
         no later than the tenth day prior to a Fixed Rate Conversion Date
         stating that a written agreement has been entered into by the Company
         and the Remarketing Agent to remarket the Bonds affected on a Fixed
         Rate Conversion Date at a price of not less than 100% of the principal
         amount thereof, which written agreement (i) may be subject to
         reasonable terms and conditions agreed to by the Remarketing Agent
         which in the judgment of the Remarketing Agent reflect current market
         standards regarding investment banking risk and (ii) must include a
         provision requiring payment by the Remarketing Agent in same-day funds
         for any Auction Rate Bonds tendered or deemed tendered;

                  (ii) by 11:00 a.m. (New York City time) on the second Business
         Day prior to a Fixed Rate Conversion Date, by telecopy or other similar
         means, a certificate in substantially the form attached hereto as, or
         containing substantially the information contained in, EXHIBIT B
         hereto, from the Authority on behalf of the Company (y) authorizing the
         establishment of a Fixed Rate and (z) confirming that Bond Counsel has
         advised the Authority that it expects to be able to give an opinion on
         a Fixed Rate Conversion Date to the effect that the change to a Fixed
         Rate is authorized by this Indenture, is permitted under the Act and
         will not have an adverse effect on the exclusion of interest on the
         Bonds from gross income for federal income tax purposes; and

                  (iii) by 4:00 p.m. (New York City time) on the effective date
         of such Change in the Interest Rate Mode, a certificate from an
         Authorized Company Representative to the effect that all of the Bonds
         tendered or deemed tendered have been purchased at a price equal to the
         principal amount thereof with funds provided from the remarketing of
         such Bonds in accordance with the Remarketing Agreement and that any
         accrued and unpaid interest on such Bonds has been paid from funds
         deposited with the Trustee or the Registrar and Paying Agent;

                  (B) with respect to a change to a Fixed Rate from any
Adjustable Rate other than an Auction Rate, the Trustee shall receive by 4:00
p.m. (New York City time) on a Fixed Rate Conversion Date a certificate in
substantially the form attached hereto as, or containing substantially the
information contained in, Exhibit C hereto, from an Authorized Company
Representative that all of the Bonds tendered or deemed tendered have been
purchased at a price equal to the principal


                                      IV-4



amount thereof plus premium, if any, plus any accrued and unpaid interest with
funds provided from the remarketing of such Bonds in accordance with the
Remarketing Agreement, from the proceeds of a Liquidity Facility, or from funds
deposited with the Trustee or the Registrar and Paying Agent; and

                  (C) with respect to any change to a Fixed Rate, the Trustee
(and the Auction Agent in the case of any change to a Fixed Rate from an Auction
Rate) by 9:30 a.m. (New York City time) on a Fixed Rate Conversion Date an
Opinion of Bond Counsel to the effect that the conversion to a Fixed Rate is
authorized by this Indenture, is permitted under the Act and will not have an
adverse effect on the exclusion of interest on such Bonds from gross income for
federal income tax purposes.

                  If any of the conditions referred to in (A)(i) or (ii) above
are not met with respect to any change to a Fixed Rate from an Auction Rate, the
Auction Rate Bonds shall not be subject to mandatory tender for purchase,
Existing Holders shall continue to hold their Auction Rate Bonds and the Auction
Rate for the next succeeding Auction Period shall be determined pursuant to the
Auction Procedures applicable to the Auction Rate Bonds. If the condition
referred to in (A)(iii) or (C) above is not met with respect to any change to a
Fixed Rate from an Auction Rate, the Auction Rate Bonds shall not be subject to
mandatory tender for purchase, Existing Holders shall continue to hold their
Bonds and the Auction Rate for the next succeeding Auction Period shall equal
the Maximum Auction Rate as determined on the Auction Date for such Auction
Period and the next succeeding Auction Period shall be a 7-day Auction Period.
Thereafter, the Auction Rate for each succeeding Auction Period shall be
determined pursuant to the Auction Procedures applicable to Auction Rate Bonds
and each Auction Period shall continue to be a 7-day Auction Period until the
length of an Auction Period and/or the Standard Auction Period is changed
pursuant to Section 3.04 hereof. If any of the conditions referred to in (B) or
(C) above are not met with respect to any change from any other Adjustable Rate
to a Fixed Rate, the Bonds shall continue to bear interest at the Adjustable
Rate then borne by the Bonds and be subject to the provisions of this Indenture
applicable thereto while the Bonds bear interest at such Adjustable Rate. If any
of the foregoing conditions to the establishment of a Fixed Rate (other than
with respect to any attempted change from an Auction Rate to a Fixed Rate) are
not met, the Trustee shall mail, or cause the Registrar and Paying Agent to mail
to the Authority, the Holders and the Company, notice thereof in substantially
the form attached hereto as, or containing substantially the information
contained in, Exhibit D hereto within 3 Business Days after the failure to meet
any of said conditions.

                  SECTION 4.03. CONVERSION GENERALLY. 1. In the event of a
Change in the Interest Rate Mode on less than all the Bonds of a series or
subseries to or from an Auction Rate, the minimum aggregate principal amount of
Bonds that continue to bear, or are adjusted to bear interest at an Auction Rate
for an Auction Rate Period, shall not be less than $20,000,000 for such Auction
Rate Bonds.

                  2. Upon any Change in the Interest Rate Mode to an Auction
Rate, the Authority and the Trustee, shall take all steps necessary to comply
with any agreement entered into with a Securities Depository or its nominee
pursuant to Section 2.03(5) with respect to such Change in the Interest Rate
Mode, including, without limitation, the purchase and designation of sufficient
CUSIP numbers to comply with the requirements of such Securities Depository
following any such Change in the Interest Rate Mode.


                                      IV-5




                  3. If the interest rate on less than all Bonds is to be
converted to a new Adjustable Rate pursuant to Section 4.01 or to a Fixed Rate
pursuant to Section 4.02, the particular Bonds to be converted shall be chosen
by the Trustee, or the Trustee shall direct the Registrar and Paying Agent to so
choose, in such manner as the Trustee or Registrar and Paying Agent in its
discretion may deem proper; provided, however, that the portion of any Bond to
be converted shall be in the principal amount of $100,000 or any integral
multiple of such amount during a Commercial Paper Rate Period, a Daily Rate
Period, a Weekly Rate Period or a Monthly Rate Period, $25,000 or any integral
multiple thereof during an Auction Rate Period, or $5,000 or any integral
multiple thereof at any other time and that, in selecting Bonds for conversion,
the Trustee or Registrar and Paying Agent shall treat each Bond as representing
that number of Bonds which is obtained by dividing the principal amount of such
registered Bond in excess of $100,000 by $100,000 during a Commercial Paper Rate
Period, a Daily Rate Period, a Weekly Rate Period or a Monthly Rate Period,
$25,000 during an Auction Rate Period, and $5,000 at any other time (such
amounts being hereinafter referred to as the "applicable units of principal
amount"). If it is determined that one or more, but not all of the $100,000,
$25,000 or $5,000 units of principal amount represented by any such Bond is to
be converted, then upon notice of intention to convert such $100,000, $25,000 or
$5,000 unit or units pursuant to Sections 4.01 or 4.02, as the case may be, the
Holders of such Bonds shall forthwith surrender such Bonds to the Registrar and
Paying Agent for (1) payment of the purchase price (including the premium, if
any, and accrued and unpaid interest to the date fixed for conversion) of the
$100,000, $25,000 or $5,000 unit or units of principal amount called for
conversion and (2) exchange for a new Bond or Bonds in the aggregate principal
amount of the balance of the principal of such Bonds not subject to conversion.
If the Holders of any such Bond of a denomination greater than $100,000, $25,000
or $5,000 shall fail to present such Bond to the Registrar and Paying Agent, for
payment and exchange as aforesaid, such Bond shall, nevertheless, become due and
payable on the date fixed for conversion to the extent of the $100,000, $25,000
or $5,000 unit or units of principal amount subject to such conversion (and to
that extent only).

                  4. Notwithstanding anything in this Article IV to the
contrary, the Authority may not effect a Change in the Interest Rate Mode
pursuant to Section 4.01 and the Authority may not exercise its option to
convert to a Fixed Rate pursuant to Section 4.02 if such action would require
the payment of a premium upon purchase of Bonds pursuant to Section 5.04 unless
there shall have been deposited the full amount of such premium in trust with
the Trustee prior to any notification of a change pursuant to Section 4.01 or
4.02.


                                      IV-6



                                   ARTICLE V

                        REDEMPTION AND PURCHASE OF BONDS

                  SECTION 5.01. OPTIONAL REDEMPTION. The Bonds shall be subject
to redemption, in whole or in part, at the option of the Authority upon the
request of the Company, from related payments made by the Company pursuant to
Section 6.02 of the Participation Agreement and any other monies held by the
Trustee and available to be applied to the redemption of Bonds as provided in
this Section 5.01 and Section 9.03 hereof:

                  (a) During any Commercial Paper Rate Period, such Bonds shall
be subject to redemption on each Interest Payment Date, as a whole or in part,
at the principal amount thereof, at a redemption price equal to 100% of the
principal amount.

                  (b) During any Auction Rate Period, Auction Rate Bonds shall
be subject to redemption on the Business Day immediately succeeding each Auction
Date, as a whole or in part, at a redemption price equal to 100% of the
principal amount thereof plus accrued and unpaid interest to the date fixed for
redemption.

                  (c) During any Daily Rate Period, such Bonds shall be subject
to redemption on any Business Day, as a whole or in part, at the principal
amount thereof, plus accrued and unpaid interest to the date fixed for
redemption, if any.

                  (d) During any Weekly Rate Period, such Bonds shall be subject
to redemption on any Business Day, as a whole or in part, at the principal
amount thereof, plus accrued and unpaid interest to the date fixed for
redemption, if any.

                  (e) During any Monthly Rate Period, such Bonds shall be
subject to redemption on each Interest Payment Date, as a whole or in part, at
the principal amount thereof.

                  (f) During any Semi-annual Rate Period, such Bonds shall be
subject to redemption on each Interest Payment Date, as a whole or in part, at
the principal amount thereof.

                  (g) During any Term Rate or Fixed Rate Period, such Bonds
shall be subject to redemption in whole at any time on any Business Day or in
part on any Interest Payment Date as follows: after the No-Call Period shown
below, which shall begin on the first day of the Calculation Period applicable
to such Bonds or on a Fixed Rate Conversion Date, as the case may be, at a
redemption price equal, initially, to the principal amount thereof, plus a
premium equal to the percentage of the principal amount to be redeemed shown in
the Initial Premium column, plus accrued and unpaid interest if paid on a
Business Day other than an Interest Payment Date. The premium percentage shall
decline by the percentage shown in the Reduction in Premium column on each
anniversary of the date on which such Bonds are first redeemable, if the
Calculation Period or period remaining to the Stated Maturity after a Fixed Rate
Conversion Date is equal to or greater than five years, and on each Interest
Payment Date if the Calculation Period or period remaining to the Stated
Maturity after a Fixed Rate Conversion Date is less than five years, until the
Bonds shall be redeemable without premium.


                                       V-1





CALCULATION PERIOD OR PERIOD TO MATURITY
- ----------------------------------------
 Equal to or                 But Less             No-Call              Initial           Reduction
Greater Than                   Than                Period              Premium            in Premium
- ------------                 --------             --------             -------            ----------

                                                                                
  18 years                     N/A                10 Years                2 %               1/2%
  12 years                   18 Years              8 Years                1 1/2             1/2
   7 Years                   12 Years              6 Years                1                 1/2
   5 Years                    7 Years              4 Years                1/2               1/2
   4 Years                    5 Years              3 Years                1/2               1/2
   3 Years                    4 Years              2 Years                1/2               1/2
   0 Years                    3 Years              Not callable


If upon establishment of a Term Rate Period or a Fixed Rate Period, as the case
may be, the Remarketing Agent certifies to the Trustee, Bond Counsel and the
Authority in writing that the foregoing schedule is not consistent with
then-prevailing market conditions, the Authority at the request of the Company
may revise the foregoing Initial Premium, Reductions in Premium and No-Call
Periods without the approval of the Holders to reflect then-prevailing market
conditions, upon receipt of an opinion of Bond Counsel to the effect that any
revisions pursuant to this paragraph, either by itself or in conjunction with
the establishment of a Calculation Period or a Fixed Rate, as the case may be,
are made in accordance with this Indenture, is permitted under the Act and will
not adversely affect the exclusion of interest on the Bonds from gross income
for federal income tax purposes.

                  SECTION 5.02. [Reserved]

                  SECTION 5.03. TENDER FOR AND PURCHASE UPON ELECTION OF HOLDER.
1. During any Daily Rate Period or Weekly Rate Period, any Bond or portion
thereof in a principal amount equal to an authorized denomination (so long as
the principal amount not purchased is an authorized denomination) shall be
purchased on the demand of the Holder thereof on any Business Day at a price
equal to the principal amount thereof plus accrued and unpaid interest, if any,
to the date of purchase, upon delivery to the Registrar and Paying Agent and the
Remarketing Agent at their respective principal offices, by the close of
business on any Business Day of a Notice of Election to Tender in substantially
the form attached hereto as, or containing substantially the information
contained in, EXHIBIT E hereto; provided, however, that the substance of such
Notice of Election to Tender must also be given telephonically to the
Remarketing Agent prior to or simultaneously with delivery of such written
Notice of Election to Tender to the Remarketing Agent. The date on which such
Bond shall be purchased shall, at the request of the Holder thereof (i) if the
Bond then bears interest at a Daily Rate, be the date of delivery of such Notice
of Election to Tender if such Notice of Election to Tender is delivered to the
Registrar and Paying Agent and the Remarketing Agent by 10:00 a.m.(New York City
time) on such date or may be any Business Day thereafter, and (ii) if the Bond
then bears interest at a Weekly Rate, shall be a Business Day not prior to the
7th day next succeeding the date of the delivery of such Notice of Election to
Tender to the Registrar and Paying Agent and the Remarketing Agent.

                  2. During any Monthly Rate Period or Semi-annual Rate Period,
any Bond or portion thereof in a principal amount equal to an authorized
denomination (so long as the principal


                                       V-2



amount not purchased is an authorized denomination) shall be purchased on the
demand of the Holder thereof on the first Business Day following each
Calculation Period at a price equal to the principal amount thereof, upon
delivery to the Registrar and Paying Agent and the Remarketing Agent, at their
respective principal offices of a Notice of Election to Tender in substantially
the form attached hereto as or containing substantially the information
contained in EXHIBIT E on or prior to a Business Day which is not less than 10
days, in the case of Bonds bearing interest at a Semi-annual Rate, or 7 days, in
the case of Bonds bearing interest at a Monthly Rate, prior to the proposed date
of purchase; provided, however, that the substance of such Notice of Election to
Tender must also be given telephonically to the Remarketing Agent prior to or
simultaneously with delivery of such written Notice of Election to Tender to the
Remarketing Agent.

                  3. Immediately upon receipt of a Notice of Election to Tender
delivered pursuant to the provisions of this Section 5.03, the Registrar and
Paying Agent shall notify, or cause to be notified, the Trustee, the Company,
the Authority and the Remarketing Agent, by telephone, promptly confirmed in
writing, of such receipt, specifying the contents thereof.

                  4. Any Notice of Election to Tender shall be irrevocable. If a
Holder fails to deliver the Bonds referred to in such notice to the Registrar
and Paying Agent, such Bonds shall nevertheless be deemed to have been purchased
on the date established for the purchase thereof, no interest shall accrue on
such Bonds from and after the date of purchase and such Holder shall have no
rights hereunder thereafter as the owner of such Bonds except the right to
receive the purchase price of such Bonds.

                  5. A Holder may not tender a Bond to the Registrar and Paying
Agent pursuant to this Section while such Bond bears interest at an Auction
Rate, Commercial Paper Rate, Term Rate or Fixed Rate.

                  SECTION 5.04. MANDATORY TENDER FOR PURCHASE UPON CHANGE IN THE
INTEREST RATE MODE OR ON BUSINESS DAY FOLLOWING CERTAIN CALCULATION PERIODS. 1.
Upon a Change in the Interest Rate Mode, the Bonds shall be subject to mandatory
tender for purchase in accordance with the terms hereof, on the effective date
of such Change in the Interest Rate Mode at the Purchase Price.

                  2. During any Term Rate Period or Commercial Paper Rate
Period, the Bonds shall be subject to mandatory tender for purchase in
accordance with the terms hereof on the Business Day immediately following each
Calculation Period, each at a price equal to the Purchase Price.

                  3. Notice of mandatory tender for purchase upon a Change in
the Interest Rate Mode shall be in substantially the form attached hereto as, or
contain substantially the information contained in, EXHIBIT A hereto.

                  4. Any such notice of mandatory tender for purchase required
by this Section 5.04 shall be given by the Trustee, in the name of the
Authority, or the Trustee shall cause the Registrar and Paying Agent to give
such notice (with copies thereof to be given to the Remarketing Agent, the
Registrar and Paying Agent, the Company, and in the case of Auction Rate


                                       V-3



Bonds, the Auction Agent and the Authority) by first-class mail to the Holders
of the Bonds subject to purchase at their addresses shown on the books of
registry.

                  5. Bonds held by or for the account of the Company or the
issuer of a Support Facility are not subject to mandatory tender for purchase
pursuant to this Section 5.04.

                  SECTION 5.05. EXTRAORDINARY OPTIONAL REDEMPTION. During any
Term Rate Period or Fixed Rate Period, the Bonds are also subject to redemption
prior to maturity in whole at any time at the option of the Authority, exercised
at the direction of the Company, upon notice given as provided in the Indenture,
at a redemption price equal to the principal amount thereof, together with
unpaid interest accrued thereon to the date fixed for redemption, in any of the
following events:

                           (i) All or substantially all of the Project shall
                  have been damaged or destroyed or title to, or the temporary
                  use of, all or a substantial portion of the Project shall have
                  been taken under the exercise of the power of eminent domain
                  by any governmental authority, or person, firm or corporation
                  acting under governmental authority, as in each case renders
                  the Project unsatisfactory to the Company for its intended
                  use;

                           (ii) Unreasonable burdens or excessive liabilities
                  shall have been imposed upon the Authority or the Company with
                  respect to all or substantially all of the Project, including
                  without limitation the imposition of federal, state or other
                  ad valorem property, income or other taxes other than ad
                  valorem taxes in effect on the date of original issuance of
                  the Bonds levied upon privately owned property used for the
                  same general purpose as the Project; or

                           (iii) Any court or regulatory or administrative body
                  shall enter or adopt, or fail to enter or adopt, a judgment,
                  order, approval, decree, rule or regulation, as a result of
                  which the Company elects to cease operation of all or
                  substantially all of the Project.

                  SECTION 5.06. SPECIAL TAX REDEMPTION PROVISIONS. 1. During any
Semi- annual Rate Period, Term Rate Period or Fixed Rate Period, the Bonds shall
be subject to mandatory redemption as a whole (provided, however, that the Bonds
shall be redeemed in part if the Company obtains an opinion of Bond Counsel to
the effect that, by redeeming such portion of the Bonds, the interest on the
remaining Bonds will not be included for Federal income tax purposes in the
gross income of any owner of the Bonds (other than an owner who is a
"substantial user" of the Project or a "related person" within the meaning of
Section 147(a)(1) of the Code)) at any time at a redemption price equal to 100%
of the principal amount thereof, together with unpaid interest accrued thereon
to the redemption date, if, in a published or private ruling of the Internal
Revenue Service or in a final, nonappealable judicial decision by a court of
competent jurisdiction (provided that the Company has been afforded the
opportunity to participate at its own expense in the proceeding resulting in
such ruling or in the litigation resulting in such decision, as the case may
be), it is determined that, as a result of a failure by the Company to observe
any covenant, agreement or representation in the Participation Agreement or the
Tax Regulatory Agreement, interest on the Bonds is included for Federal income
tax purposes in the gross income (as defined in Section 61 of


                                       V-4




the Code) of any owner of a Bond (other than a "substantial user" of the Project
or a "related person" within the meaning of Section 147(a)(1) of the Code), and,
in such event, the Bonds shall be subject to such mandatory redemption not more
than one hundred eighty (180) days after receipt by the Trustee of notice of
such published or private ruling or judicial decision and a demand for
redemption of the Bonds. The occurrence of an event requiring the redemption of
the Bonds under this paragraph does not constitute an event of default under any
Note or under the Indenture and the sole obligation in such event shall be for
the Company to prepay the Note in an amount sufficient to redeem the Bonds to
the extent required by this paragraph.

                  2. During any Semi-annual Rate Period, Term Rate Period or
Fixed Rate Period, the Bonds may be redeemed in whole or in part at any time at
a redemption price equal to 100% of the principal amount thereof, together with
accrued and unpaid interest thereon to the redemption date, if the Company has
determined, on the basis of the advice of Bond Counsel that, as a result of any
action taken or expected to be taken, or failure to take action, a reasonable
risk exists that interest on the bonds will not be excludable from gross income
for federal tax purposes. Such conclusion and certification shall be evidenced
by delivery to the Trustee of a written certificate of an Authorized Company
Representative to the effect that the Company has reached such conclusion,
together with a copy of such advice of Bond Counsel. The occurrence of an event
permitting the redemption of the Bonds under this paragraph does not constitute
an event of default under any Note or under the Indenture and the sole
obligation in such event shall be for the Company to prepay the Note in an
amount sufficient to redeem the Bonds to the extent required by this paragraph.

                  3. During any Semi-annual Rate Period, Term Rate Period or
Fixed Rate Period, the Bonds will also be subject to mandatory redemption at a
redemption price equal to one hundred three percent (103%) of the principal
amount thereof plus unpaid interest accrued thereon to the redemption date if
the Company reasonably concludes and certifies to the Trustee that the business,
properties, condition (financial or otherwise), operations or business prospects
of the Company will be materially and adversely affected unless the Company
takes or omits to take a specified action and that the Company has been advised
in writing by Bond Counsel that the specified action or omission would cause the
use of the Project to be such that, pursuant to Section 150 of the Code, the
Company would not be entitled to deduct the interest on the Bonds for purposes
of determining the Company's Federal taxable income, for a period of not less
than ninety (90) consecutive or nonconsecutive days during a twelve-month
period. Such conclusion and certification shall be evidenced by delivery to the
Trustee of a written certificate of an Authorized Company Representative to the
effect that the Company has reached such conclusion, together with a certified
copy of a resolution of the Board of Trustees of the Company authorizing such
certificate and a copy of such advice of Bond Counsel. In the event that the
Bonds become subject to redemption as provided in this paragraph, the Bonds will
be redeemed in whole unless redemption of a portion of the Bonds outstanding
would, in the opinion of Bond Counsel, have the result that interest payable on
the Bonds remaining outstanding after such redemption would be deductible for
purposes of determining the Federal taxable income of the Company, and, in such
event, the Bonds to be redeemed shall be selected (in the principal amount of
$5,000 or any integral multiple thereof) from time to time at random in such
manner as the Trustee shall determine in accordance with the Indenture, in such
amount as is necessary to accomplish that result. The occurrence of an event
requiring the redemption of the Bonds under this paragraph does not constitute
an event of default under any Note or under the Indenture and the sole


                                       V-5



obligation in such event shall be for the Company to prepay the Note in an
amount sufficient to redeem the Bonds to the extent required by this paragraph.

                  SECTION 5.07. REDEMPTION AT DEMAND OF THE STATE. In accordance
with the provisions of Section 1864 of the Act, the State of New York may, upon
furnishing sufficient funds therefor, require the Authority to redeem prior to
maturity, as a whole, the Bonds on any Interest Payment Date not less than
twenty years after the Closing Date. Any such redemption shall be at a
redemption price equal to the optional redemption price, if any, applicable on
such date set forth in Section 5.01 or if no such optional redemption price is
applicable at a redemption price of 105% of the principal amount thereof, in
either case, together with accrued and unpaid interest, if any, to the date
fixed for redemption, all in the manner provided in this Article V. The
Authority shall deposit any such funds received by it with the Trustee. During
any period during which no Direct-Pay Credit Facility is in effect, the Trustee
shall deposit any such funds in the Bond Fund and, upon notice published in the
manner provided in Section 1864 of the Act, shall apply such funds to the
redemption of the Bonds. During any period in which a Direct-Pay Credit Facility
is in effect, the Trustee shall deposit any such funds received by it in a
segregated sub-account in the Bond Fund, and upon notice published in the manner
provided in Section 1864 of the Act, shall draw monies under the related Credit
Facility pursuant to Article IX and apply such payment to the redemption of the
Bonds at the price and in the manner specified in the preceding sentence. Upon
the application of such Credit Facility payments, the Trustee shall pay the
funds furnished by the State to the issuer of the Credit Facility with
instructions to apply such funds to the reimbursement of the issuer of the
Credit Facility for such Credit Facility payment. Upon such redemption and
notwithstanding anything to the contrary in this Indenture, the Trustee shall
assign the Note relating to the Bonds to or as directed by the Authority.

                  SECTION 5.08. MANDATORY TENDER FOR PURCHASE UPON EXPIRATION OF
ANY SUPPORT FACILITY OR UPON DELIVERY OF AN ALTERNATE SUPPORT FACILITY. 1.
Except as otherwise set forth in the last sentence of this subsection 1, on the
second Business Day next preceding the date of expiration of any Support
Facility, the Bonds shall be subject to mandatory purchase at the Purchase
Price, unless on or prior to the 35th day prior to such date of expiration the
Company on behalf of the Authority has furnished to the Trustee an extension of
such Support Facility. The Bonds shall also be subject to mandatory purchase at
the Purchase Price, on the date there is delivered an Alternate Support Facility
meeting the requirements of Section 6.02. No tender for purchase of any Bonds
shall be required pursuant to this Section 5.08 during an Auction Rate Period or
a Fixed Rate Period.

                  2. Notice of the mandatory tender for purchase pursuant to
this Section 5.08 shall be given on or prior to the 30th day before the
expiration date of the expiring Support Facility or on or prior to the 30th day
before the delivery of any Alternate Support Facility, as the case may be, by
the Trustee in the name of the Authority (with copies thereof given to the
Authority, the Remarketing Agent, the issuer of a Support Facility, the Company
and the Registrar and Paying Agent) by first-class mail to the Holders of the
Bonds subject to mandatory tender for purchase at their addresses shown on the
books of registry. Such notice shall be in substantially the form attached
hereto as, or contain substantially the information contained in, EXHIBIT F
hereto.


                                       V-6



                  3. Bonds held by or for the account of the Company or the
issuer of a Liquidity Facility are not subject to mandatory tender for purchase
pursuant to this Section 5.08.

                  SECTION 5.09. MANDATORY TENDER UPON OCCURRENCE OF ANY
TERMINATING EVENT. 1. Except as otherwise set forth in the last sentence of this
subsection 1, upon the occurrence of any Terminating Event, the Bonds shall be
subject to mandatory tender for purchase at the Purchase Price on a Business Day
selected by the Trustee; provided, however, that (i) such mandatory tender shall
not occur later than the 5th day after receipt of notice of the Terminating
Event by the Trustee and (ii) such mandatory tender date shall be a Business
Day. The Bonds will not be subject to mandatory tender for purchase pursuant to
this Section 5.09 during any Auction Rate Period or any Fixed Rate Period.

                  2. Notice of the mandatory tender for purchase required by
this Section 5.09 shall be in substantially the form attached hereto as, or
contain substantially the information contained in, EXHIBIT F hereto and shall
be given to the Holders of the Bonds subject to mandatory tender for purchase at
their addresses shown on the books of registry on or before the first Business
Day after receipt of notice of a Terminating Event from the issuer of the
Support Facility by the Trustee, in the name of the Authority, or the Trustee
shall cause the Registrar and Paying Agent to give such notice, by first-class
mail to the Holders of the Bonds subject to purchase at their address shown on
the books of registry (with copies thereof given to the Authority, the
Remarketing Agent, the Company and the Registrar and Paying Agent).

                  3. Bonds held by or for the account of the Company or the
issuer of a Liquidity Facility are not subject to mandatory tender for purchase
pursuant to this Section 5.09.

                  SECTION 5.10. GENERAL PROVISIONS APPLICABLE TO MANDATORY AND
OPTIONAL TENDERS FOR PURCHASE OF BONDS. 1. If interest has been paid on the
Bonds, or an amount sufficient to pay interest thereon has been deposited in the
Bond Fund, or an amount sufficient to pay accrued interest thereon, if any, has
been set aside in the Bond Purchase Fund held under the Bond Purchase Trust
Agreement, and the Purchase Price shall be available in the Bond Purchase Fund
for payment of Bonds subject to tender for purchase pursuant to Section 5.03,
5.04, 5.08 or 5.09, and if any Holder fails to deliver or does not properly
deliver the Bonds to the Registrar and Paying Agent for which a Notice of
Election to Tender has been properly filed or which are subject to mandatory
tender for purchase on the purchase date therefor, such Bonds shall nevertheless
be deemed tendered and purchased on the date established for the purchase
thereof, no interest shall accrue on such Bonds from and after the date of
purchase and such former Holders shall have no rights hereunder as the
registered owners of such Bonds, except the right to receive the Purchase Price
of and interest to the purchase date, if any, on such Bonds upon delivery
thereof to the Registrar and Paying Agent in accordance with the provisions
hereof. The purchaser of any such Bonds remarketed by the Remarketing Agent, or
the issuer of any Support Facility, to the extent Bonds are purchased with the
proceeds of a draw on, or borrowing or payment under, the Support Facility,
shall be treated as the registered owner thereof for all purposes of the
Indenture. The payment of Bonds pursuant to Section 5.03 shall be subject to
delivery of such Bonds duly endorsed in blank for transfer or accompanied by an
instrument of transfer thereof in form satisfactory to the Registrar and Paying
Agent executed in blank for transfer at the principal office of the Registrar
and Paying Agent at or prior to 10:00 a.m. (11:30 a.m. for Bonds bearing
interest at the Weekly Rate and 12:00 noon, for


                                       V-7




Bonds bearing interest at the Daily Rate) (New York City time), on a specified
purchase date. The Registrar and Paying Agent may refuse to make payment with
respect to any Bonds tendered for purchase pursuant to Sections 5.03, 5.04, 5.08
or 5.09 not endorsed in blank or for which an instrument of transfer
satisfactory to the Registrar and Paying Agent has not been provided.

                  2. The Purchase Price of Bonds subject to tender for purchase
pursuant to Section 5.03, 5.04, 5.08 or 5.09 in an aggregate principal amount of
at least one million dollars ($1,000,000) shall be payable in immediately
available funds or by wire transfer upon written notice from the Holder thereof
containing the wire transfer address (which shall be in the continental United
States) to which such Holder wishes to have such wire directed, if such written
notice is received by the Registrar and Paying Agent not less than five days
prior to the related purchase date.

                  3. Bonds subject to mandatory tender for purchase pursuant to
Sections 5.08 or 5.09 shall not be remarketed unless and until an Alternate
Support Facility meeting the requirements of Section 6.02 of the Indenture is in
full force and effect; provided, however, that Bonds may be remarketed and no
such Alternate Support Facility is required to be in effect if, at the time the
Bonds are sought to be remarketed, the Bonds bear interest at an Auction Rate or
a Fixed Rate.

                  4. In the event Bonds tendered for purchase pursuant to
Section 5.03 or 5.04 shall be paid from a drawing under a Liquidity Facility,
such Bonds shall not be remarketed unless and until the Trustee or the Registrar
and Paying Agent has been notified by the Liquidity Facility Issuer and, upon
receipt of such notice, the Trustee or the Registrar and Paying Agent has
notified the Remarketing Agent that the amount available for a drawing under
such Liquidity Facility has been restored.

