It is the policy of Bangor Hydro-Electric Company (Bangor) and its Marketing and Energy Affiliates that the companies and all employees will and must comply with the standards of conduct in the Federal Energy Regulatory Commission’s (FERC or Commission) regulations set forth in 18 C.F.R. Part 358, including the General Principles applicable to Transmission Providers under 18 C.F.R. Section 358.2. To ensure full compliance and to advise the FERC and the public as to the steps being taken by Bangor and its Marketing and Energy Affiliates, to comply, the following Implementation Procedures have been developed. Bangor, its Marketing and Energy Affiliates, and all Transmission Function employees will follow these Implementation Procedures or shall request specific Commission waiver, as appropriate. Consistent with FERC’s regulations, these procedures do not apply to activities with respect to bundled retail sales and purchases.

Consistent with the requirements of 18 C.F.R. Section 358.2, Bangor’s Standards of Conduct ensure that (i) Bangor’s employees engaged in transmission system operations will function independently from the employees of Bangor’s Marketing and Energy Affiliates; and (ii) Bangor will treat all transmission customers, affiliated and non-affiliated, on a non-discriminatory basis and will not operate its transmission system to preferentially benefit its Marketing or Energy Affiliates. The specific process by which Bangor’s Standards of Conduct were developed, and the procedures for their enforcement, are described in Section 7 hereof.

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3.1(a) Except in emergency circumstances affecting system reliability, all Transmission Function employees shall function independently of Bangor’s Marketing or Energy Affiliates’ employees.

3.1(b) Bangor will report to the Commission and post on its OASIS each emergency that results in any deviation from the Standards of Conduct, within 24 hours of any such deviation.

3.1(c) Employees of Bangor’s Marketing or Energy Affiliates are prohibited from (i) conducting transmission system operations or reliability functions; and (ii) having access to the system control center or similar facilities used for transmission operations or reliability functions that differs in any way from the access available to other transmission customers.

3.1(d) Bangor may share with its Marketing or Energy Affiliates (i) support employees and field and maintenance employees; and (ii) risk management employees that are not engaged in Transmission Function or sales or commodity functions. In addition, Bangor may share with its Marketing and Energy Affiliates senior officers and directors who are not Transmission Function Employees. Bangor may share with its shared officers and directors transmission information covered by 18 C.F.R. Section 358.5(a) and 358.5(b) provided that such shared officers and directors do not participate in directing, organizing or executing transmission system operations or marketing functions or act as a conduit to share such information with Bangor’s Marketing or Energy Affiliates. Bangor shall identify any categories of employees shared between Bangor and its Marketing or Energy Affiliates. Bangor shall post on its OASIS the identity of the categories of such shared employees.

3.2 Organization and Affiliates

3.2(a) Bangor will maintain and keep current on its OASIS a list of all Marketing and Energy Affiliates, including addresses. Bangor will revise and post on its OASIS a revised list of revised Marketing and Energy Affiliates within seven (7) business days of a change to the information previously posted. The revised posting also will indicate the date it was updated.

3.2(b) Bangor will maintain and keep current on its OASIS a list of all facilities shared with its Marketing and Energy affiliates, including a description of the facilities and relevant addresses. Bangor will revise and post on its OASIS a revised list of all facilities shared with its Marketing and Energy Affiliates within seven (7) business days of a change to the information previously posted. The revised posting also will indicate the date it was updated.

3.2(c) Bangor will maintain and keep current on its OASIS an organizational chart depicting the corporate structure of its parent corporation and the relative relationships in the corporate structure of Bangor and its Marketing and Energy Affiliates. Bangor will revise and post on its OASIS a revised organizational chart within seven (7) business days of a change to the information previously posted. The revised posting also will indicate the date it was updated.

3.2(d) Bangor will maintain and keep current on its OASIS a listing of Bangor’s business units, job titles and descriptions, and chain of command for all positions, including officers and directors, with the exception of clerical, maintenance and field positions. The posted job titles and descriptions shall indicate whether the employee is involved in transmission or sales and will include the employee’s title, duties, and the name of the supervisory employees who manage non-clerical employees involved in transmission or sales. Bangor will revise and post on its OASIS a revised listing of Bangor’s business units, job titles and descriptions, and chain of command for all positions, including officers and directors, within seven (7) business days of a change to the information previously posted. The revised posting also will indicate the date it was updated.

3.2(e) For all employees who (i) are engaged in transmission functions for Bangor and marketing or sales functions or (ii) are engaged in transmission functions for Bangor and are employed by any of Bangor’s Energy Affiliates, Bangor will post the name of the business unit within the marketing or sales unit or the Energy Affiliate; the organizational structure in which the employee is located; the employee’s name, job title and job description in the marketing or sales unit or Energy Affiliate; and the employee’s position within the chain of command of the Marketing or Energy Affiliate. Bangor will revise and post on its OASIS a revised listing of the information posted pursuant to this section 3.2(e) within seven (7) business days of a change to the information previously posted. The revised posting also will indicate the date it was updated.

