ENERGY EAST CORPORATION
                            RGS ENERGY GROUP, INC.
                               FILING TYPE:     U-1
                               DESCRIPTION:     APPLICATION/
                                                DECLARATION  UNDER  THE  ACT
                               FILING DATE:     JUNE 20,  2001
                               PERIOD  END:     N/A
                         PRIMARY  EXCHANGE:     NEW  YORK  STOCK  EXCHANGE
                                                TICKER:     EAS
                                                            RGS





                                 TABLE OF CONTENTS


                                                                                 PAGE
                                                                                 ----
                                                                               
ITEM 1.     DESCRIPTION OF PROPOSED MERGER . . . . . . . . . . . . . . . . . . .   1
     A.     INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1
            1.     General Request . . . . . . . . . . . . . . . . . . . . . . .   3
            2.     Overview of the Merger. . . . . . . . . . . . . . . . . . . .   3
     B.     DESCRIPTION OF THE PARTIES TO THE  MERGER. . . . . . . . . . . . . .   4
            1.     Energy East . . . . . . . . . . . . . . . . . . . . . . . . .   4
            2.     RGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   9
     C.     DESCRIPTION OF THE MERGER. . . . . . . . . . . . . . . . . . . . . .  11
     D.     MANAGEMENT AND OPERATION OF THE COMPANIES
            FOLLOWING THE MERGER . . . . . . . . . . . . . . . . . . . . . . . .  12
ITEM 2.     FEES, COMMISSIONS AND EXPENSES . . . . . . . . . . . . . . . . . . .  13
ITEM 3.     APPLICABLE STATUTORY AND REGULATORY PROVISIONS . . . . . . . . . . .  13
     A.     SECTION 9(A)(2). . . . . . . . . . . . . . . . . . . . . . . . . . .  16
     B.     SECTION 10(B). . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
            1.     Section 10(b)(1). . . . . . . . . . . . . . . . . . . . . . .  19
            2.     Section 10(b)(2). . . . . . . . . . . . . . . . . . . . . . .  21
            3.     Section 10(b)(3). . . . . . . . . . . . . . . . . . . . . . .  24
     C.     SECTION 10(c). . . . . . . . . . . . . . . . . . . . . . . . . . . .  27
            1.     Acquisition Must be Lawful. . . . . . . . . . . . . . . . . .  27
            2.     Combination and Integration of Electric Utility Operations. .  28
            3.     Combination of Gas Utility Operations . . . . . . . . . . . .  35
            4.     Economies and Efficiencies from the Merger (Section 10(c)(2))  46
            5.     Retention of Non-Utility Businesses . . . . . . . . . . . . .  50
     D.     SECTION 10(F). . . . . . . . . . . . . . . . . . . . . . . . . . . .  52
     E.     POST-MERGER CORPORATE STRUCTURE: INTERMEDIATE
            HOLDING COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . .  52
ITEM 4.     REGULATORY APPROVALS . . . . . . . . . . . . . . . . . . . . . . . .  55
     A.     ANTITRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  55
     B.     FEDERAL POWER ACT. . . . . . . . . . . . . . . . . . . . . . . . . .  55
     C.     ATOMIC ENERGY ACT. . . . . . . . . . . . . . . . . . . . . . . . . .  55
     D.     TELECOMMUNICATIONS ACT . . . . . . . . . . . . . . . . . . . . . . .  55
     E.     STATE PUBLIC UTILITY REGULATION. . . . . . . . . . . . . . . . . . .  56
ITEM 5.     PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  56
ITEM 6.     EXHIBITS AND FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . .  56
     A.     EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  56
     B.     FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . .  58
ITEM 7.     INFORMATION AS TO ENVIRONMENTAL EFFECTS. . . . . . . . . . . . . . .  58



                                        i

                              Filed June 20, 2001
                                No. ____________

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM U-1

                             APPLICATION/DECLARATION

              UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935

                             Energy East Corporation
                  P. O. Box 12904, Albany, New York 12212-2904
                             RGS Energy Group, Inc.
                 89 East Avenue, Rochester, New York  14649-0002
                  (Name of companies filing this statement and
                     address of principal executive offices)

    Kenneth M. Jasinski                     Thomas S. Richards
    Executive Vice President, General       Chairman, President and Chief
       Counsel and Secretary                   Executive Officer
    Energy East Corporation                 RGS Energy Group, Inc.
    P.O. Box 12904                          89 East Avenue
    Albany, New York 12212-2904             Rochester, New York 14649-0002
    Telephone:  (518) 434-3049              Telephone:  (716) 546-2700

                  (Names and addresses of agents for service)

     The Commission is requested to send copies of all notices, orders and
                               communications to:

    Adam Wenner, Esq.                       Frank Lee, Esq.
    Vinson & Elkins L.L.P.                  Huber Lawrence & Abell
    1455 Pennsylvania Avenue, N.W.          605 Third Avenue
    Washington, D.C. 20004-1008             New York, New York 10158
    Telephone:  (202) 639-6533              Telephone:  (212) 682-6200



DESCRIPTION  OF  PROPOSED  MERGER

A.   INTRODUCTION

     This  Application/Declaration  seeks  approvals  relating  to  the proposed
combination  of  Energy  East Corporation ("Energy East") with RGS Energy Group,
Inc.  ("RGS") (collectively the "Companies") pursuant to which RGS will become a
direct subsidiary of Energy East (the proposed combination is referred to as the
"Merger").  Energy  East  has  registered  with  the  Securities  and  Exchange
Commission  (the  "SEC" or "Commission") as a holding company under Section 5 of
the  Public  Utility  Holding  Company  Act  of  1935  (the  "Act"). (1)

     The  Merger  is  expected  to  produce  substantial benefits to the public,
investors  and  consumers,  and the Merger meets all applicable standards of the
Act.  The  Companies estimate total cost savings resulting from joint management
of  procurement,  information  technology  and  other administrative and general
areas  at  approximately  $50  million  per  year,  with an anticipated total of
approximately  $533  million  of  estimated  net  cost savings over the ten-year
period  2002-2011. The Companies believe that the Merger will allow shareholders
and  consumers  to  participate  in a larger, financially stronger company that,
through  a  combination  of  the capital, management, and technical expertise of
both  Companies,  will be a viable competitor in the rapidly evolving market for
energy  and  energy  services,  will  be  able  to  achieve  increased financial
stability  and strength, greater opportunities for earnings growth, reduction of
operating  costs,  efficiencies  of  operation, better use of facilities for the
benefit  of  customers, improved ability to use new technologies, greater retail
and  industrial sales diversity, and optimization of their respective portfolios
of gas supply and transportation through joint management. The Companies believe
the Merger will significantly improve the competitive positions of their utility
subsidiaries  and  create  greater  opportunities  for  growth.

     Additionally,  the  Merger will result in benefits to the public, investors
and consumers by allowing Energy East, through the acquisition of RGS, to become
a  larger,  financially  stronger company that will have the combined resources,
experience  and  talent  to  focus  on providing high-quality and cost-efficient
energy  delivery,  products  and  services to customers in the Northeast. In the
last  few years, industry and regulators have begun implementing a transition to
competitive  wholesale and retail markets in New York State and elsewhere in the
country.  The stronger organization resulting from the Merger should enhance the
ability  of  the  utilities  to  provide high-quality service to their customers
during  the  volatile  period  of  transition  to  full  competition.

     Moreover,  the  Merger  will  join  two  companies  with similar management
approaches  and  similar business objectives. The utility subsidiaries of Energy
East  and  RGS  operate  in  comparable  service  territories and are subject to
regulation  by state commissions that have been engaged in restructuring utility
operations  and  aggressively  pursuing retail competition policies for the past

------------------
1  Prior  to  completion of the Merger, the Companies expect to file one or more
supplemental  applications-declarations  under  the  Act with respect to ongoing
financing  activities,  intra-system  services  and  other matters pertaining to
Energy  East  after  the  Merger.



several  years.  Open  retail  access  is  available  today  on  the  electric
transmission and distribution systems of the Companies' three principal electric
utility  company  subsidiaries,  Central  Maine  Power  Company  ("Central Maine
Power"),  New York State Electric & Gas Corporation ("NYSEG"), and Rochester Gas
and  Electric  Corporation  ("RG&E").

     This Application/Declaration will show that the Merger fits within existing
Commission precedent and is made possible, applying the standards of the Act, by
reason  of  significant  legislative,  regulatory and technological changes that
have  occurred  in  the  electric  and  gas  utility industries in recent years.
Approving  the  Merger as requested will not result in any of the harms Congress
sought  to  prevent  by  adopting  the  Act  and  will  be  consistent  with the
requirements  of  the  Act.

     The  Act  was intended, among other things, to prevent the evils that arise
"when  the  growth  and  extension of holding companies bears no relation to the
economy  of  management and operation or integration and coordination of related
operating  properties."  In contrast, post-Merger Energy East will exemplify the
growth  that promotes economies and coordination of related operating properties
within  a single region in a manner consistent not only with the policies of the
Act, but also with the policies of both the Federal Energy Regulatory Commission
(the  "FERC") and state regulatory initiatives. Moreover, as discussed in detail
below,  by  placing  two  interconnected  utilities  under common ownership, the
Merger  will  increase the efficiency of the competitive markets in the state of
New  York  and  in  the  northeast  United States, thereby "serv(ing) the public
interest  by  tending  toward  the  economical  and  efficient development of an
integrated  public  utility  system."

     The  shareholders  of RGS approved the Merger with Energy East at a meeting
held  on  June  15,  2001.  Energy  East  and  RGS have submitted or will submit
applications  requesting  approval  of  the Merger and/or related matters to the
appropriate  state and federal regulators, including the New York Public Service
Commission  ("NYPSC"),  the FERC, the Nuclear Regulatory Commission ("NRC"), and
the  Federal  Communications  Commission  ("FCC"). Energy East and RGS will also
make  the required filings with the Antitrust Division of the U.S. Department of
Justice  ("DOJ")  and  the  Federal  Trade  Commission  ("FTC")  under  the
Hart-Scott-Rodino  Antitrust  Improvements  Act of 1976, as amended ("HSR Act").
See  Exhibits  D-1 through D-10 and Item 4 below for additional detail regarding
these  regulatory  approvals. It is anticipated that favorable responses will be
received  from  these  regulators  by  September  2001.

     In order to permit timely consummation of the Merger and the realization of
the  substantial  benefits  it is expected to produce, Energy East requests that
the  Commission's review of this Application/Declaration commence and proceed as
expeditiously  as  practicable,  and  that  the  Commission  order  be issued by
December 12, 2001. To the extent that the NYPSC or other approvals have not been
received  by  that  time,  Energy  East  asks  the  Commission  to condition the
effectiveness  of  its  order  upon  receipt  of  all  necessary state and other
regulatory  approvals.


                                        2

          1.   General  Request
               ----------------

     Pursuant to Sections 9(a)(2) and 10 of the Act, Energy East hereby requests
authorization and approval of the Commission to acquire, by means of the Merger,
100  percent  of the issued and outstanding common shares of RGS. A chart of the
proposed corporate structure of Energy East following consummation of the Merger
is  attached  hereto  as  Exhibit E-4. Energy East also hereby requests that the
Commission  approve:

     (i)     the  operation of post-Merger Energy East as a combination electric
and  gas  utility  holding  company;

     (ii)    the  acquisition  by  Energy  East  of the non-utility activities,
businesses  and  investments  of  RGS;

     (iii)   the  acquisition  of  shares  of  common  stock  of NYSEG by RGS;

     (iv)    the  acquisition  by  Eagle  Merger  Corp.  ("Eagle")  of  RGS;

     (v)     the  acquisition  of  shares  of  Eagle  by  Energy  East;

     (vi)    the  retention  by  Energy  East of RGS as an intermediate holding
company;  and

     (vii)   the  exemption  of  RGS from all provisions of the Act except for
Section  9(a)(2).

          2.   Overview  of  the  Merger
               -------------------------

     Pursuant  to an Agreement and Plan of Merger, dated as of February 16, 2001
(the  "Merger  Agreement"),  RGS  will be merged with and into Eagle, a New York
corporation,  which  will  be  a  wholly-owned  subsidiary of Energy East at the
effective  time of the Merger, with Eagle being the surviving corporation. Eagle
will  continue  to  conduct  RGS's  businesses under the name "RGS Energy Group,
Inc." as a direct, wholly-owned subsidiary of Energy East. Subject to regulatory
and shareholder approval, Energy East will purchase all common shares of RGS for
approximately  $39.50  in  cash  per  share,  Energy  East  common  stock  or  a
combination  of  cash and Energy East common stock. Energy East will also assume
approximately  $1.0 billion of RGS debt. The Merger Agreement is incorporated by
reference  as  Exhibit  B-1  hereto.

     As  a  result of these transactions, RGS will become a direct subsidiary of
Energy  East.  RG&E  and  the non-regulated subsidiaries of RGS will continue as
subsidiaries  of  RGS  and  will become indirect subsidiaries of Energy East. As
soon  as  practicable  after  the effective time of the Merger, Energy East will
transfer  all  of  NYSEG's  common  stock  to RGS, so that NYSEG and RG&E can be
operated  under  a  combined  management  structure.


                                        3

B.   DESCRIPTION  OF  THE  PARTIES  TO  THE  MERGER

          1.   Energy  East
               ------------

     Energy  East  is  currently a registered public utility holding company,(2)
and neither owns nor operates any physical properties. Through its subsidiaries,
Energy  East  is  an energy services and delivery company with operations in New
York,  Connecticut,  Massachusetts, Maine, New Hampshire, and New Jersey serving
1,410,000  electricity  customers and 616,000 natural gas customers. Energy East
has  corporate  offices  in  New  York  and Maine. Energy East's common stock is
publicly  traded  on  the New York Stock Exchange under the symbol "EAS." Energy
East's  principal  executive offices are located at P. O. Box 12904, Albany, New
York.  In 2000, approximately 68% of Energy East's operating revenue was derived
from  electricity  deliveries,  while approximately 26% of its operating revenue
was  derived from natural gas deliveries. On May 1, 1998, Energy East became the
parent  of  NYSEG.(3)  On  February  8,  2000,  Energy East became the parent of
Connecticut  Energy  Corporation  ("Connecticut Energy"),(4) and on September 1,
2000,  Energy  East  became  the  parent of CMP Group, Inc., CTG Resources, Inc.
("CTG  Resources")  and  Berkshire  Energy  Resources  ("Berkshire  Energy").(5)

     As described below, Energy East holds direct or indirect interests in eight
public  utility companies, each of which is wholly owned by companies within the
Energy  East  system unless otherwise noted: (1) NYSEG, (2) Central Maine Power;
(3)  Maine Electric Power Company, Inc. ("MEPCo") (78.3% voting interest held by
Central  Maine  Power);  (4)  NORVARCO  (50% partnership interest in Chester SVC
Partnership,  an electric utility company under the Act); (5) Maine Natural Gas,
L.L.C.  (6)  Connecticut  Natural Gas Corporation, (7) The Berkshire Gas Company
and  (8)  The  Southern  Connecticut Gas Company (collectively, the "Energy East
Utility  Subsidiaries").

               (a)  Public  Utility  Operations  of  Energy  East

     New  York  State  Electric  &  Gas  Corporation
     -----------------------------------------------

     NYSEG,  a regulated public utility incorporated under the laws of the State
of  New  York,  is  a  combination  electric  and gas utility providing delivery
service to approximately 824,000 electricity customers and approximately 248,000
natural  gas  customers.  NYSEG has divested substantially all of its generating
assets.  It  retains several hydroelectric facilities with an aggregate capacity
of  61  MW,  nonutility  generation  ("NUG") contracts and contracts pursuant to
which  the New York Power Authority ("NYPA") sells power to NYSEG, as well as an
18%  ownership  interest  in  the Nine Mile Point Unit 2 nuclear plant ("NMP2").

------------------
2  Energy  East  registered  with  the  Commission  under  Section  5 of the Act
following  its  acquisition  of  CMP  Group, CTG Resources and Berkshire Energy.

3  Energy  East  Corporation,  et  al.,  HCAR  No.  26834  (Mar.  4,  1998).

4  Energy  East  Corporation,  et  al.,  HCAR  No.  27128  (Feb.  2,  2000).

5  Energy  East  Corporation,  et  al.,  HCAR  No.  27224  (Aug.  31,  2000).


                                        4

NYSEG  has  reached  an  agreement  to sell its share of NMP2 to an unaffiliated
buyer,  and applications to dispose of those interests have been filed with FERC
pursuant  to  Section  203  of the Federal Power Act,(6) and with the Commission
under  Section  12(d) of the Act and Rule 44 thereunder.(7) The FERC has granted
the  application.(8)  NYSEG  is  engaged  in  the  business  of transmitting and
distributing electricity and transporting, storing and distributing natural gas.

     NYSEG's  service  territory,  99% of which is located outside the corporate
limits  of  cities, is in the central, eastern and western parts of the State of
New  York.  NYSEG's service territory has an area of approximately 20,000 square
miles  and  a  population  of 2,500,000. The larger cities in which NYSEG serves
both  electricity  and  natural  gas  customers  are Binghamton, Elmira, Auburn,
Geneva,  Ithaca  and  Lockport,  New  York.  The  service  territory  reflects a
diversified  economy,  including  high-tech  firms, light industry, colleges and
universities,  agriculture and recreational facilities. No customer accounts for
more  than 1% of either electric or natural gas revenues. During the period 1998
through  2000,  approximately  84% of NYSEG's operating revenue was derived from
electricity  deliveries,  with  the  balance  derived  from natural gas service.

     After  the  sale  of  its  interest  in  NMP2, NYSEG will be engaged almost
entirely  in  the  transmission  and  distribution  of  electricity  and  the
distribution  of  natural  gas.  As  of  December  31,  2000,  NYSEG's  electric
transmission  system  consisted  of  approximately  4,384 circuit miles of line.
NYSEG's  electric distribution system consisted of 33,962 pole-miles of overhead
lines and 2,256 miles of underground lines. NYSEG has transferred control of its
transmission  system  to  the New York Independent System Operator ("NYISO").(9)
The  NYISO, an independent operator of utilities' transmission systems, operates
the  transmission  systems  of  all  of  the public utility systems in New York.

     Central  Maine  Power  Company
     ------------------------------

     Central Maine Power is engaged in transmitting and distributing electricity
generated  by  others  to  retail customers in Maine. Central Maine Power is the
largest  transmission  and  distribution  electric  utility  in Maine and serves
approximately  544,000  customers  in  its  11,000  square-mile  service area in
southern  and  central Maine. Central Maine Power had approximately $891 million
in  consolidated  electric  operating  revenues in the twelve month period ended
December 31, 2000. Central Maine Power, a utility subsidiary wholly owned by CMP
Group, is subject to the regulatory authority of the MPUC and FERC. CMP Group is
an  intermediate  holding  company

------------------
6  See  Application of NYSEG et al., FERC Docket No. EC01-75-000, filed February
28,  2001.

7  See  Energy  East  Corporation,  Form  U-1  Application/Declaration, File No.
70-09875  (Mar.  30,  2001).

8  Nine  Mile  Point  Nuclear  Station,  LLC,  95  F.E.R.C.  61,202  (2001).

9  Central  Hudson  Gas  &  Electric  Corp.,  et al., 87 F.E.R.C. 61,135 (1999).


                                        5

subject  to  regulation  under  the  Act as a subsidiary of a registered holding
company and exempt from registration pursuant to Section 3(a)(2) of the Act.(10)

     Central  Maine  Power  has divested and/or relinquished control over all of
its  generating  assets  and  purchase  power  contracts and now functions as an
electric transmission and distribution utility. Central Maine Power has sold its
hydroelectric,  fossil  and  biomass  generating  assets.(11)  It  has  sold its
entitlements  to  purchase capacity and energy under the NUG contracts, and from
its  4% interest in the Vermont Yankee nuclear plant ("Vermont Yankee"), as well
as  its  entitlement  in  a firm energy contract with Hydro Quebec. The sales of
generating  capacity  and entitlements to purchase capacity and energy under NUG
contracts,  nuclear  interests  and  the  Hydro  Quebec  contract were conducted
pursuant  to  the  requirements  of  Maine's  electric  utility  restructuring
legislation  and  MPUC  Rules  and Regulations.(12) As of March 1, 2000, Central
Maine  Power  no  longer  controls generation resources. Also beginning March 1,
2000,  all  retail  electric  consumers in Maine were authorized to choose their
electric  supplier.  Under  Maine  law,  Central  Maine Power is unable to serve
retail  customers  except  through  the  creation of a marketing affiliate or as
directed by the MPUC. CMP Group has elected not to take the steps required under
Maine's  electric  utility  restructuring legislation to participate, through an
affiliate,  as  a  retail electric supplier. Under an order of the MPUC, Central
Maine  Power is required to arrange standard offer energy service for its medium
and  large  commercial and industrial customers who do not select an electricity
supplier.  Central  Maine  Power  has  arranged  service  for  those  classes.

     As of December 31, 2000, Central Maine Power's delivery system consisted of
2,342  miles  of  overhead transmission lines, 20,479 pole-miles of distribution
lines  and  164  miles of network underground and submarine cable. Central Maine
Power  is  a member of the New England Power Pool ("NEPOOL") and has transferred
control  over its pool transmission facilities ("PTF") system to ISO New England
Inc.  ("ISO-NE").(13)  It maintains high-voltage connections with other electric
systems  at  the  New  Hampshire  and  New  Brunswick,  Canada  borders.