                  SECTION 5.11. SELECTION OF BONDS TO BE REDEEMED. A redemption
of Bonds shall be a redemption of the whole or of any part of the Bonds from any
funds available for that purpose in a principal amount equal to an authorized
denomination (so long as the principal amount not redeemed is an authorized
denomination). If less than all Bonds shall be redeemed, the particular Bonds to
be redeemed shall be chosen by the Trustee, or the Trustee shall direct the
Registrar and Paying Agent to so choose, as hereinafter provided. If less than
all the Bonds shall be called for redemption under any provision of this
Indenture permitting such partial redemption, the particular Bonds or portions
of Bonds to be redeemed shall be selected (a) first, from Bonds held or owned by
or for the issuer of a Support Facility pursuant to any Support Facility, (b)
second, from Bonds for which the Registrar and Paying Agent has received, prior
to such selection, a Notice of Election to Tender requiring the Registrar and
Paying Agent to purchase such Bonds on the date on which the Bonds being
selected are to be redeemed and (c) third, from all other Bonds then
Outstanding, by lot or on a pro rata basis by the Trustee or, upon direction of
the Trustee, the Registrar and Paying Agent, in such manner as the Trustee or
Registrar and Paying Agent in its discretion may deem proper; provided, however,
that the portion of any Bond to be redeemed shall be in the principal amount of
$100,000 or any integral multiple thereof during a Commercial Paper Rate Period,
a Daily Rate Period, a Weekly Rate Period or a Monthly Rate Period, $25,000 or
any integral multiple thereof during an Auction Rate Period, or $5,000 or any
integral multiple thereof at any other time and that, in selecting Bonds for
redemption, the Trustee or Registrar and Paying Agent shall treat each Bond as
representing that number of Bonds which is obtained by dividing the principal
amount of such registered Bond in excess of $100,000 by $100,000 during a
Commercial Paper Rate Period,


                                       V-8



a Daily Rate Period, a Weekly Rate Period or a Monthly Rate Period, $25,000
during an Auction Rate Period, and $5,000 at any other time (such amounts being
hereinafter referred to as the "applicable units of principal amount"). If it is
determined that one or more, but not all of the $100,000, $25,000 or $5,000
units of principal amount represented by any such Bond is to be called for
redemption, then upon notice of intention to redeem such $100,000, $25,000 or
$5,000 unit or units, the Holders of such Bonds shall forthwith surrender such
Bonds to the Registrar and Paying Agent for (1) payment of the redemption price
(including the redemption premium, if any, and accrued interest to the date
fixed for redemption) of the $100,000, $25,000 or $5,000 unit or units of
principal amount called for redemption and (2) exchange for a new Bond or Bonds
of the aggregate principal amount of the unredeemed balance of the principal of
such Bonds. If the Holders of any such Bond of a denomination greater than
$100,000, $25,000 or $5,000 shall fail to present such Bond to the Registrar and
Paying Agent, for payment and exchange as aforesaid, such Bond shall,
nevertheless, become due and payable on the date fixed for redemption to the
extent of the $100,000, $25,000 or $5,000 unit or units of principal amount
called for redemption (and to that extent only).

                  SECTION 5.12. NOTICE OF REDEMPTION. 1. Notice of redemption
shall be given by the Trustee by mailing a copy of the redemption notice by
first-class mail at least 30 days prior to the date fixed for redemption to the
Holders of the Bonds to be redeemed at the addresses shown on the registration
books maintained by the Registrar and Paying Agent. A copy of such notice of
redemption shall be given by the Trustee to the Auction Agent at least 30 days
prior to the date fixed for redemption. Any redemption may be conditioned on the
receipt of moneys by the Registrar and Paying Agent sufficient to pay the
redemption price on the Redemption Date of Bonds called for redemption, if the
notice of redemption so states.

                  2. The Registrar and Paying Agent shall not be required to
transfer or exchange Bonds during any period beginning at the opening of
business fifteen (15) days before the day of mailing of a notice of redemption
and ending at the close of business on the day fixed for redemption; provided,
however, that the foregoing shall not apply during a Daily Rate Period, a Weekly
Rate Period, a Commercial Paper Rate Period or an Auction Rate Period.

                  3. Each notice of redemption shall state: (i) the full title
of the Bonds, the redemption date, the place of redemption and the redemption
price payable upon such redemption; (ii) that the interest on the Bonds, or on
the principal amount thereof to be redeemed, shall cease to accrue from and
after such redemption date and (iii) that on said date there will become due and
payable on the Bonds the principal amount thereof to be redeemed and the
interest accrued on such principal amount to the redemption date, if any, and
the premium, if any, thereon. Each notice of redemption mailed to the Holder of
the Bonds shall, if less than the entire principal sum thereof is to be
redeemed, also state the principal amount thereof and the distinctive numbers of
the Bonds to be redeemed and that such Bonds must be surrendered to the Trustee
in exchange for the payment of the principal amount thereof to be redeemed and
the issuance of a new Bond equaling in principal amount that portion of the
principal sum not to be redeemed of the Bonds to be surrendered. The failure to
give notice to any Holder of a Bond or any defects in such notice shall not
affect the proceedings for the redemption of the Bonds for which notice has been
properly given.


                                       V-9



                  SECTION 5.13. BONDS PURCHASED FOR ACCOUNT OF LIQUIDITY
FACILITY ISSUER. Bonds subject to mandatory purchase pursuant to Section 5.03,
5.04, 5.08 or 5.09 shall be deemed to be purchased by the Company except to the
extent the Liquidity Facility expressly provides that the Bonds are to be
purchased by the issuer of the Liquidity Facility in which event such Bonds
shall be deemed to be purchased by the issuer of the Liquidity Facility in a
principal amount equal to the amount of a draw on, or borrowing or payment
under, the Liquidity Facility for the payment of Bonds subject to purchase, upon
the deposit with the Registrar and Paying Agent of the proceeds of such draw on,
or borrowing or payment under, the Liquidity Facility in an amount equal to the
principal of such Bonds plus accrued interest thereon to the purchase date, and
such Bonds shall not be deemed paid and shall remain outstanding hereunder until
the issuer of the Liquidity Facility has been reimbursed for such draws on, or
borrowings or payments under, the Liquidity Facility to pay such principal and
interest. Unless the issuer of any Liquidity Facility shall otherwise direct,
any Bonds purchased by the issuer of the Liquidity Facility shall be immediately
registered in the name of the Company except to the extent the Liquidity
Facility expressly provides that the Bonds are to be purchased by the issuer of
the Liquidity Facility in which event such Bonds shall be registered in the name
of the issuer of the Liquidity Facility as a Holder and the issuer of the
Liquidity Facility shall have all rights of a Holder of Bonds under this
Indenture.

                  SECTION 5.14. EFFECT OF REDEMPTION. If the Bonds have been
duly called for redemption and notice of the redemption thereof has been duly
given or provided for as hereinbefore provided and if monies for the payment of
the Bonds (or of the principal amount thereof to be redeemed) and the interest
to accrue to the redemption date on the Bonds (or of the principal amount
thereof to be redeemed), if any, and the premium, if any, thereon are held for
the purpose of such payment by the Trustee, then the Bonds (or the principal
amount thereof to be redeemed) shall on the redemption date designated in such
notice, become due and payable and interest on the Bonds (or the principal
amount thereof to be redeemed) so called for redemption shall cease to accrue
from such date and the Holder thereof shall thereafter have no rights hereunder
as the Holder of such Bonds (or the principal amount thereof to be redeemed)
except to receive the principal amount thereof and premium (if any) thereon and
interest to the redemption date.

                  SECTION 5.15. CANCELLATION OF REDEEMED BONDS. Any Bonds
surrendered or redeemed pursuant to the provisions of this Article shall be
cancelled by the Registrar and Paying Agent.


                                      V-10



                                   ARTICLE VI

                                SUPPORT FACILITY

                  SECTION 6.01. SUPPORT FACILITY - GENERAL. Pursuant to the
Participation Agreement, the Company has agreed not to request that the interest
rate mode applicable to the Bonds be adjusted to an Adjustable Rate other than
an Auction Rate unless there shall be in effect, prior to the applicable Change
in the Interest Rate Mode, one or more Support Facilities which (i) meet the
requirements of this Article VI and (ii) permit the Bonds to be rated at least
"A" by S&P or "A" by Moody's or its equivalent by any nationally recognized
rating agency. The Company has further agreed to maintain a Liquidity Facility
meeting the requirements of the Participation Agreement with respect to the
Bonds at all times, except with respect to Bonds bearing interest at an Auction
Rate or a Fixed Rate. A Liquidity Facility also must be in effect on or prior to
the effective date of (i) any Change in the Interest Rate Mode from an Auction
Rate to another Adjustable Rate, and (ii) any Change in the Interest Rate Mode
from a Fixed Rate to an Adjustable Rate (other than a Change in the Interest
Rate Mode to an Auction Rate Period). The Bond Insurer shall have the right to
consent to the selection of the issuer of any Liquidity Facility and the terms
thereof. Such consent shall be deemed to be given if the Bond Insurer
unreasonably withholds consent. The Trustee shall be furnished with a certified
copy of any Support Facility obtained pursuant to this Section 6.01.

                  Any Support Facility Issuer not located in New York State
shall provide the Trustee with a list of holidays on which it is closed through
the next succeeding January 1 at the beginning of the term of such Support
Facility and by January 1 of each year thereafter.

                  SECTION 6.02. SUPPORT FACILITY - DELIVERY OF AN INITIAL
LIQUIDITY FACILITY AND ALTERNATE SUPPORT FACILITY. 1. At any time, the Authority
may, at the request of the Company, provide for the delivery to the Trustee of
an initial Liquidity Facility or an Alternate Support Facility. The termination
date of such initial Liquidity Facility or such Alternate Support Facility, as
the case may be, shall be a date not earlier than 364 days from its date of
issuance, subject to earlier termination upon the occurrence of (i) a
Terminating Event or another event of default under the related reimbursement
agreement or other corresponding agreement relating to such initial Liquidity
Facility or Alternate Support Facility, as the case may be, (ii) the issuance of
an alternate Liquidity Facility or a subsequent Alternate Support Facility, as
the case may be, (iii) payment in full of the Outstanding Bonds or (iv) in the
case of an alternate Liquidity Facility, a Change in the Interest Rate Mode to
an Auction Rate or a Fixed Rate. Any Liquidity Facility shall specifically
allow, in the case of occurrence of any event or events which under the terms of
such Liquidity Facility or any agreement providing for the issuance thereof
would cause the termination or expiration of such Liquidity Facility, for the
mandatory tender of Bonds pursuant to Section 5.09 with a draw on or borrowing
or payment under such Liquidity Facility prior to such termination or
expiration. On or prior to the date of the delivery of an initial Liquidity
Facility or an Alternate Support Facility to the Trustee, the Company shall
furnish to the Trustee on behalf of the Authority (a) an opinion of Bond Counsel
stating that the delivery of such initial Liquidity Facility or Alternate
Support Facility, as the case may be, to the Trustee is authorized under this
Indenture and complies with the terms hereof and (b) in the case of an Alternate
Support Facility, confirmation from S&P, if the Bonds are then rated by S&P,
from Moody's, if the Bonds are then rated by Moody's, or another rating agency,
if the


                                      VI-1




Bonds are then rated by such rating agency, to the effect that such rating
agency has reviewed the proposed Alternate Support Facility and that the
substitution of the proposed Alternate Support Facility for the Support Facility
will not, by itself, result in a reduction or withdrawal of its long or
short-term rating of the Bonds below the rating category of S&P or Moody's or
such other rating agency, as the case may be, then in effect with respect to the
Bonds.

                  2. Nothing contained herein shall prevent the Authority, at
the request of the Company, from delivering an Alternate Support Facility in
substitution for a Support Facility which will result in a decline in the
short-term or long-term rating or both assigned to such Bonds by Moody's or S&P
or such other rating agency as a result of the Alternate Support Facility;
provided, that (i) the opinion of Bond Counsel referred to in the preceding
paragraph is obtained; provided that such opinion shall also be to the effect
that delivery of such Alternate Support Facility will not adversely affect the
exclusion from gross income of interest on the Bonds for federal income tax
purposes and (ii) all Outstanding Bonds are subject to mandatory tender for
purchase pursuant to Section 5.08 (unless the Bonds bear an Auction Rate or a
Fixed Rate). The Authority, or the Company on behalf of the Authority, shall
deliver notice to the Trustee of the substitution of an Alternate Support
Facility which will result in a decline in the short-term or long-term ratings
assigned to the Bonds pursuant to this subsection 2 of Section 6.02 at least
forty- five (45) days before the date of substitution.

                  SECTION 6.03. TRUSTEE NOT RESPONSIBLE FOR ENFORCEMENT OF
SUPPORT FACILITY. The Trustee shall have no responsibility with respect to the
enforcement of any Support Facility obtained hereunder.

                  SECTION 6.04. PAYMENTS PURSUANT TO THE POLICY. 1. The Trustee
shall, at least one Business Day prior to each Interest Payment Date, determine
whether there will be sufficient funds in the Bond Fund to pay the principal of
and/or interest on the Bonds on such Interest Payment Date. If the Trustee
determines that there will be insufficient funds in the Bond Fund, the Trustee
shall so notify the Bond Insurer. Such notice shall specify the amount of the
anticipated deficiency, the Bonds to which such deficiency is applicable and
whether such Bonds will be deficient as to principal or interest, or both. If
the Trustee has not so notified the Bond Insurer at least one Business Day prior
to an Interest Payment Date, the Bond Insurer will make payments of principal or
interest due on the Bonds on or before the first Business Day next following the
date on which the Bond Insurer shall have received notice of nonpayment from the
Trustee.

                  2. The Trustee shall after giving notice to the Bond Insurer
as provided in paragraph 1 of this Section 6.04, make available to the Bond
Insurer and, at the Bond Insurer's direction, to The Bank of New York, as
insurance trustee for the Bond Insurer or any successor insurance trustee (the
"Insurance Trustee"), the registration books of the Authority maintained by the
Trustee and all records relating to the Bond Fund maintained under this
Indenture.

                  3. The Trustee shall provide the Bond Insurer and the
Insurance Trustee with a list of Holders of the Bonds entitled to receive
principal or interest payments from the Bond Insurer under the terms of the
Policy, and shall make arrangements with the Insurance Trustee (i) to mail
checks or drafts to the Holders of the Bonds entitled to receive full or partial
interest payments from


                                      VI-2



the Bond Insurer and (ii) to pay principal upon Bonds surrendered to the
Insurance Trustee by the Holders of Bonds entitled to receive full or partial
principal payments from the Bond Insurer.

                  4. The Trustee shall, at the time it provides notice to the
Bond Insurer pursuant to paragraph 1 of this Section 6.04, notify Holders of
Bonds entitled to receive the payment of principal or interest thereon from the
Bond Insurer (i) as to the fact of such entitlement, (ii) that the Bond Insurer
will remit to them all or a part of the interest payments next coming due upon
proof of the Holders' entitlement to interest payments and delivery to the
Insurance Trustee, in form satisfactory to the Insurance Trustee, of an
appropriate assignment of the Holder's right to payment, (iii) that should they
be entitled to receive full payment of principal from the Bond Insurer, they
must surrender their Bonds (along with an appropriate instrument of assignment
in form satisfactory to the Insurance Trustee to permit ownership of such Bonds
to be registered in the name of the Bond Insurer) for payment to the Insurance
Trustee, and not the Trustee, and (iv) that should they be entitled to receive
partial payment of principal from the Bond Insurer, they must surrender their
Bonds for payment thereon first to the Trustee, who shall note on such Bonds the
portion of the principal paid by the Trustee and then, along with an appropriate
instrument of assignment in form satisfactory to the Insurance Trustee, to the
Insurance Trustee, which will then pay the unpaid portion of principal.

                  5. In the event that the Trustee has notice that any payment
of principal of or interest on a Bond which has become Due for Payment (as
defined in the Policy) and which is made to a Holder of a Bond by or on behalf
of the Authority has been deemed a preferential transfer and theretofore
recovered from its Holder pursuant to the United States Bankruptcy Code by a
trustee in bankruptcy in accordance with the final, nonappealable order of a
court having competent jurisdiction, the Trustee shall, at the time the Bond
Insurer is notified pursuant to paragraph 1 of this Section 6.04, notify all
Holders of the Bonds that in the event that any Holder's payment is so
recovered, such Holder will be entitled to payment from the Bond Insurer to the
extent of such recovery if sufficient funds are not otherwise available, and the
Trustee shall furnish to the Bond Insurer its records evidencing the payments of
principal of and interest on the Bonds which have been made by the Trustee and
subsequently recovered from Holders of the Bonds and the dates on which such
payments were made.

                  6. In addition to those rights granted to the Bond Insurer
under this Indenture, the Bond Insurer shall, to the extent it makes payment of
principal of or interest on Bonds, become subrogated to the rights of the
recipients of such payments in accordance with the terms of the Policy, and to
evidence such subrogation (i) in the case of subrogation as to claims for past
due interest, the Trustee shall note the Bond Insurer's rights as subrogee on
the registration books upon receipt from the Bond Insurer of proof of the
payment of interest thereon to the Holders of the Bonds, and (ii) in the case of
subrogation as to claims for past due principal, the Trustee shall note the Bond
Insurer's rights as subrogee on the registration books upon surrender of the
Bonds by the Holders thereof together with proof of the payment of principal
thereof to the Holders of the Bonds.

                  7. If the Trustee provides a notice to the Bond Insurer
pursuant to paragraph 1 of this Section 6.04, then, so long as any Bonds bear
interest at an Auction Rate, the Trustee shall confirm with the Insurance
Trustee on or prior to the Business Day immediately following the day on which
such notice was given that the Bond Insurer made payments under the Policy in an
amount


                                      VI-3




that is equal to or exceeds the deficiency in the Bond Fund. If by the end of
business on the Business Day immediately following the day on which a notice was
given pursuant to paragraph 1 of this Section 6.04 the Trustee was unable to
confirm, upon its communication with the Insurance Trustee, that the Bond
Insurer made payments under the Policy in an amount that is equal to or exceeds
the deficiency in the Bond Fund, then the Trustee shall immediately send a
notice to the Auction Agent and Holders of each subseries of Bonds by telex,
telecopy or similar means of the occurrence of a Payment Default. If at any time
after the occurrence of a Payment Default the Trustee confirms with the
Insurance Trustee that the Bond Insurer made payments under the Policy in an
amount that is equal to or exceeds the deficiency in the Bond Fund, the Trustee
shall immediately give a notice to the Auction Agent and Holders of each
subseries of the Bonds that the Bond Insurer has cured the default under the
Policy by making all scheduled payments thereunder.

                  SECTION 6.05. RIGHTS OF CREDIT FACILITY ISSUER AFTER AN EVENT
OF DEFAULT. Notwithstanding any other provision of this Indenture, upon the
occurrence of an Event of Default and so long as the Credit Facility Issuer is
not in default under such Credit Facility, then, in all such events, the Credit
Facility Issuer shall be deemed to be the sole owner of the Bonds when the
approval, consent, direction or any other action of the owners of such Bonds is
required or may be exercised under this Indenture, including, without
limitation, (i) the right to control and direct the declaration of principal of
and accrued interest on all the Bonds then Outstanding to be due and payable
immediately as described herein, and (ii) the right to rescind and annul such
declaration and the consequences of such declaration.


                                      VI-4



                                   ARTICLE VII

                      GENERAL TERMS AND PROVISIONS OF BONDS

                  SECTION 7.01. EXECUTION AND AUTHENTICATION OF BONDS. The Bonds
shall be executed on behalf of the Authority by the manual or facsimile
signature of its Chair, Vice-Chair, President, Treasurer or any Vice President
and shall be sealed with the seal of the Authority, or in lieu thereof shall
bear a lithographed, engraved or otherwise reproduced facsimile of such seal
attested by the manual or facsimile signature of its Vice President, Treasurer,
Secretary or an Assistant Secretary.

                  Bonds bearing the manual signature of the officer of the
Authority authorized to execute such Bonds in office on the date of such manual
signing thereof and Bonds bearing the facsimile signature of the officer of the
Authority authorized to execute such Bonds in office on the date of the
reproducing of such facsimile signature on such Bonds, shall be valid and
binding obligations in accordance with their terms, notwithstanding that before
the delivery thereof and payment therefor the person whose signature appears
thereon shall have ceased to be such officer.

                  Only Bonds having endorsed thereon a certificate of
authentication substantially in the form set forth in Article XVI, duly executed
by the Trustee shall be entitled to any right or benefit under this Indenture.
No Bonds shall be valid or obligatory for any purpose unless and until such
certificate of authentication shall have been duly executed by the Trustee, and
such certificate of the Trustee upon a Bond shall be conclusive evidence that
such Bond has been duly authenticated and delivered under this Indenture and
that the Holder thereof is entitled to the benefits of this Indenture. The
Trustee's certificate of authentication on any Bond shall be deemed to have been
duly executed if signed by an authorized officer of the Trustee.

                  SECTION 7.02. BOOKS OF REGISTRY. The Registrar and Paying
Agent shall keep or cause to be kept at its principal office books (herein
referred to as the "books of registry" or "registration books") for the
registration and transfer of the Bonds. Upon presentation at its principal
office for such purpose the Registrar and Paying Agent, under such reasonable
regulations as it may prescribe, shall register or transfer, or cause to be
registered or transferred, on said books of registry, the Bonds as hereinafter
set forth. The books of registry shall at all times during business hours be
open for inspection by the Authority, the Company and the Trustee or their duly
authorized agents or representatives.

                  SECTION 7.03. TRANSFER, REGISTRATION AND EXCHANGE OF BONDS.
The transfer of the Bonds may be registered only upon the books of registry
required to be kept pursuant to Section 7.02 upon surrender thereof to the
Registrar and Paying Agent, together with an assignment duly executed by the
Holder thereof or his or her duly authorized agent and accompanied by a
guarantee of signature, each in such form as shall be satisfactory to the
Registrar and Paying Agent. Upon any such registration of transfer the Authority
shall execute and the Trustee shall authenticate and deliver in exchange for
such Bonds a new Bond or Bonds registered in the name of the transferee or
transferees for a like aggregate principal amount, of any denomination or
denominations authorized by this Indenture. No transfer of any Bond shall be
effective until entered on the books of registry.


                                      VII-1



                  Any Bond surrendered in any such registration of transfer
shall forthwith be cancelled by the Trustee. Any Bonds registered and
transferred to a new Holder pursuant to this Section shall be delivered to the
Holder at the principal office of the Registrar and Paying Agent or sent by
first-class mail to the Holder at his or her request, risk and expense.

                  Bonds, upon surrender thereof at the principal corporate trust
office of the Registrar and Paying Agent, together with an assignment duly
executed by the Holder or his or her authorized agent and accompanied by a
guarantee of signature, each in such form as shall be satisfactory to the
Registrar and Paying Agent, may, at the option of the Holder thereof, be
exchanged for an equal aggregate principal amount of Bonds of any denomination
or denominations authorized by this Indenture and in the same form as the Bonds
surrendered for exchange. All Bonds so surrendered pursuant to this Section
shall be cancelled by the Trustee.

                  Any Bonds to be delivered to the Holder upon any such exchange
shall be delivered to the Holder at the principal office of the Registrar and
Paying Agent or sent by first-class mail to the Holder thereof at his or her
request, risk and expense.

                  Any taxes or other governmental charges required to be paid
with respect to the registration of transfer or exchange of the Bonds shall be
paid by the Holder requesting registration of such transfer or exchange, as a
condition precedent to the exercise of such privilege. The Authority or the
Registrar and Paying Agent, or both, may charge the Company for every
registration of transfer or exchange sufficient to reimburse it for any and all
costs required to be paid in respect thereof.

                  SECTION 7.04. MUTILATED, LOST, STOLEN, OR DESTROYED BONDS. In
the event any Bond shall be lost, stolen, destroyed, wholly or in part, or so
defaced as to impair its value to the Holder, the Trustee shall, upon compliance
with the terms provided by law, authenticate and deliver a new Bond of like date
and tenor in exchange or replacement therefor against delivery for cancellation
of such mutilated Bond, or in lieu of and in replacement of a destroyed, stolen
or lost Bond, and upon payment by the Holder of the reasonable expenses of the
Registrar and Paying Agent and the Authority and the reasonable charges of the
Trustee and Registrar and Paying Agent in connection therewith and, in the event
that the Bond is destroyed, stolen or lost, the Holder's filing with the
Registrar and Paying Agent of evidence satisfactory to it that the Bond was
destroyed, stolen or lost, of the Holder's ownership thereof, and furnishing the
Registrar and Paying Agent and the Authority such security and indemnity as is
satisfactory to them. Any replacement Bond issued under the provisions of this
Section in exchange or substitution for the defaced, mutilated or partly
destroyed Bond or in substitution for the allegedly lost, stolen or wholly
destroyed Bond shall be entitled to the identical benefits under this Indenture
as was the original Bond in lieu of which such replacement Bond is issued. Each
such replacement Bond shall be prepared in substantially the same manner as the
original.

                  Notwithstanding the foregoing provisions of this Section, if
the lost, stolen, destroyed, defaced or mutilated Bond has matured or been
called for redemption and the date fixed for redemption thereof has arrived, at
the option of the Authority, payment of the amount due thereon may be made
without the issuance of any replacement Bond upon receipt of like evidence,


                                      VII-2


indemnity, security and payment of expenses and the surrender for cancellation
of the defaced or mutilated or partly destroyed Bond and upon such other
conditions as the Trustee may prescribe.

                  Except as provided in this sentence and as permitted in the
following paragraph, any replacement Bond shall be in the form of the Bond being
replaced, and be dated the date of its issuance and bear such number as shall be
assigned thereto by the Registrar and Paying Agent, with such subseries
designation, if any, as may be deemed appropriate by the Registrar and Paying
Agent. The Registrar and Paying Agent shall make an appropriate notation in the
books of registry that a replacement Bond has been issued in exchange or
substitution for the defaced, mutilated, lost, stolen, or wholly or partly
destroyed Bond.

                  There may be imprinted or affixed on the face and the panel
portion of any duplicate Bond a mark to identify such Bond as a replacement
Bond.

                  Prior to arranging for the preparation or printing of a
replacement Bond, the Trustee and the Registrar and Paying Agent may require a
deposit by the Holder to secure the Trustee, the Registrar and Paying Agent and
the Authority for costs and expenses incurred by them in the preparation,
printing, execution and issuance of such replacement Bond.

                  Any amount of such deposit received by the Registrar and
Paying Agent in excess of the amount required to reimburse the Registrar and
Paying Agent, the Trustee or the Authority for costs and expenses shall be
returned to the party which made the deposit.

                  Any defaced, mutilated or partly destroyed Bond surrendered to
the Registrar and Paying Agent in substitution for a new Bond pursuant to this
Section shall be cancelled by the Trustee.

                  SECTION 7.05. TEMPORARY BONDS. Pending the preparation of
definitive Bonds, interim receipts or certificates (herein referred to as
"temporary Bonds") may initially be issued, exchangeable for definitive Bonds
when the latter are ready for delivery. Such temporary Bonds may be printed,
lithographed or typewritten, shall be of such denomination or denominations as
may be determined by the Authority and may contain such references to any of the
provisions of this Indenture as may be appropriate. If temporary Bonds are
issued, the Authority will cause to be furnished duly executed definitive Bonds
without delay, and thereupon the temporary Bonds may be surrendered for
cancellation at the principal office of the Trustee in exchange for definitive
Bonds and without charge for such exchange, and the Registrar and Paying Agent
shall deliver in exchange for such temporary Bonds so surrendered an equal
aggregate principal amount of definitive duly executed Bonds, of authorized
denominations. Until so exchanged, the temporary Bonds shall be entitled to the
same benefits under this Indenture as definitive Bonds.

                  Nothing in this Indenture shall prevent the Authority from
delivering, and the Authority is hereby expressly permitted to deliver, Auction
Rate Bonds in typewritten form to the Securities Depository as registered owner
thereof.

                  SECTION 7.06. DISPOSITION OF BONDS. Any Bond surrendered to
the Registrar and Paying Agent for payment shall be cancelled upon such payment
by the Trustee. The Trustee


                                      VII-3




shall dispose of any cancelled Bond which has been paid and which bears any date
two (2) years prior to the date of disposition in accordance with the Trustee's
procedures in effect for the disposition of cancelled securities as of the date
of such disposition. When the Trustee shall dispose of any Bond, it shall
deliver a certificate of such disposition to the Authority and the Company.


                                      VII-4



                                  ARTICLE VIII

                        ESTABLISHMENT OF THE PROJECT FUND

                  SECTION 8.01. PROJECT FUND. 1. There is hereby created and
established a special trust fund to be designated "Consolidated Edison Company
of New York, Inc. Series 2001B Project Fund" (hereinafter referred to as the
"Project Fund") to be held by the Trustee. All income or gain on monies
deposited in the Project Fund shall be retained therein.

                  2. There shall be deposited into the Project Fund the proceeds
of the Bonds issued hereunder.

                  3. The monies on deposit from time to time in the Project Fund
shall be held under and subject to this Indenture, but shall not be subject to
the liens, pledges, charges, assignments and trusts created hereby for the
security and benefit of the Holders of the Bonds and shall not be available for
the payment of Bonds within the meaning of the Indenture, and shall be used and
applied solely for the purpose of refunding the Prior Bonds in accordance with
the remaining provisions of this Section.

                  4. The Trustee is authorized and directed to make payments
from the Project Fund to pay the redemption price of the Prior Bonds or costs
incurred in connection therewith, upon receipt of a letter or letters signed by
an Authorized Company Representative so directing.


                                     VIII-1



                                   ARTICLE IX

                     CREATION OF SPECIAL FUNDS AND ACCOUNTS;
                     APPLICATION AND INVESTMENT OF REVENUES

                  SECTION 9.01. CREATION OF FUNDS AND ACCOUNTS. (a) The
following fund and the following accounts therein, which shall be a special fund
and accounts to be held by the Trustee, are hereby created and designated as set
forth below:

                  Bond Fund

                           (a)      Interest Account
                           (b)      Principal Account
                           (c)      Redemption Account
                           (d)      Acceleration Account

                  The designation of each fund and account set forth above shall
include the term "Consolidated Edison Company of New York, Inc. Series 2001B,"
which term shall precede the designation as set forth above. Such fund and each
such account is, however, sometimes referred to herein as set forth above.

                  (b) The Bond Fund and the accounts therein shall be held in
the custody of the Trustee. All monies required to be deposited with or paid to
the Trustee under any provision of this Indenture shall be held by the Trustee
in trust and applied only in accordance with the provisions of this Indenture
and shall be trust funds for the purposes specified in this Indenture.

                  SECTION 9.02. DEPOSIT OF NOTE PAYMENTS. The Trustee shall
deposit the Note Payments or other money set forth below in the Bond Fund and
credit the Accounts set forth below in the order set forth below:

                  The Company shall pursuant to Sections 4.02, 4.03 and 4.04 of
the Participation Agreement deposit, or cause to be deposited, the following in
immediately available funds with the Trustee as the Note Payments become due or
are declared to be immediately due and payable under the Participation Agreement
and the Note unless sufficient amounts are then available in such Accounts to
make the required payments therefrom:

                  (a)(i) During an Auction Rate Period, no later than 12:00 noon
(New York City time) on the Business Day next preceding each Interest Payment
Date, into the Bond Fund for credit to the Interest Account an aggregate amount
of funds available on the next Business Day in The City of New York equal to the
aggregate amount required for the payment of the interest payable on the Auction
Rate Bonds, on such Interest Payment Date.

                  (ii) No later than 12:00 noon (New York City time) on each
Interest Payment Date, other than during an Auction Rate Period, into the Bond
Fund for credit to the Interest Account the amount required for the payment of
the interest payable on the Outstanding Bonds on such Interest Payment Date.


                                      IX-1



                  In the event a Direct-Pay Credit Facility is in place, amounts
required to be deposited in the Bond Fund for credit to the Interest Account
shall be derived solely from the following sources of funds in the priority
indicated and shall be so deposited and credited to the Interest Account on the
date indicated:

                           (I) First, on each Interest Payment Date, the
         proceeds of a draw, borrowing or payment under the Direct-Pay Credit
         Facility in respect of interest payable on such Interest Payment Date;
         and

                           (II) Second, on each Interest Payment Date, any other
         monies provided by the Company pursuant to the preceding paragraph for
         such purpose.

                  The Trustee shall deposit the proceeds of a draw, borrowing or
payment under a Direct-Pay Credit Facility in a segregated sub-account of the
Interest Account in the Bond Fund and such proceeds shall not be commingled with
moneys in any other Account or sub-account or derived from any other source.

                  (b)(i) During an Auction Rate Period, no later than 12:00 noon
(New York City time) on the second Business Day next preceding each Auction
Date, into the Bond Fund for credit to the Redemption Account an aggregate
amount of funds available on the next Business Day in The City of New York equal
to the aggregate amount required to pay the principal of and premium, if any,
and accrued interest on any Auction Rate Bonds, called for redemption; provided,
however if the scheduled date of such deposit to the Redemption Account by the
Company is not a Business Day then the date for such deposit to the Redemption
Account by the Company shall be the first Business Day immediately preceding the
scheduled date of such deposit to the Redemption Account by the Company.

                  (ii) Other than during an Auction Rate Period, on the last
Business Day prior to the day on which any redemption is to occur or on the last
Business Day prior to the Stated Maturity, into the Bond Fund for credit to the
Redemption Account or the Principal Account, as appropriate, the amount required
to pay principal of and premium, if any, and accrued interest on any Bonds
called for redemption or at the Stated Maturity, the amount required to pay the
principal of the Bonds.

