Les, thanks for the message, and congratulations!  I hope the fishing is good and that you get some rest. All the best.  Jim  

 -----Original Message-----
From: 	lobaughl@NiagaraMohawk.com@ENRON  
Sent:	Friday, October 12, 2001 12:58 PM
To:	Derrick Jr., James
Subject:	Niagara Mohawk-National Grid Announce Proposed Merger and Rate Plan Settlement Agreement

Jim

Attached is a copy of our new release announcing the settlement of our
merger (sales?) case. Considering the regulatory environment here and the
good relations we have built with our state commission, we really do
believe we can get final state approval on November 28th!

I am going to unwind a bit and go fishing this weekend, but when I return
on Monday I'll start writing a new resume and begin focusing on my NEXT
career!  If  during your world wide  travels you hear of a challenging
opportunity that seems suitable, please do not hesitate to let me know.
All advice and suggestions  from friends are truly welcome!

Have a good weekend.

Les
---------------------- Forwarded by Leslie E LoBaugh/LCR/NMPC on 10/12/2001
01:42 PM ---------------------------


Kenneth M Tompkins
10/12/2001 02:48 AM

To:   Leslie E LoBaugh/LCR/NMPC@NMPC
cc:

Subject:  Niagara Mohawk-National Grid Announce Proposed Merger and Rate
      Plan Settlement Agreement

The following news release was issued at 2 a.m. EDT (7 a.m. BST).  You will
also be receiving a Merger Update on this announcement later this morning.





            Niagara Mohawk?National Grid Merger Joint Proposal
          Expected to Drop Residential Electricity Bills 5 percent

       New York State Department of Public Service Staff, IBEW Local 97,
      Business, Consumer, and Environmental Groups Support Agreement


     SYRACUSE and WESTBOROUGH, Oct. 12 ? Niagara Mohawk Power Corp.'s

residential customers are expected to see a 5 percent electricity bill

decrease under a proposed merger and rate plan settlement agreement

announced by Niagara Mohawk Holdings Inc. (NYSE:NMK) and National Grid

Group plc (NYSE: NGG).  The agreement, reached with the New York State

Department of Public Service staff and other parties, was filed late

Thursday with the New York State Public Service Commission for approval.

If the merger closes, it would result in net customer savings of about $1

billion over the next 10 years, compared with rates projected without the

merger.  Also, as part of the agreement, the companies would expand Niagara

Mohawk's annual Upstate New York economic development efforts by $12.5

million.

     "Niagara Mohawk's merger with National Grid will allow us to reduce

and stabilize energy delivery costs and enhance our commitment to economic

development in the communities we serve," said William F. Edwards, Niagara

Mohawk's senior vice president and chief financial officer.  "We believe

this agreement will provide significant benefits to Upstate customers and

to the economy."

     "The rate cuts, low-income protection, and other benefits agreed to in

this plan will help National Grid fulfill our commitment to become a

positive presence in Upstate New York," said Lawrence Reilly, senior vice

president and general counsel for National Grid USA.

     "The significant size of the merged companies will provide us with the

resources and skills necessary to deliver first-rate customer service while

being a low-cost provider of electricity and natural gas service," he said.

He added that the agreement details a comprehensive service quality plan

under which customer safety, reliability, and service will be maintained

and enhanced after the merger.  The plan calls for up to $24 million in

annual penalties ? or more under certain conditions ? if defined customer

service and reliability goals aren't achieved.

     Niagara Mohawk's actual costs for delivery of electricity are expected

to drop by more than 8 percent through the merger.  When those savings are

applied to a customer's entire electricity bill ? which also includes the

cost of electricity purchased ? the net savings are projected to equal 5

percent.

     The reduction would be implemented upon consummation of the merger.