MEPCo  and  NORVARCO
--------------------

     Central  Maine  Power  has  two  electric  utility  subsidiaries  which are
organized  and  operate exclusively in Maine: MEPCo and NORVARCO. (Central Maine

------------------
10  Energy  East  Corporation,  et  al.,  HCAR  No.  27224  (Aug.  31,  2000).

11  Central  Maine  Power sold these assets to a non-affiliated third party, FPL
Energy,  a  subsidiary  of  FPL  Group.

12  35-A  M.R.S.A.  S  3204;  and  Chapt.  307  MPUC  Rules  and  Regulations.

13  New  England  Power  Pool,  79  F.E.R.C.  61,374 (1997). ISO-NE operates the
transmission  systems  of  all  of  the  public utility system in New England. A
description  of  ISO-NE  appears  in  Item  3.C.2.(b).(ii).


                                        6

Power,  MEPCo  and  NORVARCO  are  referred to collectively as the "CMP Electric
Utilities.")  MEPCo  owns  and  operates  a  345kV  transmission interconnection
between  the  Maine-New Brunswick, Canada international border at Orient, Maine.
Central  Maine  Power  owns a 78.3% voting interest in MEPCo, with the remaining
interests  owned  by  two  other  Maine  utilities. NORVARCO holds a 50% general
partnership  interest  in  Chester  SVC Partnership, a general partnership which
owns  a  static  var  compensator located in Chester, Maine, adjacent to MEPCo's
transmission  interconnection.

     Other  Nuclear  Interests
     -------------------------

     Central Maine Power owns a 38% voting interest in Maine Yankee Atomic Power
Company,  which  owns  the  Maine  Yankee  nuclear  electric generating plant in
Wiscasset,  Maine.  Maine  Yankee's plant was permanently shut down on August 6,
1997. Central Maine Power also holds (i) a 9.5% voting interest in Yankee Atomic
Electric  Company,  which  has  permanently shut down its plant located in Rowe,
Massachusetts,  and  (ii)  a  six % voting interest in Connecticut Yankee Atomic
Power Company, which has permanently shut down its plant in Haddam, Connecticut.

     Maine  Natural  Gas,  L.L.C.
     ----------------------------

     Maine  Natural Gas, L.L.C. ("Maine Gas"), formerly CMP Natural Gas, L.L.C.,
was  established to furnish natural gas distribution service, on a non-exclusive
basis,  in certain areas of Maine, including, among others, the Bethel, Windham,
Augusta,  Waterville  and  Bangor  metropolitan  areas,  and  the  coastal area,
including  Brunswick  and  Bath.  Maine  Gas  began to provide service to retail
customers  in  May  1999.  Maine Gas is a wholly-owned subsidiary of Energy East
Enterprises,  Inc.,  a  wholly-owned  subsidiary  of  Energy  East.

     Connecticut  Natural  Gas  Corporation
     --------------------------------------

     Connecticut  Natural  Gas  Corporation  ("CNGC")  distributes  gas  to
approximately  147,000  customers  in 22 Connecticut communities, principally in
the Hartford-New Britain area and Greenwich. CNGC's gas distribution business is
subject to regulation by the DPUC as to franchises, rates, standards of service,
issuance of securities, safety practices and certain other matters. Retail sales
of  gas  by CNGC and deliveries of gas owned by others are made pursuant to rate
schedules  and  contracts  filed  with  and  subject to DPUC approval. CNGC is a
utility  subsidiary  wholly  owned  by  CTG  Resources.  CTG  Resources  is  an
intermediate holding company subject to regulation under the Act as a subsidiary
of a registered holding company and exempt from registration pursuant to Section
3(a)(1)  of  the  Act.(14)

     The  Berkshire  Gas  Company
     ----------------------------

     The  Berkshire  Gas Company ("Berkshire Gas") sells and distributes natural
gas  to approximately 35,000 retail customers in nineteen communities in western

------------------
14  Energy  East  Corporation,  et  al.,  HCAR  No.  27224  (Aug.  31,  2000).


                                        7

Massachusetts.  Berkshire  Gas  operates  a  natural  gas  distribution  system
comprising some 694 miles of natural gas distribution pipeline. Berkshire Gas is
subject  to regulation by the Massachusetts Department of Telecommunications and
Energy  ("MDTE"). Berkshire Gas is a "natural gas company" under Section 2(6) of
the Natural Gas Act, 15 U.S.C. Sec. 717(a)(6), with respect to certain sales for
resale  of  natural  gas.  Berkshire Gas has secured a "blanket certificate" for
such  transactions  from  the FERC. Berkshire Gas is a utility subsidiary wholly
owned  by  Berkshire Energy. Berkshire Energy is an intermediate holding company
subject  to  regulation  under  the  Act as a subsidiary of a registered holding
company and exempt from registration pursuant to Section 3(a)(1) of the Act.(15)

     The  Southern  Connecticut  Gas  Company
     ----------------------------------------

     The Southern Connecticut Gas Company ("Southern Connecticut Gas"), a public
service  company  incorporated  under  the  laws of the State of Connecticut, is
engaged  in  the  retail distribution of natural gas for residential, commercial
and  industrial  users  and the transportation of natural gas for commercial and
industrial users. Southern Connecticut Gas is a "gas utility company" as defined
in  Section  2(a)(4)  of  the Act. Southern Connecticut Gas serves approximately
167,000  customers  in the State of Connecticut, primarily in 22 towns along the
southern  Connecticut  coast  from  Westport  to Old Saybrook, which include the
urban  communities  of Bridgeport and New Haven. Southern Connecticut Gas is the
sole  distributor  of  natural gas, other than bottled gas, in its service area.
Southern  Connecticut  Gas  is  a utility subsidiary wholly-owned by Connecticut
Energy.  Connecticut  Energy  is  an  intermediate  holding  company  subject to
regulation  under  the  Act  as a subsidiary of a registered holding company and
exempt  from  registration  pursuant  to  Section  3(a)(1)  of  the  Act.(16)

               (b)  Non-Utility  Affiliates  of  Energy  East

     Energy  East also has a number of direct and indirect subsidiaries that are
not "public utility companies" under the Act. With certain minor exceptions, the
Commission  determined  that  these  nonutility  interests  could be retained by
Energy  East following its registration as a public utility holding company.(17)
Energy  East's  direct  non-utility  subsidiaries are: (1) Berkshire Energy, the
parent of Berkshire Gas; (2) CMP Group, whose subsidiaries include Central Maine
Power  and  Mainecom  Services,  a  telecommunications  service  provider;  (3)
Connecticut  Energy,  the parent of Southern Connecticut Gas; (4) CTG Resources,
the  parent  of  CNGC; (5) The Energy Network, Inc., whose subsidiaries focus on
peaking  generation,  energy  services  and  telecommunications; (6) Energy East
Enterprises, Inc., which owns natural gas and propane air distribution companies
and  is  developing  gas  storage  in  upstate  New  York;(18) (7)  Energy  East

------------------
15  Id.

16  Id.

17  Id.

18  Energy  East  Corporation,  et  al.,  HCAR  No.  26976  (Feb.  12,  1999).


                                        8

Management Corporation ("EE Management"), a management services company;(19) and
(8)  Energy  East  Capital  Trusts  I and II, statutory business trusts.  Energy
East's  non-utility  subsidiaries  are  listed  and  described  at  Exhibit H-1.

     For  the  twelve  months  ended  December  31,  2000,  electric revenues of
approximately  $2,023,600,000  and  natural  gas  revenues  of  approximately
$770,800,000  accounted  for  approximately 72% and 28%, respectively, of Energy
East's  consolidated  gross  utility  revenues.  Energy East's utility operating
income  and  utility net income available for common stock were $555,700,000 and
$254,300,000,  respectively.  Consolidated  assets  of  Energy  East  and  its
subsidiaries  as of December 31, 2000, were approximately $7 billion, consisting
of  $3.6  billion  in  net  utility  plant and $3.4 billion in other utility and
non-utility  assets. For the twelve months ended December 31, 2000, consolidated
operating  revenues,  operating  income  and  net income for Energy East and its
subsidiaries  were approximately $2,959,520,000, $513,921,000, and $235,034,000,
respectively.

          2.   RGS
               ---

     RGS  is  the  parent  company  of  RG&E, a gas and electric utility serving
upstate  New York. Incorporated in 1998 in the State of New York, RGS became the
holding  company for RG&E on August 2, 1999.(20) RGS is a public utility holding
company  by  virtue  of  its owning all of the common shares of stock of RG&E, a
public  utility company as defined in the Act. RGS, through its subsidiaries, is
an energy generation and delivery, products and services company with operations
in  New York. RGS common stock is publicly traded on the New York Stock Exchange
under the symbol "RGS." RGS's principal executive offices are located at 89 East
Avenue,  Rochester,  New  York  14649-0002.  RGS  is  currently  exempt from all
provisions  of the Act, except Section 9(a)(2), under Section 3(a)(2) of the Act
and  Rule  2  thereunder.

               (a)  Public  Utility  Operations  of  RGS

     RG&E
     ----

RG&E  is  engaged  principally  in  the  business  of  generating,  purchasing,
transmitting  and  distributing  electricity,  and  purchasing, transporting and
distributing  natural  gas.  RG&E's  four  major  generating  facilities are two
nuclear  units, the Ginna Nuclear Plant and the Company's 14% share of NMP2, and
two fossil fuel generating stations, the Russell and Allegany Stations. In terms
of  capacity,  these  comprise  46%,  15%,  25%  and 6%, respectively, of RG&E's
current  electric  generating system.  RG&E has agreed to sell its share of NMP2

------------------
19  Energy  East  Corporation,  et  al.,  HCAR  No.  27248  (Oct.  13,  2000).

20  Rochester  Gas  and  Electric  Holdco,  HCAR  No.  26991  (Mar.  16,  1999).


                                        9

to  an  unaffiliated buyer, and an application to dispose of those interests has
been  filed  with FERC pursuant to Section 203 of the Federal Power Act.(21) The
FERC  has  granted  the  application.(22)

     RG&E's  service territory is in upstate New York in parts of nine counties.
RG&E's  service  territory has an area of approximately 2,700 square miles and a
population  of  one  million  people.  RG&E  provides  delivery  service  to
approximately  345,000 electric customers and 293,000 natural gas customers. The
larger  cities  in  which RG&E serves both electricity and natural gas customers
are  Rochester,  and Canandaigua. During 1998 through 2000, approximately 71% of
RG&E's  operating  revenue  was  derived  from electric service with the balance
derived  from  natural  gas  service.  At  December  31,  2000,  RG&E  had 1,973
employees.

               (b)  Non-Utility  Affiliates  of  RGS

     RGS  also  holds  a number of direct and indirect subsidiaries that are not
"public  utility  companies"  under the Act. Active RGS non-utility subsidiaries
are  as  follows,  with additional information regarding these, as well as RGS's
inactive  non-utility  companies,  filed  at  Exhibit  H-2  hereto.

     Energetix,  Inc.
     ----------------

     Energetix,  Inc.  ("Energetix"),  a  wholly-owned subsidiary of RGS, offers
electricity  and  natural  gas  services to retail customers throughout New York
State.  Energetix  has authorization from the FERC to engage in sales for resale
of  electricity  at  market-based  rates,(23)  and  is  a customer of the NYISO.
Energetix  owns  no  generation,  transmission  or  distribution  facilities.

     Subsidiary  companies  under  Energetix's control include Griffith Oil Co.,
Inc.,  an  oil  and  propane distribution company in New York State, and Avrimac
Corporation,  which  through  its  subsidiaries  sells  propane  and  a  limited
selection  of  electric  and  gas  appliances  in  Western and Central New York.
Energetix  and  its subsidiary companies have 379 employees and operate eighteen
customer  service  centers.

     RGS  Development  Corporation
     -----------------------------

     In 1998, the Company formed RGS Development Corporation ("RGS Development")
to  pursue  unregulated  business  opportunities  in the energy marketplace. RGS
Development  provides  energy  systems  development  and  management  services.

     Insurance  and  Investment  Interest
     ------------------------------------

     RG&E  is a member of the Nuclear Electric Insurance Limited. RG&E's account
balance  at  Nuclear  Electric  Insurance  Limited  as  of December 31, 1999 was
$44,226,000.  While  RG&E  is a member of this insurance company, that company's

------------------
21 See Application of NYSEG, et al., FERC Docket No. EC01-75-000, filed February
28,  2001.

22  Nine  Mile  Point  Nuclear  Station,  LLC,  95  F.E.R.C.  61,202  (2001).

23  Rochester  Gas  &  Electric  Corp.,  80  F.E.R.C.  61,284  (1997).


                                       10

by-laws  do  not  recognize  its  members as having an ownership interest in the
company.

     For  the  twelve  months  ended  December  31,  2000,  electric revenues of
approximately  $721,737,000  and  gas  revenues  of  approximately  $322,412,000
accounted  for  approximately  69%  and 31%, respectively, of RGS's consolidated
gross  utility  revenues.  RGS's utility operating income and utility net income
available  for  common  stock  were  $146,950,000 and $91,829,000, respectively.
Consolidated  assets  of  RGS and its subsidiaries as of December 31, 2000, were
approximately  $2.6 billion, consisting of $1.5 billion in net utility plant and
$1.1  billion  in  other  utility  and non-utility assets. For the twelve months
ended  December  31, 2000, consolidated operating revenues, operating income and
net  income  for  RGS  and  its  subsidiaries were approximately $1,448,119,000,
$149,078,000  and  $95,559,000,  respectively.

C.   DESCRIPTION  OF  THE  MERGER

     Pursuant  to the Merger Agreement, RGS will merge with and into Eagle, with
Eagle  being  the  surviving  corporation.  Eagle will continue to conduct RGS's
businesses  under  the  name  "RGS Energy Group, Inc." as a direct, wholly-owned
subsidiary  of  Energy  East.  Subject  to  regulatory and shareholder approval,
Energy  East  will purchase all common shares of RGS for approximately $39.50 in
cash  per  share,  Energy  East common stock or a combination of cash and Energy
East  common  stock.  Energy East will also assume approximately $1.0 billion of
RGS  debt.

     As  a  result of these transactions, RGS will become a direct subsidiary of
Energy  East.  RG&E  and  the non-regulated subsidiaries of RGS will continue as
subsidiaries  of  RGS  and  will become indirect subsidiaries of Energy East. As
soon  as  practicable  after  the effective time of the Merger, Energy East will
transfer  all  of  NYSEG's  common  stock  to RGS, so that NYSEG and RG&E can be
operated  under  a  combined  management  structure.

     Under  the  terms  of  the  Merger Agreement, each outstanding share of RGS
common  stock  will  be converted into the right to receive: (i) $39.50 in cash;
(ii) a number of shares of Energy East common stock valued at $39.50, so long as
Energy  East's  common  stock  price  is  between  $16.57 and $22.41; or (iii) a
combination  of cash and Energy East common stock. Each RGS shareholder would be
able  to  elect  the  form  of  consideration  they  wish to receive, subject to
proration  so  that  55  percent of the RGS Energy shares would be exchanged for
cash,  and  45  percent  would  be  exchanged  for Energy East common stock.(24)

------------------
24 If RGS shareholders owning more than 55% of RGS shares elect to receive cash,
the  number  of  RGS  shares  converted  into  cash will be less than the number
elected. Similarly, if RGS shareholders owning more than 45% of RGS shares elect
to  receive  Energy  East  shares, the number of RGS shares converted into stock
will  be  less  than the number elected. For tax reasons more fully explained in
the  Merger  Agreement,  Energy  East  may  have  to  increase  the  number  of


                                       11

     Each  RGS  share  converted into Energy East common stock would receive not
less  than  1.7626  and not more than 2.3838 shares of Energy East common stock,
depending  on  the  average  closing  price of Energy East common stock during a
20-day  trading  period  prior to the effective time of the Merger. For example,
based  on Energy East's closing price of $19.14 on February 16, 2001, RGS Energy
shareholders who choose to receive Energy East common stock would receive 2.0637
Energy  East  shares  for  each  RGS  Energy  share.

     To  carry  out  the  Merger,  Energy  East  expects to pay RGS shareholders
approximately  $750  million  in  cash  consideration.  Energy  East anticipates
funding  the cash consideration with the proceeds from the issuance of long-term
debt  and  preferred  stock.

D.   MANAGEMENT  AND  OPERATION  OF  THE  COMPANIES  FOLLOWING  THE  MERGER

     Commencing  at  the  effective time of the Merger, and continuing until his
successor  is  duly  elected,  Thomas  S.  Richards  will  be  an Executive Vice
President of Energy East, Chairman, President and Chief Executive Officer of RGS
and  Chairman  and  Chief  Executive  Officer  of  NYSEG  and  RG&E.

     At  the  effective  time  of the Merger, the Energy East Board of Directors
will be increased to sixteen members. The three new members will be Mr. Richards
and  two  RGS  outside  directors.  The  remaining  members  of  the  RGS  Board
immediately  prior  to  the  Merger  will form an Advisory Board to the Board of
Directors  of  RGS.

     The  Board of Directors of RGS will consist of three members: Wesley W. von
Schack,  the  Chairman,  President  and  Chief Executive Officer of Energy East;
Kenneth M. Jasinski, the Executive Vice President, General Counsel and Secretary
of  Energy  East;  and Mr. Richards. The post-Merger Board of Directors of NYSEG
will  consist of four members: its three present members - Mr. von Schack, Ralph
R.  Tedesco  and  Mr.  Jasinski  -  plus  Mr. Richards. The post-Merger Board of
Directors of RG&E will consist of Mr. von Schack, Mr. Jasinski, Mr. Richards and
a  fourth  member  to  be  named  by  RGS.

     The  executive  management  of RG&E and NYSEG following the proposed Merger
will  be  as  follows:  (1)  Mr.  Richards will be Chairman, President and Chief
Executive  Officer  of  RG&E and NYSEG and (2) Mr. Tedesco will remain the Chief
Operating  Officer  of  NYSEG.

     Following  the  Merger, Energy East's corporate headquarters will remain in
Albany,  New  York. The corporate headquarters of RGS, NYSEG and RG&E will be in
Rochester,  New  York  and  the  operations  center  for  NYSEG  will  remain in
Binghamton,  New  York.  EE Management, an Energy East subsidiary which provides

------------------
(. . .continued)
RGS  shares  converted  into  Energy  East shares and decrease the number of RGS
shares  converted  into  cash.  In  the  alternative,  RGS  may elect under some
circumstances to have the Merger restructured so that Eagle would merge with and
into  RGS  and  RGS  would  be  the  surviving  company.


                                       12

procurement,  information  services,  and  other  administrative  and  general
services,(25)  will also be headquartered in Rochester and will have at least 40
employees  in  Rochester,  New  York.

ITEM  2.     FEES,  COMMISSIONS  AND  EXPENSES

     The  fees,  commissions  and  expenses  to be paid or incurred, directly or
indirectly,  by  the  Companies  in  connection  with  the Merger, including the
solicitation  of  proxies,  the  payment of legal and investment banker fees and
other  related  matters  are  estimated  as  follows:

     Commission  filing  fee  for  Proxy Statement                 $   128,887
     Accountants' fees                                                 200,000
     Legal fees and expenses                                         6,300,000
     Shareholder communication and proxy solicitation                  300,000
     Investment bankers' fees and expenses                          12,800,000
     Consulting fees related to the Merger                             750,000
     Expenses related to integrating the operations of the merged
       company and miscellaneous                                     9,621,113
                                                                   -----------
     TOTAL                                                         $30,100,000
                                                                   ===========
ITEM  3.     APPLICABLE  STATUTORY  AND  REGULATORY  PROVISIONS

     The following sections of the Act and the Commission's rules thereunder are
or  may  be  directly  or  indirectly  applicable  to  the  proposed  Merger:



Section of the Act   Transactions to which section or rule is or may be applicable
-------------------  -------------------------------------------------------------
                  

9(a)(2), 10          Acquisition by Energy East of RGS; acquisition indirectly by
                     Energy East of common stock of public utility subsidiary of RGS;
                     acquisition by RGS of common stock of NYSEG; acquisition by
                     Energy East of shares of Eagle.
8, 11(b)             Retention by Energy East of its existing retail gas utility operations;
                     retention by Energy East of non-utility businesses of RGS; and
                     operation of Energy East as a combination electric and gas utility
                     holding company.
11(b)(2)             Retention by Energy East of RGS as an intermediate holding
                     company.

------------------
25  EE Management is a Commission-authorized service company for the Energy East
holding  company  system. The Commission authorized EE Management's intra-system
service  transactions on October 13, 2000. Energy East Corporation, et al., HCAR
No.  27248  (Oct.  13,  2000).


                                       13

Section of the Act   Transactions to which section or rule is or may be applicable
-------------------  -------------------------------------------------------------
3(a)(1)              Exemption of RGS from all provisions of the Act except for
                     Section 9(a)(2).

Rules
-----
53-54                Transactions involving electric wholesale generators ("EWGs")
                     and/or foreign utility companies ("FUCOs")
58                   Retention by Energy East of non-utility businesses of RGS.
80-92                Affiliate transactions, generally.