                  In the event a Direct-Pay Credit Facility is in place, amounts
required to be deposited in the Bond Fund for credit to the Redemption Account
or the Principal Account, as appropriate, shall be derived solely from the
following sources of funds in the priority indicated and shall be so deposited
and credited in the Redemption Account or the Principal Account, as appropriate,
on the date indicated:

                           (I) First, on the date any redemption is scheduled to
         occur and on the Stated Maturity, the proceeds of a draw, borrowing or
         payment under the Direct-Pay Credit Facility in respect of the amounts
         described in the preceding paragraph; and


                                      IX-2



                           (II) Second, on the date any redemption is scheduled
         to occur and on the Stated Maturity, any other monies provided by the
         Company pursuant to the preceding paragraph for such purpose.

                  The Trustee shall deposit the proceeds of a draw, borrowing or
payment under a Direct-Pay Credit Facility in a segregated sub-account of the
Redemption Account or Principal Account, as the case may be, in the Bond Fund
and such proceeds shall not be commingled with moneys in any other Account or
sub-account or derived from any other source.

                  If other monies are received by the Trustee as advance
payments of Note Payments to be applied to the redemption of all or a portion of
the Bonds, such monies shall be deposited in the Bond Fund for credit to the
Redemption Account therein.

                  (c) Immediately following the declaration of principal of and
accrued interest on the Bonds then Outstanding to be immediately due and payable
pursuant to Section 12.03, into the Bond Fund for credit to the Acceleration
Account, the amount required to pay principal of and accrued interest on such
Bonds.

                  In the event a Direct-Pay Credit Facility is in place, amounts
required to be deposited in the Bond Fund for credit to the Acceleration Account
shall be derived solely from the following sources of funds in the priority
indicated and shall immediately be so deposited and credited in the Acceleration
Account:

                           (I) First, the proceeds of a draw, borrowing or
         payment under the Direct-Pay Credit Facility in respect of principal of
         and accrued interest on the Bonds; and

                           (II) Second, any other monies provided by the Company
         pursuant to the preceding paragraph for such purpose.

                  The Trustee shall deposit the proceeds of a draw, borrowing or
payment under a Direct-Pay Credit Facility in a segregated sub-account of the
Acceleration Account in the Bond Fund and such proceeds shall not be commingled
with moneys in any other Account or sub- account or derived from any other
source.

                  SECTION 9.03. APPLICATION OF MONIES IN THE BOND FUND AND THE
BOND PURCHASE FUND. 1. The Bond Fund shall be used for the purpose of making
scheduled payments of principal of and interest on the Bonds, of making payments
of principal of and premium, if any, and accrued interest on Bonds then subject
to redemption in the manner herein provided and of making payments of principal
of and accrued interest on the Bonds then Outstanding that have been declared to
be immediately due and payable pursuant to Section 12.03. The monies in the Bond
Fund shall be applied as follows:

                  (a) INTEREST ACCOUNT. Subject to the succeeding sentence, on
each Interest Payment Date, the Trustee shall apply the amount of monies then
credited to the Interest Account equal to the interest then payable on the Bonds
to the payment of such interest on such Interest Payment Date. In the event a
Direct-Pay Credit Facility is in place and payments are required to be


                                      IX-3





made in the order specified in Section 9.02 (a)(ii), the Trustee shall request a
draw, borrowing or payment under the Direct-Pay Credit Facility in accordance
with the terms thereof in an amount equal to the amount required to pay the
interest payable on the Outstanding Bonds on such Interest Payment Date and
shall notify the Company of the amount and date of such request. If sufficient
funds are not available under Section 9.02(a)(ii)(I) to pay such interest, the
Trustee shall apply funds, if any, available pursuant to Section
9.02(a)(ii)(II), to the extent necessary, to such payment of interest. If the
interest on the Bonds has been paid in full when due and all payments required
under the Direct-Pay Credit Facility have been made, the Trustee shall apply
remaining funds, if any, available pursuant to Section 9.02(a)(ii)(II) in an
amount not to exceed the amount of the draw or borrowing under the Direct-Pay
Credit Facility to reimburse the Credit Facility Issuer for such draw or
borrowing after such draw or borrowing has been honored by the Credit Facility
Issuer.

                  (b) PRINCIPAL ACCOUNT. Subject to the succeeding sentence, on
the Stated Maturity, the Trustee shall apply the amount of monies then credited
to the Principal Account equal to the principal amount of Bonds then payable to
the payment of such principal on such date. In the event a Direct-Pay Credit
Facility is in place, the Trustee shall request a draw, borrowing or payment
under the Direct-Pay Credit Facility in accordance with the terms thereof in the
amount required, to pay such principal amount and shall notify the Company of
the amount and date of such request. If sufficient funds are not available under
Section 9.02(b)(ii)(I) to pay such principal, the Trustee shall apply funds, if
any, available pursuant to Section 9.02(b)(ii)(II), to the extent necessary, to
such payment. If the principal of the Bonds has been paid in full when due and
all payments required under the Direct-Pay Credit Facility have been made, the
Trustee shall apply remaining funds, if any, available pursuant to Section
9.02(b)(ii)(II) in an amount not to exceed the amount of the draw or borrowing
under the Direct-Pay Credit Facility to reimburse the Credit Facility Issuer for
such draw or borrowing after such draw or borrowing has been honored by the
Credit Facility Issuer.

                  (c) REDEMPTION ACCOUNT. The Trustee shall redeem on the date
set for the redemption thereof, as provided in Article V of this Indenture, a
principal amount of Bonds then subject to redemption. Subject to the following
sentence, the Trustee shall apply an amount credited to the Redemption Account
equal to the principal amount and premium, if any, of Bonds then subject to
redemption, together with accrued interest thereon to the redemption date, to
the payment of such Bonds on the redemption date from funds described in Section
9.02(b).

                  In the event a Direct-Pay Credit Facility is in place, the
Trustee shall request a draw under the Direct-Pay Credit Facility in accordance
with the terms thereof, in an amount equal to the amount required to pay the
principal amount and premium, if any, of Bonds then to be redeemed, together
with accrued interest thereon to the date set for redemption and shall notify
the Company of the date and amount of such request. If sufficient amounts to
make such payment are not available under Section 9.02(b)(ii)(I), the Trustee
shall apply amounts, if any, available pursuant to Section 9.02 (b)(ii)(II), to
the extent necessary, to such payment. Such redemption shall be made pursuant to
the provisions of Article V. If the redemption price of the Bonds equal to the
principal amount of Bonds then to be redeemed, together with premium, if any,
and accrued interest thereon has been paid in full on the redemption date and
all payments required under the Direct-Pay Credit Facility have been made, the
Trustee shall apply remaining funds, if any, available pursuant to Section
9.02(b)(ii)(II) in an amount not to exceed the amount of the draw or borrowing
under the Direct-Pay

                                      IX-4




Credit Facility to reimburse the Credit Facility Issuer for such draw or
borrowing after such draw or borrowing has been honored by the Credit Facility
Issuer.

                  Upon the retirement of any portion of the Bonds by redemption
pursuant to the provisions of this Section 9.03, the Trustee shall file with the
Authority and the Company a statement stating the amounts of the Bonds so
redeemed and setting forth the date of their redemption and the amount paid as
principal, premium and interest thereon. The expenses in connection with the
redemption of the Bonds shall be paid by the Company as Additional Payments.

                  All monies in the Redemption Account on the last Business Day
prior to the Stated Maturity shall be transferred to the Principal Account.

                  (d) ACCELERATION ACCOUNT. The Trustee shall immediately apply
an amount credited to the Acceleration Account equal to the principal amount of
and accrued interest on the Bonds then Outstanding that have been declared to be
immediately due and payable pursuant to Section 12.03 from funds described in
Section 9.02(c).

                  In the event a Direct-Pay Credit Facility is in place, the
Trustee shall request a draw under the Direct-Pay Credit Facility in accordance
with the terms thereof, in an amount equal to the amount required to pay the
principal amount of and accrued interest of the Bonds then Outstanding that have
been declared to be immediately due and payable pursuant to Section 12.03 and
shall notify the Company of the date and amount of such request. If sufficient
amounts to make such payment are not available under Section 9.02(c)(I), the
Trustee shall apply amounts, if any, available pursuant to Section 9.02(c)(II),
to the extent necessary, to such payment. If the principal of and interest on
the Bonds has been paid in full after such Bonds have been declared to be
immediately due and payable and all payments required under the Direct-Pay
Credit Facility have been made, the Trustee shall apply remaining funds, if any,
available pursuant to Section 9.02(c)(II) in an amount not to exceed the amount
of the draw or borrowing under the Direct-Pay Credit Facility to reimburse the
Credit Facility Issuer for such draw or borrowing after such draw or borrowing
has been honored by the Credit Facility Issuer.

                  2. BOND PURCHASE FUND. Pursuant to Section 4.02(d) of the
Participation Agreement, the Company has agreed that the Company shall, to the
extent not paid from a draw or payment under a Liquidity Facility, pay an amount
to the Trustee for payment to, or directly to, the Registrar and Paying Agent
for deposit in the Bond Purchase Fund and credit to the Company Account therein
established under the Bond Purchase Trust Agreement to be applied to the payment
of the Purchase Price of any Bond pursuant to the Bond Purchase Trust Agreement
to the extent not otherwise provided from the sources described in the Bond
Purchase Trust Agreement.

                  In the event sufficient funds are not available under Section
2.03(a)(i) of the Bond Purchase Trust Agreement to pay such Purchase Price on
the date of purchase of any Bonds pursuant to Section 5.03, 5.04, 5.08 or 5.09
hereof, the Registrar and Paying Agent on or prior to the time specified in the
Bond Purchase Trust Agreement shall direct the Trustee to request a draw or
payment under the Liquidity Facility in accordance with the terms thereof in the
amount required, together with amounts, if any, available under Section
2.03(a)(i) of the Bond Purchase Trust Agreement, to pay the Purchase Price of
such Bonds on such date of purchase. The Trustee shall on

                                      IX-5




or prior to the time specified in the Bond Purchase Trust Agreement request such
draw or payment under the Liquidity Facility in accordance with the terms
thereof and shall on or prior to the time specified in the Bond Purchase Trust
Agreement transfer the proceeds of such draw or payment to the Registrar and
Paying Agent, who shall cause the proceeds of such draw or payment to be
deposited in the Bond Purchase Fund under the Bond Purchase Trust Agreement and
credited to the Liquidity Facility Proceeds Account therein. The Registrar and
Paying Agent shall notify the Company of the amount and date of such request.

                  The Remarketing Agent shall notify the Registrar and Paying
Agent and the Trustee, at or prior to 11:15 a.m. (New York City time) on a
specified purchase date, of the amount of the proceeds of the related
remarketing, and shall specify whether remarketing proceeds (excluding any such
proceeds from the Company, the Authority or an affiliate of either) equal to the
full amount of the Purchase Price payable on such purchase date are held by the
Remarketing Agent and will be available on such purchase date for the payment of
such Purchase Price, and, if the amount of such remarketing proceeds that will
be available on such purchase date for the payment of such Purchase Price shall
not be equal to the full amount of the Purchase Price payable on such purchase
date, such notice shall specify the amount of the deficiency. By 11:45 a.m. (New
York City time) on such purchase date, the Remarketing Agent shall pay to the
Registrar and Paying Agent, for deposit in the Bond Purchase Fund and credit to
the Remarketing Proceeds Account, an aggregate amount of such remarketing
proceeds equal to the amount stated in such notice to be available on such
purchase date for the payment of such Purchase Price.

                  SECTION 9.04. INVESTMENT OF FUNDS. Monies in the Bond Fund and
the accounts in such fund shall be invested and reinvested by the Trustee, at
the written direction of the Company, so long as the Company is not in default
hereunder or under the Participation Agreement, to the extent reasonable and
practicable in Investment Securities selected by the Company and maturing in the
amounts and at the times as determined by the Company so that the payments
required to be made from such funds and accounts may be made when due and
subsequent to the occurrence of an Event of Default hereunder or under the
Participation Agreement, the Trustee shall hold monies in the Bond Fund
uninvested. Investment earnings shall be considered on deposit in any Fund or
Account as of the date they are actually received by the Trustee.
Notwithstanding the foregoing, so long as a Direct-Pay Credit Facility is in
effect, monies in the Bond Fund, except for proceeds of refunding bonds, shall
be held uninvested.

                  Monies on deposit in the Project Fund shall be invested and
reinvested by the Trustee at the express direction of the Company, promptly
confirmed in writing, so long as the Company is not in default under the
Participation Agreement, to the extent reasonable and practicable, in Investment
Securities maturing in such amounts and at such times as it is anticipated by
the Company that such monies will be required to pay the redemption price of the
Prior Bonds.

                  The Trustee, with the consent of the Company, shall be
authorized to sell any investment when necessary to make the payments to be made
from the funds and accounts therein. All earnings on and income from monies in
said funds and accounts (other than the Project Fund) created hereby shall be
considered to be Revenues and shall be held in the respective account in the
Bond Fund for use and application as are all other monies deposited in such
accounts. The Trustee shall, in the statement required by Section 11.07, set
forth the Investment Securities held separately


                                      IX-6




in, and the earnings realized on investment for, each fund and account
hereunder. The Trustee shall not be liable for any depreciation in the value of
the Investment Securities acquired hereunder or any loss suffered in connection
with any investment of funds made by it in accordance herewith, including,
without limitation, any loss suffered in connection with the sale of any
investment pursuant hereto.

                  The Trustee may make any such investments through its own
investment department upon written direction of the Company.

                  All Investment Securities shall constitute a part of the
respective fund and accounts therein from which the investment in Investment
Securities was made.


                                      IX-7



                                    ARTICLE X

                      PARTICULAR COVENANTS OF THE AUTHORITY

                  SECTION 10.01. PAYMENT OF PRINCIPAL OF AND INTEREST AND
REDEMPTION PREMIUM ON BONDS. The Authority will promptly pay solely from the
Note Payments and other monies held by the Trustee and available therefor, the
principal of, and the interest on, every Bond issued under and secured by the
Indenture and any premium required to be paid for the retirement of said Bonds
by redemption, at the places, on the dates and in the manner specified in this
Indenture and in said Bonds according to the true intent and meaning thereof,
subject, however, to the provisions of Section 2.02.3.

                  SECTION 10.02. PERFORMANCE OF COVENANTS. The Authority will
faithfully perform at all times all covenants, undertakings, stipulations and
provisions contained in the Indenture, in any and every Bond and in all
proceedings of the Authority pertaining thereto.

                  SECTION 10.03. FURTHER INSTRUMENTS. The Authority will from
time to time execute and deliver such further instruments and take such further
action as may be reasonable and as may be required to carry out the purpose of
the Indenture; provided, however, that no such instruments or actions shall
pledge the credit of the Authority or the State of New York or the taxing power
of the State of New York or otherwise be inconsistent with the provisions of
Section 2.02.3.

                  SECTION 10.04. INSPECTION OF PROJECT BOOKS. All books and
documents in the possession of the Authority relating to the Project or the
Participation Agreement shall at all times be open to inspection by such
accountants or other agents as the Trustee may from time to time designate.

                  SECTION 10.05. NO EXTENSION OF TIME OF PAYMENT OF INTEREST. In
order to prevent any accumulation of claims for interest after maturity, the
Authority will not directly or indirectly extend or assent to the extension of
the time of payment of any claims for interest on, any of the Bonds and will not
directly or indirectly be a party to or approve any such arrangement by
purchasing such claims for interest or in any other manner. In case any such
claim for interest shall be extended in violation hereof, such claim for
interest shall not be entitled, in case of any default hereunder, to the benefit
or security of the Indenture except subject to the prior payment in full of the
principal of, and premium, if any, on, all Bonds issued and outstanding
hereunder, and of all claims for interest which shall not have been so extended
or funded.

                  SECTION 10.06. TRUSTEE'S, AUCTION AGENT'S, REMARKETING
AGENT'S, BROKER- DEALERS' REGISTRAR AND PAYING AGENT'S AND INDEXING AGENT'S
FEES, CHARGES AND EXPENSES. Pursuant to the provisions of Section 4.02 of the
Participation Agreement, the Company has agreed to pay the fees and the expenses
(including, in the case of the Trustee, the Registrar and Paying Agent and the
Remarketing Agent, the reasonable fees and expenses of counsel and accountants)
of the Trustee, the Registrar and Paying Agent, Indexing Agent, and in the case
of Auction Rate Bonds, the Auction Agent, Remarketing Agent, and Broker-Dealers,
in the amounts set forth more fully therein, and the Authority shall have no
liability for the payment of any fees or expenses of the Trustee, the Registrar

                                       X-1




and Paying Agent, Indexing Agent and in the case of Auction Rate Bonds, the
Auction Agent, Remarketing Agent, and Broker-Dealers.

                  SECTION 10.07. AGREEMENT OF THE STATE OF NEW YORK. In
accordance with the provisions of subdivision 11 of Section 1860 of the Act, the
Authority, on behalf of the State of New York, does hereby pledge to and agree
with the Bondholders that the State of New York will not limit or alter the
rights and powers vested by the Act in the Authority to fulfill the terms of any
contract made with Bondholders, or in any way impair the rights and remedies of
such Bondholders, until the Bonds, together with the premium and interest
thereon, with (to the extent permitted by law) interest on any unpaid
installments of interest, and all costs and expenses in connection with any
action or proceeding by or on behalf of such Bondholders, are fully met and
discharged.

                  SECTION 10.08. RECORDING AND FILING. Pursuant to the
Participation Agreement, the Company covenants that it will cause all financing
statements related to this Indenture and all supplements thereto and the
Participation Agreement and all supplements thereto, as well as such other
security agreements, financing statements and all supplements thereto and other
instruments as may be required from time to time to be kept, to be recorded and
filed in such manner and in such places as may from time to time be required by
law in order to preserve and protect fully the security of Holders and the
rights of the Trustee hereunder, and to take or cause to be taken any and all
other action necessary to perfect the security interest created by this
Indenture. The Company is obligated under Section 5.18 of the Participation
Agreement to file all such financing statements and other security agreements.

                  SECTION 10.09. RIGHTS UNDER THE PARTICIPATION AGREEMENT AND
THE NOTE. The Participation Agreement, a duly executed counterpart of which has
been filed with the Trustee, sets forth the covenants and obligations of the
Authority and the Company and reference is hereby made to the same for a
detailed statement of said covenants and obligations of the Company thereunder.
Subsequent to the issuance of Bonds and prior to their payment in full or
provision for payment thereof in accordance with the provisions hereof, neither
the Participation Agreement nor the Note may be effectively amended, changed,
modified, altered or terminated except in accordance with the provisions of
Article XIV hereof. The Authority agrees that the Trustee, in its name or in the
name of the Authority, may enforce all rights of the Authority and all
obligations of the Company under and pursuant to the Participation Agreement and
the Note for and on behalf of the Holders, whether or not the Authority is in
default hereunder. The Note heretofore delivered to the Trustee evidences the
obligations of the Company to make certain specified payments under the
Participation Agreement. Nothing herein contained shall be construed to prevent
the Authority from enforcing directly any or all of its rights to administrative
compensation or indemnification under the Participation Agreement.


                                       X-2



                                   ARTICLE XI

                     CONCERNING THE TRUSTEE; APPOINTMENT OF
                 REGISTRAR AND PAYING AGENT, REMARKETING AGENT,
                        AUCTION AGENT AND INDEXING AGENT

                  SECTION 11.01. APPOINTMENT OF TRUSTEE. The Bank of New York is
hereby appointed the Trustee hereunder and by the execution of this Indenture
accepts such appointment and without further act, deed or conveyance, shall be
fully vested with all the estate, properties, rights, powers, trusts, duties and
obligations of the Trustee hereunder.

                  The Trustee shall set up suitable accounts for the deposit of
the Note Payments and for the payment of the Bonds and the interest thereon and
for all other payments provided or required by this Indenture, including,
without limiting the generality of any of the foregoing, setting up of the Funds
created by Articles VIII and IX.

                  SECTION 11.02. INDEMNIFICATION OF TRUSTEE AS CONDITION FOR
REMEDIAL ACTION. The Trustee shall be under no obligation to institute any suit,
or to take any remedial proceeding under this Indenture, or to enter any
appearance or in any way defend in any suit in which it may be made defendant,
or to take any steps in the execution of the trusts hereby created or in the
enforcement of any rights and powers hereunder, until it shall be indemnified to
its satisfaction against any and all costs and expenses, outlays and counsel
fees and other reasonable disbursements, and against all liability; the Trustee
may, nevertheless, begin suit, or appear in and defend suit, or do anything else
in its judgment proper to be done by it as such Trustee, without indemnity, and
in such case the Trustee shall be reimbursed from the Additional Payments
required to be made pursuant to the Participation Agreement for all costs and
expenses, outlays and counsel fees and other reasonable disbursements incurred
in connection therewith. If the Company shall fail to make such reimbursement,
the Trustee may reimburse itself from any monies in its possession under the
provisions of this Indenture and shall be entitled to a preference over the
Bonds; provided, however, that the proceeds of a Support Facility or of
remarketing of Bonds shall be applied solely as set forth elsewhere herein and
in such Support Facility and shall not be applied to the reimbursement set forth
in this Section 11.02. Notwithstanding the foregoing, the Trustee shall make all
payments of principal of and premium, if any, and interest on the Bonds then
Outstanding when due, when called for redemption or when declared to be
immediately due and payable pursuant to this Indenture and of the Purchase Price
of the Bonds in accordance with this Indenture.

                  SECTION 11.03. TRUSTEE NOT LIABLE FOR FAILURE OF THE AUTHORITY
OR COMPANY TO ACT. The Trustee shall not be liable or responsible because of the
failure of the Authority or the Company or any of their employees or agents to
make any collections or deposits or to perform any act herein required of the
Authority or the Company. The Trustee shall not be responsible for the
application of any of the proceeds of the Bonds or any other monies deposited
with it and paid out, withdrawn or transferred hereunder if such application,
payment, withdrawal or transfer shall be made in accordance with the provisions
of this Indenture. The immunities and exemptions from liability of the Trustee
hereunder shall extend to its directors, officers, employees and agents.


                                      XI-1



                  SECTION 11.04. CERTAIN DUTIES AND RESPONSIBILITIES OF THE
TRUSTEE. (a) Except during the continuance of an Event of Default specified in
Section 12.01 of which the Trustee has been notified or is deemed to have notice
as provided in Section 11.08,

                  (1) the Trustee shall undertake to perform such duties and
         only such duties as are specifically set forth in this Indenture, and
         no implied covenants or obligations shall be read into this Indenture
         against the Trustee; and

                  (2) in the absence of bad faith on its part, the Trustee may
         conclusively rely, as to the truth of the statements and the
         correctness of the opinions expressed therein, upon certificates or
         opinions furnished to the Trustee and conforming to the requirements of
         this Indenture; but in the case of any such certificates or opinions
         which by any provision hereof are specifically required to be furnished
         to the Trustee, the Trustee shall be under a duty to examine the same
         to determine whether or not they conform to the requirements of this
         Indenture (but need not confirm or investigate the accuracy of
         mathematical calculations or other facts stated therein).

                  (b) In case an Event of Default specified in Section 12.01 has
occurred and is continuing of which the Trustee has been notified or is deemed
to have notice as provided in Section 11.08, the Trustee shall exercise such of
the rights and powers vested in it by this Indenture, and use the same degree of
care and skill in such exercise, as a prudent person would exercise or use under
the circumstances in the conduct of his or her own affairs.

                  (c) None of the provisions of this Indenture shall be
construed to relieve the Trustee from liability for negligent action, negligent
failure to act, or willful misconduct, except that

                  (1) this subsection (c) shall not be construed to limit the
         effect of subsection (a) of this Section;

                  (2) the Trustee shall not be liable for any error of judgment
         made in good faith by any one of its officers, unless it shall be
         proved that the Trustee was negligent;

                  (3) in the absence of bad faith on its part, the Trustee shall
         be protected and shall incur no liability in acting or proceeding or in
         not acting or not proceeding upon any resolution, order, notice,
         telegram, request, consent, waiver, certificate, statement, affidavit,
         voucher requisition, bond or other paper or document which the Trustee
         shall believe to be genuine and to have been adopted or signed by the
         proper board or person or to have been prepared and furnished pursuant
         to any of the provisions of this Indenture, or upon the written opinion
         of any attorney, engineer, accountant or other expert believed by the
         Trustee to be qualified in relation to the subject matter, and the
         Trustee shall be under no duty to make any investigation or inquiry as
         to any statements contained or matters referred to in any such
         instrument but may accept and rely upon the same as conclusive evidence
         of the truth and accuracy of such statements;

                  (4) the Trustee shall not be liable with respect to any action
         taken or omitted to be taken by it in good faith in accordance with the
         direction of the Holders of not less than


                                      XI-2




         a majority in aggregate principal amount of the Outstanding Bonds
         relating to the time, method and place of conducting any proceeding for
         any remedy available to the Trustee, or exercising any trust or power
         conferred upon the Trustee, under the provisions of this Indenture; and

                  (5) no provision of this Indenture shall require the Trustee
         to expend or risk its own funds or otherwise incur any financial
         liability in the performance of its duties hereunder, or in the
         exercise of any of its rights or powers, if it shall have reasonable
         grounds for believing that repayment of such funds or adequate
         indemnity against such risk or liability is not reasonably assured to
         it.

                  (d) Notwithstanding anything contained elsewhere in this
Indenture, the Trustee shall have the right to reasonably require, in respect of
the payment or withdrawal of any monies or the taking of any action whatsoever
within the purview of this Indenture, any showings, certificates, opinions,
appraisals or other information, or corporate action or evidence thereof, in
addition to that required by the terms hereof as a condition of such action by
the Trustee.

                  (e) The Trustee may execute any of the trusts or powers hereof
and perform any of its duties by or through attorneys, agents or receivers, and
shall not be responsible for any negligence or misconduct on the part of any
such attorney, agent or receiver appointed by it if the Trustee shall have
exercised due care and diligence in appointing or selecting such person, and
shall be entitled to advice of counsel concerning all matters of the trusts
hereof and the duties hereunder, and may in all cases pay such reasonable
compensation to all such attorneys, agents and receivers as may reasonably be
employed in connection with the trusts hereof. The Trustee may act upon the
opinion or advice of any attorney or attorneys (who may be the attorney or
attorneys for the Authority or the Company), approved by the Trustee in the
exercise of reasonable care, and the Trustee shall not be responsible for any
loss or damage resulting from any action or nonaction in good faith in reliance
upon such opinion or advice.

                  (f) Whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad faith on
its part, conclusively rely upon a certificate of an Authorized Company
Representative or an Authorized Officer.

                  (g) The Trustee shall not be accountable for the use by the
Company of any proceeds of the Bonds authenticated or delivered hereunder.

                  (h) The Trustee shall not be required to give any bonds or
surety in respect of the execution of its trusts and powers hereunder.

                  (i) The Trustee may treat and deem the Holder of any Bonds as
set forth in the books of the registry hereunder as the absolute owner thereof.

                  SECTION 11.05. LIMITATIONS ON OBLIGATIONS AND RESPONSIBILITIES
OF TRUSTEE. The Trustee shall be under no obligation to effect or maintain
insurance or to renew any policies of


                                      XI-3




insurance or to inquire as to the sufficiency of any policies of insurance
carried by the Company, or to report, or make or file claims or proof of loss
for, any loss or damage insured against or which may occur, or to keep itself
informed or advised as to the payment of any taxes or assessments, or to require
any such payment to be made. The Trustee, except as to the acceptance of the
trusts by its execution of this Indenture and the performance of its
responsibilities hereunder, shall have no responsibility in respect of the
validity, sufficiency, due execution or acknowledgment of this Indenture, or in
respect of the validity of the Bonds or the due execution or issuance thereof.
The Trustee shall be under no obligation to see that any duties herein or in the
Participation Agreement, the Remarketing Agreement, the Auction Agency
Agreement, the Broker-Dealer Agreement or any Support Facility imposed upon the
Authority, the Company, the issuer of any Support Facility, or any party other
than itself in its capacity as Trustee, or any covenants herein contained on the
part of any party other than itself in its capacity as Trustee to be performed,
shall be done or performed, and the Trustee shall be under no obligation for
failure to see that any such duties or covenants are so done or performed.

                  SECTION 11.06. COMPENSATION AND INDEMNIFICATION OF TRUSTEE.
The Company has agreed in the Participation Agreement (1) to pay to the Trustee
from time to time such compensation for all services rendered by it hereunder or
shall from time to time be agreed in writing (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust); (2) except as otherwise expressly provided herein, to reimburse
the Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision of
this Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and (3) to
indemnify the Trustee for, and to hold it harmless against, any loss, liability
or expense incurred without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of this trust, including
the costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder.

                  SECTION 11.07. STATEMENTS FROM TRUSTEE. It shall be the duty
of the Trustee, on or about the fifteenth (15th) day of each month, and at such
other reasonable time or times as may be determined by the Authority or the
Company, to file with the Authority, upon the written request thereof, and the
Company a statement setting forth in respect of the preceding calendar month:

                  (a) the amount withdrawn or transferred by it and the amount
         received by it and held on account of each Fund under the provisions of
         this Indenture;

                  (b) the amount on deposit with it at the end of such calendar
         month to the credit of each such Fund or Account;

                  (c) a monthly account of reconciliation and income which
         includes a brief description of all obligations held by it as an
         investment of monies in each such Fund or Account;

                  (d) the amount applied to the redemption of the Bonds under
         the provisions of Article V and Section 9.03 and the amount of the
         Bonds remaining Outstanding; and


                                      XI-4




                  (e) any other information which the Authority or the Company
         may reasonably request.

                  All records and files pertaining to the Bonds and the Company
in the custody of the Trustee shall be open at all reasonable times upon prior
notice to the inspection of the Authority, the Company and their agents and
representatives.

                  SECTION 11.08. NOTICE OF DEFAULT. Except upon the happening of
any Event of Default specified in clauses (a) through (d), inclusive, of Section
12.01, the Trustee shall not be obliged to take notice or be deemed to have
notice of any Event of Default hereunder, unless specifically notified in
writing of such Event of Default by the issuer of any Support Facility, the
Remarketing Agent, the Auction Agent or the Holders of not less than twenty-five
percent (25%) in aggregate principal amount of the Bonds Outstanding and such
written notice shall state that it is a "notice of default."

                  SECTION 11.09. TRUSTEE MAY DEAL IN BONDS. The bank or trust
company acting as Trustee under this Indenture, and its directors, officers,
employees or agents, may in good faith buy, sell, own, hold and deal in the
Bonds issued under and secured by this Indenture, and may join in the capacity
of a Holder of a Bond in any action which any Holder of a Bond may be entitled
to take with like effect as if such bank or trust company were not the Trustee
under this Indenture.

                  SECTION 11.10. TRUSTEE NOT RESPONSIBLE FOR RECITALS. The
recitals, statements and representations contained herein and in the Bonds shall
be taken and construed as made by and on the part of the Authority, and not by
the Trustee, and the Trustee assumes, and shall be under, no responsibility for
the correctness of the same or for the recording or re- recording or filing or
refiling of the Indenture or any supplements thereto or any instruments of
further assurance (including financing statements) except as otherwise provided
herein. The Trustee makes no representations as to the value of any property
pledged hereunder to the payment of Bonds or as to the title of the Authority or
the Company thereto or as to the validity, sufficiency or adequacy of the
security afforded thereby or hereby or as to the validity of this Indenture, the
Note, the Participation Agreement, any Support Facility or of the Bonds.

                  SECTION 11.11. QUALIFICATION OF THE TRUSTEE. There shall at
all times be a Trustee hereunder which shall be a bank and/or trust company,
having combined capital and unimpaired surplus of at least $50,000,000, duly
authorized to exercise corporate trust powers and subject to examination by
federal or state authority. The Trustee hereunder shall not be required to
maintain, and any successor Trustee shall not be required to have, an office in
the city in which the principal corporate trust office of the initial Trustee
hereunder is located.

                  If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 11.11, it shall resign
immediately in the manner and with the effect specified in Section 11.12.

                  SECTION 11.12. RESIGNATION AND REMOVAL OF TRUSTEE. (a) No
resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee under Section 11.13.


                                      XI-5




                  (b) The Trustee may resign at any time by giving written
notice thereof to the Authority and the Company. If an instrument of acceptance
by a successor Trustee shall not have been delivered to the Trustee within
thirty (30) days after the giving of such notice of resignation, the retiring
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Trustee.

                  (c) The Trustee may be removed at any time by demand of the
Holders of a majority in principal amount of the Bonds then Outstanding, signed
in person by such Holders or by their attorneys, legal representatives or agents
and delivered to such Trustee, the Authority and the Company (such demand to be
effective only when received by the Trustee, the Authority and the Company).