3.2(f) Bangor shall post information concerning potential merger partners as affiliates within seven days after the potential merger is announced.

3.3 Transfers

Bangor shall post notices of any employee transfers between Bangor and its Marketing and Energy Affiliates on its OASIS, including an identification of the transferring employee, his/her respective titles (pre and post-transfer) and the effective date of the transfer. Bangor shall retain such postings for 90 days.

3.4 Books and Records

Bangor will maintain its books of account and records separately from those of its Energy Affiliates.

4.1 Bangor’s Marketing or Energy Affiliates shall not have access to any information about the Transmission Provider’s transmission system that is not available to all users of its OASIS or Internet website. Employees of Bangor’s Marketing or Energy Affiliates are prohibited from obtaining information about Bangor’s transmission system through access to information not posted on the OASIS or Internet website or not otherwise available to the general public without restriction.

4.2 Bangor’s employees shall not disclose information to Bangor’s Marketing or Energy Affiliates concerning Bangor’s transmission system or the transmission system of another (including, but not limited to, information received from non-affiliates or information about available transmission capability, price, curtailments, storage, ancillary services, balancing, maintenance activity, capacity expansion plans, or similar information) through non-public communications conducted off the OASIS or Internet website, through access to information not posted on the OASIS or Internet website that is not contemporaneously available to the public, or through information on the OASIS or Internet website that is not at the same time publicly available.

4.3 Bangor may not share any information, acquired from non-affiliated transmission customers or potential non-affiliated transmission customers, or developed in the course of responding to requests for transmission or ancillary service on the OASIS or Internet website, with employees of Bangor’s Marketing or Energy Affiliates, except to the limited extent information is required to be posted on the OASIS or Internet website in response to a request for transmission service or ancillary services.

4.4 If a Bangor employee discloses information in a manner contrary to the provisions of Sections 4.2 and 4.3 hereof (reflecting the prohibitions set forth in 18 C.F.R. Section 358.5(b)(1) and (2)), Bangor must immediately post such information on the OASIS or Internet website.

4.5 A non-affiliated transmission customer may voluntarily consent, in writing, to allow Bangor to share the non-affiliated customer’s information with a Marketing or Energy Affiliate of Bangor. In such case, Bangor must post a notice on the OASIS or Internet website of that consent, together with a statement that Bangor did not provide any preferences, either operational or rate- related, in exchange for that voluntary consent.

4.6 Bangor shall not be required to contemporaneously disclose to all transmission customers or potential transmission customers information covered by Section 4.2 hereof (reflecting the prohibitions set forth in 18 C.F.R. Section 358.5(b)(1)) if it relates solely to a Marketing or Energy Affiliate’s specific request for transmission service.

4.7 Bangor may share generation information necessary to perform generation dispatch with its Marketing and Energy Affiliate that does not include specific information about individual third party transmission transactions or potential transmission arrangements.

4.8 Neither Bangor nor Bangor’s employees may use anyone as a conduit for sharing information covered by Section 4.2 and 4.3 hereof (reflecting the prohibitions set forth in 18 C.F.R. Section 358.5(b)(1) and (2)) with a Marketing or Energy Affiliate. Bangor may share information covered by Section 4.2 and 4.3 hereof (reflecting the prohibitions set forth in 18 C.F.R. Section 358.5(b)(1) and (2)) with employees permitted to be shared under Section 3.4 hereof (reflecting permissible sharing arrangements set forth in 18 C.F.R. Sections 358.4(a)(4), (5) and (6)), provided that such employees do not act as a conduit to share such information with any Marketing or Energy Affiliates.

4.9 Bangor is permitted to share information necessary to maintain the operations of its transmission system with its Energy Affiliates.

5.2 Bangor shall apply all tariff provisions relating to the sale or purchase of open access transmission service in a fair and impartial manner that treats all transmission customers in a non-discriminatory manner, if these tariff provisions permit the use of discretion.

5.3 Bangor shall process all similar requests for transmission in the same manner and within the same period of time.

5.4 Bangor shall maintain a written log, available for Commission audit, detailing the circumstances and manner in which it exercised its discretion under any terms of the tariff. The information contained in the log shall be posted on Bangor’s OASIS or Internet website within 24 hours of when a Transmission Provider exercises its discretion under any terms of the tariff.

5.5 Bangor may not, through its tariffs or otherwise, give preference to its Marketing or Energy Affiliate, over any other wholesale customer in matters relating to the sale or purchase of transmission service including, but not limited to, issues of price, curtailments, scheduling, priority, ancillary services, or balancing.

7.1 Posting of Compliance Procedures

Bangor shall post by September 22, 2004 and thereafter maintain on its OASIS these written procedures implementing the standards of conduct in compliance with the requirements of 18 C.F.R. Part 358.

7.2 Description of Process for Developing Standards and Ensuring Compliance

Bangor provides the following written procedures describing the process by which Bangor developed its Standards of Conduct and otherwise ensured compliance with the regulations under 18 C.F.R. Part 358.