     To  the  extent that other sections of the Act are deemed applicable to the
Merger,  such  sections  should  be  considered  to be set forth in this Item 3.

     Background
     ----------

     As  discussed  in  more  detail  below, the RGS and Energy East systems are
directly  interconnected, and the Merger satisfies all of the Commission's other
requirements  to  constitute an electric integrated public utility system within
the  meaning  of  (2)(A)(29) and 10(c)(2). Moreover, new market dynamics and the
Commission's  current  criteria  regarding  what  constitutes the economical and
efficient development of an integrated public utility system further support the
Commission's  approval of the Merger. The Commission has long recognized that as
the  industry  changes -- by means of technological development and by reason of
new  laws  and  regulations  --  the  Commission  faces the task of applying the
requirements  of  the  Act  in  light of these changing conditions. Such changes
since  1935  have  made  it  possible for larger and geographically more diverse
companies  to  satisfy  the  standards  of  the  Act. (26)

     In  recent  years  the  Commission  has  emphasized that the Act "creates a
system of pervasive and continuing economic regulation that must in some measure
at  least be fashioned from time to time to keep pace with changing economic and
regulatory  climates."(27)  The Commission has attempted to "respond flexibly to
the  legislative, regulatory and technological changes that are transforming the
structure  and  shape  of  the  utility industry," as recommended by Division of
Investment  Management  (the "Staff") in its report issued in June 1995 entitled
"The  Regulation  of  Public  Utility  Holding  Companies"  (the "1995 Report").
Indeed,  with specific reference to the integration requirements of the Act, the
1995  Report  explains:

------------------
26  See,  e.g.,  American Electric Power Company, Inc., HCAR No. 20633 (July 21,
1978).

27  Union  Electric  Co.,  HCAR  No.  18368,  n.  52  (Apr. 10, 1974), quoted in
Consolidated  Natural  Gas  Co.,  HCAR  No.  26512  (Apr. 30, 1996) (authorizing
international  joint  venture to engage in energy marketing activities); Eastern
Utilities  Associates,  HCAR No. 26232 (Feb. 15, 1995) (removing restrictions on
energy management activities); and Southern Co., HCAR No. 25639 (Sept. 23, 1992)
(approving  acquisition  of  foreign  public-utility  subsidiary  company).


                                       14

       The  statute  recognizes  .  .  .  .that  the  application of the
       integration  standard  must  be  able  to  adjust  in response to
       changes  in  "the state of the art." As discussed previously, the
       Division  believes  the  SEC  must  respond  realistically to the
       changes  in the utility industry and interpret more flexibly each
       piece  of  the  integration  equation.(28)

     The  current  state  of  the  art  in  the  electric  power  industry  is
characterized  by  the  development  of  competitive  wholesale  electric supply
markets  resulting  from changes in Federal law and regulations and the adoption
by  States  of  utility restructuring policies leading to retail customer choice
and  other  changes.  Increasingly,  electric utilities no longer rely solely on
acquiring  their  own,  more  efficient  generation  to achieve efficiencies and
economies.

     Because  of  these  changes,  the  electric  utility industry today is much
different  from  what  it was even in the recent past. The utility market model,
with  generation  functionally  unbundled from transmission and distribution, is
supplanting  the  vertically  integrated  monopoly model throughout the country.
Developments  in federal law and regulations have led to a wholesale competitive
electric  generating  market.(29)  The  access  for  all  eligible  parties  to
interstate transmission is a critical component of this market. The market model
has  evolved  further  in  some  states, like New York. In New York, many retail
customers  have  a  choice  in determining who will supply their electric power.
Customer  choice the elimination of the traditional monopoly over the generation
aspects  of electric service fundamentally changes the nature of regulation. New
York  has  adopted  policies  seeking  to  provide  consumers  the  benefits  of
competition,  and  retail electric power competition in New York is being phased
in  through individual utility restructuring plans approved by the NYPSC. Retail
competition  on  NYSEG  began  on August 1, 1998, with full retail access taking
place  by  August 1, 1999.(30) Retail competition on RG&E began on July 1, 1998,
with  full  retail  access taking place by July 1, 2001.(31) Beginning March 31,
2000,  all  retail  electric  consumers in Maine were authorized to choose their
electric  supplier.(32)

------------------
28  1995  Report  at  71.

29  See,  e.g.,  Promoting  Wholesale  Competition  Through  Open  Access
Non-Discriminatory  Transmission  Service  by  Public  Utilities;  Recovery  of
Stranded  Costs  by  Public  Utilities, Order No. 888, FERC Stats & Regs., Regs.
Preambles  31,036  (1996)  (subsequent  history  omitted).

30  New  York  State  Electric  &  Gas  Corporation's  Plan  for  Electric
Rate/Restructuring,  NYPSC  Opinion  No.  95-17  (Case  No. 96-E-0891) (Jan. 27,
1998).

31  Rochester  Gas  and  Electric  Corporation's  Plans  for  Electric Rates and
Restructuring,  NYPSC  Opinion  No.  98-1  (Case No. 96-E-0898) (Jan. 14, 1998).

32  As  discussed above, under Maine law, Central Maine Power is unable to serve
retail  customers  except  through  the  creation of a marketing affiliate or as
directed by the MPUC. CMP Group has elected not to take the steps required under
Maine's  electric  utility  restructuring legislation to participate, through an
affiliate,  as  a  retail electric supplier. Under an order of the MPUC, Central
Maine  Power is required to arrange standard offer energy service for its medium


                                       15

     Similar  market-oriented  reforms illustrate the current "state of the art"
in the natural gas industry. Over the last decade, FERC has mandated open-access
transportation  on  interstate  natural  gas  pipelines  and the "unbundling" of
interstate  pipeline  gas  services  such as transportation, sales and storage."
(33)  FERC  also initiated rules that allow firm holders of pipeline capacity to
resell  or  release  their  capacity to other shippers and required pipelines to
permit shippers to use flexible receipt and delivery points.(34) These and other
regulatory  changes  have brought substantial changes to the natural gas market.

     As  FERC  recognized in its recently issued Order No. 637,(35) upstream and
downstream  market  centers  and  gas  trading  points are increasing, providing
shippers  with  greater gas supply and capacity choices. Electronic commerce has
grown  rapidly,  providing  greater  liquidity in commodity markets and with the
promise  of  providing  such  liquidity  in  the  transportation market as well.
Additionally,  residential  unbundling at the state level is underway, which may
provide  the opportunity for small commercial firms and residential consumers to
purchase  their  gas supplies in a competitive market. Similar to its structural
changes  to  the electric market, New York issued 1998 regulations providing for
comprehensive  unbundling  of  natural  gas services, and has ordered that local
distribution companies should exit the merchant function during a three-to-seven
year  transition  period.(36)

     The  Companies  believe  that  the  Merger  will  result  in  an integrated
public-utility  system positioned for competition in the utility industry of the
future.  Open  access  to  electric  power  and natural gas transmission, retail
electric and natural gas competition and technological changes are promoting the
growth  of larger and more competitive regional wholesale power markets and more
competitive  markets  for  natural  gas.

A.   SECTION  9(A)(2)

     Section  9(a)(2)  of  the  Act  makes  it unlawful, without approval of the
Commission under Section 10, "for any person to acquire, directly or indirectly,
any  security  of  any public utility company, if such person is an affiliate of
such  company  and  of  any  other public utility or holding company, or will by

------------------
(. . . . .continued)
and  large  commercial and industrial customers who do not select an electricity
supplier.  Central  Maine  Power  has  arranged  service  for  those  classes.

33  Pipeline  Service  Obligations  and  Revisions  to  Regulations  Governing
Self-Implementing  Transportation  Under  Party  284  of  the  Commission's
Regulations,  Order  No.  636,  FERC Stats. & Regs., Regs. Preambles [1991-1996]
30,930  (Apr.  8,  1992).

34  Id.

35  Regulation of Short-Term Natural Gas Transportation Services, and Regulation
of  Interstate Natural Gas Transportation Services, Order No. 637, FERC Stats. &
Regs.,  Regs.  Preambles  31,091  (Feb.  9,  2000) (subsequent history omitted).

36 Policy Statement on Issues Associated with Future of Natural Gas Industry and
Role  of  LDCs,  NYPSC  Case  Nos.  93-G-0932  and  97-G-1380.


                                       16

virtue  of  such acquisition become such an affiliate." Under the definition set
forth  in  Section 2(a)(11)(A) of the Act, an "affiliate" of a specified company
means  "any  person  that  directly  or indirectly owns, controls, or holds with
power to vote, 5 per centum or more of the outstanding voting securities of such
specified  company,"  and "any company 5 per centum or more of whose outstanding
voting securities are owned, controlled, or held with power to vote, directly or
indirectly,  by  such  specified  company."

     Energy  East  is  a holding company registered pursuant to Section 5 of the
Act.  As  a  result of the Merger, Energy East will indirectly acquire more than
five  percent of the voting securities of RG&E, the public utility subsidiary of
RGS.  Energy  East  will  thus  become  an  "affiliate,"  as  defined in Section
2(a)(11)(A)  of the Act, of RG&E. Additionally, as soon as practicable after the
effective  time  of  the Merger, Energy East will transfer all of NYSEG's common
stock to RGS, so that NYSEG and RG&E can be operated under a combined management
structure. NYSEG would thus become a subsidiary of RGS. Accordingly, Energy East
must obtain the approval of the Commission for the Merger under Sections 9(a)(2)
and 10 of the Act. The statutory standards to be considered by the Commission in
evaluating  the  proposed transaction are set forth in Sections 10(b), 10(c) and
10(f)  of  the  Act.

     The  Companies  believe that the Merger complies with all of the applicable
provisions  of  Section  10 of the Act and should be approved by the Commission.
Thus:

-    the  Merger  will  not  create  detrimental  interlocking  relations  or
     concentration  of  control;

-    the  consideration  to  be  paid  in  the  Merger  is  fair and reasonable;

-    the  Merger  will not result in an unduly complicated capital structure for
     the  post-Merger  Energy  East  system;

-    the  Merger  is  in  the public interest and the interests of investors and
     consumers;

-    the  Merger  is  consistent  with  Sections  8  and  11  of  the  Act;

-    the  Merger  tends  toward  the  economical and efficient development of an
     integrated  public  utility  system;  and

-    the  Merger  will  comply  with  all  applicable  state  laws.

     The  Commission's  approval of this Application/Declaration will facilitate
the  creation  of  a holding company which will be better able to compete in the
rapidly  evolving  utility  industry,  and  is  consistent with the Commission's
precedents for transactions previously approved by the Commission under the Act.
Additionally,  the  Merger  and  the  requests  contained  in  this
Application/Declaration  are  consistent  with  the interpretive recommendations


                                       17

made  by  the  Division  in  the  1995  Report.(37)  The  Division's  overall
recommendation  that  the  Commission  "act  administratively  to  modernize and
simplify  holding  company  regulation  and  minimize  regulatory overlap, while
protecting  the  interests  of  consumers  and  investors,"  is  germane  to the
Commission's  review  of  this  Application/Declaration  since,  as demonstrated
below,  the  Merger  will benefit both consumers and shareholders of post-Merger
Energy  East  and  since the other federal and state regulatory authorities with
jurisdiction over the Merger are expected to approve the Merger as in the public
interest.  In  addition,  as  discussed  in  more detail in each applicable item
below,  the  specific  recommendations  of  the  Division with regard to utility
ownership  and(38)  diversification,(39)  in  particular,  are applicable to the
Merger.

B.   SECTION  10(B)

     Section  10(b)  provides  that,  if  the  requirements of Section 10(f) are
satisfied,  the  Commission  shall  approve  an  acquisition  under Section 9(a)
unless:

     (1)  such  acquisition  will  tend  towards  interlocking  relations or the
concentration  of control of public utility companies, of a kind or to an extent
detrimental  to  the public interest or the interests of investors or consumers;

     (2)  in  case  of  the  acquisition  of  securities  or utility assets, the
consideration,  including  all  fees,  commissions,  and  other remuneration, to
whomsoever  paid,  to  be given, directly or indirectly, in connection with such
acquisition  is  not  reasonable  or  does  not bear a fair relation to the sums
invested  in or the earning capacity of the utility assets to be acquired or the
utility  assets  underlying  the  securities  to  be  acquired;  or

------------------
37  Letter  of  the  Division  of  Investment  Management  to the Securities and
Exchange  Commission,  1995  Report.

38  Among  other  things,  the 1995 Report recommends that the Commission should
apply  a  more flexible interpretation of the integration requirements under the
Act;  interconnection  through  power  pools,  reliability councils and wheeling
arrangements  can  satisfy  the  physical interconnection requirement of Section
2(a)(29);  the  geographic  requirements  of  Section  2(a)(29)(A)  should  be
interpreted  flexibly,  recognizing  technical  advances  consistent  with  the
purposes  and  provisions  of the Act; the Commission's analysis should focus on
whether  the  resulting  system  will  be  subject  to effective regulation; the
Commission  should  liberalize  its  interpretation  of  the "A-B-C" clauses and
permit  combination  systems where the affected states agree, and the Commission
should "watchfully defer" to the work of other regulators. 1995 Report at 71-77.

39  The  1995  Report  recommends  that,  for  example,  the  Commission  should
promulgate rules to reduce the regulatory burdens associated with energy-related
diversification  and  the  Commission  should  adopt a more flexible approach in
considering all other requests to enter into diversified activities. 1995 Report
at  88-90.  The  recommendations  regarding  energy-related diversification were
incorporated  in  Rule  58.


                                       18

     (3)  such  acquisition  will unduly complicate the capital structure of the
holding  company  system  of  the applicant or will be detrimental to the public
interest or the interests of investors or consumers or the proper functioning of
such  holding  company  system.

          1.   Section  10(b)(1)
               -----------------

     Section  10(b)(1)  is  intended  to  avoid  "an excess of concentration and
bigness"  while  preserving  the  "opportunities  for  economies  of  scale, the
elimination  of  duplicate  facilities and activities, the sharing of production
capacity  and  reserves and generally more efficient operations" afforded by the
coordination  of  local  utilities  into  an  integrated system.(40) In applying
Section  10(b)(1) to utility acquisitions, the Commission must determine whether
the  acquisition  will  create "the type of structures and combinations at which
the  Act was specifically directed."(41) As discussed below, the Merger will not
create  a  "huge,  complex,  and  irrational system," but rather will afford the
opportunity to achieve economies of scale and efficiencies which are expected to
benefit  investors  and  consumers.(42)

     The  Merger  is  not  being  undertaken for the purpose of extending Energy
East's  control over regulated public utilities and will not lead to the type of
concentration  of  control  over utilities, unrelated to operating efficiencies,
that  Section  10(b)(1) was intended to prevent. The primary objective of Energy
East  in  the  Merger  is to become positioned to participate in the growing and
increasingly competitive northeastern United States energy market. The Companies
believe that their combination provides a unique opportunity for Energy East and
RGS,  as  well  as  their  respective  shareholders, customers and employees, to
participate  in  the  formation of a competitive energy services provider in the
rapidly  evolving  energy  services  business  and  to  share in the benefits of
industry  restructuring  which  is  already  occurring  in  New  York,  Maine,
Connecticut,  Massachusetts  and  other  states.

     Size:  If  approved,  the  post-Merger  Energy  East  system  will  serve
     ----
approximately  1,755,000  electric  customers  in  two  states  and  909,000 gas
customers  in  four  states.  As  of  March 31, 2001, (1) the combined assets of
Energy  East  and  RGS  would  have totaled approximately $10.5 billion; and (2)
combined  operating revenues of these Companies would have totaled approximately
$5.6  billion  for  the  twelve  months  ended  March  31,  2001.

     By  comparison,  there  are  a number of companies that are larger than the
post-Merger  Energy  East  system.  The  tables  attached as Exhibit E-5 to this
Application/Declaration  show the post-Merger Energy East system's size relative
to  other  electricity and natural gas companies in terms of operating revenues,
assets  and  customers,  on  both  a  regional  and  a  national  basis.

------------------
40  American  Electric  Power  Co.,  46  S.E.C.  1299,  1309  (1978).

41  Vermont  Yankee  Nuclear  Corp.,  43  S.E.C.  693,  700  (1968).

42  American  Electric  Power  Co.,  46  S.E.C.  at  1307  (1978).

                                       19

     As  illustrated  by the tables in Exhibit E-5, Energy East will be small in
comparison to the total of electricity and gas utilities operating in contiguous
regions,  as  well  as in comparison to the total of all utilities in the United
States.

     The assets, operating revenues and customers of Energy East will comprise a
moderate  percentage  of  electricity  and gas utilities operating in contiguous
regions,  and a very small percentage of total electric and gas utilities in the
United  States.  Energy  East's  operations will not exceed the economies of the
scale  of  current  electric  generation  and  transmission  technology,  or gas
transportation  technology,  or provide undue power or control to Energy East in
the  region  in  which  it  will  provide  service. (43)

     Efficiencies  and  economies: The Commission has rejected a mechanical size
     ----------------------------
analysis  under Section 10(b)(1) in favor of assessing the size of the resulting
system  with  reference  to  the efficiencies and economies that can be achieved
through  the  integration  and  coordination  of utility operations. More recent
pronouncements  of  the  Commission  confirm  that  size  is  not determinative,
particularly  in  light  of the improved economies of scale that can be achieved
through  a  combination.(44)

     By  virtue  of the Merger, post-Merger Energy East will be in a position to
realize  the "opportunities for economies of scale, the elimination of duplicate
facilities  and  activities, the sharing of production capacity and reserves and
generally  more  efficient  operations"  described by the Commission in American
Electric  Power  Co.(45)  Among  other  things,  the Merger is expected to yield
significant  capital  expenditure  savings  through  facilities  consolidation,
corporate  and  administrative  programs,  non  fuel  purchasing  economies  and
combined gas supply. These expected economies and efficiencies from the combined
utility  operations  are  described  in  greater  detail  below.

     Competitive Effects: In Northeast Utilities,(46) the Commission stated that
     -------------------
"antitrust  ramifications  of  an acquisition must be considered in light of the
fact  that  public utilities are regulated monopolies and that federal and state
administrative  agencies  regulate the rates charged consumers." Energy East and
RGS will file Notification and Report Forms with the DOJ and FTC pursuant to the
HSR  Act  describing  the  effects  of the Merger on competition in the relevant
markets. It is a condition to the consummation of the Merger that the applicable
waiting  periods  under  the  HSR Act shall have expired or been terminated. The
NYPSC  will  also  consider  the  competitive  effects  of combining the utility
systems  of  RGS  and  Energy East pursuant to the Companies' Joint Petition for
Approval  of  Merger  and  Stock  Acquisition.  See  Exhibit  D-3.

------------------
43  Source: FERC Forms and other data compiled by RDI in its PowerDat and GasDat
data  bases  for  1999.

44 See, e.g., 1995 Report at 73-4; Centerior Energy Corp., HCAR No. 24073 (April
29,  1986).

45  American  Elec.  Power  Co.,  Inc.,  46  S.E.C.1299,  1309  (1978).

46  Northeast  Utilities,  HCAR  No.  25221  (Dec.  21,  1990).


                                       20

     In  addition,  the  competitive  impact of the Merger will be considered by
FERC  pursuant to the May 9 , 2001 filing of Energy East and RGS with FERC under
Section 203 of the Federal Power Act. A detailed explanation concerning why such
Merger  will not threaten competition in even the most narrowly drawn geographic
and  product  markets  is  set  forth  in  the prepared testimony of Dr. William
Hieronymus,  an  economist  and Member of the Management Group of PA Consulting,
Inc.  (successor  to  PHB Hagler Bailly, Inc.), filed with the FERC application.
Dr.  Hieronymus'  testimony  addresses  potential horizontal and vertical market
power related to Energy East's Merger with RGS. Dr. Hieronymus concludes that no
market  power  concerns  are  raised  by  the proposed Merger. Specifically, Dr.
Hieronymus  concludes  that  the  Merger  will not lead to material increases in
concentration in any relevant market. The markets in which the Companies operate
generally  are  unconcentrated,  the result of massive industry restructuring in
New  York  and  New England. Energy East and RGS control only a modest amount of
generation in New York. CMP no longer controls any generation. Additionally, Dr.
Hieronymus  concludes  that  the  Merger  will  not create vertical market power
arising  from  the  Companies'  control of transmission facilities or generating
sites,  nor  from  their  activities  in  the  natural gas markets. All relevant
portions  of  the  Companies' electric transmission facilities are controlled by
their  respective  ISOs,  and there is no dominant control by the Companies over
generating  sites  in  the relevant markets.(47) A copy of the FERC application,
including Dr. Hieronymus' prepared testimony as an attachment, has been filed as
Exhibit  D-1.  It  is  anticipated  that FERC will rule that the Merger will not
significantly  affect  competition  in  any  relevant  market.