                  (d) If at any time:

                           (1) the Trustee shall cease to be eligible under
         Section 11.11 and shall fail to resign after written request by the
         Authority or by a Holder who shall have been a bona fide Holder for at
         least six months, or

                           (2) the Trustee shall become incapable of acting or
         shall be adjudged a bankrupt or insolvent or a receiver of the Trustee
         or of its property shall be appointed, or any public officer shall take
         charge or control of the Trustee or of its property or affairs for the
         purpose of rehabilitation, conservation or liquidation,

then, in either such case, (i) the Authority may remove, and the Company may
request the Authority to remove, the Trustee, or (ii) any Holder who has been a
bona fide Holder for at least six months may, on behalf of herself and all other
similarly situated, petition any court of competent jurisdiction for the removal
of the Trustee and the appointment of a successor.

                  (e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of the Trustee
for any cause, the Authority shall promptly appoint a successor; the Company or
the issuer of any Support Facility or both of them, having the right to request
the appointment of a particular qualified institution as such successor. Within
one year after such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee may be appointed by an instrument or
concurrent instruments in writing executed by the Holders of a majority in
principal amount of the Bonds then Outstanding delivered to the Authority and
the retiring Trustee, and, upon such delivery, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the
Authority.

                  (f) The Authority shall give notice to the Trustee, the
Company, the Remarketing Agent, the Registrar and Paying Agent, the Auction
Agent and the Bondholders of each resignation and each removal of a Trustee and
each appointment of a successor Trustee in the manner set forth in Section 17.03
with respect to Bondholders and Section 17.09 with respect to the Company, the
Auction Agent and the Remarketing Agent. Each notice shall include the name and
address of the Principal Corporate Trust Office of the successor Trustee.


                                      XI-6




                  (g) The Trustee at any time other than during the continuance
of an Event of Default and for any reason may be removed by an instrument in
writing, executed by an Authorized Officer, appointing a successor, filed with
the Trustee so removed.

                  SECTION 11.13. SUCCESSOR TRUSTEE. Every successor Trustee
appointed hereunder shall execute, acknowledge and deliver to its predecessor,
and also to the Authority and the Company, an instrument in writing accepting
such appointment hereunder, and thereupon such successor Trustee, without any
further act, shall become fully vested with all the rights, immunities, powers
and trusts and subject to all the duties and obligations, of its predecessor;
but such predecessor shall, nevertheless, on written request of its successor or
of the Authority and upon payment of expenses, charges and other disbursements
of such predecessor which are payable pursuant to the provisions of Sections
11.02 and 11.06, execute and deliver an instrument transferring to such
successor Trustee all the rights, immunities, powers and trusts of such
predecessor hereunder; and every predecessor Trustee shall deliver all property
and monies held by it hereunder to its successor, subject, nevertheless, to its
first lien and preference provided for in Sections 11.02 and 11.06. Should any
instrument in writing from the Authority be required by any successor Trustee
for more fully vesting in such Trustee the rights, immunities, powers and trusts
hereby vested or intended to be vested in the predecessor Trustee, any such
instrument in writing shall and will, on request, be executed, acknowledged and
delivered by the Authority.

                  Notwithstanding any of the foregoing provisions of this
Article, any bank or trust company having power to perform the duties and
execute the trusts of this Indenture and otherwise qualified to act as Trustee
hereunder with or into which the bank or trust company acting as Trustee may be
converted, merged or consolidated, or to which the corporate trust business
assets as a whole or substantially as a whole of such bank or trust company may
be sold, shall be deemed the successor of the Trustee.

                  SECTION 11.14. APPOINTMENT OF REMARKETING AGENT. Salomon Smith
Barney Inc., Morgan Stanley & Co. Incorporated and J.P. Morgan Securities Inc.
are hereby appointed by the Authority as the initial Remarketing Agents to serve
as such under the terms and provisions hereof and of the Market Agent Agreement
for the Series 2001B-1 Bonds, the Series 2001B-2 Bonds and the Series 2001B-3
Bonds, respectively, and of any successor Remarketing Agreement. The Remarketing
Agent for any subseries, including any successor appointed pursuant hereto,
shall be a member of the National Association of Securities Dealers, Inc. having
capitalization of at least $25,000,000, and be authorized by law to perform all
the duties imposed upon it by this Indenture, the Bond Purchase Trust Agreement
and the Remarketing Agreement. The Remarketing Agent for any subseries of Bonds
may be removed at any time by the Authority, upon thirty (30) days' notice,
acting at the written direction of the Company by an instrument signed by the
Authority and filed with the Trustee, the Registrar and Paying Agent, the
Remarketing Agent and the Company. If there shall not be at least one
Remarketing Agent serving as such for any subseries of Bonds following the
effective date of a proposed removal of a Remarketing Agent for such subseries,
no such removal shall take effect until the appointment of a successor
Remarketing Agent for such subseries of Bonds. The Remarketing Agent for any
subseries of Bonds may resign upon 30 days written notice delivered to the
Company, the Authority, the Trustee, the Registrar and Paying Agent and the
issuer of any Support Facility. The Company shall use its best efforts to cause
the Authority to appoint a successor Remarketing Agent that is a qualified
institution, effective as of the effectiveness of any


                                      XI-7



such resignation or removal. Each successor Remarketing Agent shall be a
qualified institution selected and appointed by the Authority, upon the written
request and with the approval of the Company. If there shall be more than one
Remarketing Agent serving as such for a subseries of Bonds, the Authority, at
the request of the Company, shall designate one such Remarketing Agent as
"Remarketing Representative" to act on behalf of all Remarketing Agents for such
subseries, and each other Remarketing Agent shall agree in writing to accept the
determinations of such Remarketing Representative.

                  SECTION 11.15. APPOINTMENT OF REGISTRAR AND PAYING AGENT. The
Bank of New York in New York, New York is hereby appointed by the Authority to
serve as the Registrar and Paying Agent hereunder. The Company shall have the
right to request the appointment of an institution meeting the requirements of
Section 11.19 to serve as successor thereto in the event of the removal or
resignation of such Registrar and Paying Agent.

                  The Trustee hereby appoints any Registrar and Paying Agent
appointed hereunder as authenticating agent.

                  SECTION 11.16. GENERAL PROVISIONS REGARDING REGISTRAR AND
PAYING AGENT.

                  (a) The Registrar and Paying Agent shall:

                  (i) hold all Bonds delivered to it for purchase hereunder in
         trust for the benefit of the respective Bondholders which shall have so
         delivered such Bonds until monies representing the purchase price of
         such Bonds shall have been delivered to or for the account of or to the
         order of such Holders and deliver said Bonds in accordance with the
         provisions of this Indenture;

                  (ii) hold all monies delivered to it for the purchase of
         Bonds, in trust for the benefit of the person or entity who has
         delivered such monies until the Bonds purchased with such monies have
         been delivered to or for the account of such person or entity as
         provided in this Indenture;

                  (iii) maintain the books of registry and keep such books and
         records as shall be consistent with prudent industry practice and make
         such books and records available for inspection by the Trustee, the
         Remarketing Agent, the Authority and the Company at all reasonable
         times;

                  (iv) perform the duties and undertake the obligations assigned
         to them in Sections 7.02 through 7.06;

                  (b) The Registrar and Paying Agent may deem and treat the
Holder of any Bonds as set forth in the books of registry hereunder as the
absolute owner thereof;

                  (c) The Registrar and Paying Agent may in good faith hold any
other form of indebtedness issued by the Authority or any security issued by the
Company, or any affiliate of the Company; own, accept or negotiate any drafts,
bills of exchange, acceptances or obligations thereof;


                                      XI-8



and make disbursements therefor and enter into any commercial or business
arrangement therewith; all without any liability on the part of such Registrar
and Paying Agent for any real or apparent conflict of interest by reason of any
such actions; and

                  (d) The Registrar and Paying Agent agrees to cooperate with
the Trustee and the Company in preparing and conveying information necessary for
drawings under any Support Facility. To the extent that any other certificate to
be submitted by the Trustee to an issuer of a Support Facility in connection
with a drawing under the Support Facility requires the Trustee to state that the
Registrar and Paying Agent has certified certain information to the Trustee, the
Registrar and Paying Agent agrees to provide such certification to the Trustee
to the extent such information is known to it.

                  SECTION 11.17. PAYMENT OF REGISTRAR AND PAYING AGENT;
INDEMNIFICATION. The Authority will cause the Company to agree in the
Participation Agreement to pay all reasonable fees, charges and expenses of the
Registrar and Paying Agent for acting under and pursuant to this Indenture. In
addition, the Authority will cause the Company to agree in the Participation
Agreement to indemnify the Registrar and Paying Agent and its directors,
officers and employees against and save them harmless from any and all losses,
costs, charges, expenses, judgments and liabilities incurred while carrying out
the transactions contemplated by this Indenture, except that said indemnity does
not apply to the extent that they are caused by the negligent action, negligent
failure to act or willful misconduct of the Registrar and Paying Agent or its
directors, officers, employees or agents.

                  SECTION 11.18. REGISTRAR AND PAYING AGENT'S PERFORMANCE; DUTY
OF CARE. The duties and obligations of the Registrar and Paying Agent shall be
determined solely by the provisions of this Indenture. None of the provisions of
this Indenture shall be construed to relieve the Registrar and Paying Agent from
liability for negligent action, negligent failure to act or willful misconduct,
except that (a) the Registrar and Paying Agent shall not be liable except for
the performance of such duties and obligations as are specifically set forth in
this Indenture, and, in the absence of bad faith on the part of the Registrar
and Paying Agent, the Registrar and Paying Agent may conclusively rely, as to
the truth of the statements expressed therein, upon any document furnished to
the Registrar and Paying Agent and conforming to the requirements of this
Indenture and the Registrar and Paying Agent may conclusively rely and shall be
protected in acting upon any document believed by it to be genuine and to have
been signed or presented by the proper party or parties, provided that, in the
case of any such document which by any provision of this Indenture is
specifically required to be furnished to the Registrar and Paying Agent, the
Registrar and Paying Agent shall be under a duty to examine the same to
determine whether or not it conforms to the requirements of this Indenture, and
(b) no provisions of this Indenture shall require the Registrar and Paying Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder. The Registrar and Paying Agent
may act upon the opinion or advice of any attorney or attorneys (who may be the
attorney or attorneys for the Authority or the Company), approved by the Trustee
in the exercise of reasonable care, and the Registrar and Paying Agent shall not
be responsible for any loss or damage resulting from any action or nonaction in
good faith in reliance upon such opinion or advice.


                                      XI-9



                  SECTION 11.19. QUALIFICATIONS OF REGISTRAR AND PAYING AGENT.
The Registrar and Paying Agent, including any successor appointed pursuant to
this Indenture, shall be a corporation duly organized under the laws of the
United States of America or any state or territory thereof, having a combined
capital and unimpaired surplus of at least $50,000,000 and authorized by law to
perform all the duties imposed upon it by this Indenture. Unless the Bonds bear
an Auction Rate, or a Fixed Rate, the Registrar and Paying Agent shall have an
office or agency in New York, New York capable of performing its obligations
hereunder.

                  SECTION 11.20. RESIGNATION OR REMOVAL OF REGISTRAR AND PAYING
AGENT AND SUCCESSOR TO REGISTRAR AND PAYING AGENT; TERMINATION OF REGISTRAR AND
PAYING AGENT'S OBLIGATIONS. The Registrar and Paying Agent may at any time
resign and be discharged of the duties and obligations created hereunder and
under the Bond Purchase Trust Agreement by giving at least sixty days' notice to
the Authority, the Company, the Trustee and the Remarketing Agent. The Registrar
and Paying Agent may be removed at any time upon and pursuant to the request of
the Company by an instrument, signed by the Authority and filed with the Trustee
and the Registrar and Paying Agent and the Company, provided that such removal
shall not take effect until the appointment of a successor Registrar and Paying
Agent. The Authority at the request of the Company shall appoint a successor
Registrar and Paying Agent effective as of the effectiveness of any such
resignation or removal. Each successor Registrar and Paying Agent shall be a
qualified institution selected by the Company and, so long as a Support Facility
is in effect, the issuer of a Support Facility, and approved and appointed by
the Authority.

                  In the event of the resignation or removal of the Registrar
and Paying Agent, the Registrar and Paying Agent shall pay over and deliver any
monies and Bonds held by it in such capacity to its successor or, if there is no
successor, to the Trustee. In the event that there is no successor to the
Registrar and Paying Agent on the effective date of its resignation, the entity
acting as Trustee shall perform the functions of the Registrar and Paying Agent;
provided that monies held by the Trustee pursuant to this paragraph shall not be
deemed to be held by the Trustee in its capacity as Trustee.

                  SECTION 11.21. APPOINTMENT OF AUCTION AGENT; QUALIFICATIONS OF
AUCTION AGENT, RESIGNATION; REMOVAL. The Authority hereby appoints The Bank of
New York to serve as the Auction Agent for the Bonds. The Auction Agent may at
any time resign and be discharged of the duties and obligations created by this
Indenture by giving at least 90 days' notice to the Trustee, the Company, the
Authority, and in the case the Auction Agent is also serving as Trustee, to the
Remarketing Agent. During the Auction Rate Period, the Auction Agent may be
removed at any time by the Authority acting at the request of the Company by an
instrument signed by the Authority and filed with the Company, the Auction
Agent, the Remarketing Agent and the Registrar and Paying Agent upon at least 90
days' notice. During any Auction Rate Period, an Authorized Officer of the
Authority shall appoint a successor Auction Agent with the consent of the
Company. The Company shall evidence its consent to such appointment by entering
into an Auction Agency Agreement with the Auction Agent. The Auction Agent shall
be (a) a bank or trust company duly organized under the laws of the United
States of America or any state or territory thereof having its principal place
of business in the Borough of Manhattan, in The City of New York and having a
combined capital stock, surplus and undivided profits of at least $25,000,000 or
(b) a member of the National Association of Securities Dealers, Inc., having a
capitalization of at least $25,000,000 and,

                                      XI-10




in either case, authorized by law to perform all the duties imposed upon it
under the Auction Agency Agreement.

                  If a No Auction Rate is in effect with respect to a subseries
of Bonds for three consecutive Auction Periods, the Authority shall use its best
efforts to remove the then-existing Auction Agent and appoint a successor
Auction Agent in accordance with this Indenture and the then-existing Auction
Agency Agreement.

                  SECTION 11.22. APPOINTMENT OF BROKER-DEALERS. On the Closing
Date, the Company appointed, subject to the consent of the Authority, Salomon
Smith Barney Inc., Morgan Stanley & Co. Incorporated and J.P. Morgan Securities
Inc. as the initial Broker-Dealers for the Series 2001B-1 Bonds, the Series
2001B-2 Bonds and the Series 2001B-3 Bonds, respectively. The Authority hereby
consents to such appointment of Salomon Smith Barney Inc., Morgan Stanley & Co.
Incorporated and J.P. Morgan Securities Inc. On or prior to a Change in the
Interest Rate Mode to an Auction Rate Period, the Company with the consent of
the Authority shall appoint an initial Broker-Dealer and may appoint any
additional initial Broker-Dealers. After the Closing Date or a Change in the
Interest Rate Mode to an Auction Rate Period, as the case may be, the Company
may select, with the consent of the Authority and the initial lead Broker-
Dealer or any successor, from time to time, one or more additional persons to
serve as Broker- Dealers under Broker-Dealer Agreements.

                  SECTION 11.23. APPOINTMENT OF ADDITIONAL PAYING AGENTS; EACH
PAYING AGENT TO HOLD MONEY IN TRUST. The Authority may at the request of the
Company appoint an additional Paying Agent or Paying Agents for the Bonds. Each
such Paying Agent shall hold in trust subject to the provisions of the Indenture
for the benefit of the Holders all sums held by such Paying Agent for the
payment of the principal of, premium, if any, and interest on the Bonds. Any
such Paying Agent may be any person or corporation authorized to perform such
functions, including to the extent permitted by law, the Company.

                  SECTION 11.24. APPOINTMENT AND DUTIES OF INDEXING AGENTS. The
Authority hereby appoints Kenny Information Systems, Inc. as Indexing Agent for
the Bonds for the purpose of calculating each rate index defined in Section
1.01. The Authority may, with the approval of the Company, appoint additional or
successor Indexing Agents, subject to the conditions set forth in this Section.
There may be separate Indexing Agents for the purpose of calculating each rate
index defined in Section 1.01. The Indexing Agent shall designate to the Trustee
its principal office and signify its acceptance of the duties and obligations
imposed upon it hereunder by a written instrument of acceptance delivered to the
Authority, the Trustee, the Company and the Remarketing Agent under which the
Indexing Agent will agree, particularly:

                  (a) to compute the Daily Rate Index, the Commercial Paper Rate
         Index, the Weekly Rate Index, the Monthly Rate Index, the Semi-annual
         Rate Index, the Term Rate Index or the Fixed Rate Index, as the case
         may be, pursuant to and in accordance with Section 3.01, and to give
         notice to the Trustee, the Registrar and Paying Agent, the Remarketing
         Agent and the Company of such rate index on the date of the computation
         thereof in accordance with Section 3.01; and


                                      XI-11




                  (b) to keep such books and records as shall be consistent with
         prudent industry practice and to make such books and records available
         for inspection by the Authority, the Trustee, the Registrar and Paying
         Agent, the Remarketing Agent and the Company at all reasonable times.

                  The Indexing Agent will perform the duties provided for in
Section 3.01. Whenever the Indexing Agent makes a computation under that
Section, it will promptly notify the Trustee, the Registrar and Paying Agent,
the Authority, the Remarketing Agent (and during any Auction Rate Period, the
Auction Agent), and the Company of the results and date of computation. The
Indexing Agent will keep adequate records pertaining to the performance of its
duties and allow the Trustee, Registrar and Paying Agent, the Authority, the
Remarketing Agent and the Company (and, if appropriate, the Auction Agent) to
inspect the records at reasonable times.

                  SECTION 11.25. QUALIFICATIONS OF INDEXING AGENTS. Each
Indexing Agent shall be a commercial bank, a member of the National Association
of Securities Dealers, Inc. or a nationally recognized municipal securities
evaluation service authorized by law to perform all the duties imposed upon it
by the Indenture. Any Indexing Agent may at any time resign and be discharged of
the duties and obligations created by the Indenture by giving at least sixty
(60) days' notice to the Authority, the Company, the Remarketing Agent and the
Trustee. The Indexing Agent may be removed at any time, at the written direction
of the Company, by an instrument, signed by the Authority, filed with the
Company, the Indexing Agent, the Remarketing Agent, the Trustee, the Registrar
and Paying Agent and the issuer of a Support Facility, if any.


                                      XI-12



                                   ARTICLE XII

                        EVENTS OF DEFAULT; REMEDIES UPON
                               OCCURRENCE THEREOF

                  SECTION 12.01. EVENTS OF DEFAULT. Each of the following is
hereby defined as and declared to be and shall constitute an "Event of Default":

                  (a) Payment of the principal of and premium, if any, on any
Bond (whether by maturity, proceedings for redemption, purchase in accordance
with Article V hereof or the Remarketing Agreement, or otherwise) shall not be
made when the same shall become due and payable; or

                  (b) Payment of any installment of interest on any Bond shall
not be made when the same shall become due and payable and such nonpayment shall
continue for one (1) Business Day; or

                  (c) The Trustee shall receive written notice from the issuer
of the Support Facility of the occurrence of a Terminating Event under the
Support Facility, if applicable, or the agreement providing for the issuance
thereof; or

                  (d) Receipt by the Trustee of written notice from the
financial institution providing any Direct-Pay Credit Facility following a draw
on or borrowing or payment under such Direct-Pay Credit Facility for the payment
of interest on the Bonds that the Direct-Pay Credit Facility has not been
reinstated in the amount so drawn, borrowed or paid; or

                  (e) Receipt by the Trustee of written notice from the Bond
Insurer of the occurrence and continuance of an event of default under the
agreement entered into in connection with the issuance of the Policy directing
the Trustee to declare an Event of Default; or

                  (f) The Authority shall fail in the due and punctual
performance of any of the covenants, conditions, agreements, provisions or
obligations, other than as set forth in (a) and (b) above, contained in the
Bonds or in this Indenture or in any Supplemental Indenture on the part of the
Authority to be performed, and such failure shall continue for ninety (90) days
after written notice specifying such failure and requiring the same to be
remedied shall have been given to the Authority, the Company, the Governor, the
Comptroller and the Attorney General of the State of New York, by the Trustee or
to the Trustee, the Authority and the Company by the Holders of not less than
twenty-five percent (25%) in aggregate principal amount of the Bonds then
Outstanding as provided for in Section 12.08; provided that if any such failure
shall be such that it cannot be cured or corrected within such ninety (90) day
period, it shall not constitute an Event of Default hereunder if curative or
corrective action is instituted within such period and diligently pursued until
the failure of performance is cured or corrected; or

                  (g) The occurrence of an event of default as defined in
Section 7.01 of the Participation Agreement.


                                      XII-1



                  SECTION 12.02. NOTICE TO HOLDERS AND OTHERS UPON OCCURRENCE OF
AN EVENT OF DEFAULT OR A PAYMENT DEFAULT. 1. The Trustee shall give notice to
the Bondholders of all Events of Default within sixty (60) days after the
Trustee has been notified thereof or is deemed to have notice thereof as
provided in Section 11.08, unless the Event of Default shall have been cured
before the giving of such notice or unless the Trustee shall deem it in the best
interest of the Holders to defer or withhold notice under this Section;
provided, however, that if a notice of an Event of Default is given to any
Bondholder, the Trustee shall concurrently therewith cause a copy to be provided
to all beneficial owners.

                  2. So long as ownership of the Auction Rate Bonds is
maintained in book-entry form by the Securities Depository, upon the occurrence
of an Event of Default, the Trustee shall immediately send a notice thereof in
substantially the form required by the Auction Agency Agreement to the Auction
Agent and to the registered Holders of each series of Bonds by telecopy or
similar means.

                  3. So long as the ownership of the Auction Rate Bonds is
maintained in book- entry form by the Securities Depository, the Trustee shall
immediately send a notice in substantially the form required by the Auction
Agency Agreement to the Auction Agent and to the registered Holders of each
series of Bonds by telecopy or similar means if an Event of Default has been
cured or waived in accordance with this Article XII.

                  4. Upon the occurrence of a Payment Default, or in the event
such Payment Default is cured, the Trustee shall give the Auction Agent the
notices referred to in paragraph 7 of Section 6.04 hereof.

                  SECTION 12.03. DECLARATION OF PRINCIPAL AND INTEREST AS DUE.
Notwithstanding the pendency of a mandatory tender under Section 5.09, upon the
occurrence of an Event of Default specified in clause (c) or (d) of Section
12.01 of which the Trustee has been notified by the issuer of the Support
Facility or the Direct-Pay Credit Facility, as the case may be, then the Trustee
shall upon the written request or direction of such issuer of the Support
Facility or the Direct-Pay Credit Facility, as the case may be, declare the
principal of and accrued interest on all the Bonds then Outstanding (if not then
due and payable) to be due and payable immediately, and upon such declaration
the same shall become due and be immediately due and payable and interest shall
immediately cease to accrue on such Bonds, anything contained in the Bonds or in
this Indenture to the contrary notwithstanding. Upon the occurrence and
continuation of any Event of Default, except for an Event of Default specified
in clause (c) or (d) of Section 12.01, of which the Trustee has been notified or
is deemed to have notice as provided in Section 11.08, then and in every case
the Trustee, by a notice in writing to the Authority, the Company and (to
addresses then specified by the Authority) the Governor, the Comptroller and the
Attorney General of the State of New York, may with the written consent of the
Credit Facility Issuer, and shall upon the written request or direction of the
Credit Facility Issuer, or, if the Credit Facility Issuer is in default under
the Credit Facility, upon the written request or direction of the Holders of not
less then twenty-five percent (25%) in principal amount of the Bonds then
Outstanding (determined in accordance with the provisions of Section 13.03)
shall, declare the principal of and accrued interest on all the Bonds then
Outstanding (if not then due and payable) to be due and payable immediately, and
upon such declaration the same shall become due and be immediately due and
payable, anything contained in the Bonds or in this


                                      XII-2



Indenture to the contrary notwithstanding. If, however, at any time after the
principal of the Bonds shall have been so declared to be due and payable, and
before the entry of final judgment or decree in any suit, action or proceeding
instituted on account of such Event of Default, or before the completion of the
enforcement of any other remedy under this Indenture, monies shall have
accumulated in the Bond Fund sufficient to pay the principal of and any premium
(or redemption price) on all Bonds (or portions of the principal amount thereof)
then or theretofore required to be redeemed pursuant to any provisions of this
Indenture (excluding principal not then due except by reason of the aforesaid
declaration) and all arrears of interest and interest then due, if any, upon
Bonds then Outstanding and if the fees, compensation, expenses, disbursements,
advances and liabilities of the Trustee and all other amounts then payable by
the Company under the Participation Agreement and the Note shall have been paid
or a sum sufficient to pay the same shall have been deposited with the Trustee,
and every other Event of Default known to the Trustee in the observance or
performance of any covenant, condition or agreement contained in the Bonds or in
this Indenture (other than default in the payment of the principal of such Bonds
then due only because of a declaration under this Section) shall have been
remedied to the satisfaction of the Trustee or, the Company shall be taking, or
shall be causing to be taken, appropriate action in good faith to effect its
cure, then and in every such case the Trustee may with the written consent of
the Credit Facility Issuer, and shall upon the written request of the Credit
Facility Issuer, or, if the Credit Facility Issuer is in default under the
Credit Facility, upon the written request or direction of the Holders of not
less than a majority in principal amount of the Bonds (determined in accordance
with the provisions of Section 13.03) then Outstanding shall, by written notice
to the Authority, rescind and annul such declaration and its consequences;
provided, however, that notwithstanding any such rescission and annulment during
an Auction Rate Period, the Bonds shall continue to bear interest at the Overdue
Rate for the applicable period of time determined pursuant to Article III. No
such rescission or annulment pursuant to the next preceding sentence shall
extend to or affect any subsequent default or impair any right consequent
thereto.

                  SECTION 12.04. ACTION BY TRUSTEE UPON OCCURRENCE OF EVENT OF
DEFAULT. Upon the occurrence and continuation of an Event of Default the Trustee
(i) for and on behalf of the Holders of the Bonds, shall have the same rights
hereunder which are possessed by any Holders of the Bonds; (ii) shall be
authorized to proceed, in its own name and as trustee of an express trust; (iii)
may pursue any available remedy by action at law or suit in equity to enforce
the payment of the principal of and interest and premium, if any, on the Bonds;
(iv) may file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of such Trustee and of the
Bondholders allowed in any judicial proceedings relative to the Company, its
creditors, its property or the Bonds; and (v) may, and upon the written request
or direction of the Holders of not less than twenty-five percent (25%) in
principal amount of the Bonds then Outstanding (determined in accordance with
the provisions of Section 13.03), with the prior written consent of the Credit
Facility Issuer, shall proceed to protect and enforce all rights of the Holders
and the Trustee under and as permitted by this Indenture and the laws of the
State of New York, by such means or appropriate judicial proceedings as shall be
suitable or deemed by it most effective in the premises, including the
appointment of temporary trustees and any actions, suits or special proceedings
at law or in equity or in bankruptcy or by proceedings in the office of any
board or officer having jurisdiction, or otherwise, whether for the specific
enforcement of any covenant or agreement contained in this Indenture, or in aid
of execution of any power granted in this Indenture or to enforce any other
legal or equitable right or remedy vested in the Holders of the Bonds or the


                                      XII-3



Trustee by this Indenture or by such laws, or for the appointment of a receiver.
All rights of action (including the right to file proofs of claim) under this
Indenture or under any of the Bonds may be enforced by the Trustee without the
possession of any of the Bonds or the production thereof in any trial or other
proceedings relating thereto. Any such suit or proceeding instituted by the
Trustee shall be brought in its name and as trustee of an express trust without
the necessity of joining as plaintiffs or defendants any Holders of the Bonds,
and any recovery or judgment shall be for the equal benefit of the Holders of
the Outstanding Bonds.

                  In the enforcement of any remedy under this Indenture the
Trustee shall be entitled to sue for, enforce payment of and receive any and all
amounts, then or during any Event of Default becoming, and at any time
remaining, due from the Company and unpaid under the Participation Agreement and
the Note for principal, premium, interest or otherwise under any of the
provisions of this Indenture or of the Bonds, with interest on overdue payments
if such interest then is permitted by the laws of the State of New York,
together with any and all costs and expenses of collection and of all
proceedings hereunder and under such Bonds, without prejudice to any other right
or remedy of the Trustee or of the Holders, and to recover and enforce judgment
or decree against the Company which is in default of its respective obligations
under the Participation Agreement and the Note, but solely as provided herein
and in such Bonds, for any portion of such amounts remaining unpaid, with
interest, costs and expenses, and to collect in any manner provided by law, the
monies adjudged or decreed to be payable. Any such judgment shall be recovered
by the Trustee, in its own name and as trustee of an express trust.

                  SECTION 12.05. POWERS OF TRUSTEE WITH RESPECT TO PARTICIPATION
AGREEMENT AND OTHER AGREEMENTS. If the payments required to be paid to the
Trustee under the Participation Agreement and the Note or other agreement
pledged and assigned hereunder, as the case may be, are not paid when due or
upon the happening and continuance of an Event of Default set forth in clause
(a) or (b) of Section 12.01, the Trustee, in its own name and as trustee of an
express trust, shall be entitled and empowered to institute any action or
proceedings at law or in equity for the collection of all payments due and
unpaid under the Participation Agreement and the Note or other agreement, as the
case may be, and required to be paid to the Trustee and may prosecute any such
action or proceedings to judgment or final decree, and may enforce any such
judgment or final decree against the Company or the obligor under any other
agreement, as the case may be, and collect in the manner provided by law out of
the property of the Company or such obligor wherever situated, the monies
adjudged or decreed to be payable.

                  In case there shall be pending proceedings for the bankruptcy
or for the reorganization of the Company under the Participation Agreement or an
obligor under any other agreement pledged and assigned hereunder, as the case
may be, under the Federal Bankruptcy Act or any other applicable law, or in case
a receiver or trustee shall have been appointed for the property of the Company
under the Participation Agreement and the Note or an obligor under any other
agreement pledged and assigned hereunder, as the case may be, the Trustee,
regardless of whether the principal of the Bonds shall then be due and payable
as therein expressed or by declaration or otherwise and regardless of whether
the Trustee shall have made any demand pursuant to the power vested in it by
this Indenture, shall be entitled and empowered, by intervention in such
proceedings or otherwise, to file and prove a claim or claims for the whole
amount owing and unpaid under the Participation Agreement and the Note by the
Company or under such other agreement by such obligor, as the case


                                      XII-4




may be, and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
for reimbursement of all expenses and liabilities incurred, and all advances
made, by the Trustee except as a result of its negligence or bad faith) and of
the Holders allowed in any such judicial proceedings relative to the Company or
other obligor, as the case may be, or to the creditors or property of the
Company or other obligor, as the case may be, and to collect and receive any
monies or other property payable or deliverable on such claims, and to
distribute in accordance with the provisions hereof all amounts received with
respect to the claims of the Holders and of the Trustee on their behalf, and any
receiver, assignee or trustee in bankruptcy or reorganization is hereby
authorized to make such payments to the Trustee.

                  NOTHING HEREIN CONTAINED SHALL BE DEEMED TO AUTHORIZE THE
TRUSTEE TO AUTHORIZE OR CONSENT TO OR ACCEPT OR ADOPT ON BEHALF OF ANY HOLDERS
ANY PLAN OF REORGANIZATION, ARRANGEMENT, ADJUSTMENT OR COMPOSITION AFFECTING THE
BONDS OR THE RIGHTS OF ANY HOLDER THEREOF, OR TO AUTHORIZE THE TRUSTEE TO VOTE
IN RESPECT OF THE CLAIM OF ANY HOLDERS IN ANY SUCH PROCEEDING.

                  The provisions of this Section shall not be construed as in
any way limiting the powers of the Trustee, with respect to defaults by the
Authority or by the Company under the Participation Agreement and the Note, or
an obligor under any other agreement pledged and assigned hereunder, as the case
may be, whether such powers be expressly or implicitly granted to the Trustee
elsewhere in this Indenture or in the Participation Agreement or the Note or
other agreement, as the case may be, or as a denial that the Trustee has any
such other powers, but the powers granted to the Trustee by this Section shall
be supplemental, additional and cumulative to all other powers possessed by the
Trustee with respect to defaults under this Indenture or under the Participation
Agreement, the Note or other agreement pledged and assigned hereunder, as the
case may be.