7.2(a) Bangor first reviewed its previously-effective “Standards for Company and Employee Conduct” to identify changes and updates necessary to ensure full compliance with 18 C.F.R. Part 358. As a result of this review, Bangor determined that, in large part, Bangor’s pre-existing “Standards for Company and Employee Conduct” included many of the functional separation and disclosure protections prescribed by the new regulations. Nonetheless, Bangor has replaced its existing “Standards for Company and Employee Conduct,” in their entirety, with these “Standards of Conduct” that specifically reflect the new requirements under 18 C.F.R. Part 358.

7.2(b) In order to ensure full compliance with the new regulations, Bangor engaged regulatory counsel to assist in the review, drafting and implementation of these Standards of Conduct. As part of this process, Bangor identified all currently effective organizational, functional and disclosure restrictions/requirements that were retained under the Commission’s new regulations and confirmed Bangor’s continued compliance with all such restrictions/requirements. Following multiple communications by and between Bangor and regulatory counsel, this step of the process was concluded on or about September 16, 2004.

7.2(c) The next step in the compliance process was to identify any new requirements imposed under the 18 C.F.R. Part 358 regulations. Working with regulatory counsel, a compliance checklist was prepared with responsibilities assigned to address any outstanding tasks. Through electronic mail and telephone conferences, periodic progress reports were provided. In addition, questions concerning interpretation or implementation of the new standards were resolved through consultation with regulatory counsel. With regard to the specific requirements of the new regulations, the following procedures were followed:

7.2(c)(i) To ensure independent functioning of the transmission function (and in addition to updating its Standards of Conduct) Bangor provided copies of these Standards of Conduct to all Transmission Provider employees and employees of the Marketing and Energy Affiliates. In addition, Bangor conducted training programs in accordance with 18 C.F.R. Section 358.5(e)(5). All Bangor officers and directors, as well as employees with access to transmission information of information concerning gas or electric purchases, sales or marketing functions, shall sign or certify participation in the Edison Electric Institute computer-based training program. As of September 22, 2004, Bangor Hydro has substantially complied with these training requirements, while the remaining officers and directors will be in compliance on or before October 29, 2004.

7.2(c)(ii) Bangor has confirmed that there are no shared facilities between Transmission Provider and its Energy Affiliates. Bangor notes that all corporate buildings are secured through card key access and all IT servers are housed in a secure (locked) room. Bangor’s network systems are password-protected and all databases are subject to separate password protection. Employees of Bangor’s Marketing and Energy Affiliates do not have access to Bangor’s buildings, network systems, servers or databases.

7.2(c)(iii) Bangor has designated Mr. Jeffrey A. Jones as its Chief Compliance Officer (CCO). Mr. Jones was fully briefed by regulatory counsel regarding the new Standards of Conduct and the responsibilities thereunder. Mr. Jones was directly involved in establishing the revised Standards of Conduct, including, specifically, the provisions governing independent functioning. Mr. Jones, in conjunction with regulatory counsel, reviewed each of the requirements under 18 C.F.R. Part 358 and independently confirmed Bangor’s compliance. Mr. Jones’ contact information is provided below.

Jeffrey A. Jones
Manager—Legal & Regulatory Services
Bangor Hydro-Electric Company
33 State Street
P.O. Box 932
Bangor, Maine 04402

(207) 973-2899
(207) 947-1655 (fax)
jjones@bhe.com

7.2(c)(iv) The Chief Compliance Officers general duties and functions include the following:

• Answering employee questions regarding the standards of conduct.
• Coordinating audits and investigations with Federal Energy Regulatory Commission Staff.
• Overseeing compliance with the standards of conduct, including on-going posting and training requirements described in Section 7.3 hereof.
• Interfacing with regulatory counsel on compliance issues.

7.3 Description of Process for Ensuring Continued Compliance

7.3(a) Bangor’s Chief Compliance Officer shall be responsible for Bangor’s updating information required to be posted pursuant to standard of conduct procedures. Bangor’s Chief Compliance Officer shall discharge these responsibilities by (i) directing that information concerning employment changes be communicated to the Chief Compliance Officer within three (3) business days following such change; (ii) directing that all employees familiarize themselves with the Standards of Conduct and communicate any information that would require posting or updating of Bangor’s OASIS to maintain compliance with the Standards of Conduct; (iii) circulating, on a weekly basis, electronic mail reminders of the Bangor’s continuing compliance obligations under the Standards of Conduct.

7.3(b) Bangor will provide a copy of its standards of conduct to any new employee of Bangor or its Marketing and Energy Affiliates upon the new employee’s commencement of employment.

7.3(c) Bangor will retain documents and communications to demonstrate that Bangor is in compliance with the Standards of Conduct in 18 C.F.R. Part 358 and shall comply with the information storing and archiving requirements of 18 C.F.R. Part 37.

7.3(d) Bangor will update, upon any changes, the identity of categories of employees shared between Bangor and its Marketing and Energy Affiliates provided in section 3.1(d) of these standards of conduct and written procedures.

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