     The  Merger  has  been  carefully  structured  to  protect the interests of
consumers  and  other  local  interests  while ensuring that the only management
interlocks  created  are  those  which  are  necessary to integrate RGS into the
Energy East system. Furthermore, there will be continuity of management because,
following the Merger, the management of NYSEG and RG&E will largely be comprised
of  their  respective  current  management.  In  addition,  the Merger Agreement
provides  that  the  current  RG&E  Board  of  Directors  (other  than the three
directors  who  will join the Energy East Board) will serve as an advisory board
to  the  surviving company. The advisory board will meet at least quarterly, and
will  provide advice to the surviving company's board of directors as requested.
Such  continuity of management oversight will help to assure that the management
of  the  regulated  utility  subsidiaries  of  RGS  remain  responsive  to local
regulation  and  to other essentially local interests. For the reasons set forth
above,  the  Merger  will  not  "tend  toward  interlocking  relations  or  the
concentration  of  control"  of  public  utility  companies, of a kind or to the
extent  detrimental  to  the  public  interest  or the interests of investors or
customers  within  the  meaning  of  Section  10(b)(1).

          2.   Section  10(b)(2)
               -----------------

               (a)  Reasonableness  of  Consideration

     Section  10(b)(2)  requires  the  Commission  to  determine  whether  the
consideration  to  be given by Energy East to the holders of RGS common stock in
connection  with  the  Merger,  including  fees  and  expenses of the Merger, is
reasonable and whether it bears a fair relation to the investment in and earning

------------------
47  Testimony of Dr. William H. Hieronymus, Exhibit D-1 at Exhibit J-1, pp. 5-6.


                                       21

capacity  of the utility assets underlying the securities being acquired. Market
prices  at  which securities are traded have always been strong indicators as to
values.  As shown in the table below, the most recent quarterly price data, high
and low, for RGS common shares provide support for the consideration paid in the
Merger.



                      COMPARATIVE PER SHARE MARKET PRICE:
                                  ENERGY EAST*
                                  PRICE RANGE

                                          CASH
                                        DIVIDENDS
                       HIGH      LOW    PER SHARE
                     --------  -------  ---------
                               
     1999
     First Quarter   $  28.63  $ 24.56  $    .21
     Second Quarter  $  28.13  $ 24.75  $    .21
     Third Quarter   $  27.06  $ 22.63  $    .21
     Fourth Quarter  $  25.75  $ 20.56  $    .21

     2000
     First Quarter   $  23.63  $ 18.81  $    .22
     Second Quarter  $  22.94  $ 19.00  $    .22
     Third Quarter   $  23.50  $ 17.94  $    .22
     Fourth Quarter  $  22.63  $ 18.44  $    .22

     2001
     First Quarter   $  20.31  $ 16.96  $    .23


     * Per share amounts have been restated to reflect Energy East's two-for-one
common  stock  split  effective  April  1,  1999.



                                      RGS
                                  PRICE RANGE

                                           CASH
                                         DIVIDENDS
                       HIGH       LOW    PER SHARE
                     --------  --------  ---------
                                
     1999
     First Quarter   $  31.56  $  25.44  $    .45
     Second Quarter  $  28.44  $  25.25  $    .45
     Third Quarter   $  27.31  $  24.06  $    .45
     Fourth Quarter  $  25.50  $  20.00  $    .45

     2000
     First Quarter   $  21.88  $  18.69  $    .45
     Second Quarter  $  24.50  $  20.50  $    .45
     Third Quarter   $  28.38  $  22.25  $    .45
     Fourth Quarter  $  33.31  $  27.38  $    .45

     2001
     First Quarter   $  37.48  $  27.75  $    .45



                                       22

     On  February  16,  2001,  the  last  full  trading  day  before  the public
announcement  of the execution and delivery of the Merger Agreement, the closing
price  per  share  of  RGS  common  stock  as  reported  on the NYSE - Composite
Transaction  of  RGS  common  stock  was  $33.10.

     In its determinations as to whether or not a price meets the reasonableness
standard,  the  Commission  has  considered whether the price was decided as the
result  of  arms  length  negotiations(48)  and  the  opinions  of  investment
bankers,(49)  among other things. For the reasons given below, there is no basis
in  this  case  for  the Commission to make any negative findings concerning the
consideration  being  offered  by  Energy East in the Merger. The Commission has
previously  recognized  that when the consideration to be paid in an acquisition
is  the  result  of  arms  length  negotiations  between  the  management of the
companies  involved,  supported  by  opinions  of  financial  advisors, there is
persuasive  evidence  that  the  requirements  of  Section  10(b)(2)  have  been
satisfied.  (50)  The  agreed-upon  level  of  consideration  was the product of
extensive  and  vigorous  arms  length negotiations between Energy East and RGS.
These  negotiations  were  preceded  by  appropriate due diligence, analysis and
evaluation  of  the assets, liabilities and business prospects of the respective
companies.  An  extensive  discussion  of  the  negotiations  that took place in
connection  with  the  Merger  is  found  at pages 23-27 of the Proxy Statement,
incorporated  by  reference  as  Exhibit  C-1.

     Finally,  Energy  East engaged UBS Warburg LLC ("UBS Warburg") with respect
to the Merger. UBS Warburg provided a "fairness" opinion regarding the Merger to
the  Energy East Board of Directors. See Exhibit G-1. RGS engaged Morgan Stanley
&  Co.,  Incorporated  ("Morgan  Stanley")  with  respect  to the Merger. Morgan
Stanley  provided  a  fairness  opinion regarding the Merger to the RGS Board of
Directors.  See  Exhibit  G-2. In light of these opinions and an analysis of all
relevant factors, including the benefits that may be realized as a result of the
Merger,  the  Companies believe that the conversion ratio falls within the range
of  reasonableness,  and the consideration to be paid in the Merger bears a fair
relation  to  the  sums  invested  in,  and the earning capacity of, the utility
assets  of  RGS.

               (b)  Reasonableness  of  Fees

     The  Companies  believe  that  the  overall  fees, commissions and expenses
incurred  and  to  be  incurred in connection with the Merger are reasonable and
fair  in  light  of  the  size  and  complexity  of the Merger relative to other
transactions and the anticipated benefits of the Merger to the public, investors
and  consumers,  that  they  are consistent with recent precedent, and that they
meet  the  standards  of  Section  10(b)(2).

     As  set  forth  in  Item 2 of this Application/Declaration, Energy East and
RGS,  together,  expect to incur a combined total of approximately $30.1 million

------------------
48  In  the  Matter  of  American  Natural Gas Company, HCAR No. 15620 (Dec. 12,
1966).

49  Consolidated  Natural  Gas  Company,  HCAR  No.  25040  (Feb.  14,  1990).

50  Entergy  Corporation,  et  al., HCAR No. 25952 (Dec. 17, 1993); The Southern
Company,  et  al.,  40  S.E.C.  Docket  350  at  352  (Feb.  12,  1988).


                                       23

in  fees,  commissions  and  expenses  in  connection with the Merger, including
expenses  related to integrating the operations of the merged company. Such fees
will  be  paid  on an arms length basis to third parties and are consistent with
fees, commissions and expenses paid for similar transactions and approved by the
Commission  as reasonable. For example, Northeast Utilities alone incurred $46.5
million  in  fees  and  expenses  in  connection  with its acquisition of Public
Service of New Hampshire, and Entergy incurred $38 million in fees in connection
with its acquisition of Gulf States Utilities which amounts all were approved as
reasonable  by  the  Commission. (51)

     The  Companies  also  believe  that  the financial advisory fees payable to
their respective investment bankers are fair and reasonable for similar reasons.
Pursuant  to  the engagement letter between Morgan Stanley and RGS dated January
18, 2001, Morgan Stanley has earned a fee of $3,058,965 for the rendering of the
Morgan  Stanley  opinion and the public announcement of the Merger. In addition,
Morgan  Stanley  will  receive a fee of $3,058,965, payable upon the approval by
RGS's shareholders, and another $3,058,965 upon completion of the Merger. Morgan
Stanley  will  also  be  reimbursed  for certain of its related expenses. Morgan
Stanley will not be entitled to any additional fees or compensation in the event
the  Merger  is  not  approved  or  otherwise  completed.  RGS has agreed, under
separate  agreement,  to  indemnify  Morgan Stanley against certain liabilities,
including  liabilities under federal securities laws, relating to or arising out
of  its  engagement.

     Pursuant  to  the  engagement  letter  between Energy East and UBS Warburg,
Energy  East  paid  UBS  Warburg  $2 million upon the rendering of UBS Warburg's
fairness  opinion. In addition, UBS Warburg will receive a $1 million payment at
the  time of the Energy East shareholder approval of the issuance of Energy East
shares  in  connection  with  the  Merger.  At the completion of the Merger, UBS
Warburg  will receive a fee of $0.8 million. Energy East has agreed to indemnify
UBS  Warburg  against  certain  liabilities, including liabilities under federal
securities  laws, relating to or arising out of its engagement. In the past, UBS
Warburg and its predecessors have provided investment banking services to Energy
East  and  received  customary  compensation  for  rendering  such  services.

     The investment banking fees paid by RGS and Energy East are lower than fees
paid in other similar transactions and approved by the Commission as reasonable.
The  fees  reflect  the financial marketplace, in which investment banking firms
actively  compete  with  each  other  to  act  as  financial  advisors to merger
partners.

          3.   Section  10(b)  (3)
               -------------------

     Section  10(b)(3)  requires  the Commission to determine whether the Merger
will unduly complicate Energy East's capital structure or will be detrimental to
the  public  interest,  the  interests  of  investors or consumers or the proper
functioning  of  Energy  East's  system.

------------------
51 See Northeast Utilities, HCAR No. 25548 (June 3, 1992) ("Northeast"); Entergy
Corporation,  et  al.,  HCAR  No.  5952  (Dec.  17,  1993).


                                       24

     The  Commission  has  found  that an acquisition satisfies this requirement
where  the  effect of a proposed acquisition on the acquirer's capital structure
is  negligible  and  the  equity  position  is  at  or  above  the traditionally
acceptable 30 percent level prescribed by the Commission.(52) The Commission has
approved  common  equity  to  total  capitalization  ratios  as  low  as  27.6
percent.(53)  Under these standards, the proposed combination of Energy East and
RGS  will  not  unduly  complicate the capital structure of the combined system.

     Set  forth  below  are  summaries  of  the historical capital structures of
Energy  East and RGS as of March 31, 2001 and the pro forma consolidated capital
structure  of  post-Merger  Energy  East  as  of  March  31,  2001:



-------------------------------------------------------------------
                           Pre-Merger Energy East and
                                      RGS
                             (Dollars In thousands)
                                  (unaudited)

                             Energy East            RGS
-------------------------------------------------------------------
                                                 
Common Stock Equity          $1,821,555  39.14%  $  798,461  44.84%
-------------------
Preferred stock not subject
  to mandatory redemption
  (of subsidiaries)              43,332    .93%      47,000   2.64%
Preferred stock subject to
  mandatory redemption
  (of subsidiaries)              ------    ---       25,000   1.40%
Notes Payable                   393,279   8.45%      76,900   4.32%
Long-term Debt, including
  current maturities          2,395,902  51.48%     833,263  46.80%
---------------------------  ----------  ------  ----------  ------

Total                        $4,654,068    100%  $1,780,624    100%


------------------
52  See,  e.g.,  Entergy  Corp.,  55  S.E.C.  2035  (Dec.  17,  1993); Northeast
Utilities,  47  S.E.C.1279  (1990).

53  See  Northeast,  supra.


                                       25



--------------------------------------------------------------------------------
        Post-Merger Energy East Pro Forma Consolidated Capital Structure
                             (Dollars in thousands)
                                   (unaudited)
--------------------------------------------------------------------------------

                                                              

Common Stock Equity (incl. additional paid in capital)  $2,436,156  34.80%
Preferred stock not subject to mandatory redemption
  (of subsidiaries)                                         90,332   1.29%
Preferred stock subject to mandatory redemption (of
  subsidiaries)                                            275,000   3.93%
Notes Payable                                              470,179   6.71%
Long-term Debt, including current maturities             3,729,165  53.27%
------------------------------------------------------  ----------  ------

Total                                                   $7,000,832    100%


     As  can  be  seen  from  these  tables, post-Merger Energy East's pro forma
consolidated  equity  to  total  capitalization  will  be  34.80%, which will be
significantly  higher  than  Northeast  Utilities'  approved 27.6% common equity
position  and  will  exceed  the  traditionally  accepted 30% level. The capital
structure  of  post-Merger Energy East will also be substantially similar to the
capital  structures  approved  by  the  Commission  in  other  orders.  (54)

     Protected  interests:  As set forth more fully in Item 3.C.4 (Economies and
     --------------------
Efficiencies  from  the  Merger  (Section  10(c)(2)),  and  elsewhere  in  this
Application/Declaration,  the Merger is expected to result in economies and will
integrate and improve the efficiency of the Energy East and RGS utility systems.
The  Merger  will  create  an  entity  poised  to  respond  effectively  to  the
fundamental  changes  taking  place  in the markets for natural gas and electric
power  and  to  compete  effectively  for  consumers'  business. The Merger will
therefore  be  in  the  public  interest  and  the  interests  of  investors and
consumers,  and  will  not  be  detrimental  to  the  proper  functioning of the
resulting  holding  company  system.

     As  indicated  previously,  consummation  of the Merger is conditioned upon
receipt  not  only  of  the Commission's approval, but also on the NYPSC, and on
FERC  and  other  federal  regulatory approvals. Those regulatory approvals give
additional  assurance  that  the  interests  of  retail customers are adequately
protected. Approval of the Merger by FERC and the NYPSC will further assure that
there  is  no  significant  adverse  effect  on competition. In sum, because the
Merger does not add any complexity to Energy East's capital structure, is in the
interest of investors and consumers, and is consistent with the public interest,
the  requirements  of  Section  10(b)(3)  are  met.

------------------
54 See, e.g., Ameren Corporation, HCAR No. 26809 (Dec. 30, 1997); CINergy Corp.,
HCAR No. 26934 (Nov. 2, 1998); and Centerior Energy Corp., HCAR No. 24073 (April
29,  1986).


                                       26

C.   SECTION  10(c)

Section  10(c)  of  the  Act  provides  that,  notwithstanding the provisions of
Section  10(b),  the  Commission  shall  not  approve:

     (1)  an  acquisition  of  securities  or  utility  assets,  or of any other
          interest,  which  is  unlawful under the provisions of Section 8 or is
          detrimental  to  the  carrying out of the provisions of Section 11; or

     (2)  the acquisition of securities or utility assets of a public utility or
          holding company unless the Commission finds that such acquisition will
          serve  the  public  interest by tending towards the economical and the
          efficient  development  of  an  integrated  public  utility  system.

          1.   Acquisition  Must  be  Lawful
               -----------------------------

     Section  10(c)(1)  requires  that an acquisition be lawful under Section 8.
Section  8  prohibits  registered  holding  companies  from  acquiring,  owning
interests  in  or  operating  both  a  gas  and  an  electric  utility  serving
substantially  the same area if state law prohibits it. Section 8 indicates that
a  registered  holding company may own both gas and electric utilities where, as
here,  the  acquisition  is subject to approval by the state utility commissions
with  jurisdiction  over  the  acquired  companies. RGS, along with Energy East,
NYSEG, RG&E and Eagle, have filed an application with the NYPSC to carry out the
Merger,  which  application  is  attached at Exhibit D-3. It is anticipated that
this  application  will  be  granted  by  July  2001.

     Section 10(c)(1) further requires that an acquisition not be detrimental to
carrying  out  the provisions of Section 11 of the Act. Section 11(a) of the Act
requires the Commission to examine the corporate structure of registered holding
companies  to  ensure  that  unnecessary  complexities are eliminated and voting
powers are fairly and equitably distributed. As described above, the Merger will
not  result  in  unnecessary  complexities  or  unfair  voting  powers.

     Although  Section  11(b)(1) generally requires a registered holding company
system  to  limit  its operations "to a single integrated public utility system,
and  to  such  other  businesses  as  are reasonably incidental, or economically
necessary  or  appropriate  to  the operations of such integrated public utility
system,"  a  combination  integrated gas and electric system within a registered
holding  company  is  permissible  under  Section  8.(55)  Additionally, Section
11(b)(1)  provides  that  "one  or  more  additional  integrated  public utility
systems" may be retained if, as here, certain criteria are met. Section 11(b)(2)
directs  the  Commission  "to  ensure  that the corporate structure or continued
existence  of  any  company  in  the  holding  company system does not unduly or
unnecessarily  complicate  the  structure, or unfairly or inequitably distribute
voting  power  among  security  holders,  of  such  holding  company  system."

------------------
55  See,  e.g.,  New  Century  Energies,  Inc.,  HCAR  No. 26748 (Aug. 1, 1997).


                                       27

     As  detailed  below, the Merger will not be detrimental to the carrying out
of  the provisions of Section 11. The combination of the NYSEG, RG&E and Central
Maine Power electric system will result in a single, integrated electric utility
system  (the  "new  Energy East Electric System"). Integration of the new Energy
East  Electric  System  will  be  facilitated  by  NYSEG's  and  RG&E's  direct
interconnection,  as  well  as their participation in the same ISO. Further, the
combination  of Energy East's current gas system with the gas operations of RG&E
will  result  in  a single, integrated gas utility system with operations in the
same  states  as  the electric system or states adjoining those states (the "new
Energy  East  Gas  System"). The Commission should accordingly find that the new
Energy East Electric System will be the primary integrated public utility system
for  purposes  of  Section  11(b)(1)  and  the  new  Energy East Gas System is a
permissible  additional  system  under  Section  11(b)(1)A-C.

     Furthermore,  Section  10(c)(2)  requires  that  the  Commission  approve a
proposed  transaction if it will serve the public interest by tending toward the
economical  and  efficient  development  of an integrated public utility system.
This  Section  10(c)(2)  standard  is  met  where  the  likely  benefits  of the
acquisition  exceed  its  likely  cost.(56)  As discussed below, the Merger will
result  in  the  creation  of  an  integrated  electric  utility  system  and an
additional  integrated  gas  utility  system  and  will  produce  economies  and
efficiencies  more than sufficient to satisfy the standards of Section 10(c)(2).

          2.   Combination  and  Integration  of  Electric  Utility  Operations

     Section  2(a)(29)(A)  of  the  Act  defines  an  "integrated public utility
system,"  as  applied  to  electric  utilities,  as:

     a  system  consisting of one or more units of generating plants and/or
     transmission  lines  and/or  distributing  facilities,  whose  utility
     assets,  whether  owned by one or more electric utility companies, are
     physically  interconnected  or capable of physical interconnection and
     which under normal conditions may be economically operated as a single
     interconnected  and  coordinated system confined in its operation to a
     single  area  or  region,  in  one  or more states, not so large as to
     impair  (considering  the  state  of  the  art  and the area or region
     affected) the advantages of localized management, efficient operation,
     and  the  effectiveness  of  regulation.  (emphasis  added)

     As  the definition suggests, and the Commission has observed, Section 11 is
not  intended to impose "rigid concepts" but rather create a "flexible" standard
designed  "to  accommodate  changes  in  the electric utility industry."(57) The
Commission  has  established  four  standards  under  the  statutory integration
requirement:

------------------
56  See  City  of  Holyoke  v.  SEC,  972  F.2d  358  (D.C.  Cir.  1992).

57  Unitil  Corp.,  HCAR  No.  25524  (April  24,  1992).


                                       28

     (1)  The  utility  assets  of  the  system are physically interconnected or
          capable  of  physical  interconnection;

     (2)  The  utility  assets,  under  normal  conditions,  may be economically
          operated  as  a  single  interconnected  and  coordinated  system;

     (3)  The  system  must  be  confined  in its operations to a single area or
          region;  and

     (4)  The system must not be so large as to impair (considering the state of
          the  art  and the area or region affected) the advantages of localized
          management,  efficient operation, and the effectiveness of regulation.

     NYSEG  and  RG&E  have  adjacent  electric  service  territories  that  are
physically  interconnected at eight locations.(58) The Commission has ruled that
the  combination  of  NYSEG  and Central Maine Power creates a single integrated
electric  transmission  system  serving  the  northeast  region  of  the  United
States.(59)  The addition of RG&E to this system will enhance the integration of
this  system.  As  discussed  below,  the  Merger  satisfies  all  four  of  the
Commission's  standards  under  the  integration  requirement.