                  SECTION 12.06. DISPOSITION OF MONIES IN EVENT OF
INSUFFICIENCIES IN FUNDS AND ACCOUNTS. All monies (other than proceeds of any
Support Facility) received by the Trustee pursuant to any right given or action
taken under the provisions of this Article, after payment of the costs and
expenses of the proceedings resulting in the collection of such monies and of
the expenses, fees and advances incurred or made by the Trustee hereunder, shall
be deposited in the Bond Fund. If at any time the monies in the Bond Fund shall
not be sufficient to pay the interest or principal or premium, if any (or the
redemption price), of the Bonds as the same become due and payable (whether at
maturity or upon proceedings for the redemption thereof or by acceleration or
otherwise), the monies in such fund, together with any other monies then
available or thereafter becoming available for such purpose, whether through the
exercise of the remedies provided for in this Article XII or otherwise, shall be
applied as follows:

                  (a) Unless the principal of all the Bonds shall have become
due and payable or shall have been declared due and payable pursuant to the
provisions of Section 12.03, all such monies shall be applied:

                  First: to the payment to the persons entitled thereto of all
         installments of interest then due, in the order of the maturity of the
         installments of such interest, and if the amount available shall not be
         sufficient to pay in full any particular installment, then to the
         payment


                                      XII-5




         ratably, according to the amounts due on such installment, to the
         persons entitled thereto, without any discrimination or preference; and

                  Second: to the payment of the premium, if any, on and the
         principal of the Bonds, to the purchase and retirement of Bonds and to
         the redemption of Bonds, all in accordance with the provisions of this
         Indenture.

                  (b) If the principal of all the Bonds shall have become due
and payable or shall have been declared due and payable pursuant to the
provisions of Section 12.03, all such monies shall be applied to the payment of
the principal and interest then due and unpaid, with interest on such principal
as aforesaid, without preference or priority of principal over interest or of
interest over principal, or of any installment of interest over any other
installment of interest, or of any Bond over any other Bond, according to the
amounts due respectively for principal and interest, to the persons entitled
thereto without any discrimination or preference except as to any difference in
the respective rates of interest specified in the Bonds.

                  (c) If the principal of all the Bonds shall have been declared
due and payable pursuant to the provisions of Section 12.03, and if such
declaration shall thereafter have been rescinded and annulled pursuant to the
provisions of such Section 12.03, then, subject to the provisions of
subparagraph (b) above of this paragraph in the event that the principal of all
the Bonds shall later become due and payable or be declared due and payable
pursuant to the provisions of Section 12.03, the monies then held in the Bond
Fund shall be applied to the payment of the principal of and premium (or
redemption price) on all matured Bonds and all Bonds (or portions of the
principal amount thereof) then or theretofore required to be redeemed pursuant
to any provisions of this Indenture (excluding principal not then due except by
reason of such declaration) and all arrears of interest and interest then due,
if any, upon all Bonds then Outstanding, and any monies thereafter deposited in
the Bond Fund shall be applied in accordance with the provisions of Article IX.

                  Whenever monies are to be applied by the Trustee pursuant to
the provisions of subparagraphs (a) and (b) of this Section, (i) such monies
shall be applied by the Trustee at such times, and from time to time, as the
Trustee in its sole discretion shall determine, having due regard to the amount
of such monies available for application and the likelihood of additional monies
becoming available for such application in the future; (ii) the deposit of such
monies, in trust for the proper purpose, shall constitute proper application by
the Trustee; and (iii) the Trustee shall incur no liability whatsoever to the
Authority, to any Holder or to any other person for any delay in applying any
such monies, so long as the Trustee acts with reasonable diligence, having due
regard to the circumstances, and ultimately applies the same in accordance with
such provisions of this Indenture as may be applicable at the time of
application by the Trustee. Whenever the Trustee shall exercise such discretion
in applying such monies, it shall fix the date (which shall be an Interest
Payment Date unless the Trustee shall deem another date more suitable) upon
which such application is to be made and upon such date interest on the amounts
of principal to be paid on such date shall cease to accrue. The Trustee shall
give such notice as it may deem appropriate of the fixing of any such date, and
shall not be required to make payment to the Holder of any unpaid Bond until
such Bond shall be surrendered to the Trustee for appropriate endorsement, or
for cancellation if fully paid.



                                      XII-6



                  SECTION 12.07. EFFECT OF DELAY OR OMISSION; WAIVER OF DEFAULT;
DIRECTION OF REMEDIAL PROCEEDINGS BY THE HOLDERS. No delay or omission of the
Trustee or of any Holder of the Bonds to exercise any right or power accruing
upon any default or Event of Default shall impair any such right or power or
shall be construed to be a waiver of any such default or acquiescence therein.

                  Anything in this Indenture to the contrary notwithstanding,
the Holders of not less than a majority in principal amount of the Bonds at the
time Outstanding (determined in accordance with the provisions of Section 13.03)
with the prior written consent of the Credit Facility Issuer shall be authorized
and empowered and have the right, by an instrument or concurrent instruments in
writing delivered to the Trustee on behalf of the Holders of the Bonds then
Outstanding to consent to the waiver of any Event of Default or its
consequences, and the Trustee shall waive any Event of Default and its
consequences upon the written request of the Holders of such majority; provided,
however, that there shall not be waived (i) any default in payment of principal
or premium when due or (ii) any default in payment when due of interest unless,
in either case, prior to such waiver all arrears in principal, premium, if any,
and interest, with additional interest, to the extent permitted by law, at the
rate then borne by the Bonds (which, in the case of Auction Rate Bonds shall be
the Overdue Rate), and all fees and expenses of the Trustee shall have been paid
or provided for; provided, however, that notwithstanding any such waiver, any
Auction Rate Bonds shall continue to bear interest at the Overdue Rate until
such Event of Default is cured. No such waiver shall extend to or affect any
other existing or subsequent default or Event of Default or impair any rights or
remedies consequent thereon.

                  Anything in this Indenture to the contrary notwithstanding,
the Holders of not less than twenty-five percent (25%) in principal amount of
the Bonds at the time Outstanding (determined in accordance with the provisions
of Section 13.03) with the prior written consent of the Credit Facility Issuer
shall be authorized and empowered and have the right, by an instrument or
concurrent instruments in writing delivered to the Trustee to direct the time
and method of conducting any proceeding for any remedy to be taken by the
Trustee or available to the Trustee or available to the Holders of the Bonds, or
exercising any trust or power conferred upon the Trustee hereunder provided: (1)
such direction shall not be in conflict with any rule of law or with this
Indenture or expose the Trustee to personal liability, or be unduly prejudicial
to Holders not joining therein, and (2) the Trustee may take any other action
deemed proper by the Trustee which is not inconsistent with such direction.

                  SECTION 12.08. SUITS OR ACTIONS BY HOLDERS; ANY HOLDER MAY
ENFORCE OVERDUE PAYMENT OF HIS OR HER BOND OR INTEREST THEREON. No Holder of any
of the Bonds shall have any right to institute any suit, action or proceeding in
equity or at law for the execution of any trust hereunder or for any other
remedy hereunder unless there shall have occurred an Event of Default of which
the Trustee has been notified or is deemed to have notice as provided in Section
11.08, and such Holder previously shall have given to the Trustee written notice
of the Event of Default on account of which such suit, action or proceeding is
to be instituted, and unless also the Holders of not less than twenty-five
percent (25%) in principal amount of the Bonds then Outstanding shall have made
written request of the Trustee after the right to exercise such powers or right
of action, as the case may be, shall have accrued, and shall have afforded the
Trustee a period of 60 days either to proceed to exercise the powers hereinabove
granted or to institute such action, suit or proceeding in its or their name,
the Trustee shall have been indemnified by Holders against the costs, expenses
and liabilities

                                      XII-7




to be incurred in compliance with such request, and shall not have received an
inconsistent direction from the Holders of not less than twenty-five percent
(25%) in principal amount of the Bonds and the Trustee shall have refused or
neglected to comply with such request within a reasonable time. It is understood
and intended that no one or more Holders of the Bonds hereby secured shall have
any right in any manner whatever by the action of such Holder or Holders to
affect, disturb or prejudice the security of this Indenture, or to enforce any
right hereunder except in the manner herein provided; that all proceedings at
law or in equity shall be instituted, had and maintained in the manner herein
provided and for the benefit of all Holders of such Outstanding Bonds; and that
any individual rights of action or other right given to one or more of such
Holders by law are restricted by this Indenture to the rights and remedies
herein provided. Notwithstanding the foregoing and subject to Section 11.02, the
Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Indenture at the request or direction of any of the
Holders, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction.

                  Notwithstanding any other provision of this Indenture, the
right of any Holder of a Bond to receive payment of the principal of, premium,
if any, and interest on such Bond, on or after the respective due dates
expressed in such Bond, or to institute suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder, except that no Holder of any such Bond shall
have the right to institute any such suit, if and to the extent that the
institution or prosecution thereof or the entry of judgment therein would, under
applicable law, result in the surrender, impairment, waiver, or loss of the lien
of this Indenture.

                  SECTION 12.09. REMEDIES NOT EXCLUSIVE. No remedy by the terms
of this Indenture conferred upon or reserved to the Trustee or the Holders of
the Bonds is intended to be exclusive of any other remedy so conferred or
reserved or to be exclusive of other remedies now or hereafter existing at law
or in equity or by statute, and each and every such remedy shall be cumulative
and shall be in addition to any other remedy given hereunder to the Trustee or
to the Holders of the Bonds or now or hereafter existing at law or in equity or
by statute. Every such right, power and remedy given hereunder or by law or in
equity or by statute may be exercised from time to time and as often as may be
deemed expedient.

                  SECTION 12.10. EFFECT OF ABANDONMENT OF PROCEEDINGS ON
DEFAULT. In case any proceeding taken by the Trustee or the Holders of the Bonds
on account of any Event of Default shall have been discontinued or abandoned for
any reason, then and in every such case the Authority, the Trustee and the
Holders shall be restored to their former positions and rights hereunder,
respectively, and all rights, remedies, powers and duties of the Trustee shall
continue as though no such proceeding had been taken.

                  SECTION 12.11. INTEREST ON OVERDUE AMOUNTS. To the extent
permitted by law all amounts which are due and payable but which have not been
so paid under this Indenture shall bear interest at the then current rate of
interest on the Bonds until paid; provided, however, that during any Auction
Rate Period all amounts which are due and owing but unpaid hereunder shall bear
interest at the Overdue Rate until paid.


                                      XII-8



                                  ARTICLE XIII

                   EXECUTION OF INSTRUMENTS BY BONDHOLDERS AND
                     OWNERSHIP OF BONDS; EXCLUSION OF BONDS
                     OWNED BY THE AUTHORITY OR THE COMPANY

                  SECTION 13.01. EXECUTION OF REQUESTS, DIRECTIONS AND CONSENTS
AND OTHER INSTRUMENTS AND PROOF OF SAME; OWNERSHIP OF BONDS AND PROOF OF SAME.
Any request, direction, consent or other instrument required by this Indenture
to be signed or executed by Holders of Bonds may be signed or executed by such
Holders in person or by agent or agents duly appointed in writing, and may be in
any number of concurrent writings of substantially similar tenor. Proof of the
execution of any such request, direction, consent or other instrument or of a
writing appointing any such agent, and of the holding or ownership of Bonds,
shall be sufficient for any purpose of this Indenture and shall be conclusive in
favor of the Trustee hereunder with regard to any action taken by it under such
request, direction, consent or other instrument or of a writing appointing any
such agent, if made in the following manner:

                  (a) the fact and date of the execution by any person of any
         such request, direction, consent or other instrument in writing may be
         proved in any reasonable manner which the Trustee deems sufficient;

                  (b) the ownership of Bonds shall be proved by the books of
         registry kept under the provisions of this Indenture.

                  Any request, direction, consent or vote of the Holder of any
Bond shall bind and be conclusive upon the Holder of such Bond giving such
request, direction or consent or casting such vote and upon every future Holder
of the same Bond in respect of anything done or suffered to be done by the
Trustee or otherwise, or by the Holders of other Bonds, in pursuance of such
request, direction, consent or vote, and whether or not such future Holder has
knowledge of or information as to such request, direction, consent or vote;
provided that any request, direction, consent or vote of the Holder of a Bond
required by any of the provisions hereof may be revoked by the Holder giving
such request, direction, consent or vote or by a subsequent Holder if such
revocation in writing is filed with the Trustee, prior to the time when the
request, direction, consent or vote of the percentage of the Holders of the
Bonds required by such provision shall have been given and action taken by the
Trustee or otherwise, or by the Holders of other Bonds, under authority of such
request, direction, consent or vote.

                  The payment of or on account of principal to or upon the order
of the person in whose name the Bonds shall at the time be registered on said
books of registry and the payment of interest to or upon the order of any person
in whose name the Bonds shall at the time be registered on said books of
registry, shall be valid and effectual fully to satisfy and discharge all
liability hereunder or upon the Bonds to the extent of the sum or sums so paid.

                  The Authority at the request of the Company may establish a
record date for the taking of any action by the Holders.


                                     XIII-1



                  SECTION 13.02. MEETINGS OF HOLDERS. The Trustee or the Holders
of not less than twenty percent (20%) in principal amount of the Bonds then
Outstanding may at any time call a meeting of the Holders of the Bonds for the
purpose of the consenting to, the approving, the requesting, or the directing by
the Holders of the Bonds of any action required to be consented to or approved
by them hereunder or which they may request or direct hereunder to be taken, or
for the making by the Holders of any appointments they may make hereunder, or
for the purpose of taking any other action which the Holders may take hereunder,
or for any other purpose concerning the payment and security of the Bonds
hereunder. Every such meeting shall be held at such place in The City of New
York, State of New York, as may be specified in the notice calling such meeting.
Written notice of such meeting, stating the place and time of the meeting and in
general terms the business to be submitted, shall be mailed to the Holders whose
names and addresses then appear upon the books of registry by the Registrar and
Paying Agent or the Holders calling such meeting, not less than 20 days nor more
than 60 days before such meeting. Any meeting of Holders shall, however, be
valid without notice if the Holders of all Bonds then Outstanding are present in
person or by proxy or if notice is waived before or within 30 days after the
meeting by those not so present.

                  Attendance and voting by Holders at meetings thereof may be in
person or by proxy. Holders of Bonds may, by an instrument in writing under
their hands, appoint any person or persons, with full power of substitution, as
their proxy to attend and vote at any meeting for them.

                  Persons named by the Trustee, or elected by the Holders of a
majority in principal amount of the Bonds represented at the meeting in person
or by proxy in the event the Trustee is not represented at such meeting, shall
act as temporary chairman and temporary secretary of any meeting of Holders. A
permanent chairman and a permanent secretary of such meeting shall be elected by
the Holders of a majority in principal amount of the Bonds represented at such
meeting in person or by proxy. The permanent chairman of the meeting shall
appoint two (2) inspectors of votes who shall count all votes cast at such
meeting, except votes on the election of chairman and secretary as aforesaid,
and who shall make and file with the secretary of the meeting and the Trustee
their verified report of all such votes cast at the meeting.

                  The Holders of not less than the principal amount of the Bonds
required by the provisions hereof to consent to, approve, request or direct any
action to be taken at a meeting of Holders, or required by the provisions hereof
to make any appointments to be made at such meeting, or required by the
provisions hereof to take any other action to be taken at such meeting, must be
present at such meeting in person or by proxy in order to constitute a quorum
for the transaction of such business. Less than a quorum, however, shall have
power to adjourn the meeting from time to time without notice of such
adjournment other than the announcement thereof at the meeting; provided,
however, that if such meeting is adjourned by less than a quorum for more than
ten (10) days, notice of such adjournment shall be given by the Trustee at least
five (5) days prior to the adjourned date of the meeting.

                  Any Holder of a Bond shall be entitled in person or by proxy
to attend and vote at such meeting as Holder of the Bond or Bonds registered in
his or her name without producing such Bond or Bonds. Such persons and their
proxies shall, if required, produce such proof of personal identity as shall be
satisfactory to the Secretary of the meeting.


                                     XIII-2



                  All proxies presented at such meeting shall be delivered to
the Inspector of Votes and filed with the Secretary of the meeting. The right of
a proxy for a Holder to attend the meeting and act and vote thereat may be
proved (subject to the Trustee's right to require additional proof) by a written
proxy executed by such Holder as aforesaid.

                  The officers or nominees of the Trustee may be present or
represented at such meeting and take part therein, but shall not be entitled to
vote thereat, except for such officers or nominees who are Holders or proxies
for Holders (including the Trustee).

                  The vote at any such meeting of the Holder of any Bond, or his
or her proxy, entitled to vote thereat shall be binding upon such Holder and
upon every subsequent Holder of such Bond (whether or not such subsequent Holder
has notice thereof).

                  SECTION 13.03. EXCLUSION OF BONDS HELD BY OR FOR THE
AUTHORITY, THE COMPANY AND OF BONDS NO LONGER DEEMED OUTSTANDING HEREUNDER. In
determining whether the Holders of the requisite aggregate principal amount of
Bonds have concurred in any demand, request, direction, consent, vote or waiver
under this Indenture, any Bonds which are owned by or on behalf of or for the
account of the Authority, the Company and, except for the purposes of Section
15.01, any Bonds which are deemed no longer Outstanding hereunder shall be
disregarded and not included for the purpose of any such determination, and such
Bonds shall not be entitled to vote upon, consent to or concur in any action
provided in this Indenture, except that for the purposes of determining whether
the Trustee shall be protected in relying on any such demand, request,
direction, consent, vote or waiver only Bonds which the Trustee knows are owned
as aforesaid shall be disregarded. The Trustee may require each Holder of a Bond
or Bonds, before such Holder's demand, request, direction, consent, vote or
waiver shall be deemed effective, to reveal if the Bonds as to which such
demand, request, direction, consent, vote or waiver is made, granted, cast or
given are disqualified as provided in this Section.


                                     XIII-3



                                   ARTICLE XIV

                    AMENDING AND SUPPLEMENTING THE INDENTURE,
             THE PARTICIPATION AGREEMENT, THE REMARKETING AGREEMENT,
               AUCTION AGENCY AGREEMENT, BROKER-DEALER AGREEMENTS,
                          BOND PURCHASE TRUST AGREEMENT

                  SECTION 14.01. AMENDING AND SUPPLEMENTING INDENTURE WITHOUT
CONSENT OF HOLDERS. The Authority and the Trustee, from time to time and at any
time and without the consent or concurrence of any Holder, may enter into a
Supplemental Indenture, (i) to make any changes, modifications, amendments or
deletions to this Indenture that may be required to permit the Indenture to be
qualified under the Trust Indenture Act of 1939 of the United States of America
or (ii) for any one or more of the following purposes:

                  (a) (x) to make any changes or corrections in this Indenture
         or any Supplemental Indenture as to which the Authority shall have been
         advised by counsel that the same are required for the purpose of curing
         or correcting any ambiguity or defective or inconsistent provision or
         omission or mistake or manifest error contained in this Indenture or
         Supplemental Indenture, or (y) to insert in this Indenture such
         provisions clarifying matters or questions arising under this Indenture
         as are necessary or desirable if such provisions shall not materially
         and adversely affect the rights of the Holders;

                  (b) to add additional covenants and agreements of the
         Authority for the purpose of further securing the payment of the Bonds;

                  (c) to surrender any right, power or privilege reserved to or
         conferred upon the Authority by the terms of this Indenture;

                  (d) to confirm as further assurance any lien, pledge or
         charge, or the subjection to any lien, pledge or charge, created or to
         be created by the provisions of this Indenture or any Supplemental
         Indenture;

                  (e) to grant to or confer upon the Holders any additional
         rights, remedies, powers, authority or security that lawfully may be
         granted to or conferred upon them, or to grant to or to confer upon the
         Trustee for the benefit of the Holders any additional rights, duties,
         remedies, power or authority;

                  (f) to provide for the issuance of Bonds in book entry or
         coupon form, if at the time permitted by applicable law;

                  (g) to provide for the substitution of rating agencies;

                  (h) to provide for any new administrative or procedural
         provisions made necessary or desirable by the issuance of a Support
         Facility or an Alternate Support Facility, other credit, liquidity or
         support facility, including, but not limited to, any amendment
         necessary to obtain a rating on the Bonds based upon such facility; and


                                      XIV-1



                  (i) to modify, amend or supplement the Indenture in such
         manner as to permit the qualification of the Bonds for deposit with a
         Securities Depository, and, in connection therewith, if they so
         determine, to add to the Indenture, such other terms, conditions and
         provisions as may be required to permit such qualification.

                  No Supplemental Indenture shall be entered into unless in the
opinion of Bond Counsel which shall be delivered to the Trustee (which opinion
may be combined with the opinion required by Section 14.04) the execution of
such Supplemental Indenture is permitted by the foregoing provisions of this
Section and the provisions of such Supplemental Indenture do not materially and
adversely affect the rights of the Holders of the Bonds and the Trustee may rely
on any such opinion.

                  SECTION 14.02. AMENDING AND SUPPLEMENTING INDENTURE WITH
CONSENT OF HOLDERS. With the consent of the Holders of a majority in principal
amount of the Bonds then Outstanding, the Authority and the Trustee from time to
time and at any time may enter into a Supplemental Indenture for the purpose of
adding any provisions to, or changing in any manner or eliminating any of the
provisions of, this Indenture, or modifying or amending the rights and
obligations of the Authority hereunder, or modifying or amending in any manner
the rights of the Holders; provided that, without the specific consent of the
Holders of all Bonds Outstanding which would be affected thereby no Supplemental
Indenture amending or supplementing the provisions hereof shall: (a) change the
fixed maturity date for the payment of the principal of any Bond, or the dates
for the payment of interest thereon or the terms of the purchase or redemption
thereof, or reduce the principal amount of any Bond or the rate of interest
thereon or the method of calculating the same except as otherwise provided in
this Indenture; or (b) reduce the aforesaid percentage of Bonds, the Holders of
which are required to consent to any Supplemental Indenture amending or
supplementing the provisions of this Indenture; or (c) give to any Bond any
preference over any other Bond secured hereby; or (d) authorize the creation of
any pledge of payments under the Participation Agreement or Note Payments prior
or superior to the pledge of a lien and charge thereon assigned herein for the
payment of the Bonds; or (e) effect any change in the purchase or redemption
provisions relating to the Bonds; or (f) deprive any Holders in any material
respect of the security afforded by this Indenture. A modification or amendment
of the provisions of Article IX hereof with respect to the Bond Fund or any
other Funds or Accounts established thereby shall not be deemed a change in the
terms of payment; provided that no such modification or amendment shall, except
upon the consent of the Holders of all Bonds Outstanding affected thereby,
reduce the amount or amounts required to be deposited in the Bond Fund. Nothing
in this paragraph contained, however, shall be construed as making necessary the
approval of the Holders of the execution of any Supplemental Indenture
authorized by the provisions of Section 14.01.

                  The proof of the giving of any consent by any Holder required
by this Section and of the holding of the Bonds for the purpose of giving
consents shall be made in accordance with the provisions of Article XIII. It
shall not be necessary that the consent of the Holders approve the particular
form of wording of the proposed supplemental amendment or supplement, but it
shall be sufficient if such consent approves the substance of the proposed
amendment or supplement. After the Holders of the required percentage of Bonds
shall have filed their consents to the amending or supplementing hereof pursuant
to this Section, the Authority shall mail a copy of notice of such consent,
postage prepaid, to each Holder at his or her address as it appears upon the
books of registry


                                      XIV-2



and to the Trustee. Nothing in this paragraph contained, however, shall be
construed as requiring the giving of notice of any amending or supplementing of
this Indenture authorized by this Section. A record of the consents shall be
filed with the Trustee, and shall be proof of the matters therein stated until
the contrary is proved. No action or proceeding to set aside or invalidate such
Supplemental Indenture or any of the proceedings for its adoption shall be
instituted or maintained unless such action or proceeding is commenced within
sixty (60) days after the mailing of the notice required by this paragraph.

                  Notwithstanding anything in this Indenture to the contrary,
the consent of the Holders of the required amount of Bonds shall be deemed given
with respect to a Supplemental Indenture if:

                  (a) (i) the Supplemental Indenture takes effect on a date on
         which all of the Bonds that are affected by such Supplemental Indenture
         are subject to mandatory tender for purchase in accordance with this
         Indenture, (ii) any modification or amendment effected thereby is
         consented to in writing by the Remarketing Agent for such Bonds on or
         prior to such effective date and is disclosed in the official statement
         or other disclosure document pursuant to which such Bonds are
         remarketed and (iii) the Bonds so tendered are purchased;

                  (b) (i) not less than 30 days before the effective date of the
         Supplemental Indenture, the Trustee sends a notice of the proposed
         modification or amendment to the Holders of the Bonds that are affected
         by such Supplemental Indenture and the Holders of such Bonds have the
         right to tender their Bonds for purchase pursuant to Section 5.03
         hereof before such effective date, (ii) any modification or amendment
         effected thereby is consented to in writing by the Remarketing Agent
         for such Bonds on or prior to such effective date and is disclosed in
         the official statement or other disclosure document pursuant to which
         such Bonds are remarketed and (iii) the Bonds so tendered are
         purchased; or

                  (c) (i) not less than 30 days before the Auction Date for the
         Auction Period during which any modification or amendment to this
         Indenture shall become effective, the Trustee sends a notice of the
         proposed modification or amendment to the Holders of the Auction Rate
         Bonds that are affected by such modification or amendment, (ii) the
         Auction Rate determined for such Auction Rate Bonds at the Auction
         immediately preceding the effective date of the modification or
         amendment is a Winning Bid Rate, and (iii) any modification or
         amendment effected thereby is consented to in writing by the Broker-
         Dealer(s) for such Bonds on or prior to such effective date and is
         disclosed in the official statement or other disclosure document
         delivered by the Broker-Dealer(s) to Potential Holders prior to the
         Auction immediately preceding such effective date; provided, however,
         that, notwithstanding anything to the contrary in this Indenture, any
         Auction Rate Bonds that are not the subject of a specific Hold Order or
         Bid shall be deemed to be subject to a Sell Order at the Auction
         immediately preceding such effective date.

                  SECTION 14.03. NOTATION UPON BONDS; NEW BONDS ISSUED UPON
AMENDMENTS. The Bonds delivered after the effective date of any action taken as
provided in this Article, if any, may and shall if required by the Trustee bear
a notation as to such action, by endorsement or


                                      XIV-3




otherwise and in form approved by the Authority. In that case, upon demand of
any Holder at such effective date and upon presentation of Bonds at the
principal office of the Trustee or other transfer agent or registrar hereunder
for such Bonds, and at such additional offices, if any, as the Authority may
select and designate for that purpose, a suitable notation shall be made on the
Bonds.

                  SECTION 14.04. EFFECTIVENESS OF SUPPLEMENTAL INDENTURES. Upon
the execution pursuant to this Article by the Authority and the Trustee of any
Supplemental Indenture amending or supplementing the provisions of this
Indenture and the delivery to the Trustee of an opinion of Bond Counsel that
such Supplemental Indenture is permitted by the provisions of this Article XIV
and has been duly executed in accordance with the provisions hereof and
applicable law and that the provisions thereof are valid (upon which opinion the
Trustee, subject to the provisions of Section 11.04, shall be fully protected in
relying), or upon such later date as may be specified in such Supplemental
Indenture, (i) this Indenture and the Bonds shall be modified and amended in
accordance with such Supplemental Indenture; (ii) the respective rights,
limitations of rights, obligations, duties and immunities under this Indenture
of the Authority, the Trustee, and the Holders shall thereafter be determined,
exercised and enforced under this Indenture subject in all respects to such
modifications and amendments; and (iii) all of the terms and conditions of any
such Supplemental Indenture shall be a part of the terms and conditions of the
Bonds and of this Indenture for any and all purposes.

                  SECTION 14.05. SUPPLEMENTAL INDENTURE AFFECTING SUPPORT
FACILITY PROVIDER. No Supplemental Indenture affecting the rights or obligations
of the Support Facility Issuer which takes effect while any Support Facility is
in effect may be entered into by the Authority and the Trustee or be consented
to by the Holders without written consent of each Support Facility Issuer.

                  SECTION 14.06. SUPPLEMENTAL PARTICIPATION AGREEMENTS NOT
REQUIRING THE CONSENT OF THE HOLDERS. The Authority and the Company may, with
the written consent of the Trustee but without notice to or consent of any
Holder, from time to time and at any time, agree to such supplemental agreements
supplementing the Participation Agreement or amendments to the Participation
Agreement as shall not be inconsistent with the terms and provisions of the
Participation Agreement or this Indenture and, in the opinion of the Authority,
shall not be detrimental to the interests of the Holders (which Supplemental
Participation Agreements shall thereafter form a part of the Participation
Agreement):

                  (a) to cure any ambiguity or formal defect or omission in the
         Participation Agreement or in any supplemental agreement;

                  (b) to grant to or confer upon the Trustee for the benefit of
         the Holders any additional rights, remedies, powers, authority or
         security that may lawfully be granted to or conferred upon the Holders
         or the Trustee;

                  (c) to provide for any new administrative, security or
         procedural provisions necessitated by the issuance of an Alternate
         Support Facility; or

                  (d) to provide for or add any further changes or corrections
         that are necessary or desirable to comply with any Supplemental
         Indenture entered into pursuant to Section 14.01;


                                      XIV-4




provided that no such Supplemental Participation Agreement which takes effect
while a Support Facility is in effect shall be effective prior to the receipt by
such parties of the written consent of each Support Facility Issuer.

                  SECTION 14.07. NOTICE AND CONSENT FOR SUPPLEMENTAL
PARTICIPATION AGREEMENTS REQUIRING THE CONSENT OF THE HOLDERS. Except for
Supplemental Participation Agreements or amendments provided for in Section
14.06, neither the Authority nor the Trustee shall agree or consent, as the case
may be, to any Supplemental Participation Agreement or amendment to the
Participation Agreement unless notice of the proposed execution of such
Supplemental Participation Agreement or amendment shall have been given and the
Holders shall have consented to and approved the execution thereof in the same
manner and form as provided for in Section 14.02 in the case of Supplemental
Indentures; provided that no such Supplemental Participation Agreement which
materially and adversely affects any issuer of a Support Facility (so long as
such Support Facility is in effect) shall be effective prior to the receipt by
such parties of the written consent of the issuer of such Support Facility.

                  Notwithstanding anything in this Indenture to the contrary,
the consent of the Holders of the required amount of Bonds shall be deemed given
with respect to any Supplemental Participation Agreement or amendment to the
Participation Agreement if:

                  (a) (i) the Supplemental Participation Agreement or amendment
         to the Participation Agreement takes effect on a date on which all of
         the Bonds that are affected by such Supplemental Participation
         Agreement or amendment to the Participation Agreement are subject to
         mandatory tender for purchase in accordance with this Indenture, (ii)
         any modification or amendment effected thereby is consented to in
         writing by the Remarketing Agent for such Bonds on or prior to such
         effective date and disclosed in the official statement or other
         disclosure document pursuant to which such Bonds are remarketed and
         (iii) the Bonds so tendered are purchased;

                  (b) (i) not less than 30 days before the effective date of the
         Supplemental Participation Agreement or amendment to the Participation
         Agreement, the Trustee sends a notice of the proposed modification or
         amendment to the Holders of the Bonds that are affected by such
         modification or amendment and the Holders of such Bonds have the right
         to tender their Bonds for purchase pursuant to Section 5.03 hereof
         before such effective date, (ii) any modification or amendment effected
         thereby is consented to in writing by the Remarketing Agent for such
         Bonds on or prior to such effective date and is disclosed in the
         official statement or other disclosure document pursuant to which such
         Bonds are remarketed and (iii) the Bonds so tendered are purchased; or

                  (c) (i) not less than 30 days before the Auction Date for the
         Auction Period during which any modification or amendment to the
         Participation Agreement shall become effective, the Trustee sends a
         notice of the proposed modification or amendment to the Holders of the
         Auction Rate Bonds that are affected by such modification or amendment,
         (ii) the Auction Rate determined for such Auction Rate Bonds at the
         Auction immediately preceding the effective date of the modification or
         amendment is a Winning Bid Rate, and (iii) any modification or
         amendment effected thereby is consented to in writing by the


                                      XIV-5





         Broker-Dealer(s) for such Bonds on or prior to such effective date and
         is disclosed in the official statement or other disclosure document
         delivered by the Broker-Dealer(s) to Potential Holders prior to the
         Auction immediately preceding such effective date; provided, however,
         that, notwithstanding anything to the contrary in this Indenture, any
         Auction Rate Bonds that are not the subject of a specific Hold Order or
         Bid shall be deemed to be subject to a Sell Order at the Auction
         immediately preceding such effective date.

                  SECTION 14.08. EFFECTIVENESS OF SUPPLEMENTAL PARTICIPATION
AGREEMENT. Upon the execution pursuant to this Article and of applicable law by
the Authority and the Company of any Supplemental Participation Agreement
amending or supplementing the provisions of the Participation Agreement and the
delivery to the Trustee of an Opinion of Bond Counsel that such Supplemental
Participation Agreement is in due form, has been duly executed in accordance
with the provisions hereof and applicable law and that the provisions thereof
are valid (upon which opinion the Trustee, subject to the provisions of Section
11.04, shall be fully protected in relying), or upon such later date as may be
specified in such Supplemental Participation Agreement, (i) the Participation
Agreement shall be modified and amended in accordance with such Supplemental
Participation Agreement; (ii) the respective rights, limitations of rights,
obligations, duties and immunities thereunder of the Authority and the Company
shall thereafter be determined, exercised and enforced thereunder subject in all
respects to such modifications and amendments; and (iii) all of the terms and
conditions of any such Supplemental Participation Agreement shall be a part of
the terms and conditions thereof for any and all purposes.