At that time, today's agreement calls for customers' delivery charges to be

immediately reduced by approximately $160 million.  After that decrease,

delivery charges would remain stabilized for

10 years subject to limited adjustments.  In addition, the companies would

forgo collection of approximately $850 million in nuclear costs that

otherwise would have been collected from customers.

     The long-term proposal has a number of other initiatives, including:

?    Price-stabilized electricity commodity service for residential and
small commercial customers for several years, providing those customers
with significant protection from any major fluctuations in the generation
marketplace.
?    The extension by 16 months of a multi-year gas rate settlement,
resulting in gas delivery rates -- unchanged since 1996 -- remaining the
same through December 2004.
?    The extension of the Low-Income Customer Assistance Program, which was
expanded under Niagara Mohawk's existing regulatory agreement with the PSC,
and the development of a special rate for eligible low-income customers.
?    The establishment of electricity choice educational programs targeted
to customers and energy service companies.
?    Environmental benefits such as interconnection assistance for wind
power sources, support for "green" power marketing, and the continued sale
of surplus land for preservation.
     The agreement culminates five months of negotiations among Niagara

Mohawk, National Grid, the Department of Public Service staff, and other

parties including large industrial customers,

energy service companies, and various state agencies.

      "This joint proposal continues the recent downward trend in Niagara

Mohawk's delivery rates for businesses and provides additional rate and

service options for those customers, all of which should enhance business

expansion and economic development across Upstate New York," said Robert

Loughney on behalf of Multiple Intervenors, a trade association

representing the interests of the state's largest commercial and industrial

employers.

     The proposed settlement is supported by two major national

environmental groups: the Natural Resources Defense Council, and

Environmental Defense.  It also is supported by the American Wind Energy

Association and by Community Energy, a green power marketing company.

     "The merger agreement benefits the environment and the economy, by

providing customers with an easy way to purchase renewable energy products

on their electricity bill, and by stimulating a large new investment in

wind energy generation in Upstate New York," said David Wooley, counsel for

the four environmental interests.  "In this proposal, National Grid

demonstrates that it intends to continue Niagara Mohawk's established

record of responsible environmental stewardship."

     A leading advocacy group for low-income customers also supports the

joint settlement proposal.

     "Specifically and positively addressed in this proposal are the needs

of many customers who struggle to make ends meet," said Ben Wiles, an

attorney for the Public Utility Law Project.  "The opportunity created by

the merger of National Grid USA and Niagara Mohawk will result in a special

reduced rate for as many as 60,000 eligible low-income customers.  It also

will expand Niagara Mohawk's safety net program to allow more people to

receive assistance."

     Among the other parties to sign the settlement was the International

Brotherhood of Electrical Workers Local 97, which represents Niagara

Mohawk's unionized work force.  In addition, the Distributed Generation

Power Coalition, energy marketers, energy services companies, and regional

economic development agencies support the settlement proposal.

     The companies have asked that the matter be considered at the PSC's

Nov. 28 meeting.  The merger also is subject to Securities and Exchange

Commission approval.

     Niagara Mohawk Holdings Inc. is an investor-owned energy services

company that provides electricity to more than 1.5 million customers across

24,000 square miles of Upstate New York.  The company also delivers natural

gas to more than 540,000 customers over 4,500 square miles of eastern,

central, and northern New York.

     National Grid USA includes local electric companies Massachusetts

Electric, Narragansett Electric, Granite State Electric, Nantucket

Electric, and a substantial transmission business.  Its parent company,

National Grid Group plc, builds, owns, and operates electric and

telecommunications networks around the world.



NOTE:  This release contains statements that constitute forward-looking
information.  Such statements are subject to certain risks, uncertainties
and assumptions.  All of these forward-looking statements are based on
estimates and assumptions made by the company's management which, although
believed by the company's management to be reasonable, are inherently
uncertain.  Such forward-looking statements are not guarantees of future
performance or results and involve certain risks and uncertainties.  Actual
results or developments may differ materially from the forward-looking
statements as a result of various factors.


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