                    (i)  Physical  interconnection  or  capability  of  physical
                         interconnection

     The  NYSEG  and  RG&E  electric  utility  facilities  clearly  satisfy  the
requirement  that  they  be  "physically  interconnected  or capable of physical
interconnection."  As  described  above,  NYSEG  and  RG&E  are  physically
interconnected  at  eight  locations. Thus, under the Commission's traditionally
applied  standards,  the  Merger  satisfies  the  Act's  interconnection
requirements.(60)  In  addition,  NYSEG  and  RG&E  satisfy  the interconnection

------------------
58  The  two  systems  are  physically  interconnected  at the following points:

        South  Perry  (NYSEG)  -  South  Perry  (RG&E):  115kV-125MVA
        Macedon  (NYSEG)  -  Quaker  Road  (RG&E):  115kV-60MVA
        Sleight  Road  (NYSEG)  -  Clyde  (RG&E):  115kV-39MVA
        Sleight  Road  (NYSEG)  -  Quaker  Road  (RG&E):  115kV-150MVA

        In addition, the following  are  normally  open  interconnects  used for
        emergency  supply:

        Clyde  (NYSEG)  -  Browns  Corners  (RG&E):  34.5kV-23.9MVA
        Savannah  (NYSEG)  -  Wolcott  (RG&E):  34.5kV-23.9MVA
        Portageville  (NYSEG)  -  Portageville  (RG&E):  34.5kV-12MVA
        Leicester  (NYSEG)  -  Leicester  (RG&E):  34.5kV-12MVA

59  Energy  East  Corporation,  et  al.,  HCAR  No.  27224  (Aug.  31,  2000).

60  In applying the requirement that the electric generation and/or transmission
and/or  distribution  facilities  comprising  the  system  be  "physically
                                                          (. . . . . .continued)


                                       29

requirement  through  their  membership  in  the  NYISO.(61)  The Commission has
determined  that  the  interconnection requirement is met through memberships in
"tight"  power pools and ISOs.(62) In 1992, for example, the Commission approved
the  merger of Unitil Corporation with Fitchburg Gas and Electric Light Company,
based  on  their common membership in NEPOOL, (63) In 1998, based on Unitil, the
Commission  found  that Delmarva Power & Light Company and Atlantic Energy, Inc.
met  the  physical  interconnection  requirements of Section 2(a)(29)(A) through
their  common  membership  in  PJM  Interconnection,  LLC  ("PJM"),  which was a
regional  power  pool  and the first FERC-approved, operational ISO.(64) In both
Unitil  and  Conectiv,  the  Commission stated that it was not necessary for the
applicant  to  construct  an  additional  transmission  line interconnecting the
affected  electric  utility  companies  "since present transmission arrangements
provide  adequate service."(65) The Commission's precedent regarding tight power
pools  thus  directly supports a finding of physical interconnection with regard
to  the  RG&E  and  NYSEG  systems.

------------------
(. . . . . .continued)
interconnected  or  capable  of  physical  interconnection,"  the Commission has
historically  focused  on  physical  interconnection through facilities that the
parties owned or, by contract, controlled.  See, e.g., Northeast Utilities, HCAR
No. 25221 (Dec. 21, 1990) ("Northeast Utilities") at note 85, supplemented, HCAR
No. 25273 (March 15,  1991), aff'd sub nom. City of Holyoke v. SEC, 972 F.2d 358
(D.C.  Cir.  1992);  Centerior  Energy  Corp.,  HCAR No. 24073 (April 29, 1986).

61  The  Commission  has  previously  found  that  Central Maine Power and NYSEG
satisfy  the interconnection requirements. Energy East Corporation, et al., HCAR
No.  27224  (Aug. 31, 2000). As the Commission noted in its order, the NYISO and
ISO NE coordinate their scheduling and operations so as to enable "cross-border"
transactions  to  occur  seamlessly.  The  high  degree of integrated operations
insures  that  the two systems are operated as a coordinated system in which the
flow  of  energy  is  "centrally  controlled  and  allocated, as need or economy
directs,"  and  in which no generator, purchaser, or transmission owner operates
in  isolation.  Id.,  slip  op.  at  25  (citations  omitted).

62  See,  e.g.,  Unitil  Corp.,  supra  (interconnection  through  NEPOOL),  and
Conectiv,  Inc.  HCAR  No.  26832  (Feb. 25, 1998) (interconnection through PJM,
Inc.).  See  also Yankee Atomic Elec. Co., 41 S.E.C.552, 565 (1955) (authorizing
various  New  England companies to acquire interests in a commonly-owned nuclear
power  company  and  finding the interconnection requirement met because the New
England  transmission  grid  already  interconnected  the  companies).

63 New England Power Pool, 79 F.E.R.C. 61,374 (1997); New England Power Pool, 83
F.E.R.C.61,045  (1998).

64  Conectiv,  Inc.,  HCAR  No.  26832  (Feb.  25,  1998).

65  Unitil  Corp.,  HCAR  No.  25524  (1992),  citing  Electric Energy, Inc., 38
S.E.C.658,  669  (1953)  (direct  interconnection  not required in circumstances
which  would  have  resulted  in  an  uneconomic  duplication  of  transmission
facilities);  Conectiv, Inc., HCAR No. 26832, at 1998 SEC LEXIS 326, at 29, note
27.


                                       30

                    (ii) Coordination  of  electric  operations

                         (a)  Power  Pools  and  ISOs

     The  Merger satisfies the requirement that the utility assets, under normal
conditions,  may  be  "economically  operated  as  a  single  interconnected and
coordinated  system."(66)  The Commission has interpreted this language to refer
to  the  physical  operation of utility assets as a system in which, among other
things,  the  generation  and/or  flow of current within the system be centrally
controlled  and  allocated  as  need  or  economy  directs.(67)

     While  the definition reflects an assumption that the holding company would
coordinate  the  operations  of  the  integrated  system,(68) the Commission has
recognized  the  "Congress  did  not intend to impose rigid concepts but instead
expressly  included  flexible  considerations"  to  accommodate  changes  in the
electric  utility  industry.(69) Thus, the Commission has considered advances in
technology  and  the  particular  operating  circumstances  in  applying  the
integration  standards.(70)  In its decision approving the acquisition of Public
Service  Company of New Hampshire ("PSNH") by Northeast Utilities ("Northeast"),
the  Commission  noted, "the operation of generating and transmitting facilities

------------------
66  See  id.,  citing  Cities  Services  Co.,  14 S.E.C. 28, 55 (1943) (Congress
intended  that the utility properties be so connected and operated that there is
coordination  among  all  parts, and that those parts bear an integral operating
relationship  to  one  another).

67  North  American  Co.  HCAR  No. 10320 (1950) at 242, note 15. The Commission
explained  that  "even  though we find physical interconnection exists or may be
effected, evidence is necessary that in fact the isolated territories are or can
be  so  operated  in  conjunction  with the remainder of the system that central
control  is  available  for  the  routing  of  power  within  the  system."

68  In  1935,  an  electric  utility system generally included local generation,
transmission  and  distribution,  little  long-distance  transmission,  no joint
ownership  of  generation  or  transmission  facilities,  and  no  power  pools.

69 Mississippi Valley Generating Co., 36 S.E.C. 159, 186 (1955), cited in Yankee
Atomic  Elec. Co., 36 S.E.C. 552, 565 (1965). We have stated that "[w]e think it
clear  from  the  language  of  Section 2(a)(29)(A), which defines an integrated
public  utility  system  that  congress  did  not  intend to imposed [sic] rigid
concepts with respect thereto". Yankee Atomic Electric Co., HCAR No. 13048 (Nov.
25,  1955).  Accord  Unitil,  supra,  note  8.

70  In  New  England  Elec. Sys., 38 S.E.C. 193, 198-99 (1958), for example, the
Commission  found that an electric-utility system could be economically operated
as  a single interconnected and coordinated system because the holding company's
internal  coordination  system was supplemented by contractual arrangements with
nonaffiliates  for  power  and  transmission.

In  Yankee  Atomic Elec. Co., 36 S.E.C. 552, 565 (1965) the Commission found the
coordination  requirement  satisfied  because  each system could absorb its full
share of plant output, as set by a predetermined schedule, and because operating
necessity  or technological developments would determine when the plant would be
serviced, modified or retired.  See also Connecticut Yankee Atomic Power Co., 41
S.E.C.  705,  710  (1963);  Unitil,  supra  note 8; and National Grid Group plc,
Holding  Co.  Act  Release  No.  27154  (March  15,  2000).


                                       31

of  PSNH  and  the  Northeast  operating  companies is coordinated and centrally
dispatched under the NEPOOL Agreement."(71) Similarly, in Unitil, the Commission
concluded  that  the  combined  electric  utility assets of the companies may be
operated  as  a  single  interconnected  and  coordinated  system  through their
participation  in  NEPOOL.(72)

     In  Unitil, the Commission noted that NEPOOL is a "tight" power pool, which
consists  of electric systems "which coordinate the planning and/or operation of
their  bulk  power  facilities  for the purpose of achieving greater economy and
reliability  in  accordance  with  a contractual agreement that establishes each
member's  responsibilities."(73)  The  Commission stated that tight power pools:

             have  centralized  dispatch  of  generating facilities,
             whereby  energy and operating reserves are interchanged
             among  the  participant  systems  and  transferred over
             facilities  owned   by  the  individual   participants.
             Participants  have contractual requirements relating to
             generating  capacity  and  operating reserves, together
             with specific financial penalties if these requirements
             are  not  met. Sufficient transmission capacity is made
             available  to  realize  the full value of operating and
             planning  coordination.(74)

     The  Commission further recognized that NYPP, the predecessor to the NYISO,
similarly  is  a  tight  power pool, in terms of its level of centralization and
automation.(75)

     NYSEG and RG&E have transferred scheduling and operational control over its
high-voltage  transmission  facilities  to  the  NYISO.  The  NYISO  commits and
dispatches  generation  assets  and operates the combined transmission assets of
its  participants  as  a  single  electrical  system, ensuring that transmission
capacity  is provided to enable the market to function. Moreover, the generating
assets  of  RG&E and NYSEG are centrally dispatched through NYISO procedures. In
addition, the NYISO energy markets operate on a bid price basis and the dispatch
of  any  facility will depend upon its bid. To meet their respective retail load

------------------
71  Northeast  Utilities,  HCAR  No. 25221 (Dec. 21, 1990), n. 85, supplemented,
HCAR  No.  25273  (Mar. 15, 1991), aff'd sub nom. City of Holyoke v. S.E.C., 972
F.2d  358  (D.C.  Cir.  1992).

72 Unitil, supra note 8. See also Conectiv, Inc., HCAR No. 26832 (Feb. 25, 1998)
(the  Commission  found that Delmarva Power & Light Company and Atlantic Energy,
Inc.  met  the  physical  interconnection  requirements  through  their  common
membership  in PJM Interconnection, LLC, which was a regional power pool and the
first  FERC-approved  operational  ISO).

73  Id.  at  n.  22.

74  Id.

75  Id.


                                       32

obligations,  NYSEG  and RG&E will jointly purchase and schedule the delivery of
capacity  and  energy  on  an economic basis. Transmission service over both the
NYSEG  and  RG&E  systems  will  be  provided  through  the  NYISO  tariff.

                         (b)  Other  Means  of  Coordination.

     As  noted  above,  the  Companies project that bringing Energy East and RGS
together  will  produce net savings of approximately $50 million per year. Those
savings will be achieved in part through the common management of NYSEG and RG&E
in  areas  such as procurement, information systems and other administrative and
general  areas.  As  affiliates  of a bigger company, RG&E and NYSEG become more
valuable customers to potential supplies, which will enable the two utilities to
negotiate  more  aggressively  for  goods  and  services,  thereby  achieving
efficiencies  and  savings  in  the  areas  of  energy  supply  and  materials
procurement.  Moreover,  since  electric demand in NYSEG's service area peaks in
the  winter  while  RG&E's peak occurs during the summer, together the Companies
will  have  a  higher  annual  electric  load  factor  than  either  would  have
separately,  which  can  provide  advantages  in  the  purchase of power and the
utilization  of  generation  assets.

     Appendix  E  to  the  Companies'  petition to the NYPSC for approval of the
Merger(76)  consists  of  the  affidavit  of  Thomas  J.  Flaherty  of  Deloitte
Consulting  L.P.,  which  affidavit  describes  the  categories  and  levels  of
Merger-related  cost  savings that are anticipated to result from the Merger. In
addition  to  savings  in the areas of staffing and corporate and administrative
programs,  Mr.  Flaherty  identifies  the  ability  of the combined Companies to
obtain  purchasing  economies in the nonfuel area resulting from the aggregation
of  materials  and  supplies  volumes,  as  well as service contracts. Regarding
energy  supply, savings can be obtained in the area of gas supply from combining
the  Companies'  gas  supply  portfolio  to  eliminate  unnecessary  capacity
redundancies  and  to achieve greater purchasing leverage in the marketplace. In
addition,  energy  sourcing  savings  can  be  obtained  by consolidating system
operations  to achieve benefits from the amount of load shifted to baseload from
peaking  and  intermediate  cycling as a result of noncoincidental peaks between
the  Companies.

     The Companies note that while the NYPSC has already granted NYSEG the right
to  retain  merger savings for five years from the date of closing, customers of
NYSEG  and RG&E will nonetheless enjoy significant benefits as a result of those
savings  because such savings will allow greater price stability. NYSEG and RG&E
are  committed  to  the principle of protecting customers to the extent feasible
from  the volatility and price increases that have accompanied the transition to
a  competitive marketplace in electricity. Consistent with that commitment, both
Companies  operate  under  electric  restructuring agreements that do not burden
their  customers with pass-through mechanisms that have caused electric bills to
rise  elsewhere  in  the  State  and  around  the  country as a result of wildly
fluctuating  wholesale  market  prices.  NYSEG and RG&E have been addressing the
risk  of  rising fuel, power and natural gas costs. The savings that will result

------------------
76  This  Petition  is described in Item 4.E. below, and the Petition, including
Mr. Flaherty's  affidavit,  is  attached  as  Exhibit  D-3.


                                       33

from  the  Merger  enhance  both Companies' ability to manage these costs in the
coming  years,  thereby  benefiting  their  customers.

     Finally,  NYSEG  and RG&E intend to continue to operate in their respective
service  areas under their own names and with their own workforces in the field.
Having  separate utilities as part of one holding company system will facilitate
the  Companies' ability to cooperate, not only in times of emergency such as ice
storms,  blizzards  and  other  natural disasters. Similar opportunities will be
available  with  respect  to more routine, day-to-day administrative and general
functions.

                         (iii)  Single  area  or  region

     The  Commission's  third requirement for integration is also satisfied. The
Energy  East  electric  system  will  operate  in  a  single area or region. The
electric  system will operate in upstate New York and central and southern Maine
in  the  northeast  region  of  the United States. NYSEG and RG&E share over 200
miles  of  contiguous  service territory and will provide service to upstate New
York  customers. Although the service territories of NYSEG and RG&E do not touch
or  overlap  with  the service territory of Central Maine Power, they are within
the  same  general  region.  The  Commission has specifically approved NYSEG and
Central  Maine  Power  as  operating within a single area or region,(77) and has
authorized  a  number  of  similar  combinations  of electric utilities.(78) The
Commission  has made clear that the "single area or region" requirement does not
mandate  that  a system's operations be confined to a small geographic area or a
single  state.  In  considering size, the Commission has consistently found that
utility  systems  spanning  multiple  states  satisfy  the single area or region
requirement  of the Act. (79) Given the high level of interpool transactions and
ready  transmission access between NEPOOL and NYISO, and the elimination of rate
pancaking,  the  net  effect  is  a  regional  northeast U.S. grid, from both an
operational  and  economic  standpoint. By virtue of their common memberships in
the  highly  interactive  NYISO  and NEPOOL, NYSEG, RG&E and Central Maine Power
will  be  part  of  the  same  region.

                         (iv) Not  so large as to impair advantages of localized
                              management,  efficient  operation,  and  the
                              effectiveness  of  regulation

     Finally,  with  respect  to the Commission's fourth requirement, the Energy
East  system  will  not  be  so  large  as to impair the advantages of localized
management,  efficient operations, and the effectiveness of regulation. RGS will

------------------
77  Id.

78  See,  e.g., CP&L Energy, Inc., HCAR No. 27284 (Nov. 27, 2000); WPS Resources
Corp.,  HCAR  No.  26922  (Sept.  28,  1998).

79  See,  e.g.,  American  Electric  Power  Co.,  HCAR No. 27186 (June 14, 2000)
("AEP")  (approving  power  system covering portions of eleven states); Entergy,
supra,  (approving  power  system covering portions of four states): New Century
Energies,  Inc.,  HCAR  No.  26748  (Aug.  1, 1997) (approving integrated system
covering  portions  of  five  states).


                                       34

maintain  its  corporate  headquarters in Rochester, New York. After the Merger,
Energy  East  will  maintain  its  principal  office  in  Albany,  New York. The
management  of post-Merger Energy East will be drawn primarily from the existing
management  of  Energy  East  and RGS and their subsidiaries.(80) This structure
will  preserve all the benefits of localized management that Energy East and RGS
presently enjoy while simultaneously allowing for the efficiencies and economies
that  will  derive  from  the  Merger.

     Additionally,  the  post-Merger  Energy  East  system  will  not impair the
effectiveness  of  state regulation. Energy East's and RGS' utility subsidiaries
will  continue  their  separate existence as before and their utility operations
will  remain  subject  to  the  same  regulatory  authorities  by which they are
presently  regulated,  namely the NYPSC, MPUC, DPUC, MDTE, the FERC and the NRC.
Energy  East  and  RGS  are  working  closely  with  all  agencies to the extent
necessary to ensure they are well informed about the Merger, and the Merger will
not  be  consummated  unless  all  required  regulatory  approvals are obtained.
Pursuant to the recommendations contained in the 1995 Report this last factor is
significant,  as the Division stated therein "where the affected state and local
regulators  concur,  the  [Commission] should interpret the integration standard
flexibly  to  permit  non-traditional  systems  if  the standards of the Act are
otherwise  met,"(81) especially since the Merger will result in a system similar
to  the  traditional  registered  holding  company  system.

     The  electric  operations  of  NYSEG,  Central  Maine  Power  and  RG&E are
coordinated  through  joint  planning  with, and for, NYISO and ISO-NE and joint
distribution  activities.  Given the close coordination of NYISO and ISO-NE, the
area  encompassed  should  be  considered  a single area or region and given the
maintenance  of  utility  corporate headquarters in Connecticut, Maine, New York
and  Massachusetts,  and  ongoing  regulation  by  various  state  and  federal
authorities, there is no impairment of localized management, efficient operation
or  effective  regulation.

          3.   Combination  of  Gas  Utility  Operations
               -----------------------------------------
               (a)  Section  10(c)(1)

     Energy  East's  acquisition of the gas operations of RG&E as well as Energy
East's  retention  of  the  existing  gas  operations of NYSEG, Maine Gas, CNGC,
Southern Connecticut Gas, and Berkshire Gas is lawful under Section 8 of the Act
and  would  not  be  detrimental  to  the carrying out of Section 11 of the Act.

------------------
80  The  Commission has found that an acquisition does not impair the advantages
of  localized  management where the new holding company's "management [would be]
drawn  from  the  present  management," (Centerior, supra) or where the acquired
company's  management  would  remain  substantially  intact.  (AEP,  supra).

81  1995  Report  at  74.


                                       35

                    (i)  Section  8

     Section  8  of  the  Act  provides  that:

     [w]henever  a  State  law   prohibits,   or   requires   approval   or
     authorization  of,  the  ownership or operation by a single company of
     the  utility  assets  of an electric utility company and a gas utility
     company serving substantially the same territory, it shall be unlawful
     for  a  registered  holding company, or any subsidiary company thereof
     (1)  to  take  any  step,  without  the  express approval of the state
     commission  of  such  state,  which  results in its having a direct or
     indirect  interest  in  an  electric utility company and a gas company
     serving substantially the same territory; or (2) if it already has any
     such  interest,  to acquire, without the express approval of the state
     commission,  any  direct  or  indirect interest in an electric utility
     company  or  gas  utility  company  serving  substantially  the   same
     territory  as that served by such companies in which it already has an
     interest.

     A  fair  reading  of  this section indicates that, with the approval of the
relevant  state  utility  commissions,  registered  holding  company systems can
include  both  integrated  electric  utility  systems and integrated gas utility
systems.

     Energy East, as a combination company, is permissible pursuant to the terms
of Section 8 of the Act and is in the public interest. First, the combination of
electric  and gas operations in Energy East is lawful under all applicable state
laws  and regulations. The Merger will not result in any change in the provision
of  gas and electric services of any so-called combination system within a given
state.  Energy  East,  through  NYSEG, will continue to provide electric and gas
service  in  the State of New York, CMP Group, through its utility subsidiaries,
will  continue  to  provide  electric  service  in  the State of Maine, and RGS,
through  its  utility  subsidiary,  will  continue  to  provide electric and gas
service  in  the  state  of  New  York.  Since  New  York  and Maine both permit
combination  gas  and  electric utilities serving the same area, the Merger does
not  raise  any issue under Section 8. Moreover, earlier concerns that a holding
company  such  as  Energy  East  would  be able to greatly emphasize one form of
energy over the other based on its own agenda have substantially receded because
of the competitive nature of the energy market, which requires utilities to meet
customer  demand for energy in whatever form. Furthermore, state regulators will
have sufficient control over, and are unlikely to approve, a combination company
that  attempts  to  undertake  such  practices.

                    (ii) Section  11

     Even  if  Section 8 of the Act were not interpreted as generally permitting
the  combination  of separate gas systems where such combination is approved and
accepted  by  the  relevant  state  commissions,  Sections  10 and 11 of the Act
contain  additional  provisions  that permit the retention by Energy East of its
existing  integrated  gas  system  and  the acquisition of the gas operations of
RG&E.

     Section 10(c)(1) prevents the Commission from approving an acquisition that
"would  be  detrimental  to  the  carrying out of the provisions of Section 11."
Section  11(b)(1)  of  the  Act  generally  confines the utility properties of a
registered  holding  company  to  a  "single  integrated public-utility system,"
either  gas  or  electric.