                  SECTION 14.09. AMENDING AND SUPPLEMENTING THE REMARKETING
AGREEMENT, AUCTION AGENCY AGREEMENT, BROKER-DEALER AGREEMENTS OR BOND PURCHASE
TRUST AGREEMENT. Amendments of or supplements to the Remarketing Agreement, the
Auction Agency Agreement, any Broker-Dealer Agreement or the Bond Purchase Trust
Agreement shall be made only in accordance with the terms thereof.

                  SECTION 14.10. SUPPLEMENTAL PARTICIPATION AGREEMENT AFFECTING
SUPPORT FACILITY PROVIDER. No Supplemental Participation Agreement or amendments
to the Participation Agreement affecting the rights or obligations of the
Support Facility Issuer which take effect while any Support Faciliyt is in
effect may be entered into by the Authority or be consented to by the Holders
without written consent of each Support Facility Issuer.


                                      XIV-6



                                   ARTICLE XV

                     DEFEASANCE; MONEYS HELD FOR PAYMENT OF
                                 DEFEASED BONDS

                  SECTION 15.01. DISCHARGE OF LIENS AND PLEDGES; BONDS NO LONGER
DEEMED TO BE OUTSTANDING HEREUNDER. Bonds purchased pursuant to Section 5.03,
5.04, 5.08 or 5.09 shall continue to be Outstanding hereunder until such Bonds
shall be cancelled in accordance with Section 5.15 or paid at maturity or
redeemed pursuant to Article V or otherwise defeased. The obligations of the
Authority under this Indenture and the liens, pledges, charges, trusts,
covenants and agreements of the Authority, herein made or provided for, shall
be, subject to the terms of Section 15.02, fully discharged and satisfied as to
the Bonds or portion thereof and the Bonds shall no longer be deemed to be
Outstanding hereunder:

                  (a) when the Bonds shall have been cancelled, or shall have
         been surrendered for cancellation and are subject to cancellation, or
         shall have been redeemed by the Trustee from monies held by it under
         this Indenture; or

                  (b) if the Bonds have not been cancelled or so surrendered for
         cancellation or subject to cancellation, or so redeemed, when (1)
         payment of the principal of and premium, if any, on the Bonds, plus
         interest on such principal to the due date thereof (whether such due
         date be by reason of maturity or upon redemption or prepayment, or
         otherwise) and of any Purchase Price which is or may become due on such
         Bonds either (i) shall have been made or caused to be made in
         accordance with the terms thereof, or (ii) shall have been provided for
         by irrevocably depositing with the Trustee in trust, and irrevocably
         appropriating and setting aside exclusively for such payments (A)
         monies sufficient to make such payment, or (B) Governmental Obligations
         maturing as to principal and interest in such amounts and at such times
         as will insure the availability of sufficient and timely monies to make
         such payments when due, or (C) a combination of both such monies and
         Governmental Obligations, whichever the Authority deems to be in its
         best interest, (2) there shall have been delivered to the Trustee (x) a
         letter addressed to the Trustee from a nationally recognized firm of
         independent public accountants verifying the mathematical accuracy of
         the sufficiency of the deposit made pursuant to (1)(ii) above, (y) an
         opinion of Bond Counsel to the effect that upon the provision of
         payment on the Bonds as described in (1)(ii) above, the Bonds are no
         longer deemed to be Outstanding under the Indenture and (z) in the case
         of Bonds bearing interest at a Daily Rate, a Weekly Rate, an Auction
         Rate, a Monthly Rate and a Semi-annual Rate, written confirmation from
         S&P, if the Bonds are then rated by S&P, to the effect that the deposit
         made pursuant to (1)(ii) above will not, by itself, result in a
         reduction or withdrawal of its short-term or long-term rating of the
         Bonds below the rating category of S&P then in effect with respect to
         the Bonds, and (3) all necessary and proper fees, compensation and
         expenses of the Trustee pertaining to the Bonds or portion thereof with
         respect to which such deposit is made, shall have been paid or the
         payment thereof provided to the satisfaction of the Trustee.

                  At such time as the Bonds shall be deemed to be no longer
Outstanding hereunder, as aforesaid, such Bonds shall cease to accrue interest
from the due date thereof (whether such due


                                      XV-1




date occurs by reason of maturity, or upon redemption or prepayment or
otherwise) and, except for the purposes of any such payment from such monies or
Governmental Obligations and except, in the case of Auction Rate Bonds, to the
extent provided in the definition of Outstanding in Article I shall no longer be
secured by or entitled to the benefits of this Indenture.

                  Any such monies so deposited with the Trustee as provided in
this Section may at the written direction of the Company also be invested and
reinvested in Governmental Obligations, maturing in the amounts and times as
hereinbefore set forth, and all income from all Governmental Obligations in the
hands of the Trustee pursuant to this Section which is not required for the
payment of the Bonds and interest thereon with respect to which such monies
shall have been so deposited shall be paid to the Company or if any Bonds are
then Outstanding, be deposited in the Bond Fund and credited to the Principal
Account as and when realized and collected, for use and application as are other
monies credited to such Account.

                  Anything in Article XV to the contrary notwithstanding, if
monies or Governmental Obligations have been deposited or set aside with the
Trustee pursuant to this Section for the payment of the Bonds, the Bonds shall
be deemed to have been paid in full. No amendment to the provisions of this
Article shall be made without the consent of the Holders of the Bonds affected
thereby.

                  The Trustee shall promptly surrender any Support Facility (if
appropriate for the type of instrument or instruments then serving as Support
Facility) to the issuer of such Support Facility for cancellation or shall
otherwise take appropriate action to terminate the Support Facility following
any such defeasance.

                  SECTION 15.02. RELEASE OF INDENTURE, TERMINATION OF RIGHT,
TITLE AND INTEREST OF TRUSTEE. When the Bonds shall be deemed to be paid in
accordance with the provisions of Section 15.01, then and in the case all right,
title and interest of the Trustee under this Indenture shall thereupon cease,
determine and become void, and the Trustee in such case shall release this
Indenture, shall execute such documents to evidence such release as may be
reasonably required by the Authority and furnish the Authority with the same,
and shall turn over to the Company any surplus monies and balances remaining in
any of the Funds and Accounts created in or held under this Indenture, other
than monies and Governmental Obligations held by it pursuant to Section 15.01 or
the provisions of Section 15.03 for the redemption, payment or prepayment of the
Bonds; otherwise, this Indenture shall be, continue and remain in full force and
effect.

                  Notwithstanding the satisfaction and discharge of this
Indenture, the rights of the Trustee and the Registrar and Paying Agent under
Sections 11.02, 11.06 and 11.17 shall survive defeasance of the Bonds hereunder.

                  SECTION 15.03. BONDS NOT PRESENTED FOR PAYMENT WHEN DUE;
MONIES HELD FOR THE BONDS AFTER DUE DATE OF BONDS. Subject to the provisions of
the next sentence of this paragraph, if the Bonds shall not be presented for
payment when the principal thereof shall become due, whether at maturity or at
the date fixed for the redemption thereof, or otherwise, and if monies or
Governmental Obligations shall at such due date be held by the Trustee in trust
for that purpose sufficient and available to pay the principal of and premium,
if any, on the Bonds, together with all


                                      XV-2




interest due on such principal to the due date thereof or to the date fixed for
redemption thereof, all liability of the Authority and the Company for such
payment shall forthwith cease, determine and be completely discharged, and
thereupon it shall be the duty of the Trustee to hold said monies or
Governmental Obligations without liability to the Holders for interest thereon,
in trust for the benefit of the Holders, which thereafter shall be restricted
exclusively to said monies or Governmental Obligations for any claim of whatever
nature on its part on or with respect to the Bonds, including for any claim for
the payment thereof. Notwithstanding anything to the contrary in Section 9.04,
any monies or Governmental Obligations held by the Trustee for the Holders after
the principal of and premium, if any, and interest on the Bonds or any portion
thereof with respect to which such monies or Governmental Obligations have been
so set aside has become due and payable (whether at maturity or upon redemption
or prepayment or otherwise) shall be either held uninvested as cash or at the
written direction of the Company invested and reinvested in Governmental
Obligations which mature on the next Business Day. Any such monies or
Governmental Obligations held by the Trustee for the Holders after the principal
of and premium, if any, and interest on the Bonds or any portion thereof with
respect to which such monies or Governmental Obligations have been so set aside
has become due and payable (whether at maturity or upon redemption or prepayment
or otherwise) shall be deemed abandoned property when such monies or
Governmental Obligations shall have remained unpaid or undelivered to the Holder
or Holders entitled thereto for three years from the date the principal of and
premium, if any, and interest on the Bonds or any portion thereof has become due
and payable and shall be subject to the laws of the State of New York relating
to disposition of unclaimed property.


                                      XV-3



                                   ARTICLE XVI

                                  FORM OF BONDS
                    AND ENDORSEMENT AND ASSIGNMENT PROVISIONS

                  SECTION 16.01. FORM OF BONDS AND ENDORSEMENT AND ASSIGNMENT
PROVISIONS. The form of Bond, the form of the certificate of authentication
thereof, the form of endorsement to appear thereon and the form of assignment
thereof shall be substantially in the form set forth in Appendix A hereto.


                                      XVI-1



                                  ARTICLE XVII

                                  MISCELLANEOUS

                  SECTION 17.01. BENEFITS OF INDENTURE LIMITED TO AUTHORITY,
COMPANY, TRUSTEE, REGISTRAR AND PAYING AGENT, SUPPORT FACILITY ISSUER, AND
AUCTION AGENT AND HOLDERS OF THE BONDS. With the exception of rights or benefits
herein expressly conferred, nothing expressed or mentioned in or to be implied
from this Indenture or the Bonds is intended or should be construed to confer
upon or give to any person other than the Authority, the Company, the Trustee,
the Registrar and Paying Agent, the Support Facility Issuer, the Auction Agent
and the Holders of the Bonds any legal or equitable right, remedy or claim under
or by reason of or in respect to this Indenture or any covenant, condition,
stipulation, promise, agreement or provision herein contained. Unless otherwise
expressly set forth herein, this Indenture and all of the covenants, conditions,
stipulations, promises, agreements and provisions hereof are intended to be and
shall be for and inure to the sole and exclusive benefit of the Authority, the
Company, the Trustee, the Registrar and Paying Agent, the Support Facility
Issuer, the Auction Agent and the Holders of the Bonds as herein and therein
provided.

                  SECTION 17.02. INDENTURE A CONTRACT; INDENTURE BINDING UPON
SUCCESSORS OR ASSIGNS OF THE AUTHORITY. In consideration of the acceptance of
the Bonds by any person who shall hold the same from time to time, each of the
obligations, duties, limitations and restraints imposed by this Indenture upon
the Authority or any employee thereof shall be deemed to be a covenant between
the Authority and every Holder and this Indenture and every provision and
covenant hereof shall be a contract by the Authority with the Holders of the
Bonds issued hereunder to secure the full and final payment of the principal of,
premium, if any, of and the interest on the Bonds executed and delivered
hereunder. The provisions of the Act shall be a contract by the Authority with
the Holders and the duties of the Authority and any employee thereof under the
Act shall be enforceable by the Holders. This Indenture shall be enforceable by
the Holders, by mandamus or other appropriate suit, action or proceeding in any
court of competent jurisdiction. The covenants and agreements herein set forth
to be performed by the Authority and any employee thereof, shall be for the
benefit, security and protection of the Holders. All the terms, provisions,
conditions, covenants, warranties and agreements contained in this Indenture
shall be binding upon the assigns of the Authority, and shall inure to the
benefit of the Trustee, its successors or substitutes in trust and assigns, and
the Holders.

                  SECTION 17.03. NOTICE TO HOLDERS OF BONDS. Except as is
otherwise provided in this Indenture, any provision for the mailing of a notice
or other paper to the Holders shall be fully complied with if it is mailed
postage prepaid, to the Holder of the Bonds at such Holder's address appearing
upon the books of registry kept pursuant to Article VII.

                  SECTION 17.04. WAIVER OF NOTICE. Whenever in this Indenture
the giving of notice by mail, publication, or otherwise is required, the giving
of such notice may be waived by the person entitled to receive such notice, and
in any case the giving or receipt of such notice shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.

                  SECTION 17.05. EFFECT OF SATURDAYS, SUNDAYS AND NON-BUSINESS
DAYS. Except as otherwise specifically provided herein, whenever this Indenture
requires any action to be taken


                                     XVII-1




on a Saturday, Sunday or other day which is not a Business Day, such action
shall be taken on the first Business Day occurring thereafter. Except as
otherwise specifically provided herein, whenever in this Indenture the time
within which any action is required to be taken or within which any right will
lapse or expire shall terminate on a Saturday, Sunday or other day which is not
a Business Day, such time shall continue to run until midnight on the next
succeeding Business Day.

                  SECTION 17.06. PARTIAL INVALIDITY. If any one or more of the
covenants or agreements or portions thereof provided in this Indenture on the
part of the Authority or the Trustee to be performed should be determined by a
court of competent jurisdiction to be contrary to law, then such covenant or
covenants, or such agreement or agreements, or such portions thereof, shall be
deemed severable from the remaining covenants and agreements or portions thereof
provided in this Indenture and the invalidity thereof shall in no way affect the
validity of the other provisions of this Indenture or of the Bonds, but the
Holders shall retain all the rights and benefits accorded to them hereunder and
under any applicable provisions of law.

                  If any provisions of this Indenture shall be held or deemed to
be or shall, in fact, be inoperative or unenforceable or invalid in any
particular case in any jurisdiction or jurisdictions or in all jurisdictions, or
in all cases because it conflicts with any constitution or statute or rule of
public policy, or for any other reason, such circumstances shall not have the
effect of rendering the provision in question inoperative or unenforceable or
invalid in any other case or circumstance, or of rendering any other provision
or provisions herein contained inoperative or unenforceable or invalid to any
extent whatsoever.

                  SECTION 17.07. LAW AND PLACE OF ENFORCEMENT OF INDENTURE. THIS
INDENTURE SHALL BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK AND ALL SUITS AND ACTIONS ARISING OUT OF THIS INDENTURE SHALL
BE INSTITUTED IN A COURT OF COMPETENT JURISDICTION IN THE STATE OF NEW YORK.

                  SECTION 17.08. REQUESTS, APPROVALS AND DIRECTIONS OF
AUTHORITY. Whenever in this Indenture a request, approval, direction or other
action is required of the Authority, such request, approval, direction or other
action shall be in the form of and evidenced by a certificate of an Authorized
Officer of the Authority unless otherwise provided herein.

                  SECTION 17.09. NOTICES, DEMANDS; REQUESTS. Except as otherwise
set forth herein, all notices, demands, directions and requests to be given to
or made hereunder by the Company, the Authority, the Trustee, the Remarketing
Agent, the Auction Agent and the Registrar and Paying Agent shall be given or
made in writing and shall be deemed to be properly given or made if sent by
first class United States mail, postage prepaid, addressed as follows:


(a)  As to the Company                 4 Irving Place
                                       New York, New York 10003
                                       Attention: Secretary

(b)  As to the Authority               Corporate Plaza West
                                       286 Washington Avenue Extension
                                       Albany, New York 12203

                                     XVII-2




                                       Attention: President

(c)   As to the Trustee                101 Barclay Street - 8W
                                       New York, New York 10286
                                       Attention: Corporate Trust Trustee
                                                  Administration

(d)   As to the Auction Agent          at the address specified in the
                                       Auction Agency Agreement

(e)   As to the Remarketing Agents     at the address specified in the
                                       applicable
                                       Remarketing Agreement

(f)   As to the Registrar              101 Barclay Street - 8W
        and Paying Agent               New York, New York 10286
                                       Attention: Corporate Trust Trustee
                                                  Administration

                  Any such notice, demand, direction or request may also be
transmitted to the appropriate above-mentioned party by telegram, telecopy,
telex or similar means and shall be deemed to be properly given or made at the
time of such transmission if, and only if, such transmission of notice shall be
in writing and sent as specified above.

                  Any notice, demand, direction or request given or transmitted
to the Trustee or the Authority shall be effective only upon receipt.

                  Any of such addresses may be changed at any time upon written
notice of such change sent by first-class United States mail, postage prepaid,
to the other parties by the party affecting the change.

                  If the Bonds shall be rated by Moody's, the Trustee shall
furnish to Moody's at 99 Church Street, New York, New York, Attention: Corporate
Department Structured Finance Group or such other office as Moody's may
designate to the Trustee, if the Bonds shall be rated by S&P, the Trustee shall
furnish to S&P at 55 Water Street, New York, New York 10041, Attention: Letter
of Credit Surveillance Group, and if the Bonds shall be rated by Fitch, the
Trustee shall furnish to Fitch, Inc. at One State Street Plaza, New York, New
York 10004, Attention: Municipal Structured Finance Group (i) a copy of each
amendment to the Indenture, Participation Agreement, Bond Purchase Trust
Agreement, and each Support Facility of which it has knowledge, (ii) notice of
the termination, extension or expiration of any Support Facility, (iii) notice
of the payment of all the Bonds (iv) notice of a Change in the Interest Rate
Mode, and (v) notice of any successor Trustee, Registrar and Paying Agent or
Remarketing Agent; provided, however, that failure by the Trustee to so notify
Moody's, S&P or Fitch shall not result in any liability on the part of the
Trustee or affect the validity of such documents or actions.

                  SECTION 17.10. EFFECT OF ARTICLE AND SECTION HEADINGS AND
TABLE OF CONTENTS. The heading or titles of the several Articles and Sections
hereof, and any table of contents appended hereto or to copies hereof, shall be
solely for convenience of reference and shall not affect the meaning,
construction, interpretation or effect of this Indenture.


                                     XVII-3




                  SECTION 17.11. INDENTURE MAY BE EXECUTED IN COUNTERPARTS;
EFFECTIVENESS OF INDENTURE. This Indenture may be simultaneously executed in
counterparts. Each such counterpart so executed shall be deemed to be an
original, and all together shall constitute but one and the same instrument.
This Indenture shall take effect immediately upon the execution and delivery
hereof. Notwithstanding the actual date hereof, for convenience and purposes of
reference this Indenture shall be dated as of November 1, 2001 and may be cited
and referred to as the "Indenture dated as of November 1 , 2001".

                  SECTION 17.12. LIABILITY OF AUTHORITY LIMITED TO REVENUES.
Notwithstanding anything in this Indenture or in the Bonds contained, the
Authority shall not be required to advance any monies derived from any source
other than the Revenues and other assets pledged under this Indenture for any of
the purposes in this Indenture mentioned, whether for the payment of the
principal or redemption price of or interest on the Bonds or for any other
purpose of this Indenture. Pursuant to Section 5.08 of the Participation
Agreement, the Company has agreed to indemnify and hold harmless the Authority
and the Trustee from all liability arising hereunder.

                  SECTION 17.13 WAIVER OF PERSONAL LIABILITY. No member,
officer, agent or employee of the Authority shall be individually or personally
liable for the payment of the principal of or premium, if any, or interest on
the Bonds or be subject to any personal liability or accountability by reason of
the issuance thereof; but nothing herein contained shall relieve any such
member, officer, agent or employee from the performance of any official duty
provided by law or by this Indenture.







                   [Signature Page of this Indenture Follows]


                                     XVII-4




                  IN WITNESS WHEREOF, the Authority has caused this Indenture to
be executed by its President, Vice President or Treasurer and its corporate seal
to be hereunto affixed and attested by its Secretary, and the Trustee has caused
this Indenture to be executed by its authorized officer, all as of the date
first above written.

                                            NEW YORK STATE ENERGY RESEARCH
                                              AND DEVELOPMENT AUTHORITY

                                            By
                                              ----------------------------------
                                                              President
(SEAL)

Attest:



- ---------------------------------------
                  Secretary

                                                     THE BANK OF NEW YORK
                                                        as Trustee,



                                                     By
                                                       -------------------------
















                          [Signature Page of Indenture]






                                                                  APPENDIX A


            [FORM OF BONDS OTHER THAN BONDS BEARING AN AUCTION RATE]

                       NEW YORK STATE ENERGY RESEARCH AND
                              DEVELOPMENT AUTHORITY
                     Facilities Revenue Bonds, Series 2001B
             (Consolidated Edison Company of New York, Inc. Project)
                        (Subseries 2001[B-1, B-2 or B-3])

NO. B[-1, -2 OR -3]R-                                                   $

INTEREST RATE
OR INTEREST RATE
MODE ON DATE OF           MATURITY               ORIGINAL
AUTHENTICATION              DATE                ISSUE DATE             CUSIP
- --------------            --------              ----------             -----
                          October 1, 2036       November 1, 2001

REGISTERED OWNER:

PRINCIPAL SUM:


                  NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY (the
"Authority"), a body corporate and politic, constituting a public benefit
corporation, organized and existing under and by virtue of the laws of the State
of New York, for value received, hereby promises to pay, but solely from the
revenues, income and other monies hereinafter specified and not otherwise, to
the registered owner named above or registered assigns, the principal amount
specified above on the maturity date specified above (subject to the right of
prior redemption hereinafter described), upon presentation and surrender of this
Bond, and to pay interest on such principal amount, but solely from such
revenues, income and other monies hereinafter specified and not otherwise, from
the date of authentication hereof, or if such date shall not be an Interest
Payment Date (as hereinafter defined) from the next preceding Interest Payment
Date or, if the date of authentication is after the Record Date next preceding
the next succeeding Interest Payment Date, from the next succeeding Interest
Payment Date until the payment of such principal amount in full, at the rate of
interest per annum specified above, such interest being payable on each Interest
Payment Date in each year, by check mailed to the registered owner hereof at his
or her address as it appears on the registration books kept by the Registrar and
Paying Agent pursuant to the Indenture hereinafter mentioned; provided, that (i)
while the Securities Depository (as defined in the Indenture) is the registered
owner of the Bonds, all payments of principal of and premium, if any, and
interest on the Bonds shall be paid to the Securities Depository by wire
transfer, (ii) prior to and including any Fixed Rate Conversion Date, interest
on the Bonds shall be payable,


                                    App. A-1




at the option of any registered owner of at least one million dollars
($1,000,000) in aggregate principal amount of the Bonds, by wire transfer upon
written notice received by the Registrar and Paying Agent from such registered
owner at least five days prior to the Record Date, containing the wire transfer
address (which shall be in the continental United States) to which such
registered owner wishes to have such wire directed, and (iii) during a
Commercial Paper Rate Period, interest on this Bond shall be payable only upon
presentation and surrender hereof to the Registrar and Paying Agent upon
purchase thereof pursuant to the Indenture, and if such presentation and
surrender is made by 2:00 p.m. (New York City time) such payment shall be by
wire transfer. If interest is in default it shall be paid to the person in whose
name this Bond is registered as of a special record date as set forth in the
Indenture. Except as set forth above, principal of and premium, if any, on this
Bond are payable at the principal office of The Bank of New York, in New York,
New York, as Registrar and Paying Agent of the Bonds. Principal of and premium,
if any, and interest on this Bond are payable in lawful money of the United
States of America.

                  This Bond is one of a duly authorized issue of Bonds of the
Authority designated as "Facilities Revenue Bonds, Series 2001B (Consolidated
Edison Company of New York, Inc. Project"), issued in the aggregate principal
amount of Ninety-Eight Million Dollars ($98,000,000), referred to herein as the
"Bonds." In order to distinguish between Bonds which are subject to different
interest rate determination methods and other features and to distinguish the
portion of the Bonds to be offered or remarketed by any particular underwriter
or Remarketing Agent, the Bonds may be designated and redesignated from time to
time by the Authority in such a way as to identify one or more subseries of the
Bonds pursuant to Article II of the Indenture. Pursuant to the Indenture, the
Series 2001B Bonds are being issued in three subseries, designated Series
2001B-1, Series 2001B-2 and Series 2001B-3, in principal amounts of $33,000,000,
$33,000,000 and $32,000,000, respectively. This Bond and the issue of which it
is one are authorized to be issued and are issued under, pursuant to and in full
compliance with the Constitution and statutes of the State of New York,
including particularly the New York State Energy Research and Development
Authority Act, Title 9 of Article 8 of the Public Authorities Law of the State
of New York, as amended (the "Act"), a resolution of the Authority adopted on
September 24, 2001 and a Trust Indenture dated as of November 1, 2001 between
the Authority and The Bank of New York, as Trustee (herein, as it may be amended
from time to time, called the "Indenture"). The Bonds are issued for the purpose
of refunding certain outstanding bonds of the Authority issued to finance the
acquisition, construction and installation of certain facilities of Consolidated
Edison Company of New York, Inc. (the "Company") used for the furnishing of
electric energy within the Company's service area (all of said facilities being
referred to herein as the "Project") pursuant to a Participation Agreement dated
as of November 1, 2001, between the Authority and the Company (hereinafter, as
it may be amended or supplemented from time to time, called the "Participation
Agreement"). Under the Participation Agreement and the promissory note delivered
to the Trustee (the "Note"), the Company is required to make payments to the
Trustee for deposit to the Bond Fund established pursuant to the Indenture in an
amount sufficient to pay principal of and premium, if any, and interest on the
Bonds when due. The Participation Agreement also imposes on the Company certain
obligations respecting the use and operation of the Project. A copy of the
Participation Agreement is on file at the principal office of the Trustee, and
reference is hereby directed to the Participation Agreement for the provisions
thereof.


                                    App. A-2




                  The terms and provisions pertaining to Bonds bearing an
Auction Rate are set forth in separate bond certificates.

                  A copy of the Indenture is on file at the principal office of
the Trustee. Reference is hereby directed to the Indenture for the provisions,
among others, with respect to the custody and application of the proceeds of the
Bonds; the collection and disposition of revenues; a description of the nature
and extent of the security for the Bonds, the funds and monies pledged for the
payment of the principal of and premium, if any, and interest on the Bonds; the
nature and extent and manner of enforcement of the pledge; the rights and
remedies of the registered owners of Bonds with respect thereto; the conditions
for and the permissible extent of alteration, modification and amendment of the
Indenture; the terms and conditions upon which this Bond and the issue of which
it is one are issued; the rights, duties and obligations of the Authority and
the Trustee thereunder; the terms and provisions upon which the liens, pledges,
charges, trusts and covenants made therein may be discharged at or prior to the
maturity, purchase or redemption of this issue and pursuant to which this Bond
thereafter will no longer be secured by the Indenture, or be deemed to be
outstanding thereunder, if sufficient monies or certain specified securities
shall have been deposited with the Trustee and held in trust solely for the
payment thereof; and for all other terms and provisions thereof. The provisions
of the Act and the Indenture shall be a contract with the registered owner of
this Bond, and the duties of the Authority and any employee thereof under said
Act and the Indenture shall be enforceable by the registered owner hereof, by
mandamus or other appropriate suit, action or proceeding, in any court of
competent jurisdiction in the State of New York.

                  The Bonds are not general obligations of the Authority, and
shall not constitute indebtedness of or a charge against the general credit of
the Authority or give rise to any pecuniary liability of the Authority. The
liability of the Authority under the Bonds shall be enforceable only to the
extent provided in the Indenture, and the Bonds shall be payable solely from the
monies and revenues received from the payments made by the Company pursuant to
the Participation Agreement and the Note, or the income from the temporary
investment thereof, and from amounts held under the Indenture including the
proceeds of a Credit Facility, if any, and not from any other fund or source.
Pursuant to the Indenture, the Authority has pledged and assigned to the Trustee
its right, title and interest (with certain exceptions) in and to the Note and
the Participation Agreement to secure the payment of the principal of and
premium, if any, and interest on the Bonds. The Bonds are and shall be secured
by a prior and paramount lien and charge on said monies and revenues. The Bonds
shall not be a debt of the State of New York, and the State of New York shall
not be liable thereon. The Bonds are payable solely from the monies and revenues
pledged under the Indenture to the payment thereof. Neither the Authority nor
the State of New York is obligated to provide for the payment of the Purchase
Price of tendered Bonds or payment of principal, premium, if any, or interest on
the Bonds.

                  This Bond shall not be entitled to any security, right or
benefit under the Indenture or become valid or obligatory for any purpose until
it shall have been authenticated by the Trustee by its execution of the
certificate of authentication endorsed hereon.

                  No covenant or agreement contained in this Bond or the
Indenture shall be deemed to be a covenant or agreement of any member, agent or
employee of the Authority in his or her individual capacity, and neither the
members of the Authority nor any officer thereof executing this


                                    App. A-3




Bond shall be liable personally on this Bond or be subject to any personal
liability or accountability by reason of the issuance of this Bond.

                  It is hereby certified, recited and declared that all acts,
conditions and things required by the Constitution and laws of the State of New
York and the Indenture to exist, to have happened and to have been performed
precedent to and in the issuance of this Bond and the issue of which this Bond
is a part, do exist, have happened and have been performed in due time, form and
manner as required by such Constitution, laws and the Indenture; that the amount
of this Bond and the issue of which this Bond is a part does not exceed any
constitutional or statutory limitations of indebtedness; and that provision has
been made for the payment of the principal of and premium, if any, and interest
on this Bond and the series of which it is a part as provided in the Indenture.

                  EXCEPT AS OTHERWISE PROVIDED IN SECTION 2.03 OF THE INDENTURE,
THIS GLOBAL BOND MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO A NOMINEE
OF THE SECURITIES DEPOSITORY OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A
NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY.

                  The Bonds will bear interest at one of the following interest
rates: a "Commercial Paper Rate", an "Auction Rate", a "Daily Rate," a "Weekly
Rate," a "Monthly Rate," a "Semi- annual Rate" or a "Term Rate" (each of the
foregoing referred to as an "Adjustable Rate") or a "Fixed Rate". Each
Adjustable Rate other than an Auction Rate shall be equal to the lesser of (i)
the Maximum Allowed Rate (as defined in the Indenture), (ii) 110% of the rate
index for such rate on the applicable determination date and (iii) an adjustable
rate which, with respect to the first day of each Calculation Period (as herein
defined) applicable to such Adjustable Rate, shall be equal to the rate or rates
of interest per annum established and certified to the Trustee by the
Remarketing Agent (as herein defined) no later than 12:00 noon (New York City
time) on and as of the Determination Date (as defined in the Indenture) as the
minimum rate of interest per annum which, in the opinion of the Remarketing
Agent, would be necessary on and as of the date of such certification to
remarket Bonds in a secondary market transaction at a price equal to the
principal amount thereof plus accrued interest thereon, if any, except as
otherwise provided in the Indenture. Anything in the Indenture to the contrary
notwithstanding, in no event shall the interest rate borne by any Bond exceed
the maximum rate allowable by applicable law. The term "Business Day" means any
day other than a Saturday, Sunday or other day on which the New York Stock
Exchange or banks are authorized or obligated by law or executive order to close
in New York, New York, or any city in which is located the principal corporate
trust office of the Trustee or the office of an issuer of a Support Facility (as
hereinafter defined), at which demands for a draw on, or borrowing or payment
under, the Support Facility will be made.

                  During any Commercial Paper Rate Period, at or prior to 12:00
noon (New York City time) on each Determination Date, the Remarketing Agent
shall establish Calculation Periods and related Commercial Paper Rates. In
determining Calculation Periods, the Remarketing Agent shall take into account
certain factors set forth in the Indenture. The Remarketing Agent shall select
the Calculation Periods and the applicable Commercial Paper Rates that, together
with all other Calculation Periods and related Commercial Paper Rates, in the
sole judgment of the Remarketing Agent, will result in the lowest overall
borrowing cost on the Bonds or are otherwise in the best financial interests of
the Company, as determined in consultation with the Company. Any

                                    App. A-4



Calculation Period established under the Indenture may not extend beyond the
second Business Day next preceding the expiration date of the Support Facility
or the day prior to the maturity date of the Bonds. The Authority, at the
request of the Company, may place limitations upon the establishment of the
Calculation Periods in accordance with the Indenture.

                  The term "Calculation Period" means (a) during any Commercial
Paper Rate Period, following a Change in the Interest Rate Mode to a Commercial
Paper Rate Period, the period from and including the effective date of the
Change in the Interest Rate Mode to a Commercial Paper Rate Period to but not
including any day not more than 270 days thereafter which is a day immediately
preceding a Business Day established by the Remarketing Agent pursuant to the
Indenture and, thereafter, any Calculation Period established by the Remarketing
Agent pursuant to the Indenture which shall end on a day not later than 270 days
from the commencement thereof; (b) during any Daily Rate Period, the period from
and including a Business Day to but not including the next succeeding Business
Day; (c) during any Weekly Rate Period, following a Change in the Interest Rate
Mode to a Weekly Rate, the period from and including the effective date of the
Change in the Interest Rate Mode to and including the following Tuesday, and,
thereafter, the period from and including Wednesday of each week to and
including the following Tuesday; (d) during any Monthly Rate Period, following a
Change in the Interest Rate Mode to a Monthly Rate, the period from and
including the effective date of the Change in the Interest Rate Mode to but
excluding the first Business Day of the following month, and thereafter, each
period from and including the first Business Day of the month to but excluding
the first Business Day of the following month; (e) during any Semi-annual Rate
Period, following a Change in the Interest Rate Mode to a Semi-annual Rate, the
period from and including the effective date of the Change in the Interest Rate
Mode to but excluding the next succeeding Interest Payment Date and, thereafter,
each period from and including the day following the end of the last Calculation
Period to but excluding the next succeeding Interest Payment Date; (f) during
any Term Rate Period, any period of not less than 365 days from and including a
Business Day to and including any day (established by the Remarketing Agent
pursuant to the Indenture) not later than the day prior to the Stated Maturity;
and (g) during any Fixed Rate Period following a Change in the Interest Rate
Mode to a Fixed Rate, the period from and including the effective date of the
Change in the Interest Rate Mode through the day immediately preceding the
earlier of (x) the effective date of another Change in the Interest Rate Mode,
or (y) the Stated Maturity.

                  The term "Interest Payment Date" means (a) during each
Commercial Paper Rate Period, the Business Day immediately succeeding the last
day of any Calculation Period; (b) during each Daily Rate Period, the first
Business Day of each month thereof; (c) during each Weekly Rate Period, on the
first Business Day of each month thereof; (d) during each Monthly Rate Period,
the first Business Day of each month thereof; (e) during each Semi-annual Rate
Period, (i) the first Business Day of the sixth calendar month following the
month in which the first day of such Semi-annual Rate Period occurred; (ii) each
anniversary of the date so determined, and (iii) each anniversary of the first
day of the first month of such Semi-annual Rate Period; (f) during each Term
Rate Period, (i) the first Business Day of the sixth calendar month following
the month in which the first day of such Term Rate Period occurred; (ii) each
anniversary of the date so determined, (iii) each anniversary of the first day
of the first month of such Term Rate Period, and (iv) the Business Day
immediately succeeding such Term Rate Period; (g) the April 1 or October 1 next
succeeding a Fixed Rate Conversion Date and each April 1 and October 1
thereafter; provided, however, that

                                    App. A-5



if the April 1 or October 1 next succeeding a Fixed Rate Conversion Date occurs
less than twenty-one (21) days after such Fixed Rate Conversion Date, the first
Interest Payment Date shall be the second such date following such Fixed Rate
Conversion Date; (h) a Fixed Rate Conversion Date; (i) any day on which Bonds
are subject to mandatory tender for purchase or redemption in whole pursuant to
the Indenture; and (j) the Stated Maturity; provided, however, that if any such
date determined in any of the foregoing clauses is not a Business Day, the
Interest Payment Date shall be the next succeeding day which is a Business Day.

                  While the Bonds bear interest at a Commercial Paper Rate, a
Daily Rate, a Weekly Rate, a Monthly Rate or a Semi-annual Rate, interest
accrued on such Bonds shall be computed on the basis of a 365 or 366-day year,
as applicable, for the number of days actually elapsed. While the Bonds bear
interest at a Term Rate or a Fixed Rate, interest accrued on such Bonds shall be
computed on the basis of a 360-day year, consisting of twelve (12) thirty (30)
day months.

                  As used herein, the term "Record Date" means (a) with respect
to each Interest Payment Date during a Commercial Paper Rate Period, a Daily
Rate Period, a Weekly Rate Period or a Monthly Rate Period, the Business Day
next preceding such Interest Payment Date; (b) with respect to each Interest
Payment Date during a Semi-annual Rate Period or a Term Rate Period, the
fifteenth day of the calendar month next preceding such Interest Payment Date;
and (c) with respect to each Interest Payment Date during a Fixed Rate Period,
the fifteenth day of the month next preceding such Interest Payment Date, or, if
such day is not a Business Day, the next preceding Business Day.

                  As used herein, the term "Remarketing Agent" shall mean
Salomon Smith Barney Inc. with respect to the Series 2001B-1 Bonds, Morgan
Stanley & Co. Incorporated with respect to the Series 2001B-2 Bonds, and J.P.
Morgan Securities Inc. with respect to the Series 2001B-3 Bonds or their
respective successors or assigns or such other Remarketing Agents or their
respective successors or assigns as shall be appointed from time to time
pursuant to the Indenture and the Remarketing Agreement (as defined in the
Indenture).

                  The Bonds shall cease to bear interest at the Adjustable Rate
or a Fixed Rate, as the case may be, then borne by the Bonds and shall bear
interest at such different Adjustable Rate or Fixed Rate as shall be specified
by the Authority, at the request of the Company.

                  If any condition to any Change in the Interest Rate Mode is
not met on any date, then the Bonds shall continue to bear interest at the
Adjustable Rate or Fixed Rate, as the case may be, then borne by the Bonds and
be subject to all provisions of the Indenture applicable thereto while the Bonds
bear interest at such Adjustable Rate or Fixed Rate, as the case may be.
Notwithstanding the failure to meet such conditions, the Bonds shall remain
subject to mandatory tender for purchase in accordance with the Indenture.

                  FIXED RATE. On a Fixed Rate Conversion Date, the Bonds shall
cease to bear interest at the Adjustable Rate then borne by the Bonds and shall
bear interest at a Fixed Rate upon the election by the Authority, at the request
of the Company, to exercise its Option to Convert (as defined in the Indenture).
Fixed Rate means the lesser of (i) 18%, (ii) 110% of the Fixed Rate Index on
such date and (iii) the rate of interest per annum established and certified to
the Trustee by the

                                    App. A-6




Remarketing Agent no later than 12:00 noon (New York City time) on and as of
such date as the minimum rate of interest per annum which, in the opinion of the
Remarketing Agent, would be necessary on and as of such date to remarket the
Bonds in a secondary market transaction at a price equal to 100% of the
outstanding principal amount thereof. A Fixed Rate shall be established in
accordance with the terms and subject to the conditions set forth in the
Indenture. Anything in the Indenture to the contrary notwithstanding, in no
event shall the interest rate borne by any Bond exceed the maximum rate
allowable by applicable law.

REDEMPTION PROVISIONS

                  OPTIONAL REDEMPTION. The Bonds shall be subject to redemption
at the option of the Authority upon the request of the Company:

                  (a)      During any Commercial Paper Rate Period, the Bonds
                           shall be subject to redemption on each Interest
                           Payment Date, as a whole or in part, at the principal
                           amount thereof.

                  (b)      During any Daily Rate Period, the Bonds shall be
                           subject to redemption on any Business Day, as a whole
                           or in part, at the principal amount thereof, plus
                           accrued and unpaid interest to the date fixed for
                           redemption, if any.

                  (c)      During any Weekly Rate Period, the Bonds shall be
                           subject to redemption on any Business Day, as a whole
                           or in part, at the principal amount thereof, plus
                           accrued and unpaid interest to the date fixed for
                           redemption, if any.

                  (d)      During any Monthly Rate Period, the Bonds shall be
                           subject to redemption on each Interest Payment Date,
                           as a whole or in part, at the principal amount
                           thereof.

                  (e)      During any Semi-annual Rate Period, the Bonds shall
                           be subject to redemption on each Interest Payment
                           Date, as a whole or in part, at the principal amount
                           thereof.

                  (f)      During any Term Rate Period or any Fixed Rate Period,
                           the Bonds shall be subject to  redemption in whole at
                           any  time  on  any  Business  Day or in  part  on any
                           Interest  Payment Date as follows:  after the No-Call
                           Period  shown  below,  which shall begin on the first
                           day of the  Calculation  Period  applicable  to  such
                           Bonds or on a Fixed Rate Conversion Date, as the case
                           may be, at a redemption  price equal,  initially,  to
                           the principal amount thereof, plus a premium equal to
                           the percentage of the principal amount to
                           be redeemed shown in the Initial Premium column plus
                           accrued and unpaid interest if paid on a Business Day
                           other than an Interest Payment Date. The premium
                           percentage shall decline by the percentage shown in
                           the Reduction in Premium column on each anniversary
                           of the date on which such Bonds are first redeemable,
                           if the Calculation Period or period remaining to the
                           Stated Maturity after a Fixed Rate Conversion Date is
                           equal to or greater than five

                                    App. A-7



                           years, and on each Interest Payment Date if the
                           Calculation Period or period remaining to the Stated
                           Maturity after a Fixed Rate Conversion Date is less
                           than five years, until the Bonds shall be redeemable
                           without premium.


                               Calculation Period
                              or Period to Maturity
                              ---------------------


Equal to or       But Less      No-Call           Initial          Reduction
Greater Than        Than        Period            Premium          in Premium
- ------------      --------      -------           -------          ----------

18 Years          N/A           10 Years           2 %             1/2%
12 Years          18 Years       8 Years           1-1/2           1/2
 7 Years          12 Years       6 Years           1               1/2
 5 Years           7 Years       4 Years           1/2             1/2
 4 Years           5 Years       3 Years           1/2             1/2
 3 Years           4 Years       2 Years           1/2             1/2
 0 Years           3 Years      Not Callable

If upon establishment of a Term Rate Period or a Fixed Rate Period, as the case
may be, the Remarketing Agent certifies to the Trustee, Bond Counsel and the
Authority in writing that the foregoing schedule is not consistent with
then-prevailing market conditions, the Authority at the request of the Company
may revise the foregoing Initial Premium, Reductions in Premium and No-Call
Periods without the approval of the Holders to reflect then-prevailing market
conditions, upon receipt of an opinion of Bond Counsel to the effect that any
revisions pursuant to this paragraph, either by itself or in conjunction with
the establishment of a Calculation Period or a Fixed Rate, as the case may be,
are made in accordance with the Indenture, is permitted under the Act and will
not adversely affect the exclusion of interest on the Bonds from gross income
for federal income tax purposes.

                  Extraordinary Optional Redemption. During any Term Rate Period
or Fixed Rate Period, the Bonds are also subject to redemption prior to maturity
in whole at any time at the option of the Authority, exercised at the direction
of the Company, upon notice given as provided in the Indenture, at a redemption
price equal to the principal amount thereof, together with unpaid interest
accrued thereon to the date fixed for redemption, in any of the following
events:

                  (1) All or substantially all of the Project shall have been
                  damaged or destroyed or title to, or the temporary use of, all
                  or a substantial portion of the Project shall have been taken
                  under the exercise of the power of eminent domain by any
                  governmental authority, or person, firm or corporation acting
                  under governmental authority, as in each case renders the
                  Project unsatisfactory to the Company for its intended use;

                  (2) Unreasonable burdens or excessive liabilities shall have
                  been imposed upon the Authority or the Company with respect to
                  all or substantially all of the Project, including without
                  limitation the imposition of federal, state or other ad
                  valorem


                                    App. A-8



                  property, income or other taxes other than ad valorem
                  taxes in effect on the date of original issuance of the Bonds
                  levied upon privately owned property used for the same general
                  purpose as the Project; or

                  (3) Any court or regulatory or administrative body shall enter
                  or adopt, or fail to enter or adopt, a judgment, order,
                  approval, decree, rule or regulation, as a result of which the
                  Company elects to cease operation of all or substantially all
                  of the Project.

                  Special Tax Redemption Provisions. 1. During any Semi-annual
Rate Period, Term Rate Period, or Fixed Rate Period, the Bonds shall be subject
to mandatory redemption as a whole (provided, however, that the Bonds shall be
redeemed in part if the Company obtains an opinion of Bond Counsel to the effect
that, by redeeming such portion of the Bonds, the interest on the remaining
Bonds will not be included for Federal income tax purposes in the gross income
of any owner of the Bonds (other than an owner who is a "substantial user" of
the Project or a "related person" within the meaning of Section 147(a)(1) of the
Code)) at any time at a redemption price equal to 100% of the principal amount
thereof, together with unpaid interest accrued thereon to the redemption date,
if, in a published or private ruling of the Internal Revenue Service or in a
final, nonappealable judicial decision by a court of competent jurisdiction
(provided that the Company has been afforded the opportunity to participate at
its own expense in the proceeding resulting in such ruling or in the litigation
resulting in such decision, as the case may be), it is determined that, as a
result of a failure by the Company to observe any covenant, agreement or
representation in the Participation Agreement or the Tax Regulatory Agreement,
interest on the Bonds is included for Federal income tax purposes in the gross
income (as defined in Section 61 of the Code) of any owner of a Bond (other than
a "substantial user" of the Project or a "related person" within the meaning of
Section 147(a)(1) of the Code), and, in such event, the Bonds shall be subject
to such mandatory redemption not more than one hundred eighty (180) days after
receipt by the Trustee of notice of such published or private ruling or judicial
decision and a demand for redemption of the Bonds. The occurrence of an event
requiring the redemption of the Bonds under this paragraph does not constitute
an event of default under any Note or under the Indenture and the sole
obligation in such event shall be for the Company to prepay the Note in an
amount sufficient to redeem the Bonds to the extent required by this paragraph.

                  2. During any Semi-annual Rate Period, Term Rate Period, or
Fixed Rate Period, the Bonds may be redeemed in whole or in part at any time at
a redemption price equal to 100% of the principal amount thereof, together with
accrued and unpaid interest thereon to the redemption date, if the Company has
determined, on the basis of the advice of a Bond Counsel that, as a result of
any action taken or expected to be taken, or failure to take action, a
reasonable risk exists that interest on the bonds will not be excludable from
gross income for federal tax purposes. Such conclusion and certification shall
be evidenced by delivery to the Trustee of a written certificate of an
Authorized Company Representative to the effect that the Company has reached
such conclusion, together with a copy of such advice of Bond Counsel. The
occurrence of an event permitting the redemption of the Bonds under this
paragraph does not constitute an event of default under any Note or under the
Indenture and the sole obligation in such event shall be for the Company to
prepay the Note in an amount sufficient to redeem the Bonds to the extent
required by this paragraph.


                                    App. A-9



                  3. During any Semi-annual Rate Period, Term Rate Period, or
Fixed Rate Period, the Bonds will also be subject to mandatory redemption at a
redemption price equal to one hundred three percent (103%) of the principal
amount thereof plus unpaid interest accrued thereon to the redemption date if
the Company reasonably concludes and certifies to the Trustee that the business,
properties, condition (financial or otherwise), operations or business prospects
of the Company will be materially and adversely affected unless the Company
takes or omits to take a specified action and that the Company has been advised
in writing by Bond Counsel that the specified action or omission would cause the
use of the Project to be such that, pursuant to Section 150 of the Code, the
Company would not be entitled to deduct the interest on the Bonds for purposes
of determining the Company's Federal taxable income, for a period of not less
than ninety (90) consecutive or nonconsecutive days during a twelve-month
period. Such conclusion and certification shall be evidenced by delivery to the
Trustee of a written certificate of an Authorized Company Representative to the
effect that the Company has reached such conclusion, together with a certified
copy of a resolution of the Board of Trustees of the Company authorizing such
certificate and a copy of such advice of Bond Counsel. In the event that the
Bonds become subject to redemption as provided in this paragraph, the Bonds will
be redeemed in whole unless redemption of a portion of the Bonds outstanding
would, in the opinion of Bond Counsel, have the result that interest payable on
the Bonds remaining outstanding after such redemption would be deductible for
purposes of determining the Federal taxable income of the Company, and, in such
event, the Bonds to be redeemed shall be selected (in the principal amount of
$5,000 or any integral multiple thereof) from time to time at random in such
manner as the Trustee shall determine in accordance with the Indenture, in such
amount as is necessary to accomplish that result. The occurrence of an event
requiring the redemption of the Bonds under this paragraph does not constitute
an event of default under any Note or under the Indenture and the sole
obligation in such event shall be for the Company to prepay the Note in an
amount sufficient to redeem the Bonds to the extent required by this paragraph.

                  MANDATORY REDEMPTION UPON STATE FURNISHING FUNDS. Pursuant to
Section 1864 of the Act, the State of New York may, upon furnishing sufficient
funds therefor, require the Authority to redeem prior to maturity, as a whole,
the Bonds on any Interest Payment Date not less than twenty years after the date
of initial delivery of the Bonds. Any such redemption shall be at a redemption
price equal to the optional redemption price, if any, applicable on such date or
if no such optional redemption price is applicable at a redemption price of 105%
of the principal amount thereof, in either case, together with accrued and
unpaid interest, if any, to the date fixed for redemption, all in the manner
provided in the Indenture.

                  PURCHASE UPON ELECTION OF HOLDER. During any Daily Rate Period
or Weekly Rate Period, any Bond or portion thereof in a principal amount equal
to an authorized denomination (so long as the principal amount not purchased is
an authorized denomination) shall be purchased on the demand of the registered
owner thereof, on any Business Day at the Purchase Price, upon delivery to the
Registrar and Paying Agent and the Remarketing Agent at their respective
principal offices, by the close of business on any Business Day of a Notice of
Election to Tender (the substance of which notice must also be given
telephonically to the Remarketing Agent prior to or simultaneously with such
notice). The date on which such Bond shall be purchased shall, at the request of
the registered owner, (i) if the Bond then bears interest at a Daily Rate, be
the date of delivery of such notice if such notice is delivered to the Registrar
and Paying Agent and the Remarketing Agent by 10:00 a.m. (New York City time) on
such date or may be any Business Day thereafter, and (ii) if the


                                    App. A-10




Bond then bears interest at a Weekly Rate, shall be a Business Day not prior to
the 7th day next succeeding the date of the delivery of such notice to the
Registrar and Paying Agent and the Remarketing Agent.

                  During any Monthly Rate Period or Semi-annual Rate Period,
this Bond or portion hereof in a principal amount equal to an authorized
denomination (so long as the principal amount not purchased is an authorized
denomination) shall be purchased on the demand of the registered owner thereof
on the first Business Day following each Calculation Period at a price equal to
the principal amount thereof, upon delivery to the Registrar and Paying Agent
and the Remarketing Agent, at their respective principal offices of a Notice of
Election to Tender (the substance of which notice must also be given
telephonically to the Remarketing Agent prior to or simultaneously with the
delivery of such notice) on or prior to a Business Day which is not less than 10
days, in the case of Bonds bearing interest at a Semi-annual Rate, or 7 days, in
the case of Bonds bearing interest at a Monthly Rate, prior to the proposed date
of purchase.

                  MANDATORY TENDER FOR PURCHASE UPON A CHANGE IN THE INTEREST
RATE MODE. Upon a Change in the Interest Rate Mode, the Bonds shall be subject
to mandatory tender for purchase in accordance with the Indenture on the
effective date of such Change in the Interest Rate Mode at the Purchase Price
(as defined in the Indenture).

                  MANDATORY TENDER FOR PURCHASE ON BUSINESS DAY FOLLOWING
CALCULATION PERIODS. Bonds bearing a Commercial Paper Rate or a Term Rate shall
be subject to mandatory tender for purchase in accordance with the Indenture on
the Business Day immediately following each Calculation Period at a price equal
to the Purchase Price.

                  MANDATORY TENDER FOR PURCHASE UPON EXPIRATION OF ANY SUPPORT
FACILITY OR UPON DELIVERY OF AN ALTERNATE SUPPORT FACILITY. On the second
Business Day next preceding the date of expiration of any Support Facility, the
Bonds shall be subject to mandatory purchase at the Purchase Price, unless on or
prior to the 35th day prior to such date of expiration the Company on behalf of
the Authority has furnished to the Trustee an agreement to extend such Support
Facility. The Bonds shall also be subject to mandatory purchase at the Purchase
Price on the date there is delivered an Alternate Support Facility meeting the
requirements of the Indenture. No tender for purchase of any Bonds shall be
required if a Fixed Rate Conversion Date shall have occurred with respect to
such Bonds or if such Bonds have been converted to bear interest at an Auction
Rate on a date prior to such date of expiration.

                  MANDATORY TENDER UPON OCCURRENCE OF ANY TERMINATING EVENT.
Upon the occurrence of any Terminating Event, the Bonds shall be subject to
mandatory tender for purchase on a Business Day selected by the Trustee;
provided, however, such mandatory tender shall not occur later than the 5th
day after the receipt of notice thereof by the Trustee at the Purchase Price.
The Bonds will not be subject to such mandatory tender for purchase during
any Auction Rate Period or any Fixed Rate Period.

                  Procedure for Redemption. In the event any of the Bonds are
called for redemption, the Trustee shall give notice, or cause the Registrar and
Paying Agent to give notice in the name of the Authority, of the redemption of
such Bonds in accordance with the Indenture.


                                    App. A-11




                  Notice of redemption shall be given by mailing a copy of the
redemption notice by first-class mail at least 30 days prior to the date fixed
for redemption to the registered owners of the Bonds to be redeemed at the
addresses shown on the registration books maintained by the Registrar and Paying
Agent; provided, however, that failure to give notice or any defects in such
notice shall not affect the proceedings for the redemption of the Bonds for
which notice has been given.

                  GENERAL PROVISIONS APPLICABLE TO MANDATORY AND OPTIONAL
TENDERS FOR PURCHASE OF BONDS. If interest has been paid on the Bonds, or an
amount sufficient to pay interest thereon has been deposited in the Bond Fund,
or an amount sufficient to pay accrued interest thereon, if any, has been set
aside in the Bond Purchase Fund under the Bond Purchase Trust Agreement, and the
Purchase Price shall be available under the Bond Purchase Fund for payment of
Bonds subject to tender for purchase in accordance with the Indenture and if a
registered owner fails to deliver or does not properly deliver the Bonds to the
Registrar and Paying Agent for which a Notice of Election to Tender has been
properly filed or which are subject to mandatory tender for purchase on the
purchase date therefor, such Bonds shall nevertheless be deemed tendered and
purchased on the date established for the purchase thereof, no interest shall
accrue on such Bonds from and after the date of purchase and such former
registered owners shall have no rights hereunder as the registered owners of
such Bonds, except the right to receive the Purchase Price of and accrued and
unpaid interest to the purchase date, if any, on such Bonds upon delivery
thereof to the Registrar and Paying Agent in accordance with the provisions
hereof. The purchaser of any such Bonds remarketed by the Remarketing Agent, or
the issuer of any Support Facility, to the extent Bonds are purchased with the
proceeds of a draw on, or borrowing or payment under, the Support Facility,
shall be treated as the registered owner thereof for all purposes of the
Indenture. The payment of Bonds tendered upon the election of the registered
owner shall be subject to delivery of such Bonds duly endorsed in blank for
transfer or accompanied by an instrument of transfer thereof in form
satisfactory to the Registrar and Paying Agent executed in blank for transfer at
the principal office of the Registrar and Paying Agent at or prior to 10:00 a.m.
(11:30 a.m. for Bonds bearing interest at the Weekly Rate and 12:00 noon, for
Bonds bearing interest at the Daily Rate) (New York City time), on a specified
purchase date. The Registrar and Paying Agent may refuse to make payment with
respect to any Bonds tendered for purchase pursuant to items (i)-(v) above not
endorsed in blank or for which an instrument of transfer satisfactory to the
Registrar and Paying Agent has not been provided.

                  The Purchase Price of Bonds subject to tender for purchase
pursuant to items (i)-(v) of the immediately preceding paragraph in an
aggregate principal amount of at least one million dollars ($1,000,000) shall
be payable in immediately available funds or by wire transfer upon written
notice from the registered owner thereof containing the wire transfer address
(which shall be in the continental United States) to which such registered
owner wishes to have such wire directed, if such written notice is received
by the Registrar and Paying Agent not less than five days prior to the
related purchase date.

                  The Bonds may be transferred or exchanged by the registered
owners thereof, in person or by his or her attorney duly authorized in writing,
at the principal office of the Registrar and Paying Agent but only in the
manner, subject to limitations and upon payment of the charges, if any, provided
in the Indenture and upon the surrender thereof to the Registrar and Paying
Agent for cancellation. Upon such transfer or exchange, a new Bond or Bonds of
authorized denominations and of like aggregate principal amount as the Bond
surrendered will be issued in exchange therefor.


                                    App. A-12




No transfer or exchange of Bonds shall be required to be made by the Registrar
and Paying Agent after a Record Date until the next succeeding Interest Payment
Date.

                  All terms used herein which are defined in the Indenture and
not otherwise defined herein shall have the respective meanings set forth in the
Indenture.

                  This Bond shall be governed by and construed in accordance
with laws of the State of New York.





                                    App. A-13




                  IN WITNESS WHEREOF, the Authority has caused this Bond to be
signed in its name and on its behalf by the manual or facsimile signature of its
President, Vice President or Treasurer and its seal or a facsimile thereof to be
impressed, imprinted or otherwise reproduced hereon and attested by the manual
or facsimile signature of its Secretary or an Assistant Secretary, as of the
date set forth in the Certificate of Authentication.


                                      NEW YORK STATE ENERGY RESEARCH
                                      AND DEVELOPMENT AUTHORITY

[SEAL]
                                      By --------------------------------------
                                                    President

Attest:


- --------------------------------------------
         [Assistant] Secretary


                                    App. A-14



                          CERTIFICATE OF AUTHENTICATION

                  This Bond is one of an issue described in the Indenture
mentioned herein.

                                                   THE BANK OF NEW YORK,
                                                   AS TRUSTEE


                                                   By: -------------------------
                                                          Authorized Officer


DATE OF AUTHENTICATION:




                                    App. A-15







                              (FORM OF ASSIGNMENT)


                  For value received ____________________________ hereby sells,
assigns and transfers unto _____________________ the within mentioned Bond and
hereby irrevocably constitutes and appoints _______________________, Attorney,
to transfer the same on the registration books in the office of the Registrar
and Paying Agent with full power of substitution in the premises.


                                      __________________________________


Dated: _________________________

                  I hereby certify that the above signature is true and genuine.

                                      ____________________ Authorized Officer

                                      ____________________________ Bank





                                    App. A-16





                     (FORM OF BOND BEARING AN AUCTION RATE)

                       NEW YORK STATE ENERGY RESEARCH AND
                              DEVELOPMENT AUTHORITY
                     Facilities Revenue Bonds, Series 2001B
             (Consolidated Edison Company of New York, Inc. Project)
                        (Subseries 2001[B-1, B-2 or B-3])

NO. B[-1, -2 OR -3]R-


    MATURITY DATE                ORIGINAL ISSUE DATE                 CUSIP
    -------------                -------------------                 -----
    October 1, 2036              November 1, 2001



REGISTERED OWNER:

PRINCIPAL SUM:


                  NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY (the
"Authority"), a body corporate and politic, constituting a public benefit
corporation, organized and existing under and by virtue of the laws of the State
of New York, for value received, hereby promises to pay, but solely from the
revenues, income and other monies hereinafter specified and not otherwise, to
the registered owner named above or registered assigns, the principal amount
specified above on the maturity date specified above (subject to the right of
prior redemption hereinafter described), upon presentation and surrender of this
Bond, and to pay interest on such principal amount, but solely from such
revenues, income and other monies hereinafter specified and not otherwise, from
the date of authentication hereof, or if such date shall not be an Interest
Payment Date (as hereinafter defined) from the next preceding Interest Payment
Date, or if the date of authentication is after the Record Date next preceding
the next succeeding Interest Payment Date from the next succeeding Interest
Payment Date until the payment of such principal amount in full, at the Auction
Rate hereinafter described, such interest being payable on each Interest Payment
Date in each year, by check mailed to the registered owner hereof at such
owner's address as it appears on the registration books kept by the Registrar
and Paying Agent pursuant to the Indenture hereinafter mentioned; provided, that
(i) while the Securities Depository (as defined in the Indenture) is the
registered owner of the Bonds, all payments of principal of and premium, if any,
and interest on the Bonds shall be paid to the Securities Depository by wire
transfer, (ii) prior to any Fixed Rate Conversion Date, interest on the Bonds
shall be payable, at the option of any registered owner of at least one million
dollars ($1,000,000) in aggregate principal amount of the Bonds, by wire
transfer upon written notice received by the Registrar and Paying Agent from
such registered owner at least five days prior to the Record Date, containing
the wire transfer address (which shall be in the continental United States) to
which such registered owner wishes to have such wire directed, all as set forth
in such registration books at the close of business on the appropriate Record
Date preceding an Interest Payment Date. If interest is in default it shall be
paid to the person



                                    App. A-17




in whose name this bond is registered as set forth on the registration books as
of the record date as set forth in the Indenture. Except as set forth above,
principal of and premium, if any, on this Bond are payable at the corporate
trust office of The Bank of New York, in New York, New York, as Registrar and
Paying Agent of the Bonds. Principal of and premium, if any, and interest on
this Bond are payable in lawful money of the United States of America.

                  This Bond is one of a duly authorized issue of Bonds of the
Authority designated as "Facilities Revenue Bonds, Series 2001B (Consolidated
Edison Company of New York, Inc. Project)", issued in the aggregate principal
amount of Ninety-Eight Million Dollars ($98,000,000), referred to herein as the
"Bonds." In order to distinguish between Bonds which are subject to different
interest rate determination methods and other features and to distinguish the
portion of the Bonds to be offered or remarketed by any particular underwriter
or Remarketing Agent, the Bonds may be designated and redesignated from time to
time by the Authority in such a way as to identify one or more subseries of the
Bonds pursuant to Article II of the Indenture. Pursuant to the Indenture, the
Series 2001B Bonds are being issued in three subseries, designated Series
2001B-1, Series 2001B-2 and Series 2001B-3, in principal amounts of $33,000,000,
$33,000,000 and $32,000,000, respectively. This Bond and the issue of which it
is one are authorized to be issued and are issued under, pursuant to and in full
compliance with the Constitution and statutes of the State of New York,
including particularly the New York State Energy Research and Development
Authority Act, Title 9 of Article 8 of the Public Authorities Law of the State
of New York, as amended (the "Act"), a resolution of the Authority adopted on
September 24, 2001 and a Trust Indenture dated as of November 1, 2001 between
the Authority and The Bank of New York, as Trustee (herein, as it may be amended
from time to time, called the "Indenture"). The Bonds are issued for the purpose
of refunding certain outstanding bonds of the Authority issued to finance the
cost of the acquisition, construction, and installation of certain facilities of
Consolidated Edison Company of New York, Inc. (the "Company") to be used for the
furnishing of electric energy within the Company's service area (all of said
facilities being referred to herein as the "Project") pursuant to a
Participation Agreement dated as of November 1, 2001, between the Authority and
the Company (hereinafter, as it may be amended or supplemented from time to
time, called the "Participation Agreement"). Under the Participation Agreement
and the promissory note delivered to the Trustee (the "Note"), the Company is
required to make payments to the Trustee for deposit to the Bond Fund
established pursuant to the Indenture in an amount sufficient to pay the portion
of principal of and premium, if any, and interest on the Bonds when due. The
Participation Agreement also imposes on the Company certain obligations
respecting the use and operation of the Project. A copy of the Participation
Agreement is on file at the principal office of the Trustee, and reference is
hereby directed to the Participation Agreement for the provisions thereof.

                  The terms and provisions pertaining to Bonds bearing a Fixed
Rate or another Adjustable Rate are set forth in separate bond certificates.

                  A copy of the Indenture is on file at the principal office of
the Trustee. Reference is hereby directed to the Indenture for the provisions,
among others, with respect to the custody and application of the proceeds of the
Bonds; the collection and disposition of revenues; a description of the nature
and extent of the security for the Bonds, the funds and monies pledged
for the payment of the premium, if any, and interest on and the principal of the
Bonds; the nature and extent and manner of enforcement of the pledge; the rights
and remedies of the registered owners of Bonds with


                                    App. A-18




respect thereto; the conditions for and the permissible extent of alteration,
modification and amendment of the Indenture; the terms and conditions upon which
this Bond and the issue of which it is one are issued; the rights, duties and
obligations of the Authority and the Trustee thereunder; the terms and
provisions upon which the liens, pledges, charges, trusts and covenants made
therein may be discharged at or prior to the maturity, purchase or redemption of
this issue and pursuant to which this Bond thereafter will no longer be secured
by the Indenture, or be deemed to be outstanding thereunder, if sufficient
monies or certain specified securities shall have been deposited with the
Trustee and held in trust solely for the payment thereof; and for all other
terms and provisions thereof. The provisions of the Act and the Indenture shall
be a contract with the registered owner of this Bond, and the duties of the
Authority and any employee thereof under said Act and the Indenture shall be
enforceable by the registered owner hereof, by mandamus or other appropriate
suit, action or proceeding, in any court of competent jurisdiction in the State
of New York.