                                       36

     An exception to the requirement of a "single system" is provided in Section
11(b)(1) AC (the "ABC clauses").(82) A registered holding company may own one or
more  additional  integrated  public  utility  systems  --  i.e., gas as well as
electric  --  if  each  system meets the criteria set forth in these clauses. As
discussed  below,  post-Merger  Energy  East  qualifies  under  the  exception
established  pursuant  to  the  ABC clauses to retain the integrated gas system,
comprised  of  Energy  East's  existing  gas operations and the gas operation of
RG&E.

               (b)  "ABC"  Clauses

     Section 11(b)(1) of the Act permits a registered holding company to control
one  or  more  additional  integrated  public  utility  systems  if:

          (A)  each  of  such  additional  systems  cannot  be  operated  as  an
               independent  system  without  the  loss  of substantial economies
               which  can be secured by the retention of control by such holding
               company  of  such  system;

          (B)  all  of  such  additional  systems  are  located  in  one  state,
               adjoining  states,  or  a  contiguous  foreign  country;  and

          (C)  the  continued  combination  of such systems under the control of
               such  holding  company  is not so large (considering the state of
               the  art  and  the  area  or  region  affected)  as to impair the
               advantages  of  localized management, efficient operation, or the
               effectiveness  of  regulation.

     For  the  reasons set forth below, a divestiture order would be contrary to
the  public  interest  and  Energy  East  therefore requests that the Commission
authorize  retention  of  Energy  East's  existing  gas operations. Furthermore,
Energy  East requests that the Commission authorize Energy East's acquisition of
the  gas  operations  of  RG&E.

     In  the  1995  Report, the Commission Staff recommended that the Commission
"liberalize  its  interpretation  of  the  'ABC'  clauses."(83)  In  its  recent
decisions  in  Exelon  Corporation,(84)  Conectiv,  Inc.,(85)  and WPL Holdings,
Inc.,(86)  the  Commission  applied  the ABC clauses to proposed acquisitions by
to-be-registered holding companies. The Commission reconsidered and rejected the
implicit requirement, in many of its earlier decisions, of evidence of a severe,
even  crippling,  effect  of divestiture upon the separated system, stating that
this  approach  is  outmoded in the contemporary utility industry, and explained
that as a result of the convergence of the gas and electric industries now under
way,  separation of gas and electric businesses may cause the separated entities
to  be  weaker  competitors  than  they  would be together, and that this factor

------------------
82  See  generally  NIPSCO  Industries,  Inc.,  HCAR  No. 26975 (Feb. 10, 1999).

83  1995  Report  at  74.

84  Exelon  Corporation,  HCAR  No.  27256  (Oct.  19,  2000).

85  Conectiv,  Inc.,  HCAR  No.  26832  (Feb.  25,  1998).

86  WPL  Holdings,  Inc.,  HCAR  No.  26856  (Apr.  14,  1998).


                                       37

operates  to  compound the loss of economies represented by increased costs. The
above-cited decisions support a favorable consideration by the Commission of the
instant  Application/Declaration.

     Historically,  under  its  previous  narrow  interpretation  of  section
11(b)(1)(a), as a guide to determining whether lost economies are "substantial,"
the  Commission  has  given  consideration to ratios which measure the projected
loss  of economies as a percentage of: (1) total utility operating revenues; (2)
total  utility  expense  or  "operating  revenue  deductions;" (3) gross utility
income;  and  (4)  net gas utility operating income. Although the Commission has
declined  to draw a bright-line numerical test under section 11(b)(1)(a), it has
indicated that cost increases resulting in a 6.78% loss of operating revenues, a
9.72%  increase  in  operating  revenue  deductions,  a 25.44% loss of gross gas
income  and  a  42.46%  loss of net income would afford an "impressive basis for
finding  a  loss  of  substantial  economies."(87)

     Here, the lost economies that would be experienced if the gas properties of
Energy  East  were  to  be  operated on a stand-alone basis substantially exceed
these  numbers,  without  any  increase  in  benefits  to  consumers  from  such
divestiture.  The  Companies  have provided, at Exhibit J-1, an "Analysis of the
Economic  Impact  of  a  Divestiture  of  the  Gas Operations of Rochester Gas &
Electric."  ("Divestiture  Analysis")  As  shown  in Table I-1 of that analysis,
divestiture  of RG&E gas business into a stand-alone gas company would result in
a  14.74%  loss  of  operating  revenues, a 15.86% increase in operating revenue
deductions,  a  208.58%  loss of gross gas income, and a 367.09% loss of net gas
income.  These  figures  show  that  the  lost  economies  associated  with  the
divestiture  of  Energy East's gas business are substantial, even under a narrow
interpretation  of  Section  11(b)(1)(A).

     The Divestiture Analysis quantifies the results of divesting RG&E's natural
gas  business  and assets into a stand-alone company (referred to as "NewGasCo")
which  would  serve  RG&E's natural gas customers at a level of service, quality
and  safety  comparable  to the level currently served by RG&E. If it is assumed
that  NewGasCo  is  allowed  by state regulators to increase its rate revenue to
recover  increased  costs  resulting  from  divestiture,  NewGasCo's natural gas
customers  will  see  an overall rate increase of about 15.4%, as shown in Table
I-2  of the Divestiture Analysis. This significant increase in rates would bring
no  attendant increase in the level or quality of service. Moreover, such a rate
increase  would  come  at  a time when NewGasCo would be facing the emergence of
retail  competition  and  increased  competition  in  the  energy  industry. The
projected  impact on customers includes lost economies of $47.5 million, plus an
additional  $2.0  million  in  associated  income taxes, yielding total economic
losses  of  $49.5  million.

     In  addition to the foregoing impacts relating to the natural gas business,
divesting  RG&E's  natural gas business would result in a rate increase of about
5.2%  to  RG&E's  remaining  electric  customers.  The  analysis underlying this
conclusion  assumed  that  state  regulators would allow the pass-through to the
Company's  electric  customers of electric business unit lost economies, as well
as  associated  income  taxes.  Under this case, RG&E's electric customers would

------------------
87  Engineers  Public  Service  Co., 12 S.E.C. 41, 59 (1942) (citation omitted).


                                       38

realize  economic  losses  of  about $28.3 million, as shown in Table I-3 of the
Divestiture  Analysis.  This  impact  is  primarily  due  to:  (1)  the  expense
associated  with  additional  electric business unit employees being required to
support  functions  that  previously  were  provided  jointly for RG&E's utility
business  units;  (2)  increases  in the allocation of certain fixed costs which
were  previously  allocated among both of RG&E's utility business units; and (3)
the  capital  cost  associated  with  the  transfer  of  assets,  as well as the
acquisition  of  new  assets,  into  the  electric  rate  base.

     In  sum,  the  Divestiture  Analysis indicates that, in all likelihood, the
forced divestiture of RG&E's natural gas business and assets would result in the
realization  of  significant  operational  inefficiencies  affecting  NewGasCo's
shareholders  and/or customers and RG&E's remaining electric customers. NewGasCo
would  realize  incremental  costs  associated  with  labor and other resources,
because it would no longer be able to share these resources with RG&E's electric
segment.  Overall,  economic  losses  to NewGasCo of approximately $49.5 million
were  identified  in  the  Divestiture  Analysis.

     In  addition  to  the  quantified  economic  losses  associated  with  the
divestiture  of  the  gas  operations  of  RG&E,  divestiture  would  cause  a
significant,  although  difficult  to  quantify, amount of damage to post-Merger
Energy  East's  customers  and would disrupt plans of its regulators to create a
fluid  and  efficient  total  energy marketplace, and set of services. Likewise,
divestiture  would  interfere  with  Energy  East's  ability  to  compete in the
marketplace.  Such  costs  to customers involve the additional expenses of doing
business with two utilities instead of one (i.e., additional telephone calls for
service and billing inquiries, additional postage expense, and cost of providing
access  to  meters  and other facilities for two utilities) and costs associated
with  making  the  entities  supply  information to shareholders and publish the
reports required by the Act. Similarly, increased costs would involve additional
duties  for  the  staffs of the NYPSC as a result of that agency dealing with an
additional  utility.  These  additional  duties  would  largely be the result of
duplicating  existing  functions,  such  as  separate  requests  for approval of
financing  and  rate  case  requests.

     Energy  East's  competitive  position  in the market would also suffer from
divestiture  of  RG&E's  gas  operations  because, as the utility industry moves
toward a complete energy services concept, competitive companies must be able to
offer  customers  a  range of options to meet their energy needs. The Commission
has recognized that significant economies and competitive advantages result from
the  ownership  of  both  gas  and  electric  operations.(88) Divestiture of gas
operations  would  render Energy East unable to offer certain of its customers a
significant  and  important option, namely gas services, and could damage Energy
East's  long-term  competitive  potential.  As  the Commission recognized in New
Century  Energies,  Inc.,  in  a  competitive  utility  environment, any loss of

------------------
88  NiSource  Inc., HCAR No. 27263 (Oct. 30, 2000); Exelon Corp., HCAR No. 27256
(Oct.  19,  2000).


                                       39

economies threatens a utility's competitive position, and even a "small" loss of
economies  may  render  a  utility  vulnerable  to  significant  erosion  of its
competitive  position.(89)

     With respect to Clause B, as the Commission noted in WPL Holdings, Inc., et
al.,(90)  "[c]lause  B  contemplates the location of an additional system in the
same  state  as  the  principal system or in adjoining states."(91) Here, Energy
East's  principal system (the integrated electric system) will be located in New
York and Maine, and the "additional system" -- the integrated natural gas system
-- will be located in the same states of New York and Maine and in the adjoining
States  of  Connecticut  and Massachusetts. Hence Clause B of the ABC clauses is
satisfied.

     With  respect  to Clause C, the continued combination of the gas operations
under Energy East is not so large (considering the state of the art and the area
or region affected) as to impair the advantages of localized management. The gas
operations  of  Energy East and of RG&E will continue to be the same as they are
today  with  some  616,000  (Energy  East)  and 293,000 (RG&E) customers in four
states  and  confined  to  a  relatively  small area. (92) As the Commission has
recognized  elsewhere,  the  determinative consideration under this criterion is
not  size  alone or size in the absolute sense, either big or small, but size in
relation to its effect, if any, on localized management, efficient operation and
effective regulation.(93) Management currently is and will remain geographically
close  to  gas  operations,  thereby  preserving  the  advantages  of  localized
management.  From the standpoint of regulatory effectiveness, each gas operation
is  organized  in  a  separate  corporation  by  regulatory  jurisdiction  thus
facilitating  state  regulation.  Finally, as detailed below, the Companies' gas
operations will realize additional economies as a result of the Merger. Far from
impairing  the  advantages  of efficient operation, the continued combination of
the  gas operations under Energy East will facilitate and enhance the efficiency
of  gas  operations.

     In  summary, the addition of RG&E to the Energy East system in the State of
New  York,  where  NYSEG  already  serves  approximately  248,000  natural  gas
customers, will add 293,000 natural gas customers to Energy East's existing base
of  over  616,000  natural  gas  customers.  Such additions will bring about the
benefits  described  above.  Energy East should therefore be permitted to retain
its  existing  gas  operations  while  being  allowed  to acquire and retain the
natural  gas  utility  assets  of  RG&E.

------------------
89  New  Century  Energies,  Inc., HCAR No. 26749, citing 1995 Report at 71. See
also  WPL  Holdings, Inc., HCAR No. 26856 (Apr. 14, 1998), citing 1995 Report at
71.

90  HCAR  No.  26856  (Apr.  14,  1998).

91  Id.  at  n.44.

92  The  relative  sizes of the NYSEG, RG&E, Southern Connecticut Gas, Maine Gas
Co.,  CNGC  and  and Berkshire Gas natual gas operations are shown on one of the
maps  contained  in  Exhibit  E-1.

93  See,  e.g.,  Conectiv,  Inc.,  HCAR  No.  26832  (Feb.  25,  1998).


                                       40

               (c)  Gas  utility  integration  standards  (Section  10(b)(2))

     Section  2(a)(29)(B)  defines  an  "integrated  public  utility  system" as
applied  to  gas  utility  companies  as:

     [A]  system  consisting of one or more gas utility companies which are
     so  located  and related that substantial economies may be effectuated
     by  being  operated  as  a  single  coordinated system confined in its
     operation  to  a  single area or region, in one or more states, not so
     large  as  to impair (considering the state of the art and the area or
     region  affected)  the  advantages  of localized management, efficient
     operation,  and  the  effectiveness  of regulation: Provided, that gas
     utility  companies deriving natural gas from a common source of supply
     may  be  deemed  to  be  included  in  a  single  area  or  region.

     Unlike the definition of an "integrated electric utility system" in Section
2(a)(29)(A) of the Act, physical interconnection of the component parts of a gas
utility  system  is  not  mentioned.  Furthermore,  the  Commission  has  not
traditionally  required  that the pipeline facilities of an integrated system be
interconnected.(94)

     The  combination of Energy East's gas facilities with the gas facilities of
RG&E  will  satisfy  the integration standard set forth in Section 2(a)(29)(B)of
the  Act  for  the  following  reasons:

     -    Energy  East's  existing  gas facilities and RG&E will share a "common
          source  of  supply"  and  will  be  operated  as a "single coordinated
          system."

     -    Energy  East's  gas  facilities  and  RG&E  will  be  able  to achieve
          "substantial economies" in gas supply through the increased purchasing
          power  and gas supply coordination that will result from being part of
          the  larger  combined  gas  system;

     -    As  the  two  smallest  of  the combined gas operations, Maine Gas and
          Berkshire  Gas  and  the  customers  of  these  two gas companies will
          continue  to  particularly  benefit  from these efficiencies, and will
          benefit  from  the  expertise  of  RG&E  in such areas as engineering,
          construction,  training,  meter  service,  testing,  marketing and gas
          transportation;  and

     -    The  area  or  region  served  by  the  post-merger  Energy  East  gas
          facilities  will  not  be  "so  large  as  to impair the advantages of
          localized  management,  efficient  operation, and the effectiveness of
          regulation."  To  the contrary, management of these companies' utility

------------------
94  See  In  the  Matter  of Pennzoil Company, HCAR No. 15963 (1968) (finding an
integrated  system  where  respective  facilities  both  connected  with  an
unaffiliated transmission company but not each other). See also In the Matter of
American  Natural Gas Co., HCAR No. 15620 (1966) ("it is clear the integrated or
coordinated operations of a gas system under the Act may exist in the absence of
[physical]  interconnection").


                                       41

          subsidiaries  will largely remain intact after the consummation of the
          Merger,  and  will  be  subject  to  effective  local  regulation.

                    (i)  Section  2(a)(29)(B):  "substantial  economies  may  be
                         effectuated  by  being operated as a single coordinated
                         system"

     The gas departments of RG&E and of the Energy East gas utility subsidiaries
will  be  operated in a coordinated fashion as to portfolio design and strategy,
procurement,  storage  optimization,  price  risk  management  and  contract
administration.  Energy  East and RGS are in the process of identifying specific
components  of  their  gas  portfolios  which,  through  joint  management  and
coordination,  will  enable  the combined companies to realize opportunities for
savings  in  the  marketplace.(95)

     With  regard  to  natural gas service, Energy East and RGS gas subsidiaries
purchase  significant  amounts  of  gas  from  the same supply basins in Western
Canada  and  Texas/Louisiana,  holding  capacity  on the Dominion, Empire State,
TransCanada,  Texas  Gas  and  Tennessee  pipelines,  and  contract  for storage
services  in  Pennsylvania  and  New  York. These common portfolio resources may
bring  long-term benefits to the Companies' customers. Moreover, as the dynamics
and  structure  of  the natural gas industry continue to change, the marketplace
will  create  even  more  options  for  the  Companies  to provide value through
coordination  of their respective gas supply portfolios. For example, demand and
pricing  differentials  now  exist  and  will  continue  to  occur  and, through
coordinated  management  of their portfolios of physical and contractual assets,
the  Companies  will  be  better positioned to take advantage of changing market
conditions.

                    (ii) Section 2(a)(29)(B): "a single area or region in one or
                         more  states"

     After  consummation  of  the  Merger,  Energy East's gas operations will be
located in a single region -- the northeastern United States. The gas operations
of  NYSEG  and  RG&E  will  be  located  entirely  within the state of New York.
Although  the NYSEG, CNGC, Maine Gas, Southern Connecticut Gas and Berkshire Gas
retail  gas  service  areas  will  be separated by a distance of several hundred
miles  and, in the case of Maine Gas, are located in non-contiguous states, such
factors  by themselves are not determinative. The Commission has made clear that
systems separated by intervening territories are in the same region because they
procure  gas  from  a  "common  source  of  supply."(96)

------------------
95  See  also  Item  3.C.3  Economies  and Efficiencies from the Merger (Section
10(c)(2))  for  information  concerning  Merger  economies  and  efficiencies.

96 See Energy East Corporation, et al., HCAR No. 27224 (Aug. 31, 2000). See also
NIPSCO,  HCAR  No.  26975  (Feb.  10,  1999)  (authorizing  holding company with
operating company in Indiana to acquire a gas utility in Massachusetts where the
gas  utilities  in  each state received significant amounts of gas from the same
supply  basin).


                                       42

     Section  2(a)(29)(B)  specifically contemplates that "gas utility companies
deriving natural gas from a common source of supply may be deemed to be included
in  a  single  area  or  region."  Moreover,  in considering whether an "area or
region"  is  so  large  as  to  impair"  the advantages of localized management,
efficient  operation,  and the effectiveness of regulation," the Commission must
consider the "state of the art" in the industry. Both the Commission's precedent
and  the  "state  of the art" in the natural gas industry lead to the conclusion
that,  with  the RG&E gas system included, Energy East's gas utility system will
operate  as  a  coordinated system confined in its operation to a single area or
region  because the Energy East and RG&E systems will derive almost all of their
natural  gas  from  a  common  source  of  supply.

     The  Act,  the  Commission's orders and rulings, and the Commission staff's
no-action  letters  do not provide a definition as to what constitutes a "common
source  of supply." Historically, in determining whether two gas companies share
a  "common  source  of supply," the Commission has looked to such issues as from
whom  the distribution companies within the system receive a significant portion
of  their  gas  supply.(97) The Commission has also considered both purchases of
gas from a common pipeline.(98) as well as from different pipelines when the gas
originates  from  the  same  gas  field.(99)  Since  the  time  of most of these
decisions, the state of the art in the industry has developed to allow efficient
operation  of  systems  whose  gas  supplies derive from many sources within the
supply  regions  or  markets.

Following  consummation  of  the  Merger,  the  NYSEG, CNGC, Maine Gas, Southern
Connecticut Gas, Berkshire Gas and RG&E gas facilities will derive substantially
all of their gas from a common source of supply under Section 2(a)(29)(B). NYSEG
receives approximately 56% of its gas supply from the Texas and Louisiana Basins
and  approximately  32%  of its gas supply from the Western Canadian Sedimentary
Basin,  which  together account for over 88% of NYSEG's gas supply. In addition,
over  59%  of  NYSEG's total transportation capacity requirements are carried on
the  Dominion Transmission, Empire State, Texas Gas Transmission and TransCanada
pipelines. Southern Connecticut Gas receives approximately 64% of its gas supply
from the Texas and Louisiana Basins and approximately 35% of its gas supply from
the  Western  Canadian  Sedimentary  Basin,  which  together  account

------------------
97 See, e.g., In the Matter of Philadelphia Company and Standard Power and Light
Co.,  HCAR  No.  8242  (1948) ("most of the gas used by these companies in their
operations is obtained from common sources of supply"); Consolidated Natural Gas
Co., HCAR No. 25040 (1990) (finding integrated system where each company derived
natural  gas  from  two  transmission  companies, although one such company also
received  gas  from  other  sources).

98  In  the  Matter  of  the  North American Co., HCAR No. 10320 (1950) (finding
Panhandle  Eastern  pipeline  to  be  a  common  source  of  supply).

99  See  In  the Matter of Central Power Company and Northwestern Public Service
Co., HCAR No. 2471 (1941), in which the Commission declared an integrated system
to  exist  where  two  entities purchase from different pipeline companies since
"both  pipelines run out of the Otis field, side by side, and are interconnected
at  various  points  in  their transmission system; and that they are within two
miles  of  each  other  at  Kearney."


                                       43

for  99%  of  Southern  Connecticut Gas's gas supply. In addition, nearly all of
Southern  Connecticut Gas's total transportation capacity requirements from each
of  the basins mentioned above are carried on the Tennessee, Iroquois, Algonquin
and Texas Eastern pipelines. With regard to CTG Resources' gas subsidiary, CNGC,
approximately  78% of CNGC's gas supply is received from the Texas and Louisiana
basins,  and  approximately  21%  of its gas supply is received from the Western
Canadian  Sedimentary  Basin,  which together account for over 99% of CNGC's gas
supply.  Nearly  all  of  CNGC's  total transportation capacity requirements are
carried on the Tennessee, Iroquois, Algonquin, and Texas Eastern pipelines. With
regard  to  Maine  Gas, approximately 100% of Maine Gas' gas supply is currently
received  from  the Portland Natural Gas Transmission System ("PNGTS") pipeline,
which is interconnected with the TransCanada Pipeline, carrying Western Canadian
Sedimentary  Basin gas. When fully developed, Maine Gas will continue to receive
at  least  50%  of  its  gas  supply from the Western Canadian Sedimentary Basin
through  the  TransCanada  Pipeline  and  the  PNGTS  pipeline.  With  regard to
Berkshire Energy's gas subsidiary, Berkshire Gas, approximately 92% of Berkshire
Gas'  gas  supply  is  received  from  the  Texas  and  Louisiana  basins,  and
approximately  3%  of  its  gas  supply  is  received  from the Western Canadian
Sedimentary  Basin, which together account for 95% of Berkshire Gas' gas supply.
One hundred percent of Berkshire Gas' total transportation capacity requirements
are  carried  on  the Tennessee pipeline. RG&E receives approximately 10% of its
gas  supply  from the Texas and Louisiana Basins, 30% of its gas supply from the
Southpoint  market area and approximately 60% of its gas supply from the Western
Canadian Sedimentary Basin, which together account for 100% of RG&E's supply. In
addition,  nearly  all  of RG&E's total transportation capacity requirements are
carried  on  the Dominion Transmission, Empire State, Texas Gas Transmission and
TransCanada  pipelines.