                  The Bonds are not general obligations of the Authority, and
shall not constitute indebtedness of or a charge against the general credit of
the Authority or give rise to any pecuniary liability of the Authority. The
liability of the Authority under the Bonds shall be enforceable only to the
extent provided in the Indenture, and the Bonds shall be payable solely from the
money and revenues received from the payments made by the Company pursuant to
the Participation Agreement and the Note or the income from the temporary
investment thereof, and from amounts held under the Indenture including the
proceeds of a Credit Facility, if any, and not from any other fund or source.
Pursuant to the Indenture, the Authority has pledged and assigned to the Trustee
its right, title and interest (with certain exceptions) in and to the
Participation Agreement and the Note to secure the payment of the principal of
and premium, if any, and interest on the Bonds. The Bonds are and shall be
secured by a prior and paramount lien and charge on said monies and revenues.
The Bonds shall not be a debt of the State of New York and the State of New York
shall not be liable thereon. The Bonds are payable solely from the monies and
revenues pledged under the Indenture to the payment thereof. Neither the
Authority nor the State of New York is obligated to provide for the payment of
the Purchase Price of tendered Bonds or payment of principal, premium, if any,
or interest on the Bonds.

                  This Bond shall not be entitled to any security, right or
benefit under the Indenture or become valid or obligatory for any purpose until
it shall have been authenticated by the Trustee by its execution of the
certificate of authentication endorsed hereon.

                  No covenant or agreement contained in this Bond or the
Indenture shall be deemed to be a covenant or agreement of any member, agent or
employee of the Authority in his or her individual capacity, and neither the
members of the Authority nor any officer thereof executing this Bond shall be
liable personally on this Bond or be subject to any personal liability or
accountability by reason of the issuance of this Bond.

                  It is hereby certified, recited and declared that all acts,
conditions and things required by the Constitution and laws of the State of New
York and the Indenture to exist, to have happened and to have been performed
precedent to and in the issuance of this Bond and the issue of which this Bond
is a part, do exist, have happened and have been performed in due time, form and
manner as required by such Constitution, laws and the Indenture; that the amount
of this Bond and the issue of

                                    App. A-19




which this Bond is a part does not exceed any constitutional or statutory
limitations of indebtedness; and that provision has been made for the payment of
the principal of and premium, if any, and interest on this Bond and the series
of which it is a part as provided in the Indenture.

                  EXCEPT AS OTHERWISE PROVIDED IN SECTION 2.03 OF THE INDENTURE,
THIS GLOBAL BOND MAY BE TRANSFERRED, IN WHOLE BUT NOT IN PART, ONLY TO A NOMINEE
OF THE SECURITIES DEPOSITORY OR TO A SUCCESSOR SECURITIES DEPOSITORY OR TO A
NOMINEE OF A SUCCESSOR SECURITIES DEPOSITORY.

INTEREST RATE PROVISIONS

                  THE AUCTION PERIOD, THE AUCTION RATE, THE SELECTION OF THE
METHOD OF DETERMINING THE AUCTION RATE AND DATES OF PAYMENT OF INTEREST ON THE
BONDS AND THE AUCTION PROCEDURES RELATED THERETO WILL BE DETERMINED UPON THE
TERMS AND CONDITIONS, INCLUDING REQUIRED NOTICES THEREOF TO THE OWNERS,
DESCRIBED IN THE INDENTURE, TO WHICH PROVISIONS SPECIFIC REFERENCE IS HEREBY
MADE AND ALL OF WHICH PROVISIONS ARE HEREBY SPECIFICALLY INCORPORATED HEREIN BY
REFERENCE.

                  During any Auction Rate Period, the Bonds shall bear interest
at the Auction Rate determined as set forth in the Indenture. The initial
Auction Period for each subseries of the Bonds immediately after the date of the
delivery of the Bonds shall be a period from and including such date of delivery
to and including the initial Auction Date for each such subseries. The initial
Auction Date immediately after the date of delivery of each subseries of the
Bonds shall be the date set forth in the Indenture for each such subseries. The
Auction Rate for the initial Auction Period immediately after the date of
delivery of each subseries of the Bonds shall be the rate set forth in the
Indenture for each such subseries. The Auction Rate for any initial Auction
Period immediately after any Change in the Interest Rate Mode to an Auction Rate
for an Auction Rate Period, shall be the rate of interest per annum determined
and certified to the Trustee by the Remarketing Agent on a date not later than
the effective date of such Change in the Interest Rate Mode as the minimum rate
of interest which, in the opinion of the Remarketing Agent, would be necessary
as of such date to market Auction Rate Bonds in a secondary market transaction
at a price equal to the principal amount thereof, provided that such interest
rate shall not exceed the Maximum Allowed Rate. For any other Auction Period,
the Auction Rate for an Auction Rate Period shall be the rate of interest per
annum that results from implementation of the Auction Procedures. The Auction
Procedures are set forth in Article III of the Indenture. If on any Auction Date
the Auction Agent shall fail to determine, or for any reason fail to timely
provide, a rate of interest pursuant to the Auction Procedures, the Auction Rate
for the next succeeding Auction Period shall be equal to the No Auction Rate on
and as of such Auction Date. Determination of an Auction Rate pursuant to the
Auction Procedures shall be suspended upon a Change in the Interest Rate Mode or
the occurrence of a Payment Default. The Auction Rate for any Auction Period or
remaining portion thereof following the occurrence of a Payment Default shall be
equal to the Overdue Rate as determined on and as of the immediately preceding
Auction Date. Upon the occurrence of a Payment Default that has not been waived
or cured on or prior to any Auction Date, no Auction will be held, all Submitted
Bids and Submitted Sell Orders shall be rejected, the existence of Sufficient
Clearing Bids shall be


                                    App. A-20




of no effect and the Auction Rate for the next succeeding Auction Period shall
equal the Overdue Rate on and as of such Auction Date. In the event of the
suspension of the Auction Procedures due to a Payment Default, the Auction
Procedures shall resume two Business Days after the date on which the Auction
Agent receives notice from the Trustee that the Bond Insurer has cured the
default under the Policy by making all scheduled payments thereunder, with the
next Auction to occur on the next regularly scheduled Auction Date occurring
thereafter. The Overdue Rate shall be determined by the Trustee on each
succeeding Auction Date.

                  The Bonds may also bear interest at one of the following
interest rates at the times and in the manner set forth in the Indenture: a
"Commercial Paper Rate," a "Daily Rate," a "Weekly Rate," a "Monthly Rate," a
"Semi-annual Rate", a "Term Rate" or a "Fixed Rate".

REDEMPTION PROVISIONS

                  Optional Redemption. The Bonds shall be subject to redemption,
at the option of the Authority upon the request of the Company, on the Business
Day immediately succeeding each Auction Date, as a whole or in part, at the
principal amount thereof plus accrued interest to the date fixed for redemption.

                  MANDATORY REDEMPTION UPON STATE FURNISHING FUNDS. Pursuant to
Section 1864 of the Act, the State of New York may, upon furnishing sufficient
funds therefor, require the Authority to redeem prior to maturity, as a whole,
the Bonds on any Interest Payment Date not less than twenty years after the date
of initial delivery of the Bonds. Any such redemption shall be at a redemption
price equal to the optional redemption price, if any, applicable on such date or
if no such optional redemption price is applicable at a redemption price of 105%
of the principal amount thereof, in either case, together with accrued and
unpaid interest, if any, to the date fixed for redemption, all in the manner
provided in the Indenture.

                  PROCEDURE FOR REDEMPTION. In the event any of the Bonds are
called for redemption, the Trustee shall give notice, or cause the Registrar and
Paying Agent to give notice in the name of the Authority, of the redemption of
such Bonds in accordance with the Indenture.

                  Notice of redemption shall be given by mailing a copy of the
redemption notice by first-class mail at least 30 days prior to the date fixed
for redemption to the registered owners of such Bonds to be redeemed at the
addresses shown on the registration books maintained by the Registrar and Paying
Agent; provided, however, that failure to give notice to any Holder of a Bond or
any defects in such notice shall not affect the proceedings for the redemption
of the Bonds for which notice has been given.

                  MANDATORY TENDER FOR PURCHASE UPON A CHANGE IN THE INTEREST
RATE MODE . Upon a Change in the Interest Rate Mode, the Bonds shall be subject
to mandatory tender for purchase in accordance with the Indenture on the
effective date of such Change in the Interest Rate Mode at the Purchase Price.

                  GENERAL PROVISIONS APPLICABLE TO MANDATORY TENDERS FOR
PURCHASE OF BONDS. If interest has been paid on the Bonds, or an amount
sufficient to pay interest thereon has been

                                    App. A-21



deposited in the Bond Fund, or an amount sufficient to pay accrued interest
thereon, if any, has been set aside in the Bond Purchase Fund held under the
Bond Purchase Trust Agreement, and the Purchase Price shall be available under
the Bond Purchase Fund for payment of Bonds subject to tender for purchase upon
a Change in the Interest Rate Mode and if a registered owner fails to deliver or
does not properly deliver such Bonds to the Registrar and Paying Agent on the
purchase date therefor, such Bonds shall nevertheless be deemed tendered and
purchased on the date established for the purchase thereof, no interest shall
accrue on such Bonds from and after the date of purchase and such former
registered owners shall have no rights hereunder as the registered owners of
such Bonds, except the right to receive the Purchase Price of and interest to
the purchase date, if any, on such Bonds upon delivery thereof to the Registrar
and Paying Agent in accordance with the provisions hereof. The purchaser of any
such Bonds remarketed by the Remarketing Agent , or the issuer of any Support
Facility, to the extent Bonds are purchased with the proceeds of a draw on, or
borrowing or payment under, the Support Facility, shall be treated as the
registered owner thereof for all purposes of the Indenture. The payment of Bonds
tendered upon the election of the registered owner shall be subject to delivery
of such Bonds duly endorsed in blank for transfer or accompanied by an
instrument of transfer thereof in form satisfactory to the Registrar and Paying
Agent executed in blank for transfer at the principal office of the Registrar
and Paying Agent at or prior to 10:00 a.m. (New York City time), on a specified
purchase date. The Registrar and Paying Agent may refuse to make payment with
respect to any Bonds tendered for purchase not endorsed in blank or for which an
instrument of transfer satisfactory to the Registrar and Paying Agent has not
been provided.

                  The Purchase Price of Bonds subject to tender for purchase in
an aggregate principal amount of at least one million dollars ($1,000,000) shall
be payable in immediately available funds or by wire transfer upon written
notice from the registered owner thereof containing the wire transfer address
(which shall be in the continental United States) to which such registered owner
wishes to have such wire directed, if such written notice is received by the
Registrar and Paying Agent not less than five days prior to the related purchase
date.

                  Registered owners of Auction Rate Bonds subject to mandatory
tender for purchase upon a Change in the Interest Rate Mode to or from an
Auction Rate Period or a conversion to a Fixed Rate shall have no right to
retain such Bonds and shall be required to tender such Auction Rate Bonds on the
date established for the mandatory tender for purchase thereof.

                  The Bonds may be transferred or exchanged by the registered
owner hereof, in person or by his or her attorney duly authorized in writing, at
the principal office of the Registrar and Paying Agent but only in the manner,
subject to limitations and upon payment of the charges, if any, provided in the
Indenture and upon the surrender hereof to the Registrar and Paying Agent for
cancellation. Upon such transfer or exchange, a new Bond or Bonds of authorized
denominations and of like aggregate principal amount as the Bond surrendered
will be issued in exchange herefor. Transfer of Bonds bearing an Auction Rate is
subject to the provisions of the Indenture. The Indenture is available for
inspection at the office of the Trustee.

                  All terms used herein which are defined in the Indenture and
not otherwise defined herein shall have the respective meanings set forth in the
Indenture.


                                    App. A-22



                  This Bond shall be governed by and construed in accordance
with laws of the State of New York.

                  IN WITNESS WHEREOF, the Authority has caused this Bond to be
signed in its name and on its behalf by the manual or facsimile signature of its
President, Vice President or Treasurer and its seal or a facsimile thereof to be
impressed, imprinted or otherwise reproduced hereon and attested by the manual
or facsimile signature of its Secretary or an Assistant Secretary, as of the
date set forth in the Certificate of Authentication.

                                      NEW YORK STATE ENERGY RESEARCH
                                        AND DEVELOPMENT AUTHORITY

[SEAL]
                                      By -------------------------------------
                                                     President

Attest:


- -----------------------------------------
         [Assistant] Secretary


                          CERTIFICATE OF AUTHENTICATION

                  This Bond is one of an issue described in the Indenture
mentioned herein.

                                         THE BANK OF NEW YORK,
                                         AS TRUSTEE


                                         By:---------------------------------
                                                  Authorized Officer

DATE OF AUTHENTICATION:


                                    App. A-23




                              (FORM OF ASSIGNMENT)


                  For value received ________________________ hereby sells,
assigns and transfers unto ___________________________ the within mentioned Bond
and hereby irrevocably constitutes and appoints ________________________,
Attorney, to transfer the same on the registration books in the office of the
Registrar and Paying Agent with full power of substitution in the premises.


                                      ____________________________________




Dated: __________________

                  I hereby certify that the above signature is true and genuine.

                                      ____________________ Authorized Officer

                                      ____________________________ Bank




                                    App. A-24



                                    EXHIBIT A

                  (For use in change in the Interest Rate Mode)

            NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY
           FACILITY REVENUE BONDS, SERIES 2001B (SUBSERIES 2001B-[ ])
             (CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. PROJECT)
                              CUSIP NO. ___________

                   NOTICE OF CHANGE IN THE INTEREST RATE MODE


                  Notice is hereby given to the Trustee, Remarketing Agent,
Registrar and Paying Agent, the Company, [the Auction Agent] and the registered
owners of $___________ of the above-captioned issue (the "Bonds") of New York
State Energy Research and Development Authority (the "Authority") that:

                  1. In accordance with the Trust Indenture relating to the
Bonds (the "Indenture"), dated as of November 1, 2001 between the Authority and
The Bank of New York (the "Trustee"), subject to the conditions hereinafter set
forth, if any, the interest rate on the Bonds (or such lesser principal amount
thereof as may be specified in an attachment hereto) will be changed to a
_________Rate. Capitalized terms used herein and not otherwise defined herein
shall have the meanings given to such terms in the Indenture. The following
statements are summaries of certain provisions of the Indenture which do not
purport to be complete and are qualified in their entirety by reference to the
Indenture.

                  2. The _________ Rate will be effective from and after_______
(the "Effective Date").

                  3. The Bonds are subject to mandatory tender on the Effective
Date at a purchase price equal to the principal amount thereof [plus premium in
the amount of _____] (the "Purchase Price"). Accrued interest on the Bonds is
anticipated to be paid separately in accordance with Section 9.03(a) of the
Indenture. In the event the interest is not so paid, the Purchase Price shall
include an amount equal to the accrued and unpaid interest.

                  4. The proposed Change in the Interest Rate Mode shall take
effect only if the applicable conditions set forth in Article IV of the
Indenture have been satisfied.


                                   Exhibit A-1





                  5. Registered owners of Bonds are required to deliver their
Bonds to the Registrar and Paying Agent at The Bank of New York, 101 Barclay
Street - 8W, New York, New York 10286, Attention: Corporate Trust Trustee
Administration, no later than [Registrar and Paying Agent to insert proper
time], New York City time, on the Effective Date at the office of the Registrar
and Paying Agent referred to above, endorsed in blank by the registered owner
thereof or accompanied by an instrument of transfer thereof in form satisfactory
to the Registrar and Paying Agent executed for transfer in blank by the
registered owner thereof (the Registrar and Paying Agent being able to refuse to
make payment with respect to any such Bond not endorsed in blank or for which an
instrument of transfer satisfactory to it has not been provided).

                  6. Each registered owner of Bonds who has properly tendered
such Bonds in accordance with the above provisions will be paid the Purchase
Price therefor on the Effective Date, and if such Purchase Price is paid, such
registered owner shall have no further rights with respect to said Bonds.

                  7. Holders of Bonds subject to mandatory tender shall have no
right to retain such Bonds and shall be required to tender such Bonds on the
date established for the mandatory tender for purchase thereof.

                  8. With respect to any registered owner of Bonds who has not
properly tendered such Bonds in accordance with the above provisions of this
notice, (A) such registered owner's Bonds will be deemed tendered and purchased
on the Effective Date at the Purchase Price, (B) such registered owner will be
paid interest on such Bonds on the Effective Date as provided in the Indenture
and will be paid such Purchase Price for such Bonds upon the tender of such
Bonds to the Registrar and Paying Agent and (C) interest on such Bonds shall
cease to be payable to such registered owner from and after the Effective Date,
and after the Effective Date such registered owner will have no rights with
respect to such Bonds except to receive payment of the Purchase Price upon
tender of such Bonds to the Registrar and Paying Agent.


Dated:
       --------------------


                                        NEW YORK STATE ENERGY RESEARCH
                                          AND DEVELOPMENT AUTHORITY


                                        By:  The Bank of New York, as Trustee


                                   Exhibit A-2




                                    EXHIBIT B


            NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY
          FACILITIES REVENUE BONDS, SERIES 2001B (SUBSERIES 2001B-[ ])
             (CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. PROJECT)
                               CUSIP NO. ________


        CERTIFICATE PURSUANT TO SECTION [4.01.3(A)(ii) OR 4.02.3(A)(ii)]
                                OF THE INDENTURE

                  NOTICE IS HEREBY GIVEN to the Trustee [and the Auction Agent]
that New York State Energy Research and Development Authority (the "Authority")
at the request of Consolidated Edison Company of New York, Inc. (the "Company")
hereby authorizes the establishment of a _____ Rate.

                  Notice is also HEREBY GIVEN that the Authority has obtained
confirmation on behalf of the Company that Bond Counsel expects to be able to
give its opinion on the effective date of the Change in the Interest Rate Mode
to the effect that the change to the ________ Rate is authorized by the
Indenture referred to below, is permitted under the Act and will not have an
adverse effect on the exclusion of interest on the Bonds from gross income for
federal income tax purposes.

                  Capitalized terms used herein and not otherwise defined herein
shall have the meanings given to such terms in the Trust Indenture relating to
the above-captioned Bonds, dated as of November 1, 2001, by and between the
Authority and The Bank of New York, as Trustee.



                                             NEW YORK STATE ENERGY RESEARCH AND
                                                  DEVELOPMENT AUTHORITY



                                             By: ------------------------------
                                                   Authorized Representative



                                   Exhibit B-1



                                    EXHIBIT C


            NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY
          FACILITIES REVENUE BONDS, SERIES 2001B (SUBSERIES 2001B-[ ])
             (CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. PROJECT)
                              CUSIP NO. ___________

       CERTIFICATE PURSUANT TO SECTION [4.01.3(B) OR 4.02.3(B)(ii)] OF THE
                                    INDENTURE

                  NOTICE IS HEREBY GIVEN to the Trustee [and the Auction Agent]
that with respect to a Change in the Interest Rate Mode pursuant to Section 4.01
or 4.02 of the Indenture referred to below all of the Bonds referred to above
tendered or deemed tendered have been purchased at a price equal to the
principal amount thereof plus premium, if any, plus any accrued and unpaid
interest with funds provided from the remarketing of such Bonds in accordance
with the Remarketing Agreement, from the proceeds of a Support Facility, or from
other funds deposited with the Trustee or the Registrar and Paying Agent.

                  Capitalized terms used herein and not otherwise defined herein
shall have the meanings given to such terms in the Trust Indenture relating to
the above-captioned Bonds, dated as of November 1, 2001 by and between the New
York State Energy Research and Development Authority and The Bank of New York,
as Trustee.

                                      CONSOLIDATED EDISON COMPANY OF
                                            NEW YORK, INC.



                                      By:-------------------------------------
                                           Authorized Company Representative



                                   Exhibit C-1





                                    EXHIBIT D


            NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY
          FACILITIES REVENUE BONDS, SERIES 2001B (SUBSERIES 2001B-[ ])
             (CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. PROJECT)
                              CUSIP NO. ___________

                         NOTICE OF FAILURE OF CONDITIONS


                  NOTICE IS HEREBY GIVEN to the Authority, the Company and the
registered owners of the above captioned issue that the conditions for effecting
a Change in the Interest Rate Mode to a Rate have not been met.

                  The above-captioned Bonds will therefore continue to bear
interest at the current __________ Rate and be subject to the provisions of the
Indenture referred to below applicable while such Bonds bear interest at the
current __________ Rate.

                  Capitalized terms used herein and not otherwise defined herein
shall have the meanings given to such terms in the Trust Indenture relating to
the above-captioned Bonds, dated as of November 1, 2001 by and between the New
York State Energy Research and Development Authority and The Bank of New York,
as Trustee.


                                     THE BANK OF NEW YORK, AS TRUSTEE



                                     By:    -----------------------------------
                                     Title: -----------------------------------



                                   Exhibit D-1



                                    EXHIBIT E


            NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY
          FACILITIES REVENUE BONDS, SERIES 2001B (SUBSERIES 2001B-[ ])
             (CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. PROJECT)

                          NOTICE OF ELECTION TO TENDER


   Note:        The substance of this Notice must be given to the
                Registrar and Paying Agent and the Remarketing Agent by
                telephone at (212) _____ and _______, respectively, at or prior
                to the time this Notice must be delivered.

          1.       The undersigned, ____________, owner of the following Bonds:


          CUSIP NUMBER*                                   PRINCIPAL AMOUNT
          ------------                                    ----------------









hereby notifies you of its election to tender such Bonds for purchase on [ , ],
(which date shall be a Business Day). If this Bond bears interest at a Daily
Rate as defined in the Indenture referred to below, the date of purchase shall
be the date of delivery of this Notice to the Registrar and Paying Agent and the
Remarketing Agent if received by 10:00 a.m., New York City time, or may be any
Business Day thereafter. If this Bond bears interest at a Weekly Rate as defined
in the Indenture the date of purchase shall be a Business Day not prior to the
seventh (7th) day immediately following the date of delivery of this Notice to
the Registrar and Paying Agent and the Remarketing Agent.

- ------------------
     *Bond Number, if Bonds are no longer held by Securities Depository.



                                   Exhibit E-1





                2. If only a portion of a Bond is being tendered, both the
tendered portion and untendered portion must be authorized denominations
($100,000 or any integral multiple thereof) for Bonds bearing a Daily Rate or
Weekly Rate.

                3. After its execution and delivery by the undersigned, this
notice will be irrevocable.

                4. The person or persons to whom or to whose order the proceeds
of the purchase of the above-referenced Bonds are to be paid, such person's or
persons' taxpayer identification number or numbers and the address or addresses
of such payee or payees is ______________; which information the undersigned,
under the penalties of perjury, certifies to be true, correct and complete.

                5. The undersigned hereby undertakes to deliver the Bonds to The
Bank of New York (the "Registrar and Paying Agent") no later than 11:30 a.m.,
New York City time, for Bonds bearing interest at the Weekly Rate, and 12:00
noon, New York City time, for Bonds bearing interest at a Daily Rate, at the
office of the Registrar and Paying Agent located at 101 Barclay Street - 8W, New
York, New York 10286, Attention: Corporate Trust Trustee Administration,
endorsed in blank for transfer or accompanied by an instrument of transfer
executed in blank for transfer and acknowledges that any instrument of transfer
must be in a form satisfactory to the Registrar and Paying Agent and that the
Registrar and Paying Agent may refuse to make payment with respect to any Bond
not endorsed in blank or for which an instrument of transfer satisfactory to the
Registrar and Paying Agent has not been provided.

                6. The undersigned hereby also assigns and transfers and directs
the Registrar and Paying Agent to transfer the Bonds delivered in connection
herewith to the appropriate party under the terms and conditions contained in
the Indenture.

                7. The undersigned acknowledges that in the event of a failure
to deliver the Bonds or in the event such Bonds are not properly delivered, such
Bonds shall nevertheless be deemed tendered and purchased on the date referred
to in (1) above, no interest shall accrue thereon to the undersigned from and
after such date of purchase and that the undersigned shall have no rights under
the Bonds or under the Indenture except the right to receive the purchase price
of the Bonds.


                                   Exhibit E-2





                8. Capitalized terms used herein and not otherwise defined
herein shall have the meanings given to such terms in the Trust Indenture
relating to the above-captioned Bonds, dated as of November 1, 2001, by and
between the New York State Energy Research and Development Authority and The
Bank of New York, as Trustee (the "Indenture"). The statements contained herein
are summaries of certain provisions of the Indenture which do not purport to be
complete and are qualified in their entirety by reference to the Indenture.

Dated:________________


                                      ____________________________________

                                      Name of Owner as it is written on the
                                      face of the above-listed Bonds
                                      in every particular, without alteration,
                                      enlargement or any change whatsoever

_______________
Witness


                                   Exhibit E-3





                                    EXHIBIT F

            NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY
          FACILITIES REVENUE BONDS, SERIES 2001B (SUBSERIES 2001B-[ ])
             (CONSOLIDATED EDISON COMPANY OF NEW YORK, INC. PROJECT)


                  NOTICE OF MANDATORY TENDER UPON EXPIRATION OF
                     ANY SUPPORT FACILITY, UPON DELIVERY OF
                        AN ALTERNATE SUPPORT FACILITY OR
                    UPON OCCURRENCE OF ANY TERMINATING EVENT


                Notice is hereby given to the registered owners of the
above-captioned issue (the "Bonds") of New York State Energy Research and
Development Authority (the "Authority") that:

                1. In accordance with the Trust Indenture relating to the
Bonds (the "Indenture") dated as of November 1, 2001, between the Authority and
The Bank of New York (the "Trustee"), notice is hereby given that [the Support
Facility issued by __________ with respect to the Bonds (the "Support Facility")
will expire on ___________ , an Alternate Support Facility will be substituted
therefor on ___________ , or a Terminating Event with respect to a Support
Facility has occurred] and that all Bonds, other than Bonds held by or for the
account of the Company or the Liquidity Facility Issuer, are subject to
mandatory tender under the circumstances set forth in [Section 5.08 or 5.09] of
the Indenture as hereinafter set forth at a purchase price equal to the
principal amount thereof [plus premium in the amount of _______] (the "Purchase
Price"). Accrued interest on the Bonds is anticipated to be paid separately in
accordance with Section 9.03(a) of the Indenture. In the event the interest is
not so paid, the Purchase Price shall include an amount equal to the accrued and
unpaid interest.

                2. The Bonds are subject to mandatory tender for purchase on
__________ (the "Mandatory Tender Date").

                3. From and after the Mandatory Tender Date the Bonds will
[continue to] bear interest [insert information on interest rate to be effective
after mandatory tender date, including method of determining interest rate and
Interest Payment Dates]. [Insert information whether any letter of credit, line
of credit, insurance policy, surety bond, standby bond purchase agreement or
other instrument will be available for the payment of the principal or purchase
price of, or interest on, such Bonds and, if so, describing such instrument].

                                   Exhibit F-1





                4. On and after the Mandatory Tender Date, the [short-term]
[long term] rating on the Bonds by [Registrar and Paying Agent to insert, as
appropriate: (i) Moody's and/or S&P will be _________ and/or (ii) Moody's
and/or S&P may be reduced or withdrawn].

                5. Registered owners of Bonds are required to deliver their
Bonds to the Registrar and Paying Agent on the Mandatory Tender Date at the
office of the Registrar and Paying Agent located at The Bank of New York, 101
Barclay Street - 8W, New York, New York 10286, Attention: Corporate Trust
Trustee Administration, endorsed in blank by the registered owner thereof or
accompanied by an instrument of transfer thereof in form satisfactory to the
Registrar and Paying Agent executed in blank by the registered owner thereof
(the Registrar and Paying Agent being able to refuse to make payment with
respect to any such Bond not endorsed in blank or for which an instrument of
transfer satisfactory to it has not been provided).

                6. Each registered owner of Bonds who has properly tendered such
Bonds in accordance with the above provisions will be paid the Purchase Price,
and if such Purchase Price is paid, such registered owner shall have no further
rights with respect to said Bonds.

                7. Holders of Bonds subject to mandatory tender for purchase on
the Mandatory Tender Date shall have no right to retain their Bonds and shall be
required to tender such Bonds no later than the Mandatory Tender Date as
provided herein.

                8. With respect to any registered owner of Bonds who has not
properly tendered such Bonds in accordance with the above provisions of this
notice (A) such registered owner's Bonds will nevertheless be deemed tendered
and purchased on the Mandatory Tender Date at the Purchase Price, (B) such
registered owner will be paid interest on such Bonds on the Mandatory Tender
Date as provided in the Indenture and will be paid such Purchase Price for such
Bonds upon the tender of such Bonds to the Registrar and Paying Agent and (C)
interest on such Bonds shall cease to be payable to such registered owner from
and after the Mandatory Tender Date, and after the Mandatory Tender Date such
registered owner will have no rights with respect to such Bonds except to
receive payment of the Purchase Price upon tender of such Bonds to the Registrar
and Paying Agent.


                                   Exhibit F-2




                9. Capitalized terms used herein and not otherwise defined
herein shall have the meanings given to such terms in the Indenture. The
statements contained herein are summaries of certain provisions of the Indenture
which do not purport to be complete and are qualified in their entirety by
reference to the Indenture.

Dated: _______________



                                           NEW YORK STATE ENERGY RESEARCH
                                             AND DEVELOPMENT AUTHORITY


                                       F-3


                                                                    Exhibit 12.1

                            CONSOLIDATED EDISON, INC.

                       RATIO OF EARNINGS TO FIXED CHARGES
                               TWELVE MONTHS ENDED
                             (Thousands of Dollars)




                                                          SEPTEMBER    DECEMBER
                                                            2001         2000
                                                         ----------   ----------
                                                                
EARNINGS
  Net Income for Common Stock                            $  603,215   $  582,835
  Preferred Dividends                                        13,593       13,593
  Income Tax                                                405,295      307,168
                                                         ----------   ----------

      Total Earnings Before Federal Income Tax            1,022,103      903,596

FIXED CHARGES*                                              454,820      431,217
                                                         ----------   ----------
      Total Earnings Before Federal Income Tax
        and Fixed Charges                                $1,476,923   $1,334,813
                                                         ==========   ==========



  * Fixed Charges

  Interest on Long-Term Debt                             $  383,392   $  351,410
  Amortization of Debt Discount, Premium and Expense         12,382       12,584
  Interest on Component of Rentals                           18,814       17,697
  Other Interest                                             40,232       49,526
                                                         ----------   ----------

      Total Fixed Charges                                $  454,820   $  431,217
                                                         ==========   ==========


  Ratio of Earnings to Fixed Charges                           3.25         3.10


                                                                    Exhibit 12.2


                  CONSOLIDATED EDISON COMPANY OF NEW YORK, INC.

                       RATIO OF EARNINGS TO FIXED CHARGES
                               TWELVE MONTHS ENDED
                             (Thousands of Dollars)



                                                          SEPTEMBER        DECEMBER
                                                             2001            2000
                                                          ----------      ----------
                                                                    
EARNINGS
  Net Income                                              $  611,719      $  583,715
  Income Tax                                                 391,641         289,926
                                                          ----------      ----------

      Total Earnings Before Income Tax                     1,003,360         873,641

FIXED CHARGES*                                               406,236         392,347
                                                          ----------      ----------
      Total Earnings Before Income Tax
        and Fixed Charges                                 $1,409,596      $1,265,988
                                                          ==========      ==========


  * Fixed Charges

  Interest on Long-Term Debt                              $  345,699      $  318,842
  Amortization of Debt Discount, Premium and Expense          12,382          12,584
  Interest on Component of Rentals                            17,554          17,697
  Other Interest                                              30,601          43,224
                                                          ----------      ----------

      Total Fixed Charges                                 $  406,236      $  392,347
                                                          ==========      ==========


  Ratio of Earnings to Fixed Charges                            3.47            3.23


                                                                    Exhibit 12.3


                  ORANGE AND ROCKLAND UTILITIES, INC. AND SUBSIDIARIES

                           RATIO OF EARNINGS TO FIXED CHARGES
                                   Twelve Months Ended
                                 (Thousands of Dollars)




                                                         SEPTEMBER          DECEMBER
                                                           2001               2000
                                                         ---------          --------
                                                                      
EARNINGS
  Net Income                                              $40,453            $39,069
  Federal Income & State Tax                               31,173             22,826

  Total Earnings Before Federal and State Income Tax       71,625             61,895

FIXED CHARGES*                                             26,578             28,399
                                                          -------            -------
      Total Earnings Before Federal and State
        Income Tax and Fixed Charges                      $98,204            $90,294
                                                          =======            =======


  * Fixed Charges

  Interest on Long-Term Debt                               22,130            $22,933
  Interest Component on lease Payment                       1,260              2,515
  Other Interest                                            3,189              2,951
                                                          -------            -------

      Total Fixed Charges                                 $26,578            $28,399
                                                          =======            =======



  Ratio of Earnings to Fixed Charges                         3.70               3.18
                                                          =======            =======