     In  addition,  Sable  Island  gas  supply from offshore Nova Scotia via the
newly constructed Maritimes & Northeast Pipeline will be available to all Energy
East  gas  affiliates  via  the  Tennessee  Gas  Pipeline, which connects to the
Maritimes & Northeast Pipeline at Dracut, Massachusetts. It is anticipated that,
as Sable Island is developed, the Energy East gas facilities will draw a growing
percentage  of  supplies  from  this  important  new  supply  basin.

     It  is also anticipated that other new sources of natural gas for northeast
U.S.  markets  may  become  generally  available  to  Energy East system utility
companies.  Additional  liquefied  natural  gas  supplies  from  new  production
facilities  in  the  Caribbean  Basin  will arrive at Distrigas of Massachusetts
terminal  in  Everett,  Massachusetts,  through  Distrigas'  expansion  of  its
vaporization  and  compression  capabilities.

     Purchases  from  and through a common pipeline, as well as purchases from a
common  gas  field,  have  been  found  to satisfy the "common source of supply"
requirement  of  Section  2(a)(29)(B) of the Act.(100) There is thus substantial
evidence  that  the  Energy  East  gas  facilities will share a common source of
supply  with  RG&E  for  a  significant amount of their respective gas supplies.

------------------
100   See,  e.g.,  NIPSCO,  supra.


                                       44

     Any  determination  of the appropriate size of the area or region calls for
consideration of the "state of the art" in the gas industry. In this regard, the
"state of the art" in the gas industry continues to evolve and change, primarily
as  a  result  of decontrol of wellhead prices, the continuing development of an
integrated national gas transportation network, the construction of new pipeline
capacity,  the  emergence of marketers and brokers, and the "un-bundling" of the
commodity  and  transportation  functions  of  pipelines  and local distribution
companies in response to various FERC and state initiatives. (101) Of particular
importance  has been the development, evolution and operation of market centers,
trading  hubs,  and  pooling  areas. Today, trading activity conducted at market
centers  and  trading  hubs  play  an  increasingly  vital  role  in the overall
management  of  the  assets  in  a  gas  portfolio  (supply,  transportation and
storage).

     As  a  result  of these developments, coordination of the operations of two
non-contiguous  gas  companies  is  no  longer  dependent  solely  upon  having
contractual  capacity  on  the  same  interstate  pipelines,  so long as the two
companies both have access to one or more common market centers or trading hubs.
Importantly,  these developments in the state of the art in the gas industry now
allow  gas  distribution  companies operating in a much larger area or region of
the  country  to  realize  operating economies and efficiencies from coordinated
operation  that  were once thought to be achievable only by contiguous or nearly
contiguous  gas  companies  supplied  by  the  same  interstate  pipelines.(102)

     As  indicated  above,  because NYSEG, RG&E, Southern Connecticut Gas, CNGC,
Maine  Gas  and  Berkshire  Gas  will  potentially  share  access  through their
respective  pipeline  transporters to industry-recognized market and supply area
hubs,  they  will  have the enhanced ability to physically coordinate and manage
their  portfolios  of  supply,  transportation  and  storage  and to support, if
necessary,  the  underlying  physical side of various financial derivatives as a
means  of  managing  price  volatility.

                    (iii)Section  2(a)(29)(B): System size from perspective of
                         "the  advantages  of  local  management,  efficient
                         operation  and  the  effectiveness  of  regulation."

     The  integrated  gas  system  to be formed by the combination of the Energy
East  gas  facilities  with RG&E will not be "so large as to impair (considering
the  state  of  the  art  and  the  area  or  region affected) the advantages of
localized  management, efficient operation and the effectiveness of regulation."
Although  RG&E  gas  supply  personnel will report to an officer of Energy East,
RG&E  will  retain  gas supply personnel in Rochester, New York. Further, RG&E's
affiliation  with  Energy  East  is  expected  to  result  in  economies  and
efficiencies,  as  discussed  in  more  detail  below.

     Finally,  the  Merger  will  not  have  an  adverse  effect  upon effective
regulation.  Following the Merger, RG&E will remain subject to regulation by the

------------------
101  Id.;  1995  Report  at  29-31.

102  See,  e.g.,  New  Century  Energies,  Inc.,  supra.
                                       45

NYPSC.  Accordingly,  the  Commission  should find that the size requirements of
Section  2(a)(29)(B)  of  the  Act  are  satisfied.

     For  all  of  the above reasons, the combined gas operations of Energy East
and  RG&E  will  constitute  a  single  integrated  gas  utility  system.

          4.   Economies  and  Efficiencies  from  the Merger (Section 10(c)(2))
               -----------------------------------------------------------------

     As discussed above, Section 10(c)(2) requires that the Commission approve a
proposed  transaction if it will serve the public interest by tending toward the
economical  and  efficient  development  of an integrated public utility system.
Through the Merger, the Companies will create an entity that is well situated to
compete  effectively  in  an  increasingly  active  market. The efficiencies and
economies  brought about through the Merger, and described in more detail below,
thereby  serve  the public interest, as required by Section 10(c)(2) of the Act.

     Although  many  of the anticipated economies and efficiencies will be fully
realizable  only in the longer term, they are properly considered in determining
whether  the  standards  of  Section  10(c)(2)  have been met.(103) Furthermore,
Section 10(c)(2) of the Act does not require that the future savings be large in
relation  to  the  gross  revenues of the companies involved. (104) In addition,
some  potential benefits cannot be precisely estimated; nevertheless they should
be  considered.  (105)  The  Companies  believe  that  the  Merger  will provide
significant  financial  and  organizational  advantages  and,  as  a result, the
potential for substantial economies and efficiencies should be found to meet the
standard  of  Section  10(c)(2)  of  the  Act.

     The  Companies  have  identified  the  following  areas in which the merged
Company  may  achieve  savings: growth margin, gas supply, labor, administrative
and  general expenses, and non-fuel purchasing economies. The Companies estimate
total  cost  savings  resulting from the Merger at approximately $50 million per
year,  with  an anticipated total of approximately $533 million of estimated net
cost  savings  over  the  ten-year period 2002-2011. (This total figure has been
adjusted  to  reflect  approximately  $167  million of out-of-pocket costs to be
incurred  to achieve these savings and approximately $93 million of cost-cutting
measures  by  the  Companies  prior  to  the  Merger.)

     The  Companies  have  undertaken  a study of the economies and efficiencies
resulting  from  the  Merger. That study, performed by Mr. Thomas J. Flaherty of
Deloitte  Consulting L.P., describes the categories and levels of Merger-related

------------------
103  See  American  Electric  Power  Co.,  46  S.E.C.1299,  1320-1321  (1978).

104  See  American  Natural  Gas  Co.,  43  S.E.C.  203  at  208  (1966).

105 "[S]pecific dollar forecasts of future savings are not necessarily required;
a  demonstrated  potential  for  economies  will suffice even when these are not
precisely quantifiable." Centerior Energy Corp., HCAR No. 24073 (April 29, 1986)
(citation  omitted);  see  also  In Re Consolidated Edison, Inc., HCAR No. 27021
(May  13,  1999);  National  Grid  Group  PLC,  HCAR No. 27154 (March 15, 2000).


                                       46

cost  savings  that  are  anticipated  to result from the Merger. Mr. Flaherty's
affidavit also describes the process by which the categories and quantifications
were  derived.  Mr.  Flaherty's affidavit is attached as Appendix E to the NYPSC
Merger Application, Exhibit D-3. The Companies have identified areas where joint
management,  coordination  and/or  consolidation  should enable the Companies to
achieve synergies. As stated previously, synergies would result from elimination
of  duplicative  corporate,  administrative  and  technical support staffing. In
addition,  synergies  are  expected  to  result  from  greater  efficiencies  in
corporate  and  administrative  programs, purchasing economics (nonfuel), energy
sourcing  savings  and  gas  supply  savings.

     Mr.  Flaherty's  estimates of cost savings were developed on a nominal cost
basis  over  a  ten-year  period from January 1, 2002 to December 31, 2011. This
provides  a  long-term  view  of  attainable  savings. Although the cost savings
estimated  for  the ten-year period generally will continue into future periods,
estimates  of  cost  savings are presented in nominal dollars and are limited to
the  first  ten  years  following  the  Merger.

     Savings estimates reflect those areas where the total level of costs can be
affected  by actions of management that are the direct result of the combination
of  NYSEG  and  RG&E.  These  savings  areas  are  derived  from the operational
synergies  that  are  created  by  integration  of  two  previously  independent
operations.  The  cost savings related to the integration of common functions of
the  Companies  are  predicated  upon  operating  the  Companies  under  common
management, where appropriate and practical. These savings areas would typically
flow  from  either  cost  reduction  or  avoidance  of  parallel  expenditures.

     As  detailed in Mr. Flaherty's affidavit, there are four primary categories
of  cost  savings  that  have  been  quantified.

     -    Staffing - Position reductions related to redundancies associated with
          corporate,  administrative  and  technical  support  functions  are
          categorized  as Corporate Staffing, and position reductions related to
          redundancies  associated  with  operations related to the distribution
          business are categorized as Operations Support Staffing. The Companies
          estimate  that  the  total  cost  savings  from  Corporate  Staffing
          reductions  for  the  ten-year  period  ending  December  31, 2011 are
          estimated  at  $204.3 million. Savings derived from Operations Support
          Staffing  reductions are estimated to total $87.1 million for the same
          ten-year  period.

     -    Corporate  and  Administrative  programs  -  This  category  includes
          reductions  in  nonlabor  programs and expenses, such as insurance and
          shareholder  services,  resulting  from  economies  of  scale and cost
          avoidance.  The  Companies estimate that savings in this area over the
          ten-year  period will amount to approximately $304.5 million, with the
          greatest  savings  to be achieved through consolidation of information
          technology  ("IT")  departments  and  avoidance  of  redundant  new IT
          systems  development.

     -    Purchasing Economies (nonfuel) - Savings will also be achieved through
          aggregation  of  materials and supplies volumes and services contracts
          to  increase  purchasing  power and to reduce required reorder volumes
          and associated carrying costs. The Companies estimate that the savings
          in  this  area  over  the ten-year period will amount to approximately
          $63.4  million.


                                       47

     -    Energy  Supply  -  Energy Sourcing savings are driven by consolidating
          system  operations to achieve benefits from the amount of load shifted
          to  baseload  from  peaking  and  intermediate  cycling as a result of
          noncoincidental  peaks between the companies. This increase in the mix
          of  baseload  within  the  overall supply portfolio provides estimated
          savings  of  $102.1  million  over  ten  years. Gas supply savings are
          derived  from  combining  the  gas  supply  portfolio  to  eliminate
          unnecessary  capacity  redundancies  and  achieve  greater  purchasing
          leverage in the marketplace. Savings on the gas portfolio is available
          through  pipeline  capacity release in the early years and non-renewal
          in  later  years  for  a  ten-year  total  savings  of  $77.2 million.

     Cost  savings  initiatives  which  were already planned prior to the Merger
were  subtracted  from  the  gross savings estimates because there would be some
overlap between these initiatives and identified cost savings resulting from the
Merger. These ongoing or future initiatives will contribute to lower total costs
to  customers.  The  Merger thus allows the Companies to achieve additional cost
savings  opportunities  beyond  those  previously  identified.

     The  total estimated cost savings identified from the Merger over the first
ten  years  after  the  Merger,  after  being  adjusted for costs-to-achieve and
premerger  initiatives,  are  approximately  $533  million.

     The  geographical  locations  of  the  respective  electric  energy service
territories  of  NYSEG  and  RG&E,  which  operate  in  the same ISO, provide an
opportunity  to  integrate  their  electric  utility operations efficiently. The
combined  system  can  be  operated  as  a  single, larger cohesive system, with
virtually  no  modification  needed  with  respect  to  existing  transmission
facilities.  As  the  structure  of  the  electric utility industry continues to
evolve,  the  marketplace will create additional opportunities for the Companies
to  create  value  through  integrated  operations  and  increased efficiencies.
Moreover,  since  electric  demand  in NYSEG's service area peaks in the winter,
while  RG&E's  peak occurs during the summer, together the Companies will have a
higher  annual electric load factor than either would have separately, which can
provide  advantages  in  the purchase of power and the utilization of generation
assets.

     The  Companies  believe that their combination offers significant strategic
and  financial  benefits  to  each  company and shareholders, as well as to each
company's  respective  employees  and  customers.  These benefits include, among
others:  (i)  maintenance  of  competitive  rates that will improve the combined
entity's  ability  to  meet  the  challenges  of  the  increasingly  competitive
environment  in  both  the  electric  and gas utility industry, (ii) over time a
reduction  in  operating  costs  and  expenditures resulting from integration of
corporate  and  administrative functions, including limiting duplicative capital
expenditures  for  administrative  and customer service programs and information
systems,  and savings in areas such as outside legal, audit and consulting fees,
(iii)  greater  purchasing  power  for  gas  supply  and  for  items  such  as
transportation  services  and  operational  goods  and  services,  (iv) enhanced
opportunities for expansion into non-utility businesses, (v) expanded management
resources  and  ability  to  select  leadership  from  a larger and more diverse
management  pool,  and (vi) a financially stronger company that, through the use
of  the  combined  capital, management, and technical expertise of each Company,
will  be  able  to  achieve greater financial stability and strength and greater
opportunities for earnings growth, reduction of operating costs, efficiencies of
operation,  better  use  of  facilities  for  the benefit of customers, improved
ability  to use new technologies, greater retail and industrial sales diversity,
improved  capability  to compete in wholesale power markets and joint management


                                       48

and  optimization  of  their respective portfolios of gas supply, transportation
and  storage  assets.  The  Applicants  believe  that  over time the Merger will
generate efficiencies and economies which would not be available to the separate
companies  absent  the  Merger  and which will enable post-Merger Energy East to
continue  to  be  a  low-cost  competitor  in  the  marketplace.

     In  addition  to  the  benefits  described  above, there are other benefits
which, while presently difficult to quantify, are nonetheless substantial. These
other  benefits  include:

     -    Increased  Scale  --  As  competition  intensifies  within the gas and
          electric  industry,  the Companies believe scale will be one dimension
          that will contribute to overall business success. Scale has importance
          in  many  areas,  including  utility  operations, product development,
          advertising  and corporate services. The Merger is expected to improve
          the  profitability  of  the  combined  company by adding approximately
          630,000  customers  to  Energy  East's  existing  customer  base  and
          providing  increased  economies  of  scale  in  all  of  these  areas.

     -    Competitive  Prices  and  Services  --  Sales  to  industrial,  large
          commercial  and  wholesale  customers are considered to be at greatest
          near-term  risk  as  a result of increased competition in the electric
          utility  industry.  The  Merger  will  enable  Energy East to meet the
          challenges  of  the  increased  competition  and will create operating
          efficiencies  through  which  Energy East will be able to provide more
          competitive  prices  to  customers.

     -    More Balanced Customer Base -- The Merger will create a larger company
          with  a  more  diverse  customer  base. This should reduce post-Merger
          Energy East's exposure to adverse changes in any sector's economic and
          competitive  conditions.

     -    Financial  Flexibility  --  By creating a company with a larger market
          capitalization  than  had  been  previously  experienced by any of the
          Companies considered on an individual basis, the Merger should improve
          Energy  East's  overall credit quality and liquidity of the securities
          and  therefore improve Energy East's ability to fund continued growth.

     -    Regional Platform for Growth -- The combination of Energy East and RGS
          will  create a regional platform for growth in the northeastern United
          States.  Energy  East  plans  to  expand  relationships  with existing
          customers  and  to  develop  relationships  with  new customers in the
          region.  Energy  East  will  use its combined distribution channels to
          market  a  portfolio  of energy-related products throughout the region
          and  will  follow  regional relationships to other geographical areas.

     -    Safety  Benefits  --  Among the short-term safety benefits anticipated
          from  the  Merger  are:  improved,  more  efficient safety operations;
          enhanced  emergency  management  for both gas and electric operations;
          improved  efficiency  of tree trimming operations; improved management
          of  contractor  resources; and consolidation of call center operations
          to  address  emergency  situations.


                                       49

     -    Reliability  --  Reliability can also be enhanced with the integration
          of  regional  operations.  The  increased  efficiencies gained through
          optimal  work crew deployment will result in more rapid restoration of
          service  following interruptions. In particular, emergency operations,
          resulting  from widespread outages due to storms or other events, will
          be  supported by the availability of a larger pool of resources. These
          additional  resources,  trained  and  activated  according to a common
          Emergency  Plan,  will  effect restoration of service more quickly and
          efficiently. Over the longer term, NYSEG and RG&E expect to be able to
          coordinate  infrastructure improvements across franchise lines, with a
          potential  reduction  in  capital needs. The utilities also anticipate
          greater  integration  of territorial operations, including offices and
          crew  deployment,  resulting in less travel, better response time, and
          improved  customer  service.

     For  the  above  stated  reasons,  the  Commission  should  find  that  the
integration  criteria  are  satisfied  and  approve  the  proposed  Merger.

          5.   Retention  of  Non-Utility  Businesses
               --------------------------------------

     As  a result of the Merger, the non-utility businesses and interests of RGS
will  become  businesses  and  interests of Energy East. The total assets of all
non-utility  investments  of  RGS as of December 31, 2000, totaled approximately
$115  million.

     Corporate  charts  showing  the  subsidiaries,  including  non-utility
subsidiaries,  of  RGS  are  filed as Exhibit E-3. A corporate chart showing the
projected  arrangement  of  these  subsidiaries  under  post-Merger  Energy East
immediately  after  consummation  of  the  Merger  is  filed  as  Exhibit  E-4.

     Section  11(b)(1)  generally  limits a registered holding company to retain
"such  other  businesses as are reasonably incidental, or economically necessary
or  appropriate,  to  the  operations of [an] integrated public utility system."
Although  the Commission has traditionally interpreted this provision to require
an  operating  or "functional" relationship between the non-utility activity and
the  system's  core  utility  business,  in its recent release promulgating Rule
58,(106) the Commission stated that it "has sought to respond to developments in
the  industry  by  expanding  its  concept  of  a  functional relationship." The
Commission  added  "that  various  considerations, including developments in the
industry,  the  Commission's  familiarity  with  the  particular  non-utility
activities at issue, the absence of significant risks inherent in the particular
venture,  the  specific  protections  provided  for consumers and the absence of
objections  by  the  relevant  state  regulators,  made it unnecessary to adhere
rigidly  to the types of administrative measures" used in the past. Furthermore,
in  the  1995  Report, the SEC Staff recommended that the Commission replace the

------------------
106  Exemption  of Acquisition by Registered Public-Utility Holding Companies of
Securities  of  Non-utility  Companies  Engaged  in  Certain  Energy-related and
Gas-related  Activities,  HCAR  No.  26667  (Feb.  14,  1997)  ("Rule  58").


                                       50

use  of  bright-line  limitations  with a more flexible standard that would take
into  account  the  risks  inherent  in  the particular venture and the specific
protections  provided  for  consumers.(107)

     With certain minor exceptions, the Commission determined that Energy East's
existing  non-utility  subsidiaries could be retained by Energy East once it had
registered  as  a  public  utility  holding  company.  (108)  Energy  East seeks
authorization to retain the non-utility subsidiaries of RGS. The new non-utility
business interests that post-Merger Energy East will directly or indirectly hold
as  a  result  of  the Merger all meet the Commission's standards for retention.

     The existing direct and indirect non-utility business interests of RGS fall
within the ambit of Rule 58 or are otherwise functionally related to the utility
business  of  the  registered  holding  company and justifiable under Commission
precedent.  Exhibit  H-2,  filed  herewith,  contains  a  listing  of  all  the
non-utility  subsidiaries that Energy East will hold directly or indirectly as a
result  of  the  Merger,  and sets forth the basis for their retention by Energy
East  after  the  Merger.

     The  exemption  provided  under  Rule  58  will  be  available  only if the
aggregate  investment  by the registered holding company and its subsidiaries in
energy-related  companies  does  not exceed the greater of $50 million or 15% of
consolidated  capitalization. Consistent with the Commission's decisions in CP&L
Energy,  Inc.,(109)  investments  made by RGS prior to the effective date of the
Merger should not count in the calculation of the 15% limit for purposes of Rule
58.  Such  exclusion  is appropriate in view of the fact that at the time of the
investments RGS was not subject to the restrictions that Section 11(b)(1) of the
Act  and  the  relevant  precedents  place  upon  the non-utility investments of
registered  system  companies.(110)  All  additional  investments made by RGS in
energy-related  companies  subsequent to the effective date of the Merger would,
of  course,  be  included  in  the  15%  test.

     This  filing is also subject to Rules 53 and 54.(111) Under Rule 53(a), the
Commission  shall not make certain specified findings under Sections 7 and 12 in
connection  with  a  proposal  by  a holding company to issue securities for the
purpose of financing the acquisition of an EWG, or to guaranty the securities of
an  EWG,  if  each of the conditions in paragraphs (a)(1) through (a)(4) thereof
are  met,  provided  that  none of the conditions specified in paragraphs (b)(1)
through  ((b)(3)  of  Rule 53 exists. Rule 54 provides that the Commission shall
not  consider  the effect of the capitalization or earnings of subsidiaries of a
registered  holding  company  that  are  EWGs or FUCOs in determining whether to
approve  other  transactions  if  Rule  53(a),  (b) and (c) are satisfied. These
standards  are  met  here.

------------------
107  1995  Report  at  81-87,  91-92.

108  Energy  East  Corporation,  et  al.,  HCAR  No.  27224  (Aug.  31,  2000).

109  HCAR  No. 27284 (Nov. 27, 2000). See also SCANA Corp., HCAR No. 27133 (Feb.
9,  2000);  Conectiv,  Inc.,  HCAR  No.  26832  (Feb.  25,  1998).

110  Id.

111  17  C.F.R.  Sec. 250.53  and  Sec. 250.54.


                                       51

     First,  Rule  53(a)(1)  limits  a registered holding company's financing of
investments in EWGs if that holding company's "aggregate investment" in EWGs and
FUCOs exceeds 50% of its "consolidated retained earnings." Immediately following
the  Merger,  Energy  East's  "aggregate  investment"  in EWGs and FUCOs will be
approximately  $25 million, or approximately 0.3% of Energy East's "consolidated
retained  earnings"  at  December  31,  2000  (approximately  $918  million).

     Second,  Energy  East  has  complied  and  will continue to comply with the
record-keeping  requirements  of  Rule  53(a)(2)  concerning affiliated EWGs and
FUCOs.  Specifically, Energy East will maintain books and records enabling it to
identify investments in and earnings from each EWG and FUCO in which it directly
or  indirectly  acquires  and  holds  an  interest.  Energy East will cause each
domestic  EWG  in  which it acquires and holds an interest, and each foreign EWG
and  FUCO that is a majority-owned subsidiary, to maintain its books and records
and  prepare its financial statements in conformity with U.S. generally accepted
accounting  principles  ("GAAP").  All  of  such books and records and financial
statements  will  be made available to the Commission, in English, upon request.

     Third,  as  required  by Rule 53(a)(3), no more than 2% of the employees of
the Energy East Utility Subsidiaries and RG&E will, at any one time, directly or
indirectly,  render  services  to  EWGs  and  FUCOs.

     Finally,  Energy East states that the provisions of Rule 53(a) are not made
inapplicable  to  the authorization herein requested by reason of the occurrence
or  continuance  of any of the circumstances specified in Rule 53(b). Rule 53(c)
is  inapplicable  by  its  terms.

D.   SECTION  10(F)

     Section  10(f)  provides  that:

     The  Commission  shall  not  approve  any  acquisition  as to which an
     application  is  made  under  this  section  unless  it appears to the
     satisfaction  of  the  Commission that such State laws as may apply in
     respect  to such acquisition have been complied with, except where the
     Commission  finds  that  compliance  with  such  State  laws  would be
     detrimental  to  the  carrying  out  of  the provisions of section 11.

As  described in Item 4 of this Application/Declaration, and as evidenced by the
petition  to  the NYPSC requesting authorization to carry out the Merger, Energy
East  intends  to  comply with all applicable state laws related to the proposed
transaction.

E.   POST-MERGER  CORPORATE  STRUCTURE:  INTERMEDIATE  HOLDING  COMPANY

     Section  11(b)(2)  of  the  Act requires the Commission to ensure that "the
corporate structure or continued existence of any company in the holding company
system does not unduly or unnecessarily complicate the structure, or unfairly or
inequitably  distribute  voting  power  among  security  holders, of the holding


                                       52

company  system."  Section  11(b)(2) also directs the Commission to require each
registered  system  company  "to  take  such action as the Commission shall find
necessary in order that such holding company shall cease to be a holding company
with  respect  to each of its subsidiary companies which itself has a subsidiary
company  which  is  a  holding company." Section 11(b)(2) was directed at abuses
facilitated  by  the  pyramiding  of  holding  company  groups that involved the
diffusion  of  control  and  creation of different classes of debt or stock with
unequal  voting  rights.(112)

     In  this  Application/Declaration,  Energy East proposes to retain RGS as a
direct  subsidiary of Energy East. RGS would own all of the voting securities of
NYSEG and RG&E, Energy East's two New York utilities, as well as the non-utility
subsidiaries  currently  owned by RGS.(113) The continued existence of RGS as an
intermediate  holding  company  will not unduly complicate Energy East's capital
structure  or implicate the abuses that Section 11(b)(2) of the Act was intended
to  prevent.  Energy  East  management  believes  that  providing  a  corporate
organization  that puts the New York utility operations under one corporate roof
will  provide  for management focus on the issues that are unique to that state,
thus  enabling  better integration and efficient development of the business. In
addition,  their  continued  existence  will  preserve  certain  structural  and
financial  benefits  that  have  already  been achieved by RGS, and will help to
preserve favorable tax attributes that would be lost if such continued existence
were  eliminated.(114)  Also, as discussed below, the Companies request that the
Commission  find  that  RGS  is  exempt under Section 3(a)(1) of the Act. Exempt
status will enable RGS to comply with the terms of existing securities issuances
without  the need for additional approvals. Energy East represents that RGS will
not  engage  in  any transaction in which a registered holding company could not
engage unless approved by the Commission, thus limiting the activities of RGS in
this  area  to  previously-existing  financings.

     In  its  prior  approval  of  Energy  East's  acquisitions  of  CMP  Group,
Connecticut  Energy,  and  Berkshire  Energy,  for the same reasons as those set
forth  above, the Commission permitted Energy East to retain these companies, as
well  as  CTG  Resources  and  Energy  East  Enterprises as intermediate holding
companies.  The  Commission  found  that  the  continued  existence  of  these
intermediate  holding  companies  will not serve as a means by which Energy East
seeks  to  diffuse  control; rather, they will be maintained to help Energy East
capture  economic  efficiencies  that  might  otherwise be lost.(115) Citing its
prior  holding  in  National  Grid,  plc.,(116)  the Commission further found it
appropriate  to "look through" these intermediate holding companies for purposes
of  the analysis under Section 11(b)(2) of the Act and concluded that it was not
necessary  to  ensure  that the corporate structure of the post-merger system or
continued  existence  of  any  system  company "does not unduly or unnecessarily

------------------
112  See,  e.g.,  National  Grid  Group  plc,  HCAR  No.  27154  (Mar. 15, 2000)
("National  Grid").

113  These  include Energetix, Inc. and RGS Development Corporation. See Exhibit
H-2.

114  See  Memorandum  Analyzing  Potential  Holding  Company Tax benefits, filed
confidentially  as  Exhibit  K-1  hereto.

115  Energy  East,  slip  op.  at  36.

116  National  Grid,  supra.


                                       53

complicate the structure of the Energy East system." For those same reasons, the
Companies  request  that the Commission so find with respect to the retention of
RGS  as  an  intermediate  holding  company.

     The  Companies  further  note  that  in  the  Commission's  recent decision
approving  Exelon  Corporation's  ("Exelon")  acquisition of PECO Energy Company
("PECO"), Exelon requested, among other things, Commission authorization for the
formation  of  two  intermediate holding companies. One, Exelon Ventures Company
("Ventures"),  would  own  Exelon  Enterprises  Company,  LLC  ("Enterprises").
Enterprises  would hold the non-utility investments of the merging companies, as
well  as the voting interests in Exelon Generation Company, LLC ("Genco"), which
would own the generating assets of the merging companies. The other intermediate
holding  company,  Exelon Energy Delivery Company ("Delivery"), would own all of
the  voting  securities of PECO and Commonwealth Edison Company ("ComEd"); these
utilities  would  own  only  transmission  and  distribution  assets.

     The  Commission  found  that  the  formation  of  Ventures was necessary to
achieve  a  simple corporate structure while minimizing federal and state income
effects  of  combining the nonutility businesses of Unicom and PECO. While there
were  no  similar  tax  concerns  relating to Delivery, the Commission cited the
"desirability  of  [applicant's]  separating its regulated 'wires' business from
its  non-state-regulated  utility  (Genco)  and  its  nonutility  businesses
(Enterprises)"  (117)  and  permitted  Exelon  to  establish  Delivery  as  an
intermediate  holding  company.

     Just  as  Exelon relied on an intermediate holding company to hold its PECO
and  ComEd interests, the Companies similarly have determined that management of
Energy  East's  New  York  operations  will  be accomplished most efficiently by
maintaining RGS as an intermediate holding company over NYSEG and RGS. The costs
associated  with maintaining RGS as an intermediate holding company are minimal,
and  it  is  not contemplated that RGS will have any operational function. As in
Exelon,  the  Commission  should  approve  the  continued  existence  of  RGS.

     Additionally,  Energy East seeks an order from the Commission under Section
3(a)(1)  of  the  Act  granting  RGS an exemption from all provisions of the Act
except  Section  9(a)(2). As a result of the interposition of RGS between Energy
East  and  RG&E,  Energy  East  will  be  a  holding  company  with respect to a
subsidiary  that  has  a holding company subsidiary. Section 3(a)(1) of the Act,
along  with  Rule 2 of the Commission's regulations, (118) provides an exemption
from  all provisions of the Act, except for Section 9(a)(2) thereof, for holding
companies  that  are  predominantly  intrastate  in character and carry on their
business  substantially  in  a  single  state. All of RG&E's utility business is
carried  on  in the State of New York, the same state in which NYSEG carries out
all  of  its  utility  business.  At  such  time as Energy East transfers all of
NYSEG's common stock to RGS, the combined utility operations will all take place
in  the  State  of  New  York,  making the 3(a)(1) exemption for RGS applicable.

------------------
117  Exelon  Corporation,  HCAR  No.  35-27256  (Oct.  19,  2000)  ("Exelon").

118  17  C.F.R.  Sec.  250.2.


                                       54

ITEM  4.     REGULATORY  APPROVALS

     Set  forth  below is a summary of the regulatory approvals that Energy East
has  obtained  or  expects  to  obtain  in  connection  with  the  Merger.

A.   ANTITRUST

     The  HSR  Act and the rules and regulations thereunder provide that certain
transactions  (including  the  Merger)  may  not  be  consummated  until certain
information  has  been  submitted  to  the DOJ and FTC and the specified HSR Act
waiting period requirements have been satisfied. Energy East and RGS will submit
Notification  and  Report Forms and all required information to the DOJ and FTC.

     If  the Merger is not consummated within twelve months after the expiration
or  earlier  termination  of the initial HSR Act waiting period, Energy East and
RGS  would  be  required to submit new information to the DOJ and the FTC, and a
new  HSR Act waiting period would have to expire or be earlier terminated before
the  Merger  could  be  consummated.

B.   FEDERAL  POWER  ACT

     Section  203  of  the  Federal Power Act as amended provides that no public
utility  shall  sell  or  otherwise  dispose of its jurisdictional facilities or
directly  or  indirectly  merge or consolidate such facilities with those of any
other  person or acquire any security of any other public utility, without first
having  obtained  authorization  from  the FERC. Energy East and RGS submitted a
joint  application  for  approval  of the Merger to the FERC on May 9, 2001. See
Exhibit  D-1.  It  is  anticipated  that FERC will rule that the Merger will not
significantly  affect  competition  in  any  relevant  market.

C.   ATOMIC  ENERGY  ACT

     RG&E  holds  an  NRC non-operating license with respect to its ownership of
the  Ginna  nuclear plant and its interest in Nine Mile Point Nuclear Plant Unit
No.  2.  The  Atomic  Energy  Act  currently  provides that a license may not be
transferred  or in any manner disposed of, directly or indirectly, to any person
unless  the NRC finds that such transfer is in accordance with the Atomic Energy
Act  and  consents  to  the  transfer.  RG&E  will submit an application for the
necessary  consent  of  the  NRC.

D.   TELECOMMUNICATIONS  ACT

     RGS and Energy East will file with the FCC for approval of the transfers of
certain  radio  and microwave licenses. The radio and microwave license transfer
applications filed by RGS and Energy East will be filed by amendment as Exhibits
D-7  and  D-9.


                                       55

E.   STATE  PUBLIC  UTILITY  REGULATION

     NYSEG  and  RG&E are subject to the jurisdiction of the NYPSC. On March 23,
2001,  the  Companies filed a petition with the NYPSC requesting approval of the
Merger,  a  copy  of  which  is  included  in  Exhibit  D-3  to  this
Application/Declaration.

ITEM  5.     PROCEDURE

     The Commission is respectfully requested to issue and publish the requisite
notice  under Rule 23 with respect to the filing of this Application/Declaration
as  soon  as  possible.

     It  is  submitted  that  a  recommended  decision  by  a  hearing  or other
responsible officer of the Commission is not needed for approval of the proposed
Merger.  The  Division of Investment Management may assist in the preparation of
the  Commission's  decision.  There  should  be  no  waiting  period between the
issuance  of  the  Commission's  order  and  the  date  on which it is to become
effective.

ITEM  6.     EXHIBITS  AND  FINANCIAL  STATEMENTS

A.   EXHIBITS

A-1  Restated Certificate of Incorporation of Energy East filed in the Office of
     the Secretary of State of the State of New York on April 23, 1998 (filed as
     Exhibit 4.1 to Energy East's Post-effective Amendment No. 1 to Registration
     No.  033-54155,  and  incorporated  herein  by  reference).

A-2  Certificate of Amendment of the Certificate of Incorporation of Energy East
     filed  in  the Office of the Secretary of State of the State of New York on
     April  26,  1999  (filed  as Exhibit 3.3 to Energy East's Form 10-Q for the
     quarter  ended  March 31, 1999, File No. 1-14766 and incorporated herein by
     reference).

A-3  By-Laws  of Energy East as amended April 12, 2001, (filed as Exhibit 3-4 to
     Energy  East's  Form  10-Q  for  the quarter ended March 31, 2001, File No.
     114766,  and  incorporated  herein  by  reference).

A-4  Amended  and Restated Certificate of Incorporation of RGS (filed as Exhibit
     3  to  the  Registration Statement on Form S-4, Registration No. 333-59300,
     and  incorporated  herein  by  reference).

B-1  Agreement and Plan of Merger between Energy East and RGS (filed as Appendix
     A-1  to  the  Registration  Statement  on  Form  S-4,  Registration  No.
     333-59300,  and  incorporated  herein  by  reference).

C-1  Registration  Statement  of  Energy East on Form S-4, including Joint Proxy
     Statement/Prospectus  of  Energy East and RGS (filed with the Commission on
     April 20,  2001,  Registration  No. 333-59300  and  incorporated  herein by
     reference).


                                       56

D-1  Application  of  Energy  East Corporation and RGS to the FERC under Section
     203  of  the  FPA,  FERC  Docket  No.  EC01-97,  dated  May  9, 2001 (filed
     herewith).

D-2  Order  of  the  FERC  in  Docket  No.  EC01-97  (to be filed by amendment).

D-3  Petition  of  Energy  East  and  RGS,  et  al.  to  NYPSC (filed herewith).

D-4  NYPSC  Order  (to  be  filed  by  amendment).

D-5  Application  of  RGS  to  the  NRC  (to be filed by amendment).

D-6  NRC  Order  (to  be  filed  by  amendment).

D-7  Application  of RGS to the FCC for indirect transfer of radio and microwave
     licenses  relating  to  certain  communications  equipment  (to be filed by
     amendment).

D-8  FCC Order relating to transfer of radio and microwave licenses (to be filed
     by  amendment).

D-9  Application  of  Energy  East to the FCC for indirect transfer of radio and
     microwave  licenses  relating  to  certain  communications equipment (to be
     filed  by  amendment).

D-10 FCC order relating to transfer of radio and microwave licenses (to be filed
     by  amendment).

E-1  Maps  for  Energy  East  and RGS: Franchise Areas of Major Utilities in the
     Northeast  (filed  herewith  on  Form  S-E); Energy East Electric Franchise
     Areas  (post-Merger)  (filed herewith on Form S-E); and Energy East Natural
     Gas  Franchise  Areas  (post-Merger)  (filed  herewith  on  Form  S-E).

E-2  Energy  East  corporate  chart  (filed  herewith  on  Form  S-E).

E-3  RGS  corporate  chart  (filed  herewith  on  Form  S-E).

E-4  Energy  East  (post-Merger)  corporate  chart (filed herewith on Form S-E).

E-5  Electric and Natural Gas Statistics

F-1  Preliminary  opinion  of Huber Lawrence & Abell, counsel to Energy East (to
     be  filed  by  amendment).

F-2  Past-tense opinion of Huber Lawrence & Abell, counsel to Energy East (to be
     filed  by  amendment).

G-1  Fairness  Opinion  of UBS Warburg LLC (filed as Appendix C-1 to Joint Proxy
     Statement/Prospectus  included  in  Registration  No.  333-59300,  and
     incorporated  herein  by  reference).


                                       57

G-2  Fairness  Opinion  of Morgan Stanley & Co., Incorporated (filed as Appendix
     B-1  to  Joint  Proxy  Statement/Prospectus  included  in Registration  No.
     333-59300,  and  incorporated  herein  by  reference).

H-1  Energy  East's  Non-Utility  Subsidiaries  (filed  herewith).

H-2  Retention  of  Non-Utility  Subsidiaries  (filed  herewith).

I-1  Proposed  Form  of  Notice  (filed  herewith).

J-1  Analysis  of  the Economic Impact of a Divestiture of the Gas Operations of
     Rochester  Gas  and  Electric  Corporation  (filed  herewith).

K-1  Memorandum  Analyzing  Potential  Intermediate Holding Company Tax Benefits
     (filed confidentally pursuant to Rule 104 of the Act.)

B.   FINANCIAL  STATEMENTS

FS-1 Pre-Merger and pro forma combined condensed balance sheet of Energy East as
     of  March  31,  2001,  and  pre-Merger  and  pro  forma  combined condensed
     statement  of  income and statement of retained earnings of Energy East for
     the  twelve  months  ended  March  31,  2001  (filed  herewith).

FS-2 Balance  sheet  of  RGS  as  of March 31, 2001, and statement of income and
     statement of retained earnings of RGS for the twelve months ended March 31,
     2001,  included  in the balance sheet, statement of income and statement of
     retained  earnings  of  Energy  East  (filed  herewith  as  FS-1).

FS-3 Statements of income and surplus of RGS for the fiscal years ended December
     31,  2000,  1999,  and 1998 (included in RGS's Form 10-K for the referenced
     years  and  incorporated  herein  by  reference).

ITEM  7.     INFORMATION  AS  TO  ENVIRONMENTAL  EFFECTS

     The  Merger  neither  involves  a "major federal action" nor "significantly
affect[s]  the  quality  of  the  human  environment" as those terms are used in
Section  102(2)(C) of the National Environmental Policy Act, 42 U.S.C. Sec. 4321
et  seq.  The  only  federal  actions  related  to  the  Merger  pertain  to the
Commission's  declaration  of  the  effectiveness  of  the  Joint  Proxy
Statement/Prospectus,  Energy  East's  Registration  Statement  on Form S-4, the
expiration  of  the applicable waiting period under the HSR Act, approval of the
application  filed  by Energy East and RGS with the FERC under the Federal Power
Act,  approval  of  the application that will be filed by RGS with the NRC under
the  Atomic  Energy  Act, approval of the applications that will be filed by RGS
and  Energy  East  with  the  FCC,  and  this  Commission's  approval  of  this
Application/Declaration.  Consummation  of the Merger will not result in changes
in  the  operations  of  the  Companies  that  would  have  any  impact  on  the
environment.  No  federal  agency is preparing an environmental impact statement
with  respect  to  this  matter.


                                       58

SIGNATURE

Pursuant  to the requirements of the Public Utility Holding Company Act of 1935,
the undersigned Companies have duly caused this Form U-1 Application/Declaration
to  be  signed  on  their  behalf  by the undersigned thereunto duly authorized.

                                      Respectfully  submitted,

                                      __________________________________________
                                      Kenneth  M.  Jasinski
                                      Executive Vice President, General Counsel
                                        and  Secretary
                                      Energy  East  Corporation
                                      P.O.  Box  12904
                                      Albany,  New  York  12212-2904
                                      Telephone:  (518)  434-3049

                                      __________________________________________
                                      Michael  T.  Tomaino
                                      Senior  Vice President and General Counsel
                                      RGS  Energy  Group,  Inc.
                                      89  East  Avenue
                                      Rochester,  New  York  14649-0002
                                      Telephone:  (716)  546-2700



June  20,  2001


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